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3.5 EDSR 02-11-2013 Elk REQUEST FOR ACTION River To ITEM NUMBER Economic Development Authority 3.5 AGENDA SECTION MEETING DATE PREPARED BY Consent February 11, 2013 Clay Wilfahrt,Assistant Director of Economic Development ITEM DESCRIPTION REVIEWED By Review Conflict of Interest Disclosures Suzanne Fischer, Community Operations and Development Director REVIEWED BY Cal Portner, City Administrator ACTION REQUESTED Review the conflict of interest disclosures from Commissioner Provo and Annie Deckert BACKGROUND/DISCUSSION On January 17, staff learned that Alliance Machine intends to apply for the Forgivable Loan Program. EDA Commissioner Bryan Provo is also the Vice President of Affiance Machine. Affiance Machine has contracted with former Director of Economic Development Annie Deckert to help with their Forgivable Loan application. The federal guidelines attached to the Forgivable Loan Program indicate that both of these are potential conflicts of interest. The Department of Employment and Economic Development said that there would be no conflict if the city attorney concluded that no state or federal laws would be violated,proper disclosure was made, and Mr. Provo refrained from future discussion and decisions pertaining to the Forgivable Loan Program. Staff contacted attorney Jenny Boulton to get her professional opinion of the matter. Ms. Boulton stated that no state or local laws would be violated by the application or the involvement of Mr. Provo or Ms. Deckert. She recommended that Mr. Provo submit the attached letter to the EDA to disclose the potential conflict and commit to refrain from future discussion and decisions related to the Forgivable Loan Program. Jenny further explained that the initial correspondence sent by Ms. Deckert on January 23 explaining her potential conflict satisfies her disclosure requirements. ATTACHMENTS • Federal Guidelines on Conflict of Interest • Correspondence with Jenny Boulton Re: Conflict disclosure and state and local laws • Jenny Boulton's Legal Opinion • Letter of Disclosure of Potential Conflict of Interest from Commissioner Provo • Correspondence with Annie Deckert Re: Conflict Disclosure r ® itaii 1c NAME c. Copeland (Anti-Kickback)Act(40 USC 276c) Governs the deductions from paychecks that are allowable. Makes it a criminal offense to induce anyone employed on a Federally assisted project to relinquish any compensation to which he/she is entitled, and requires all contractors to submit weekly payrolls and statements of compliance. d. Fair Housing Standards Act of 1938,As Amended(29 USC 201, et.seq.) Establishes the basic minimum wage for all work and requires the payment of overtime at the rate of at least time and one-half. It also requires the payment of wages for the entire time that an employee is required or permitted to work, and establishes child labor standards. In accordance with 24 CFR Part 5, CDBG funds may not be used to directly or indirectly employ, award contracts to or otherwise engage the services of any contractor or subrecipient during any period of debarment, suspension or placement of ineligibility status. Grantees should check all contractors, subcontractors, lower tier contractors and subrecipients against the Federal publication that lists debarred, suspended and ineligible contractors. See internet site at http://www.arnet.gov/epls/. 4. PROCUREMENT The procurement standards of 24 CFR 85.36 apply. 5. CONFLICT-OF-INTEREST For the procurement of property and services,the conflict-of-interest provisions at 24 CFR 85.36 and 24 CFR 84.42 apply. This requires the city to maintain written standards governing the performance of their employees engaged in awarding and administering contracts. At a minimum, these standards must: a. Require that no employee, officer, agent of the city or its subrecipient shall participate in the selection, award or administration of a contract supported by CDBG if a conflict-of-interest, either real or apparent, would be involved; b. Require that grantee or subrecipient employees, officers and agents not accept gratuities, favors or anything of monetary value from contractors potential contractors or parties to subagreements; and c. Stipulate provisions for penalties, sanctions or other disciplinary actions for violations of standards. A conflict would arise when any of the following has a financial or other interest in a firm selected for award: a. An employee, agent or officer of the grantee or subrecipient; b. Any member of an employee's, agent's or officer's immediate family; c. An employee's, agent's or officer's partner; or d. An organization that employs or is about to employ an employee, agent or officer of the grantee or subrecipient. 7 Wilfahrt, Clay From: Boulton,Jenny S. <JBoulton @Kennedy-Graven.com> Sent: Monday, February 04, 2013 5:45 PM To: Wilfahrt, Clay Subject: RE: Conflict of Interest She will need to make some sort of disclosure to the EDA Board but I think her letter/email probably works. For the Commissioner I thought it was good to have the disclosure also acknowledge the additional restrictions he will be subject to. Those don't really apply to Annie because she's no longer an employee. In fact state law doesn't address former employees but the materials from the state identify her as being in a position which creates a conflict by having been an employee within the last 12 months. Consequently, I'm less concerned about the format for that disclosure. Jenny Boulton Kennedy&Graven,Chartered 470 U.S. Bank Plaza 200 South 6th Street Minneapolis, MN 55402 612-337-9202 jboulton @kennedy-graven.com Original Message From:Wilfahrt,Clay[mai lto:CWilfahrt @ElkRiverMN.gov] Sent: Monday, February 04, 2013 8:35 AM To: Boulton,Jenny S. Subject: RE:Conflict of Interest Thanks for these,Jenny! Will Annie need to make any formal disclosure as well? Thanks! Clay Clay Wilfahrt I Assistant Director of Economic Development 763.635.1041 w 1 763.635.1090 f 13065 Orono Parkway I Elk River I MN 1 55330 Original Message From: Boulton,Jenny S. [mailto:JBoulton @Kennedy-Graven.com] Sent:Sunday, February 03,2013 11:09 PM To:Wilfahrt,Clay Cc: Fischer,Suzanne Subject: RE:Conflict of Interest Hi Clay 1 Sorry I wasn't able to get this to you on Friday. I don't have Suzanne's email address so I just guessed-please make sure she gets a copy. I've attached both a form of opinion and a form of conflict declaration. I'm not sure if the opinion is supposed to be addressed to you or DEED or who at DEED so I used my typical contact for financing matters. I'm also not sure if this is CDBG funding so please correct that if it's wrong. Let's talk after you have a chance to review this. Thanks, Jenny Boulton Kennedy&Graven,Chartered 470 U. S. Bank Plaza 200 South Sixth Street Minneapolis, Minnesota 55402 612-337-9202 jboulton @kennedy-graven.com From:Wilfahrt, Clay[mailto:CWilfahrt@ElkRiverMN.gov] Sent: Monday,January 28,2013 8:51 AM To: Boulton,Jenny S. Subject: Conflict of Interest Hi Jenny, We are working on a forgivable loan program,and one of our EDA Commissioners,the owner of Alliance Machine in Elk River, has expressed an interest in applying. Annie Deckert,the former Director of Economic Development, is assisting Alliance Machine with their application. Unfortunately, both of these are potential conflicts of interest pursuant to the attached guidelines. We are pursuing an exception from the state for both parties in accordance with the requests in the email below. If we have both Annie and Bryan disclose their intentions and previous involvement and exclude Bryan from any decisions,are we violating any state or local laws? Are there other actions we can take to better protect ourselves from conflicts of interest and still allow Bryan to apply for the loan program with Annie's help? I discussed this with a Department of Employment and Economic Development(The entity to whom we apply for exemption)and they are okay with us getting an exemption as long as we have an opinion from an attorney stating that we wouldn't violate any state or local laws,and if the conflict is properly disclosed. I have attached the COI exemption worksheet for your review as well as the draft version of the forgivable loan program. Please let me know if you have any questions. Thanks! Clay Clay Wilfahrt I Assistant Director of Economic Development 763.635.1041 w I 763.635.1090 f 13065 Orono Parkway I Elk River I MN 1 55330 2 JENNY BOULTON Direct Dial(612)337-9202 Email:jboulton@kennedv-graven.com February , 2013 Mr. Bob Isaacson Minnesota Department of Employment and Economic Development 1st National Bank Building 332 Minnesota Street, Suite E200 St. Paul, Minnesota 55101-1351 Re: Opinion re Conflict of Interest Dear Mr. Isaacson: Alliance Machine (the "Company") has notified the Economic Development Authority for the City of Elk River, Minnesota (the "Authority") that it proposes to apply for a loan under the Authority's Forgivable Loan program (the "Loan") which is funded in part from federal funds ("CDBG Funds") through the Minnesota Department of Employment and Economic Development ("DEED"). Bryan Provo (the "Commissioner"), owner of the Company, is also a member of the Board of Commissioners of the Authority. In addition, the Commissioner has employed Annie Deckert, former Executive Director of the Authority, as an agent of the Company in connection with its application for the Loan. Pursuant to §570.611(d)(1)(ii) of the federal regulations relating to the CDBG Funds, in order to qualify for an exception to conflict of interest rules, you are required to provide an opinion of legal counsel that "the interest for which the exception is sought would not violate state or local law". Minnesota Statutes, Section 469.098 prohibits commissioners and employees from taking actions or making decisions which could substantially affect their financial interests or those of an organization with which they are associated without first taking certain steps to disclose their interests. The Commissioner and Ms. Deckert have disclosed their conflicts in accordance with Minnesota Statutes, Section 469.098 which will be entered into the minutes of the next Authority Board meeting. The Commissioner has further agreed to abstain from any discussion or action relating to the Company's application for the Loan and from any attempt to influence any employee of the Authority in any related matter. We are of the opinion that the Commissioner's and Ms. Deckert's interests in the Authority and the Company, as disclosed and subject to further compliance with Minnesota Statutes, Section 469.098, do not violate Minnesota law. Please do not hesitate to give me a call if there are any questions. Very truly yours, KENNEDY AND GRAVEN, CHARTERED By Jenny Boulton Enclosures DECLARATION OF CONFLICT OF INTEREST I, the undersigned commissioner of the Economic Development Authority of the City of Elk River (EDA), hereby declare that I am aware that a corporation in which I have a financial interest is reasonably likely to become a participant in a project or development that will be affected by decisions of the EDA and its board of commissioners. Specifically, Alliance Machine (the "Company") may enter into a loan agreement with the EDA. I own [a controlling interest in] the Company. In addition, I have been involved in developing the loan program under which the Company will apply for a loan from the EDA. Pursuant to Minnesota Statutes, Section 469.098, I hereby submit this statement of conflict of interest and request that it be entered in the minutes of the next EDA board meeting. Moreover, I will not attempt to influence any EDA commissioner or employee in any matter related to the Company loan, nor will I take part in any action or decision related to the loan. Finally, I understand that I will not be counted toward a quorum during the portion of any meeting of the EDA board of commissioners in which this matter will be considered. Dated: -2/S. , 2013 Bryan Prov I mmissioner Economic De elopment Authority of the City of Elk River,Minnesota CRI50.4 418385v1 JSB ELI85-13 Wilfahrt, Clay From: Annie Deckert <annie @decklangroup.com> Sent: Wednesday, January 23, 2013 5:12 PM To: Wilfahrt, Clay Cc: Fischer, Suzanne Subject: Request for exceptions to COI provisions Clay, I am writing to formally request an exception from the COI provisions as outlined in the Federal Guidelines for the forgivable loan program the city is currently working on for the following: • Alliance Machine-potential expansion • Decklan Group-economic development consulting services I have read and understand the COI provisions, however I feel justification for allowing exceptions for each item outlined above. Alliance Machine As you know, Bryan Provo, owner of Alliance Machine, sits on the EDA and DTED subcommittee. Mr. Provo has retained me for my services to prepare and submit the forgivable loan program upon approval. As outlined in the provisions, it indicates that he is unable to apply for the forgivable loan because of his position on the EDA because of a conflict of interest. From day one of the process,there was no point in time which Mr. Provo was privvy to any information which was not public information-all documents, discussions, etc. involved contain no proprietary information, and would be made available to public upon request. Because of the way the program is currently structured(draft form), Mr. Provo would go through the same process as all other applicants. His application would be scored using the same score sheet as all other applicants, and he would abstain from voting when it came in front of the EDA for consideration. While I understand the intent of the COI provisions, I feel it unfair that because of Mr. Provo's community involvement,passion for assisting the Elk River business community through his role on the EDA and valuable input as a business owner through the EDA,he is being punished by not being allowed to apply for the funds. At the time Mr. Provo was appointed to the EDA,this program did not exist, nor was there any indication that it would exist in the future- had Mr. Provo known he would later be excluded from the opportunity to grow his business, create jobs and increase Elk River's tax base because of his involvement on the EDA through the forgivable loan program,he may have thought twice before committing to serve for six years. I feel this particular case is an exception to the rule, and I don't see the conflict of interest as long as this program is promoted and marketed equally to all eligible businesses, and Mr. Provo goes through the same process as all other applicants. Mr. Provo is a key community leader and business owner in Elk River. He bought his property from the city and received Tax Abatement and Microloan funds for his business. I feel excluding him from this opportunity will not only discourage other Elk River manufacturer's from volunteering in leadership roles in the community, but opens up all other subsidies provided business who have folks associated who sit on other boards and commissions (i.e.: Bank of Elk River, etc.) Decklan Group i As you know, I worked for the city for nearly five years in the economic development department. I was the Executive Director of the EDA for the last two years of my tenure there, and played a key role in working with MNDEED in establishing the draft procedural manual and guidelines for the forgivable loan My services are to prepare and submit the application to the city. During that time, at no point was I privy to any inside information which would give me an advantage to assist other businesses in applying for these funds. All information used during the process was and is still public information. Mr. Provo has retained me to assist him in applying for these funds. Additionally, I have two additional clients which are interested in moving forward with this program as well to expand in Elk River,however, have indicated their desire to contract with me to move forward. I am more than happy to make full public disclosure at every applicable effort that I was involved int he creation of this loan, and do not participate in the decision making process for the awarding of the loan. My business is economic development consulting, and client base is primarily in Elk River,therefore I feel that not allowing me to assist businesses in applying for these funds may prevent some manufacturer expansion and development in Elk River. As you and I discussed on the phone this afternoon, I spoke with Suzanne earlier so she is familiar with the situation. I know you will be out the next two days at the EDAM conference, but I'm hoping we can get the ball rolling on this - I will send the federal guidelines and exception request information to Suzanne as well. I am more than happy to provide you with any additional information I need. From the guidelines and conflict of interest worksheet, I am confident that we should be able to obtain exceptions for both of these situations. For the exception,we also need a legal opinion from the city attorney indicating that the exception soguht would not violate state or local law. Please let me know what you need from me moving forward. Thanks Annie Annie B Deckert,MPA,EDFP,President www.decklangroup.com 612.564.0795-office 763.228.6752 -cell C C 2