8.1. SR 06-20-1994
ITEM. 8 . L
ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY
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MEMORANDUM
TO: MAYOR AND CITY COUNCIL
SUBJECT: CITY'S CONFLICT OF INTEREST
ORDINANCE
INTRODUCTION
The City Council is asked to consider a recommendation from the Elk River Econonllc
Development Authority (EOA) to revise the City's Conflict of Interest Ordinance.
BACKGROUND
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At its June 13, 1994 meeting, the Elk River EDA considered a legal opinion .fioIn City
Attorney Peter Beck regarding a conflict of interest issue. This opinion was authorized by
the EDA at its May meeting. The conflict of interest issue centered around EDA
President Jeff Gongoll's receipt of a monthly Prospect Status Report and whether access
to this report gave President Gongollor his employer, Riverside Development, an unfair
competitive advantage over other developers. Mr. Beck recommended that the EDA
discontinue its practice of preparing a "confidential" Report to its Commissioners and that
only information that is public data be provided. Such a practice helps ensure that the
EDA is in compliance with the requirements of the open meeting law, and that President
Gongoll will not have access to any information not available to the general public. . If
those conditionsare met, PresidentGongoll's receipt ofa monthly Report is not a conflict
of interest.
The balance of the opinion addressed the EDA Statute on conflict of interest matters, the
State Conflict of Interest Statute, and the City Conflict of Interest Ordinance. With
respect to the State Statutes, an EDA Commissioner is prohibited from having a "financial
interest" 111 a sale, lease, contract, proposed contract or project of the EDA. An EDA
Commissionet who has no ownership interest in his employer's company and whose
compensation is not dependent upon the company's dealings with the EDA,does not have
a 'iinancial interest" within the parameters of State Statutes.
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P.O. Box 490 · 13065 Orono Parkway · Elk River,MN 55330-1743 · (612) 441-7420 . Fax: (612) 441~7425
Equal Opportunity Housing and Equal Opportunity Employment
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The City's Conflict of Interest Ordinance states that "city officials (elected, appointed,
etc.) and employees must scrupulously. avoid any activity which suggest a conflict of
interest between their private interest and city responsibilities." Section 218.08 (9) .
provides examples of activities Which are not in accordance with the conflict. of interest
policy:
(1). Having an interest in any business which has contacts or other direct
dealings with the city;
(9) Acting as an agent or representative for another in any matterpending
before the city or council, except in the proper discharge of duties. .For
example, an official or employee should not appear before the city council
on behalf of a third party and seek to use their position or influence to sway
the council.
As discussed at the June 13 EDA meeting, illustration (1) directly impacts Commissioner
Dwyer as well as other appointed officials; illustration (9) directly impacts Commissioner
Gongoll. Consequently, questions at the EDA meeting arose relative to the City's desired
intent of its Conflict of Interest Ordinance. That is, recruiting volunteers to serve on an
appointed commission may be hindered if an appointee has an ownership interest in. a
business which has contacts or other direct dealings with the City. This has led the EDA
to recommend to the City Council that it consider revising its ordinance on this matter.
e ACTION REQUESTED
The City Council is asked to consider a recommendation from the EDA to revise its
Conflict of Interest Ordinance. Options available to the City Council include:
a. leave ordinance intact;
b. delete specific sections which are construed as cumbersome; or
c. revise the ordinance by adding additional language for purposes of
clarifying it.
EFFECTIVE DATE
The effective date of any change to a city ordinance is the date the change.is published in
the Elk River Star News.
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Attachments: June 7, 1994 City Attorney Letter
Conflict of Interest Ordinance
JAMES P. LARKIN
ROBERT L. HOFFMAN
JACK F. DALY
D. KENNETH LINDGREN
GERALD H. FRIEOELL
ALLAN E. MULLIGAN
JAMES C. ERICKSON
_WARD J. DRISCOLL
NE N. FULLER
HN D. FULLMER
ROBERT E. BOYLE
FRANK I. HARVEY
CHARLES S. MODELL
CHRISTOPHER J. DIETZEN
JOHN R. BEATTIE
LINDA H. FISHER
THOMAS P. STOLTMAN
MICHAEL C. JACKMAN
JOHN E. DIEHL
JON S. SWIERZEWSKI
THOMAS J . FLYNN
JAMES P. QUINN
TODD I. FREEMAN
PETER K. BECK
JEROME H. KAHNKE
GERALD L. SECK
JOHN B. LUNDQUIST
DAYLE NOLAN-
THOMAS B. HUMPHREY. JR.
JOHN A. COTTER-
BEATRICE A. ROTHWEILER
PAUL B. PLUNKETT
ALAN L. KILDOW
KATHLEEN M. NEWMAN
MICHAEL B. LEBARON
GREGORY E. KORSTAO
GARY A. VAN CLEVE-
JUN _ B 1994
LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
ATTORNEYS AT LAW
1500 NORWEST FINANCIAL CENTER
7900 XERXES A VENUE SOUTH
BLOOMINGTON, MINNESOTA 55431-1194
TELEPHONE (612) 835-3800
FAX (612) 896-3333
DANIELL. BOWLES
TIMOTHY J. McMANUS
TIMOTHY J. KEANE
ALAN M. ANDERSON
DONNA L. ROBACK
MICHAEL W. SCHLEY
LISA A. GRAY
GARY A. RENNEKE
CHRISTOPHER J. HARRISTHAL
MICHAEL A. ROBERTSON
BRUCE J. DOUGLAS
SHANNON K. MoCAMBRIDGE
WIWAM C. GRIFFITH. JR.
JOHN J. STEFFENHAGEN
DANIEL W. VOSS
JOHN R. HILL
PETER J. COYLE
MICHAEL J. SMITH
VILIS R. INOE
OWIGHT N. HOLMBO
ANDREW F. PERRIN
ANN M. MEYER
FREDERICK K. HAUSER III
MARY E. VOS
LARRY D. MARTIN
JANE E. BREMER
RENEE L. TOENGES
MARCY R. KREISMAN
MARIEL E. PIILOLA
DAMON E. SCHRAMM
STEPHEN J. KAMINSKI
rt:;ItJJWJ~
OF COUNSEL
WENDEll R. ANDERSON
JOSEPH GinS
MARK A. RURIK
- ALSO ADMITTED IN WISCONSIN
June 7, 1994
Mr. Bill Rubin, Executive Director
Economic Development Authority
City of Elk River
P.o. Box 490
Elk River, Minnesota 55330
6le: Conflict
~ear Bill:
of Interest
This letter is in response to your letter of May 10, 1994, requesting,
on behalf of the Elk River Economic Development Authority (EDA), my
opinion with respect to a potential conflict of interest. Your letter
indicates that EDA President Jeffrey Gongoll recently accepted
employment with Riverside Development (Riverside). Riverside, its
principals and subsidiary companies, are involved in the business of
real estate development, brokerage and leasing in the City of Elk
River. The EDA's specific concern is whether President Gongoll's
access to the monthly "confidential" Prospect Status Report
distributed to EDA Commissioners will give Riverside an unfair
competitive advantage over other developers, and therefore constitute
a conflict of interest.
Your letter refers me to Minnesota Statutes Section 469.098, which
identifies certain conflicts of interest regarding EDA Commissioners;
and Section 471.88, which identifies a number of exceptions to the
state conflict of interest statute set forth in Section 471.87. I
have also reviewed the City conflict of interest ordinance, found at
Section 218.08(9) of the City Code of Ordinances; and the Minnesota
Open Meeting Law, Minnesota Statutes Section 471.705. My response to
your specific inquiry regarding the Prospect Status Report is set
forth below. I have also come across, in the course of reviewing the
4Ittatutes and ordinances identified above, several related issues which
LARKI~' HOFFMAN, DALY & UNDGREN, LTD.
Mr. Bill Rubin, Executive Director
~conomic Development Authority
"'une 7, 1994
Page 2
the EDA and President Gongoll should be aware of. These issues are
also discussed below.
Prospect Status Report
Subdivision l(b) of the Minnesota Open Meeting Law (Minnesota Statutes
Section 471.705, Subd. l(b)) provides, in part, as follows:
Agenda Materials. In any meeting which under Subdivision 1 must
be open to the public, at least one copy of any printed materials
relating to the agenda items of the meeting which are prepared or
distributed by or at the direction of the governing body or its
employees and which are:
(1) distributed at the meeting to all members of the
governing body;
(2) distributed before the meeting to all members; or
(3) available in the meeting room to all members;
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shall be available in the meeting room for inspection by the
public. . .
The statute goes on to state that Subdivision l(b) does not apply to
materials classified by law as other than public or to materials
relating to the agenda items of properly closed meetings.
It is my understanding it has been the practice in Elk River for the
EDA to receive a "confidential" Prospect Status Report before each
meeting. It is President Gongoll's access to the monthly Prospect
Status Report which has raised the issue of a potential conflict of
interest. My recommendation is that the EDA address this issue by
discontinuing the practice of preparing "confidential" Prospect Status
Reports to the EDA Commissioners, and that only information which is
public data be provided to the Commissioners. This will insure that
the EDA is in compliance with the requirements of the Open Meeting
Law, and that President Gongoll will not have access to any
information not available to the general public.
State Conflict of Interest Statutes
Minnesota Statutes Section 471.87 provides as follows:
Except as authorized in Section 471.88, a public officer who is
authorized to take part in any manner in making any sale, lease,
or contract in official capacity shall not voluntarily have a
personal financial interest in that sale, lease, or contract or
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LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
Mr. Bill Rubin, Executive Director
~conomic Development Authority
~une 7, 1994
Page 3
personally benefit financially therefrom. Every public officer
who violates this provision is guilty of a gross misdemeanor.
Minnesota Statutes Section 469.098 provides as follows:
Except as authorized in Section 471.88 a commissioner, officer or
employee of an [economic development] authority must not acquire
any financial interest, direct or indirect, in any project or in
any property included or planned to be included in any project,
nor shall the person have any financial interests, direct or
indirect, in any contract or proposed contract for materials or
service to be furnished or used in connection with any project.
Minnesota Statutes Section 471.88 sets forth 16 exceptions to Sections
471.87 and 469.098. The only relevant exception provides that the
governing body of the EDA may, by unanimous vote, contract for goods
and services with an interested officer in the case of a contract for
which competitive bids are not required by law.
The state conflict of interest laws prohibit an EDA Commissioner from
having a IIfinancial interestll in a sale, lease, contract, proposed
contract or project of the EDA. The prohibition here is against a
_, financial interest." An employee, who has no ownership interest in
the company, and whose compensation is not dependent upon the
company's dealings with the EDA, does not have a IIfinancial interest"
within the scope of these statutes.
The City of Elk River's conflict of interest ordinance is found at
Section 218.08(9) of the Elk River City Code. The conflict of
interest ordinance, as revised by the City Council approximately a
year ago, applies to all lIofficials and employeesll of the City. The
term lIofficial" is defined in Section 9(b) of the ordinance to include
appointed officials to the EDA. The conflict of interest ordinance
4IJoes, therefore, apply to President Gongoll.
LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
Mr. Bill Rubin, Executive Director
~Economic Development Authority
~une 7, 1994
Page 4
The conflict of interest ordinance provides, in part, that:
City officials and employees must scrupulously avoid any activity
which suggests a conflict of interest between their private
interests and City responsibilities. Officials and employees of
the City, or their family members, shall not engage or have
financial interests in any business or other activity which could
reasonably lead to a conflict of interest with the officials or
employees' primary city responsibilities. . . . Examples of
activities which are not in accordance with this policy include,
but are not limited to, the following:
(1) having an interest in any business which has contacts or
other direct dealings with the city;
(4) using an official's or employee's authority, influence,
or City position for the purpose of private or personal
financial gain;
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(7) entering into a business transaction when it involves
using confidential information gained in the course of
employment or is with an individual or entity that has
contacts or other direct dealings with the City;
(8) accepting other employment or public office where it
will affect the official's or employee's independence of
judgment or require use of confidential information
gained as a result of City duties;
(9) acting as an agent or representative for another in any
matter pending before the City or Council, except in the
proper discharge of duties. For example, an official or
employee should not appear before City Council on behalf
of a third party and seek to use their position or
influence to sway the Council;
The conflict of interest ordinance sets forth twelve examples of
activities not in accordance with the conflict of interest policy. I
have set forth above the five which I believe may affect President
Gongoll. Set forth below are my comments on how these provisions may
apply to President Gongoll's situation.
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LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
Mr. Bill Rubin, Executive Director
~conomic Development Authority
,-une 7, 1994
Page 5
C>< (1)
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Having an interest in any business which has contacts or
other direct dealing with the City.
President Gongoll's employer, and its subsidiary entities,
are clearly businesses which have contacts and direct
dealings with the City. However, I believe the City Council
intended "having an interest" in such a business to mean
having an ownership or financial interest, as opposed to
being an employee. If President Gongoll does not have an
ownership interest in Riverside or any of its subsidiary
entities, and is an employee who is paid a fixed salary
regardless of the outcome of any of Riverside's dealings with
the City, this provision would be complied with. On the
other hand, if President Gongoll's compensation is dependent
on the outcome of Riverside's dealings with the City, then he
would potentially have an "interest" in the business and
violate this provision.
(4) Using an official's or em~loyee's authority. influence. or
City position for the purpose of private or personal
financial gain.
This provision prohibits President Gongoll from using his
position for the financial gain of himself or any other
private entity, including his employer. I recommend that
President Gongoll scrupulously avoid acting on any matter
which could affect his or his employer's interests, either
positively or negatively, to ensure that this guideline is
complied with.
(7) Entering into a business transaction when it involves using
confidential information gained in the course of employment
or is with an individual or entity that has contacts or other
direct dealings with the City.
This provision prohibits the use of confidential information
gained in the course of President Gongoll's service as
President of the EDA. The most effective way to address the
issue of "confidential inforrriation" is to simply not provide
confidential information to the members of the EDA, as
recommended above.
The language in this provision prohibiting an official from
entering into a "business transaction" with an entity that
has contacts or other direct dealings with the City does not
prohibit a City official from accepting employment with an
entity that has contacts or other direct dealings with the
City unless the employment, or the compensation for that
LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
Mr. Bill Rubin, Executive Director
~conomic Development Authority
,-une 7, 1994
Page 6
employment, is dependent upon the employer's dealings with
the City. See the discussion above.
(8) Accepting other employment or public office where it will
affect the official's or employee's independence of judgment
or require use of confidential information gained as a result
of City duties.
The recommendation contained in the discussion immediately
above regarding confidential information also addresses that
portion of this provision. The prohibition in this provision
on accepting employment where it will affect the official's
independence of judgment could apply to President Gongoll's
situation but will not, by itself, require President Gongoll
to resign. This provision will be complied with if President
Gongoll scrupulously avoids acting on any matter which could
affect his employer's interests, either positively or
negatively.
C>( (9)
Acting as an agent or representative for another in any
matter pendinq before the City or Council, except in the
proper discharge of duties. For example, an official or
employee should not appear before City Council on behalf of a
third party and seek to use their position or influence to
sway the Council.
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This provision will prevent President Gongoll from appearing
on behalf of his employer, or any other third party, before
the City Council. I recommend that President Gongoll not
represent Riverside, or any of its subsidiary entities, in
any matter pending before the City Council. I would also
recommend, in the spirit of complete compliance with this
provision, that President Gongoll not appear before the
Planning Commission or EDA either.
Conclusion
In conclusion, I recommend that the EDA discontinue the practice of
distributing "confidential" Prospect Status Reports to the EDA
Commissioners, and that all information provided to the Commissioners
for their meetings be made available to the public at the meeting. I
further recommend that President Gongoll and the EDA follow the
following guidelines:
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President Gongoll should resign from the EDA if he has an
ownership interest in Riverside or any of its subsidiaries;
or if his compensation is dependent in any way on the outcome
of Riverside's dealings with the City.
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LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
Mr. Bill Rubin, Executive Director
~Economic Development Authority
_June 7, 1994
Page 7
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If President Gongoll does not have an ownership interest in
any business entity which has direct dealings with the City,
and his compensation is not dependent in any way on the
outcome of his employer's dealings with the City, I do not
see a need for President Gongoll to resign from his position
on the EDA, provided:
o
That President Gongoll does not participate in the
discussion or the EDA's action on any item which
could affect his employer's interests, either
positively or negatively (i.e., any item that
affects either his employer or any of its
subsidiary entities, or any competitor of his
employer and its subsidiary entities); and
o
That President Gongoll does not have access to or
use any confidential information as a result of his
position on the EDA; and
o
That President Gongoll does not appear as a
representative of his employer or any other third
party before the City Council, the EDA, the
Planning Commission, or any other City Board,
Commission or other entity.
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I have attached the City conflict of interest ordinance for your ready
reference. Please call if you have any questions.
Si~;t--
Peter K. Beck, for
LARKIN, HOFFMAN, DALY & LINDGREN, Ltd.
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the City at any time and for any reason upon proper noti e.
With the exception of department heads, City employees re
required to submit a written resignation to their su rvisor at
least ten (10) working days prior to their anticipa ed
separation date.
Department heads must provide twenty (20) work. g days written
notice to the City Administrator prior to th r anticipated
separation date. Employees who terminate ployment with the
City after giving proper written notice 0 such termination
shall be compensated for accrued but un ed vacation time as of
the date of separation. Failure to c ply with this notice
procedure may be considered reason r denying an employee
future employment with the City. unauthorized absence from
work for a period of three (3) w king days may be considered a
resignation without notice.
8. Su lemental Em 10 men Employees must devote all work
time to City business. N work relating to supplemental
employment may be perfo ed during an employees regularly
scheduled hours. Empl ees may accept supplemental employment
while a City employe only if the following conditions are met:
a. The emp' oyee informs his/her supervisor of the duties
of the sup emental position and any potential conflict of
interest ith City employment;
e supplemental employment does not conflict with
vertime requirements of the employee's position with
City; and
of the supplemental
conflicts with his/her City
<:::>( 9 .
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Conflict of Interest.
a. Introduction. The credibility of local government
rests heavily upon the confidence which citizens have in
public officials and employees to render fair and
impartial services to all citizens without regard to
personal interest and/or political influence. Thus, City
officials and employees must scrupulously avoid any
activity which suggest a conflict of interest between
their private interests and City responsibilities.
Officials and employees of the City, or their family
members, shall not engage or have financial interest in
any business or other activity which could reasonably lead
to a conflict of interest with the official's or
employee's primary City responsibilities. "Family
members" of an official or employee shall be deemed to be
the official or employee's spouse, parents, children,
siblings, brothers-in-law, and sisters-in-law and the
lineal descendants of any of them. Examples of activities
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which are not in accordance with this policy include, but
are not limited to, the following:
.
~ (1) Having an interest in any business which has
contacts or other direct dealing with the City;
(2) Activities which require the official or
employee to interpret City codes, ordinances, or
regulations when such activity involves matters with
which the official or employee has business and/or
family ties;
(3) Consulting activities carried out within the
City if such consulting involves talents or skills
primarily related to the official's or employee's
City work responsibilities;
(4) Using an official's or employee's authority,
influence, or City position for the purpose of
private or personal financial gain;
(5) The use of city time, facilities, equipment, or
supplies for the purpose of private or personal
financial gain;
.
(6) Receipt or acceptance of any compensation or
other considerations from anyone other than the City
for the performance of an act which the official or
employee would be required or expected to perform in
the regular course of his/her City employment, or as
a part of his/her duties as an official or employee.
Compensation does not include awards, plaques, or
momentos recognizing the official's or employee's
contribution in their area or to a charitable
organization, honoraria, or other expenses in
conjunction with a presentation or demonstration in
the employee's field of expertise or
scholarships/financial grants for schools;
(7) Entering into a business transaction when it
involves using confidential information gained in the
course of emploYment or is with an individual or
entity that has contacts or other direct dealings
with the City;
(8) Accepting other-.emploYment or public office
where it will affect the official's or employee's
independence of judgement or require use of
confidential information gained as a result of City
duties;
.
~ (9) Acting as an agent or representative for another
in any matter pending before the City or Council,
except in the proper discharge of duties. For
example, an official or employee should not appear
before City Council on behalf of a third party and
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seek to use their position or influence to sway the
Council;
.
(10) Conducting personal business while working
regularly scheduled hours;
(11) Accepting rebates or procuring any financial
gain through the bidding process or employment of
outside personnel; and
(12) Acceptance of any gift (other than a campaign
contribution) with a value of $100 or more from any
individual, corporation, or other entity that is, or
may become, a supplier of goods or services to the
City.
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Any official or employee engaging in any activity
involving either an actual or potential conflict of
interest or having knowledge of such activity by another
official or employee shall promptly report the activity to
the City Administrator, or if such activity be by the City
Administrator, to the Mayor. The City Administrator or
Mayor shall investigate the matter and make a
determination as to whether or not an actual or potential
conflict exists. If the City Administrator or Mayor
determines a conflict exists, it shall be presumed that
the continuation of the practice would be injurious to the
effectiveness of the official or employee in carrying out
his/her duties and responsibilities. In such cases the
official or employee shall immediately terminate the
conflicting activity or be subject to termination of
employment or removal from office.
b. Officials. For the purposes of this Section
218.08(9), the term "official" shall include all elected
and appointed officials of the City including, but not
limited to, the City Council, the Economic Development
Authority, and the members of the Boards and Commissions
established by Chapter II of the City Code of Ordinances.
"Employee" shall include any individual employed by the
City on a full or part-time basis.
c. Elections. NO elected official shall require,
either directly or indirectly, any employees of the City
to campaign on his/her behali as a condition to
employment. No employees shall use City time or resources
in promoting or advocating the election of any individual.
d. Applicability. Nothing in this policy is intended
to violate, supersede, or conflict with any applicable
state or federal law regarding conflicts of interest in
public employment or disclosure requirements such as those
set forth in Minn. Stat. Chapter lOA.
. ~~. ~g~o~~.. Lfi,off. may 5eesme fie.e:::~ :: a ~::~;: ::.
ohort.J.gc at 'h'eLlc, SReLt.J.gc et t1:!l'\eis, 1:!-~--~ii__wl Q___ -_i.__a.R~I,
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