We have received a request from the State Treasurer, who is a member of the Board of Public Works, concerning whether he may purchase a piece of real property currently held by the State Military Department.
The Treasurer is the owner of a large piece of agricultural/residential property near Havre de Grace, Maryland. A portion of the property, which is improved by a residential structure used for rental purposes, abuts the Maryland National Guard Havre de Grace Military Reservation. The Treasurer acquired the property from his father in 1937. Due to litigation occurring prior to his father's acquisition of the property, a fence had been constructed directly next to the building, defining the property line less than one foot from the back of the structure. In order to gain access to make improvements to the building, the Treasurer recently approached the Military Department about the possibility of moving the fence two to three feet. He recalls being told that plans had been made pre-dating his request to replace this and other fences on the Reservation.
Staff in the Military Department indicate that plans to replace the fences were independent of the Treasurer's request, in response to federal military direction, and primarily with federal funds. Thus, at the time that the fences at the Havre de Grace Armory were replaced, the fence along the property line with the Treasurer's property was moved to sixteen feet back from the structure. Military Department officials also indicate that the difficulty in maintaining the fence so close to the building meant that moving it back would also be in the Department's interest. The Treasurer has made his property improvements and since he now has access to the additional land, has offered to purchase the parcel from the State if its sale would not impact on the operation of the Military Reservation. The Military Department reviewed the offer and advised the appropriate control authorities that the parcel was excess to the needs of the Department.
The control agencies in circumstances such as this are the Clearinghouse in the Department of State Planning (DSP), the Department of General Services (DGS), and the Board of Public Works (BPW or the Board). Property that is excess to a particular agency is reported to the Clearinghouse, which advises other State and local governmental agencies of its availability. Property not claimed under this process is reviewed by Clearinghouse staff. If an adjacent property owner is interested in a purchase, then DSP may refer the property to DGS with a recommendation that it be placed on DGS' Board of Public Works agenda for sale to the property owner. Otherwise, the DSP recommendation is that DGS seek BPW approval for offer of the property to the public. Prior to placing a property on its BPW agenda either for general sale or to an adjoining owner, DGS has a fair market value appraisal done by its own staff appraiser.
This process has been followed in the circumstances presented here. The Military Department declared the property excess and the Clearinghouse completed its procedure, recommending sale of the parcel to the adjoining property owner, the Treasurer. An appraisal has been prepared for the DGS Division of Real Estate, valuing the property at $.10 per square foot or $192 for the entire parcel. The appraisal seems to rely strongly on the limited possible uses of the property and the absence of any access to it except through the Military Reservation or the Treasurer's property. The Treasurer does not believe that addition of this parcel would materially enhance the value of his current holdings, which he describes as a large farm and residence including many waterfront acres having substantial value. The parcel to be transferred is described by him as so small that its addition would have an insignificant impact on his total property value.
The Director of the DGS Real Estate Division indicates that this process is the standard process for any sale of State property. Under Article 78A, §15, Annotated Code of Maryland, the BPW is the final approval authority for the sale, lease or transfer of any real property belonging to the State, and any conveyance of property must be executed by the Board as well as the head of the agency holding the property. This section also requires the Board to determine the adequacy of consideration in these transactions. The Treasurer of the State is one of three officials designated in Article XII, §1 of the Constitution as members of the Board of Public Works. The other two members are the Governor and the Comptroller of the Treasury. The Board is generally charged with the responsibility to "hear and determine such matters as affect the Public Works of the State, as the General Assembly may confer upon them the power to decide."
This request raises issues primarily under §§3-103(a) and 3-101 of the Public Ethics Law (Article 40A, §§3-103(a) and 3-101, Annotated Code of Maryland, the Ethics Law). Section 3-103(a) deals with prohibited outside employment and financial interests in entities that contract with or are under the authority of an official or his agency (subsection (a)(1)(i)), and also with generally prohibited inconsistent employment (subsection (a)(1)(ii)). Under Article 78A, §15, this sales transaction could be viewed as a contract with or as under the authority of the BPW, and would be barred by §3-103(a)(1)(i) if it involves the Treasurer's employment or interest in an "entity" as contemplated by §3-103(a).
While we have on occasion treated the holding of investment property as resulting in an employment and interest in an entity (see Opinion No. 83-27), we do not believe that the circumstances of this request require this result. The small parcel of land involved here would abut a very old building of little value, and having a total rental income of under $50 per unit per month. This building is at the fringe of a much larger residential/agricultural property, and the State land being purchased would apparently only negligibly improve the value of the total property. Under these circumstances, we do not believe that this proposed sale constitutes an investment transaction as we have viewed this concept. Rather, it represents an insignificant purchase of a small addition to property that is primarily and substantially residential. Consistent with our Opinions that the holding of residential property does not constitute an interest in an entity (Opinions No. 83-27 and 82-271), we therefore conclude that the Treasurer's purchase of this property does not involve his having an employment or interest relationship with an entity that would be covered by the provisions of §3-103(a)(1)(i) or the inconsistent employment provisions of subsection (a)(1)(ii)).
Though this transaction is not absolutely barred by §3-103(a), the Treasurer should, of course, be aware that §3-101 would nevertheless require his disqualification from any BPW consideration of the matter. However the Board's action is described for purposes of the authority provisions of §3-103(a), a member's participation in deliberations on a proposed real property transaction is in our view the type of non-ministerial action forbidden by §3-101 if the individual has an interest. Section 3-101(a) uses the very broadly defined term "interest" rather than financial interest. Thus, the Treasurer's participation in consideration of this sale would be prohibited under this section, however the economic value of the sale to him is characterized.
Herbert J. Belgrad, Chairman
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Date: September 28, 1983
1 Except as otherwise expressly cited to the Maryland Register, Opinion citations are to Commission Opinions published in COMAR Title 19A.