A member (the Member) of a county Property Tax Assessment Appeals Board (PTAB or the Board) has requested an opinion as to whether a conflict of interest arises if he owns an interest in and works as a salesman for a real estate agency.
The Member was appointed to his county PTAB effective July 1983. The Property Tax Assessment Appeals Board was established by Act of the Legislature in 1977 (Maryland Code Annotated, Article 81, §248 et seq.). The Board consists of 24 separate Appeals Boards, one for each county and Baltimore City, which are authorized to hear all appeals in their respective jurisdictions concerning property tax assessments set by the local Supervisor of Assessments. Board members are appointed by the Governor based on recommendations from the county governing body or chief executive. They serve five-year terms and are paid an hourly fee plus expenses.
Hearings are conducted pursuant to the Maryland Administrative Procedure Act, though according to the PTAB Administrator, the approach is that the hearings are informal and non-technical. The Board's proceedings are also subject to Maryland Open Meetings requirements. Thus, most proceedings on residential properties are open, though appeals involving commercial property may be closed because they involve business income, expense data and other information that is confidential. Section 248(e) of Article 81 sets forth conflict of interest provisions applying to Board members. These provisions deal with disclosure of data, acceptance of gifts, and disqualification as to property in which a member has an interest, and also prohibit Board members from holding any position or engaging in any business which is incompatible with the duties of their office.1
The Member submitted an Ethics Commission Board and Commission Financial Disclosure Statement on August 24, 1983, disclosing on Schedule H that he works as a part-time salesman for a local realty firm (the Firm) and on Schedule I that he has a 30 percent interest in it. He indicates that he has a real estate salesman's license. He has been involved with the business for 6-8 years; he received no income last year, anticipates approximately $3,000 this year, and (since he is filing for Social Security) could have a maximum $4,900 income next year. He indicates that the Firm has not declared dividends and that its gross annual income has not exceeded $1 million. The Member also states that though salesmen are required under the real estate law to be supervised by a broker, he generally functions as a self-employed free-lance salesman. The company does not control his time or hours or otherwise control the substance of his sales activities. The Member indicates that he has never done appraisal work, and that he has never been involved in his real estate activities with the assessment or appeals processes.
The Governor's Appointments Officer indicates that the general policy of the appointing authority has been to avoid appointment to PTAB's of individuals involved in real estate. This is partly based on the view that there are likely to be available candidates for these positions who are not in the real property business, and partly in reliance on provisions of the PTAB law prohibiting service by persons having "incompatible" employment. In this situation, however, the member's affiliation with the Firm was not known and his appointment was apparently based on the belief that he was retired from a business unrelated to real estate. The Member submitted an Ethics Commission Appointee Exemption Form disclosing no interests or employment. He has stated that based on his inquiries at the time, and the fact that he was not involved in the appraisal process, he did not view his real estate affiliations as conflicts requiring disclosure on the form.
As we have discussed in other Opinions dealing with the Department of Assessments and Taxation (DAT) and PTAB's (see Opinions No. 83-28, No. 83-24, No. 82-27, No. 82-24 and No. 80-192, the assessment process involves evaluation of properties based on comparable sales in an area as of a particular date of the assessment. It is this value that is the subject of appeal to a PTAB. The assessed value is a possible information factor in the real estate transaction, though the actual sale or asking price may be determined by more recent transactions than those considered in the assessment process. The Administrator of PTAB has expressed the view that the kind of knowledge involved in the real estate sales transaction is not the type that would be involved in the assessment process or appeal process. He has also stated his view that limited real estate activity would not result in such pervasive involvement with real property transactions as to impact on a Board member's official actions.
The Director of DAT indicates that employees of his Department involved in the assessment process are forbidden from holding current real estate broker's or salesman's licenses. This is so, he says, because of concerns that assessors would have access to data and knowledge about properties that would not be available to the general public, and also because of risks that this information and special position could be used to private economic advantage in real estate work, especially in advising a client about the value and best price for a property. The Director sees this as less of a problem for PTAB members, since their information access is more limited, and is generally public in any case. The only possible problem that he could envision in an appeal situation would be in a case involving commercial property where the Board member was a realtor involved in the transaction.
This request involves the employment and financial interest prohibitions of §3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law). The strict prohibition of subsection (a)(1)(i) of this section applies to both financial interests and employment and bars these relationships as to entities that are under the authority of or contract with an individual's agency. We do not believe, however, that the Member's affiliations with the Firm constitute a financial interest or employment with an entity subject to the PTAB's authority. Nor, in our view, would his relationships with individual clients, as a general matter, constitute employment within this subsection. This conclusion is consistent with our Opinion No. 80-19, which addresses the question of jurisdiction and authority of PTAB's over property owners.
Opinion No. 80-19 notes that the Board's authority is narrowly drawn, limited to making determinations relating to particular properties on a case-by-case basis. Taking into account the Board's absence of regulatory or other authority to control real property or assessments thereon, we concluded that as long as no appeal was made to the Board by a property owner, the individual or entity was not under the Board's authority for purposes of §3-103(a). Thus, business of the Member with particular property owners would not be limited by this section unless the particular property owner has an appeal currently pending before the Board. Also, unless the Firm itself were somehow to become a property owner with appeals before the Board, ownership and employment affiliations with it would not be within the scope of the strict prohibition of §3-103(a)(1)(i).
Subsection (a)(1)(ii), however, could potentially apply here, even if there is no strictly defined authority relationship. This provision applies only to employment and generally bars any employment that would impair an individual's impartiality and independence of judgment. We have viewed this section as general inconsistent employment provision (in implementation of the appearance language of §1-102), but have also looked to the issue of whether and how the employment would impact on actual official duties. We have applied this provision in many opinion requests, generally looking to the relationship between private and official activities to determine whether outside duties are likely to impair an individual's ability to carry out his State duties impartially and independently. Though we believe that there is a relationship here between the Member's private and official interests, in our view his real estate activities do not, as currently described to us, represent a substantial enough involvement in the real estate process to create a relationship likely to impair his impartiality.
We wish to clarify, however, that our conclusion should not be read to reflect the view that participation in the real estate process would generally be treated as allowable employment under §3-103(a) (1)(ii). Both the assessment process and the real estate sales process involve important economic relationships with real property, and when these activities occur in the same geographical area, we believe that there is significant potential for conflict of interest. Our Opinion No. 83-28, for example, involved a PTAB member who also worked full-time as a real estate appraiser. We concluded in that request that the work as an appraiser of properties within the same county as his Board was inconsistent with the individual's service on the Board. That member's activity with his county was extensive and involved the very process, valuing of property, that he was undertaking in his official activity.
We were concerned in Opinion No. 83-28 about the strong likelihood that the individual's private work would involve specific properties, the value of which was likely to be at issue, directly or indirectly, in particular matters being considered by his Board. We also noted that "as the owner of a private appraisal business within the county, the individual can be expected to have a personal and economic stake in the validity of his work," concluding in that situation that the relationships between the individual's private and official duties were not remote, and that the situation presented raised questions under the Ethics Law's goal of avoiding improper influence and "even the appearance of improper influence." (See §1-102(d).) We are not convinced, as a general matter, that involvement in real estate sales transactions would not raise some of the same concerns.
However, in the circumstances of this request, we believe that the Member's extremely limited activity requires a conclusion that his real estate work would not impair his actions in his official position. The Member's real estate firm has very little activity (with annual gross sales of $1 million or under); his own sales activities are limited to residential properties and involve a minimum annual income; and he indicates he has never earned dividends or other profits generally from the Firm. Under these circumstances, we cannot conclude that the Member's private economic involvement in county real estate transactions is so significant that it is likely to involve matters before the Board to an extent where his impartiality would be impaired. We therefore advise him that the employment disclosed here would not result in a violation of §3-103(a)(1)(ii).3
Herbert J. Belgrad, Chairman
Reverend John Wesley Holland
Betty B. Nelson
Date: November 29, 1983
1 We wish to make it clear at the outset that our Opinion deals only with application of the Maryland Public Ethics Law (Article 40A, Annotated Code of Maryland, the Ethics Law). We do not in any way purport to rule on the specific provisions of the PTAB law in Article 81. In view of the number of questions (formally and otherwise) that we receive regarding employment of PTAB members, however, we recommend that the Administrator act to interpret the provisions of Article 81, and that the appointing authority communicate these policies to potential appointees and local recommending agencies.
2 Except as otherwise expressly cited to the Maryland Register, Opinion citations are to Commission Opinions published in COMAR Title 19A.
3 He should be aware, of course, that should his own activity or that of the Firm increase in any significant way, a very different result could be possible.