86.31

OPINION NO. 86-31

The Maryland Agricultural Land Preservation Foundation (the Foundation) has requested an Opinion as to whether members of its Board of Trustees, or members of other Department of Agriculture (DAGR) boards and commissions, may participate in the Foundation's agricultural district and easement purchase programs. This program was established in 1977, with the general purpose of preserving agricultural land and woodland in the State. (Agricultural Article, §2-501 et seq., Annotated Code of Maryland.) The Board of Trustees of the Foundation consists of 11 members, two serving ex officio (the State Treasurer and the DAGR Secretary) and the remainder from the State at large appointed by the Governor. Five of the at-large members must be farmer representatives actively engaged in or retired from farming. Of the remaining four, one must be a representative of the Department of State Planning.

The agricultural land preservation program is a two-step process, with the first step the establishment of an agricultural district. The process is started by the petition of one or more landowners to establish a district. Each area must be at least 100 contiguous acres, though individual landowners may have smaller units. The petition is referred to the local planning agency and a local preservation advisory group, each of which evaluates the petition and makes a report to the local governing body. They apply criteria which must be at least as restrictive as the State criteria defined in COMAR 15.15.01.03C. These include size, productivity and location. The local jurisdiction may have additional criteria, and very often local governing bodies have requirements designed to conform agricultural land preservation to local planning and growth expectations. If the local governing body votes to establish a district, it refers this recommendation to the Foundation. A report is prepared by the agency's staff regarding whether the district meets the Foundation's criteria, and final determination is by the Board of Trustees of the Foundation. If the determination is to approve, then a district agreement is executed and recorded in the land records of the County.

Once a district is established the landowner may not use the land for any purpose other than farming for at least five years. Under the agreement, the land may not be subdivided or developed for residential, commercial or industrial purposes. Notice of intent to terminate must be provided one year in advance of termination. Landowners may retain the right to develop one-acre residential lots for themselves and their children with a maximum of 10 and no more than one for each 20 acres. The primary benefit of the establishment of the district, however, is that this is a pre-condition to the sale to the Foundation of a perpetual development rights easement.

This second step of the Foundation's program is one in which landowners may apply to sell development rights to the Foundation. Easement applicants in this process bid on the difference in value between the land's fair market value (what a developer would pay) and the agricultural value (what a farmer would pay). Basically, the landowner is being compensated for the equity lost to him by his agreement not to sell the property for development. This easement purchase program is funded by the agricultural transfer tax and program open space funds, as well as some county matching funds. During FY1986 there was $7.6 million available. This sum is divided equally, with one-half allocated for county-by-county distribution, and the remainder available for distribution to counties having matching funds.

The easement purchase process is similar to the district process, with the list of applicants for a particular county sent to that county and reviewed there by the same bodies as the district petitions. After the county lists are returned to the Foundation, an appraisal is ordered of all parcels included on each county list. A ranking is prepared based either on a ratio comparing the asking price to the appraised value, or, where the asking price is above the appraised value, on a 100-point easement priority formula that takes into account other characteristics such as size, productivity, development pressure, and local recommendations. The Foundation's Executive Director describes these as fundamentally objective criteria as set forth in the point system in the agency's regulations at COMAR 15.15.01.04.1B. The criteria are applied by the staff. Once the ranking is established, an offer to purchase an easement will be made offering either the appraised value or the asking price, whichever is lower. The Executive Director indicates that the Board has considerable discretion in defining criteria, but very little in the actual offer process. If an applicant meets the criteria and funds are available at his ranking, there is no discretion for the Board to disapprove.

After an offer is made and accepted, the transaction is treated as a real estate transaction and after settlement the existence of a permanent negative easement is recorded in the county land records. The landowner continues to be the owner of the property in fee simple. The land can be transferred, but would be subject to a restriction in perpetuity against use for any purpose other than agriculture. The landowner and his successors are barred from any development, commercial, industrial or residential, except for certain limited family residential lot exclusions. Except for these family lots, no residential subdivision is allowed. A restaurant, gift shop or other commercial activity would be barred. Generally, signs, billboards, and advertising activities are barred, as is the dumping of trash, ashes or other non-agricultural debris. Agricultural land and woodlands must also be managed in accordance with sound agricultural and forestry practices.

The landowner thus continues to have an obligation to the Foundation, which may periodically inspect the property to ensure compliance with the conditions of the easement. Staff indicates that landowners with easements are monitored, and that legal action was taken in one case where a commercial activity was undertaken on land in a district. The law provides for a "buy-back" of the easement rights 25 years or later from the time of purchase, if it is determined that profitable farming on the land is no longer feasible, and the buy-back is approved by the Foundation and the county. The landowner could buy the easement back for the difference between the fair market value and the agricultural value, as appraised at the time of the buy-back. Though Foundation staff recognize that buy-back is a legal possibility, they express the general program view that the restriction will apply to the land in perpetuity.

This request is presented by the Chairman of the Foundation's Board of Trustees, and addresses the issue of whether and to what extent members of DAGR boards and commissions, including the Foundation Board, may participate in this program. Currently, there are a total of 5 easements and 10 districts with which DAGR board members are involved. One easement is held by an individual who has been a member of the Foundation's Board since 1984. This person was one of the early participants in the program, and his easement was purchased several years before his appointment. (It was not disclosed, however, on a time of appointment exemption form pursuant to §3-103(a)(2)(iii).)

This request raises issues under the outside employment and interest prohibitions of §3-103(a) and 3-105 of the Public Ethics Law (Article 40A, §§3-103(a) and 3-105, Annotated Code of Maryland, the Ethics Law). Section 3-103(a) prohibits an official or employee from being employed by or having a financial interest in an entity that contracts with or is under the authority of his agency (subsection (a)(1)(i)). It further bars any other employment that would impair the individual's impartiality or independence of judgment (subsection (a)(1)(ii)). Section 3-105 also deals with employment, forbidding an official whose duties include responsibilities relating to a contract from being employed by the contractor, if the contract is with any agency of the State and involves the obligation by the State to expend in excess of $1,000 in a single calendar year.

We have consistently said that an interest in land that related to commercial or investment activity results in the existence of a business entity in which the individual has both an employment and interest relationship. In this program, both the district establishment and the easement purchase result in a contractual relationship between the landowner and the Department. Membership in a district or sale of an easement by a member of any DAGR board or commission would thus come within the §3-103(a)(1)(i) prohibition against being employed by or having a financial interest in an entity that contracts with one's agency, and would be prohibited unless an exception can be applied.

As to members of boards other than the Foundation's Board of Trustees, there are several possible exception provisions in the Law that specifically deal with board and commission members, aimed at allowing certain skilled people to be appointed to and retained on boards. These include, for example, the licensing or regulatory exception where members are required to be licensed by the agency (§3-103(a)(2)(i)), the time of appointment exception (§3-103(a)(2)(iii)), the Gubernatorial exemption (§3-103(a)(3)), and the board and commission exemption (§2-103(h)). Of these possible exceptions the time of appointment exemption could be applied to future members of DAGR boards. This provision is aimed at attracting necessary skills to a board where there is a known publicly disclosed existing conflict that is found acceptable to the appointing authority and to the Senate where confirmation is required. The exemption leaves intact protections in the Law which prohibit new business activity relating to the board member's agency. It is an exemption which applies as a matter of law where there has been proper and timely disclosure in connection with the appointment process.

As to current members of DAGR boards, we have also evaluated the situation in view of an additional general exception set forth in §3-103(a)(1), and our implementing regulatory criteria (COMAR 19A.02.01). This exception is allowed where an interest is disclosed and where there is a determination that the situation presents no conflict of interest or appearance of conflict. The regulations are designed as guidelines for determining whether the relationships between private and official activities are sufficiently remote so that these statutory criteria are met. They include review of official responsibilities, consideration of the nature of the private affiliation, and a general evaluation of whether the total circumstances of the particular situation would present a conflict of interest or appearance thereof.

We cannot, of course, deal specifically with each of the 14 individuals serving on DAGR boards other than the Foundation's Board of Trustees. All of the exception criteria, to some extent, depend upon the particular authority of the person's board and the nature of his duties and responsibilities. Some general conclusions can be drawn, however, regarding the application of the exception criteria. First, to the extent that a particular board does not deal in any way with the land preservation program or property owners or transactions in that program, the criteria regarding ability to impact on the private activity would not seem to raise issues. Second, we do not as a general matter believe that this one-time compensation type of transaction results in the kind of continuing contract implementation and compensation relationships intended to be addressed by the regulatory items dealing with the characterization of the individual's private activities.

We recognize that there could be particular circumstances that would require a different conclusion. For example, as ranking decisions may be appealed to the Board of Review, a member of that Board could have a problem if he were to appeal a Foundation determination to that body. Also, we are aware of the continuing nature of the Department's jurisdiction over agricultural land that is subject to a preservation easement. For these reasons, we advise the Department that the regulatory exception of §3-103(a)(1) can be applied to members of boards other than the Foundation, provided that the agency head provides written certification that none of the current board members who are in districts or hold easements present situations that would be conflicts that would impair the credibility of the agency's mission. Explanation of this approach should be provided to all current board members and care should be taken to evaluate any new situations as they develop to ensure that they also meet the statutory and regulatory criteria. Department officials and others involved in the appointment of members should also be aware of the application of the §3-103(a) prohibitions to the holding of a land preservation easement, and the potential application of the appointee exemption and disclosure provisions of §3-103(a)(2)(iii).

In considering application of the Ethics Law to members of the Foundation's Board of Trustees, we believe that a different result is required. The landowner whose property is subject to a preservation easement has a continuing responsibility to comply with restrictions, and also may have certain continuing and reserved rights to develop family residential units. All of these are subject to the substantive scrutiny and monitoring of the Foundation and its staff, which is hired subject to the approval of and reports to the Foundation's Board. Moreover, the Foundation staff indicate that the primary focus of the Board of Trustees' exercise of its discretion is in developing policy in the context of regulatory action and proposed legislation, any of which could impact on landowners with easements. The Board also acts in making decisions regarding exclusions or implementation of particular monitoring or other policies, and defines the ranking criteria that are followed by staff.

Under all of these circumstances, we believe that several of the §3-103(a) regulatory criteria regarding the potential for an official to impact on the private activities in his official duties would raise issues here. Moreover, given the significance of the continuing jurisdiction, the nature of the Board's discretionary authority, and its supervisory role with regard to program staff, we cannot conclude that the relationship between a member's private land preservation activity and his official duties is sufficiently remote to warrant application of a §3-103(a)(1) regulatory exception. We should also note that in view of the nature of these continuing official duties and the fact that easement contract prices would probably exceed the $1,000 threshold of §3-105, this prohibition would also apply. Since there are no exception provisions in this section, the time of appointment and other exceptions of §3-103(a) would not be available to permit this relationship, at least as to Board members that have sold or propose to sell easements to the Foundation.

It is therefore our conclusion that the holding of an easement relationship or inclusion in a preservation district by members of the Foundation Board of Trustees is prohibited by the Ethics Law. Section 2-103(h) of the Law, however, in some limited circumstances allows modification by the Commission of any of the requirements of the Law as to "any member of a State board or commission if, because of the nature of the board or commission...application of the Law to that...member...: (i) would constitute an unreasonable invasion of privacy; (ii) would significantly reduce the availability of qualified persons for public service; and (iii) is not necessary to preserve the purposes of the Law." Exemptions under this section must be requested by the executive agency involved.

Our general approach to this exemption has been to treat it as an extraordinary measure designed to deal with situations where strict application of the provisions of the Ethics Law would clearly be contrary to a defined public interest. In our view the basic intention of the Law is that its provisions be uniformly and evenly applied to require avoidance of situations that could impair a State agency's credibility and damage the public's trust in its implementation of its mission. We continue to believe that this is the correct and proper approach to the section, and that as a general matter it is unlikely that an exemption could be justified under it as to members of the Foundation's Board of Trustees.

In the absence of such an exemption, we advise the Board and the Department that service on the Foundation Board of Trustees by a person in a district or with an easement would be inconsistent with the provisions of the Public Ethics Law.

Thomas D. Washburne, Chairman
   Reverend John Wesley Holland
   Betty B. Nelson
   Barbara M. Steckel

Date: December 10, 1986