87.04

OPINION NO. 87-4

An opinion has been requested as to whether members of the Regional Planning Council (RPC) may serve on the Board of Directors of the Baltimore Region Community Development Corporation (BRCDC), a private non-profit corporation established to promote the development of low and moderate income housing and general neighborhood revitalization. The RPC is a planning agency covering Baltimore City and Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties, and is described as "in effect a council of local governments with State participation." (Maryland Manual, 1985-1986, p. 389.) The RPC was established by Act of the Legislature and its authority and responsibilities are set forth in Article 78D, Annotated Code of Maryland. Its membership includes representatives of the respective counties, other local jurisdictions and several State agencies, as well as several members appointed at-large by the Governor.

The RPC responsibilities include preparation and adoption of a suggested general development plan, which may be adopted by any unit of government within the area; conducting research and studies; providing advice and recommended standards to units in the area; and developing recommended capital improvement methods. Any development in the area affecting more than one unit of government must be reviewed by the Council, though the unit agency or body responsible for the proposed development may proceed without RPC approval. The RPC appears not to be generally involved in regulatory or grant-making activity. Basic responsibility for policy, direction and operations is with the membership of the Council. (Maryland Manual, 1985-1986, p. 389.)

The agency is funded by State general funds, matching funds from local governments, federal grants and private grants and gifts. Much of its funds are "reimbursable funds," originating with a federal grant to another State agency and provided to RPC under contract. For example, RPC is the authorized "metropolitan planning organization" to do transportation planning in the region. It carries out this planning with federal transportation planning funds awarded to the Maryland Department of Transportation and transferred to RPC by contractual agreement. The agency has a similar working relationship with the Department of Economic and Community Development (DECD). The agency may sometimes receive income through contracts to provide statistical and planning types of services to the private sector. Most of its activities are conducted directly by RPC staff. Though occasionally a consultant is hired, and once the Dundalk Chamber of Commerce was subcontracted to do the planning part of a grant, RPC does not generally make grants or contract out its work to private entities. The agency's work is concentrated almost entirely in the planning area; it does not get involved in actual construction projects.

The BRCDC was established in 1982 in order to allow regional participation in a federal Housing and Urban Development (HUD) program that has since been discontinued. Basically, HUD had a program of bonus funding to encourage localities to develop cooperative housing strategies and programs. This program involved in several stage approval process involving submission of the housing element of RPC's general development plan, and also a general application for the special bonus funds. Subsequent more detailed applications were then to be submitted for spending funds for particular defined projects. The detailed application was to be made (once the first two stages of approval had passed) by either the RPC (to do planning), or by local housing authorities within the region.

This HUD regional initiative was developed by HUD as a program effort, but funded with federal funds from already established housing programs, such as the community block grant housing program. The funds were therefore subject to the additional appropriation limitations of these programs. According to RPC staff, RPC, through its standing committee on housing, made a determination to participate in this program to develop a region-wide program for low-income housing. Restrictions on block grant fund awards, however, presented some logistical problems. On the one hand, these grants could only be made to local jurisdictions, and RPC was not eligible to apply directly. On the other hand, local housing authorities were not permitted to expend block grant funds directly on new housing. Local grantees could use block grants for new housing only through awards to eligible non-profit organizations. At the time there was no eligible region-wide housing organization in the RPC area. Based on a vote and specific request from the Council, Baltimore City was requested to and did apply for a HUD grant on behalf of all the jurisdictions in the region, transferring the funds to an eligible private non-profit housing organization established specifically for this purpose. This organization is the BRCDC. There were no other entities competing for funding for this activity.

As a central regional entity involved in initiating this effort, RPC took the lead in establishing BRCDC. The initial Directors were appointed by the RPC Chairman and the Board's by-laws provided for membership of the RPC Executive Director, the RPC Director of Housing and Community Development, three members of RPC, and four private sector representatives. The HUD grant was made to Baltimore City, which in turn granted the funds to the Corporation, and Baltimore City continues to have the responsibility for monitoring. The Corporation established a revolving loan fund for the support of low-income housing. Though the grant has been closed out by HUD, this close out provides for the continuation of the Corporation, and it functions as an on-going low-income housing program. Its funds include its income from interest and payback of loans, and also a $169,000 loan from RPC. This latter source consists of revenues earned by RPC in another housing program, which are required to be used in housing activities. These funds are available through a loan agreement between the RPC and the Corporation.

In addition to this loan contract, the Corporation also contracts with RPC to provide it with staff services. Planning Council staff indicate that this is similar to other contracts where RPC undertakes a planning or management contract and its employees provide services to other entities as part of their RPC duties. This contract is administered by RPC's Executive Director, and the staff services are provided to the Corporation by the agency's Director of Housing and Community Development. (Both of these RPC staff members were originally on the Corporation's Board of Directors, but were deleted by amendment to the by-laws of January 28, 1987.) The Corporation exists as an independent private organization, answerable for grant monitoring purposes to Baltimore City and HUD, and has the loan agreement and staff services agreement with RPC. According to RPC staff, the Corporation was specifically structured to include RPC staff and members as ex-officio voting members in order to ensure continuity and an ongoing commitment to a regional housing approach.

This request originally arose as a result of the concern of the legislative auditors regarding the service on the BRCDC Board of the two RPC staff members. This aspect of the request has recently became moot, however, by the deletion of these two from the Board. As RPC members are also officials under the Public Ethics Law (Article 40A, Annotated Code of Maryland), however, their continued service would be covered by the provisions in Title 3 of the Law that apply to all officials and employees, and would be prohibited if it is viewed as employment with an entity that contracts with their agency. In our view the determining question in this request is whether these individuals' service on the Board is employment for purposes of either the the strict employment provision of the impairment provision of § 3-103(a)(1) of the Law. This section provides (in subsection (a)(1)(i)) that an official or employee may not be employed by an entity that is under the authority of or contracts with his agency, and further bars (at subsection (a)(1)(ii)) and other employment that would impair his impartiality or independence of judgment.

In considering requests involving a wide variety of activities, we have consistently said that service on the operational and controlling boards of private entities, even where it is not compensated, constitutes an employment relationship for purposes of § 3-103(a)(1). (See, for example, Opinion No. 87-1 and Opinions cited there.) We have also, however, said that service on such entities ex officio, as part of official assigned State duties, does not result in the type of private employment relationship intended to be addressed by these provisions, as for example, in Opinions No. 86-32, No. 85-26, No. 82-11 and No. 80-5. Opinion No. 82-11 in particular involved a situation similar to the one presented here, where several DECD employees were permitted to fill "DECD seats" on a private economic development company. In that request the agency was involved in an ongoing interactive development process. It had expressed the interest in the employees' participating on the private board to ensure the maintenance of a coordinative approach to economic development activities in which the State (through DECD) and the private entity were jointly involved.

In view of the history of the establishment of BRCDC, we believe that the principles followed in Opinion No. 82-11 are equally applicable here. This activity can therefore be viewed as a joint effort of RPC and the Corporation, and the officials' BRCDC service as part of their official RPC duties, provided that this service is kept strictly within the constraints on such service discussed in the earlier Opinions. As noted in our Opinion No. 80-5, this includes the following:

(1) Their appointment and service should be at the pleasure of the RPC (by appointment from that body to fill an "RPC seat," rather than by BRCDC election);

(2) It should be clear that their actions on the Board reflect the officially defined policy of the RPC; and

(3) It should be clear that no compensation, reimbursement (other than what would be allowable under State regulation) or other remuneration be provided to them in connection with their BRCDC service.

It should also be noted that all of their actions as officials of the State are governed by the other provisions of the Ethics Law. They should thus be conscious in their loan decisions as BRCDC Board members that they cannot participate if they have an interest in the transaction or it involves relatives or entities with which they have the relationships defined in § 3-101 of the Law. Further, the § 3-104 prohibition against use of prestige of office for one's own gain or that of another would also apply, as would the limitation in § 3-107 against use of official information for their own economic benefit or that of another.

Barbara M. Steckel, Acting Chairman
   William J. Evans
   Reverend John Wesley Holland
   M. Peter Moser
   Betty B. Nelson

Date: February 26, 1987