An advisory opinion has been requested as to whether a prospective appointee as a Deputy Director of the Office of Planning (the Requestor) may retain an active real estate license and continue certain private real estate activities and transactions if he becomes a State employee. The Requestor is a former local official who currently holds a real estate agent's license and is affiliated with a local entity (the Firm) whose focus is primarily on commercial and investment property transactions. He is not a partner or owner of the Firm, but an independent agent operating within the authority of a licensed real estate broker. His request deals with issues presented by his interest in completing certain transactions begun in this employment, as well as in continuing active involvement in others. We advise the Requestor he may retain his license as long as he does not engage in active real estate business while he is employed with the Office. Also, he may receive future compensation for past work done in his real estate business, consistent with a transition plan submitted and approved in accordance with the constraints set forth in this Opinion.
The Office of Planning is an agency established in Title 5 of the State Finance and Procurement Article of the Annotated Code. It is defined as the staff agency of the Governor for planning matters, particularly concerning the resources and development of the State. Its Director is appointed by the Governor and reports directly to him. The Office functions as an advisory, consultative, and coordinating agency. It is to prepare, recommend, and periodically revise a balanced, integrated program for the development and effective use of the natural and other resources of the State. It prepares population projections for the State and for each county and municipal corporation in the State, and submits special reports regarding issues in the Office that are of current interest. In addition, the Office has authority and funds to provide planning assistance, including surveys, land use studies, urban renewal plans, technical services and other planning work to local governments.
The Office is the State-level agency responsible (in cooperation with the Department of Agriculture) for certifying local county agricultural land preservation programs and is mandated to establish a central depository for all plans related to its efforts, and to be a repository and clearinghouse for information about real property available for public use. It is also charged with the development and maintenance of the State Development Plan. Under its current authority, the Office's responsibility has been primarily advisory and coordinating, in the areas of land use by State agencies and local jurisdictions and as a planning data center as to State land and populations. Local and regional plans are required to be submitted to the Office, which has the responsibility to review, but no authority to require changes. The agency may make planning grants to localities and provide technical assistance, primarily through contractual employees who work with local jurisdictions. The Office also has central office personnel who serve as liaisons and work closely with local officials throughout the State. The Office may also coordinate with other State agencies as to development issues, but is not the final decision-maker or in a position to compel particular actions or approaches by other agencies.1
The Requestor would be employed as a Deputy Director in the Office, and expects to be working largely with local officials in jurisdictions in various activities in which the agency is involved. Also, he will serve as a principal deputy, and could therefore expect to handle any matters that the Director handles. This would include working in comprehensive planning and information activities and interacting with regional and local planning activities and officials. According to the agency counsel, in addition to the continuing coordination and technical assistance to localities, Office staff would be expected to be involved in the educational and informational efforts in the localities to build support for enactment of legislation granting additional planning authority to the Office in a future Session. Counsel indicates that this effort will entail significant interaction by all staff with local governmental and private individuals, and the agency would not want its staff to have private interests and economic relationships that could create ambiguities about their official status and position.
As noted above, the Requestor is currently actively involved as an agent in a commercial and investment real estate business. In his request, he identified several aspects of his current endeavors that he would like to continue or in which he would retain an interest. In addition to considering the general question of a person in his proposed position continuing an active real estate business, we considered the particular matters. These include, for example, two land transactions for investment/commercial property (which because of the need for additional planning and other approvals are not expected to settle for two or more years), a proposed shopping center sale, continuing involvement in a sale of townhouses in a development subject to bankruptcy action, and several other pending listings that are in various stages of the sale process. The Requestor advises that as to some of these matters he has invested considerable effort and time and contract negotiations are near complete. The commission structure is established, and though the sales are conditional upon a variety of governmental approvals that may take two or more years, once the contract is signed the price and compensation structure will not change. The Requestor believes that he can ensure that there is no further work or involvement by him in these projects.
This request involves primarily application of the impairment provision of §3-103(a)(1)(ii) of the Public Ethics Law (Article 40A, §3-103(a)(1)(ii), the Ethics Law). This section bars employment by public officials that would impair their impartiality or independence of judgment. Also of possible concern are the participation, prestige and information provisions of §§3-101, 3-104, and 3-107 of the Law. Since the activities described by the Requestor do not seem to involve direct regulatory or contractual interactions with the agency, the strict employment and interest prohibitions of §3-103(a)(1)(i) would not seem to apply. Rather, this type of situation is one where we have looked to the other cited provisions of the Law to determine whether the private activity involves potential interactions or dealings with situations or parties that have relationships with the agency or agency programs that would result in impairment or present a potential for violation or appearance issues under the other conflict provisions.
We have followed this approach in a variety of situations involving real estate activities in several opinions where we have considered the ability of employees or board or commission members to engage in active real estate business while maintaining their State job or appointed position.2 Generally, our concern in these situations has resulted in barring such activities where there is an overlap in the populations to be served by the private work and the State duties. While advising in some cases that real estate activities are not absolutely prohibited (see, for example, Opinion No. 80-15) we have said that these activities may be barred where they would necessarily bring the individual into contact with individuals or companies that would be interacting with the agency or agency program (Opinion No. 88-8), or where the prestige of the person's State position would be an unavoidable factor in the private undertaking (Opinion No. 85-3).
These principles must be applied here to determine whether as a general matter any real estate activities by the Requestor would be appropriate in view of the nature of the Office of Planning's impact on the State's land use program. The Office of Planning does not at this time appear to have direct regulatory authority or significant contractual dealings with local developers or landowners. The Office does, however, have continuing planning and coordinating responsibilities in the area of land-use planning that would bring its staff into regular and close interaction with local officials and to some extent private landowners or developers. Thus, despite the absence of direct regulatory authority over individuals or entities that are or would be his real estate clients, the Requestor's duties as Deputy would appear to entail his personal involvement with local officials and others interested in development activities. It is therefore our view that he should not, while he is a State official, be actively engaged in any real estate activity.
We recognize, however, that in real estate work, compensation for services rendered may be delayed, based on defined commission and contractual provisions. We therefore conclude that the Requestor may receive compensation for past services in accordance with a transition plan that would meet the following criteria:
1) Each pending transaction must be disclosed to the Commission and its parameters carefully defined. This would include a definitive list identifying all such matters, and indicating how and when they would be closed or otherwise disposed of. (We note as matter of information that substantial information regarding these transactions was submitted in the opinion review and has been considered by us in reaching this decision.)
2) Compensation may be received in the future for closed or transferred transactions only in accordance with an established fee structure, either consistent with a standard commission arrangement included in a listing agreement or by specific agreement setting forth the fee to be paid. This compensation may not be subject to any future negotiation, discretionary action, or contingency (other than that the transaction actually settle).
3) It must be clear that the compensation may entail no future services to be provided by the Requestor after he becomes a State official.
4) Existing listings or open matters, for which there is no contract at the time of State employment, would have to be transferred to another agent or broker within 30 days of the Requestor's entering into his State position. Where there is a contract, compensation may be received in accordance with items 1 through 3 above upon settlement with the particular parties involved in the contract at the time he assumes his State position. Where there is no contract and the listing is transferred, compensation would be possible based on an agreed upon and defined arrangement for compensation if there is a sale based on the original listing.
5) The Requestor may retain his real estate license as long as it is understood there will be no active real estate activities. It may be held with the Firm with the understanding that if the Firm becomes involved in or affiliated with issues or matters of any significant concern to the Office he may need to make other arrangements, and, further, with the understanding that the Firm will not use the Requestor's State affiliation for any marketing purposes.
This guidance, particularly as it relates to specific transactions, is based on the facts presented, and new facts could require further guidance or adjustments. This approach is designed to allow the Requestor to enter into State service without having to sacrifice compensation for past services, but to ensure that this is done under carefully defined and controlled parameters, and to ensure that further dealings in this field are discontinued while he is an employee of the State. The Requestor should coordinate any transition plan with Commission staff.
William J. Evans, Chairman
Mark C. Medairy, Jr.
Robert C. Rice, Ph.D.
Mary M. Thompson
Date: May 22, 1991
1 Legislation that would have resulted in substantial new regulatory authority in the Office of Planning was not passed by the Legislature in the 1991 Session; it was assigned for summer study. The Office therefore continues for the foreseeable future to be without significant authority that would result in direct regulatory or contractual relationships with private landowners or developers.
2 Opinions No. 80-15, No. 83-28, No. 83-41, No. 85-3, No. 87-9, No. 88-8 and No. 89-10.