96.06

OPINION NO. 96-06

An opinion has been requested as to application of the Public Ethics Law (State Government Article, Title 15, Annotated Code of Maryland, the Ethics Law) to a transaction in which the Charles County Community College is considering whether to purchase property for a Calvert County campus from a landowner who serves as State Comptroller and is also a member of the Board of Public Works (BPW).

This request involves a transaction by which a local community college (Charles County Community College (CCCC)) proposes to purchase real property for construction of an extension campus in another county. The project is funded in part through the Maryland Community Colleges Capital Improvement Program. When a project such as this entails site acquisition for construction of a facility, the site selection is made by the College and the County (with, however, the assistance and input of various interested State agencies) and a recommendation and request for action under the capital improvement program is made to the Maryland Higher Education Commission (MHEC). After MHEC approval there is a formal request to the State Department of General Services (DGS) to take action to have the property appraised and negotiate a purchase price. For contracts where State funding is involved, the contract is presented to BPW as a DGS agenda item. After BPW approval the MHEC certifies the availability of the local matching funds to the Comptroller of the Treasury, and upon the warrant of the Comptroller the State Treasurer disburses the funds to the County.

The community college at Calvert County (established in 1980) functions as an extension of CCCC pursuant to agreement between the College and the Calvert County Commissioners. The search for a new site for the College was begun in Fall 1991 after an engineering study suggested that expansion would not be practical on the current site. It has been described by those involved in the decision as a difficult process, because of various factors that make identification of appropriate large buildable lots a problem. Also, the impact of the development policies of the Economic, Growth, and Resource Protection and Planning Act of 1992 has been significant. This planning law, implemented primarily by the State Office of Planning, reflects the State's growth management objectives to concentrate public facilities in growth areas. The result has been an interest in identifying a site that meets the Office of Planning's interest in location within a designated Town Center, as well as the Calvert County/College interest in a large enough site to allow for campus development and future growth.

We have received many documents and related materials regarding the property search involved in this transaction, which has apparently involved approaching County property owners and placement of notices in newspapers, and entailed consideration of over 20 properties. According to the information provided, the process has involved various public advertisements and notices, each of which resulted in identification of properties that were carefully considered and proved unacceptable or unavailable for a variety of reasons. One of three properties offered in response to a 1995 advertisement is a property on Williams Road owned by the Comptroller. Including over 100 acres, this property is located west of Prince Frederick, is currently within the Town Center area, and is zoned for Employment Center Town Center (ECTC). Though the other two properties presented at this time were either unacceptable or withdrawn, this site came to be viewed by the agencies involved in the search for a college site in Calvert County as meeting both the planning and growth goal and the College's interest in a larger site. It was formally approved by the Calvert County Commissioners and the recommendation was transmitted to MHEC in August 1995. The proposed site was reviewed and concurred in by the Office of Planning and the Department of General Services has been requested by MHEC to proceed with the acquisition. At the time of our review, though the State was involved in the appraisal process, no price information had been discussed and there had been no negotiations regarding the possible purchase of this property by the College.

According to the Comptroller, he has had limited involvement in this transaction to date, and has had no specific discussions regarding availability of any of his property for this use. His property is managed by a son who has a real estate business in the area. The property was offered by the son based on consultation with the Comptroller and execution of a listing agreement. Apparently the real estate firm itself has also had limited dealings with the College as to this specific transaction, except to advise that the site could be reconfigured to avoid power lines in the area. This change was also concurred in by the Comptroller. The Comptroller has pointed out, however, that he did not seek this transaction, and that the property was purchased many years ago (in 1949 and the mid-1950's) without any expectation of a State sale. He advises that it is productive property that is part of the Town Center and likely to be marketable to other parties as well. He also advises that if the State wants his property, however, he is not opposed to sale and to this end has indicated an intention not to be involved on either side of this transaction. He stated his willingness to execute a power of attorney to his son (acting as his realtor), fully authorizing him to negotiate and reject or accept any offer for the property.

On the State side the price negotiation is by DGS and the price decision is by the Secretary of DGS and the College President. If a satisfactory sale price is agreed upon then a contract of sale is signed by both the seller and the DGS (subject to BPW approval). It is presented to the BPW as a completed agreement with the cost presented and justified along with a discussion of the programmatic purpose. According to the Secretary of DGS, these types of transactions are presented with limited substantive review by BPW staff and the question is whether it is a good real estate transaction—that is, whether the programmatic need is established, whether the County is committed, and whether legislatively approved funding is available. The Comptroller would disqualify himself from any involvement whatever in the transaction, as would be required by the nonparticipation provisions of §15-501 of the Ethics Law.

This request presents issues under §15-502(b) of the Ethics Law. This section prohibits an official from being employed by or having a financial interest in an entity that is subject to the official's authority or that of his agency, or that contracts with or is negotiating to contract with the official's agency. We have consistently advised in conflict of interest and financial disclosure contexts that holding real property for investment or income producing purposes gives rise to an entity in which one has both an employment and interest relationship for purposes of this section. (See, for example, Opinions No. 80-19 and No. 83-27.) The Comptroller is a member of the BPW, which has final and substantial authority over this purchase transaction. Also, as Comptroller he heads an Office having the limited function of providing the warrant to the Treasurer that authorizes actual disbursement of funds to the County for purchase of the property. His involvement as an owner of the property would therefore as an initial matter be covered by this section unless there is an applicable exception or exemption.

We have carefully considered this matter and do not believe that an exception can be allowed here pursuant to our regulatory authority under §15-502(c) of the Law. This section allows exception pursuant to Commission regulations where there is no conflict of interest or appearance of conflict. Our regulations implementing this provision (published at COMAR 19A.02.01 and .02) include a series of guideline criteria designed to evaluate the relationships between an individual's official duties and proposed private activities. They consider, for example, whether the individual's official duties involve direct impact on the private entity and whether the individual's unit or supervisor directly impact on the entity. The criteria also look to the nature of the person's functions and relationships with the private activity, and account is taken of the general circumstances and the potential application of other provisions of the Law, as well as appearance concerns. Interest exceptions also require disclosure, which has been done here.

We understand that the Comptroller has not had any official involvement in this transaction to date and would recuse himself entirely from any BPW consideration of this matter. Also, we are advised that the BPW does not function as an operational staff agency, but reviews a completed proposed transaction, and the Comptroller's recusal from participation in this matter could thus be viewed as a true disqualification. In our view issues are presented under the regulatory criteria, however, and we are not convinced under the circumstances that a regulatory exception is supportable in this situation. The Comptroller of the Treasury is a State official with significant functions relating to fiscal and financial matters, including, in his role as a member of the BPW, over real property transactions such as the one being considered here. We also note, though no price figures have yet been discussed, that this transaction would result in substantial and direct economic benefit to him. Moreover, we have not in the past generally allowed disqualification as a basis for exception under the regulatory authority of §15-502(c). This exception was designed to allow for exception from the strict prohibition where the relationships between private and official activities are clearly remote, and has not been allowed where the official's duties as described involved direct authority to impact on the private entity, or where the private relationship entailed such direct involvement or financial benefit.

As described to us, however, it appears that this property purchase was initiated by the State and has been reviewed and considered as to programmatic need and substance by not one but several local and State agencies. The State and the program agencies involved in this transaction believe that they have, after a substantial search, identified a property that reflects the best opportunity to provide educational services to the public in this area of the State. While we are inclined to believe that this is the type of situation where the Ethics Law may be applied in the context of other substantial State needs, we do not, as noted above, believe that this is a legal determination appropriately made under the exception provisions of the Law. In our view a determination that this transaction is allowable consistent with the Law must be based on the substantive recommendation of the Governor and the agency involved as contemplated in the extraordinary exemption provisions of §15-502(d) of the Law. Under this provision exemption is permitted based on the request of the agency and the recommendation of the Governor, and the determination that failure to grant an exemption would, among other things, limit the ability of the State to assure the availability of competent services to the public.

In view of the stated facts and needs presented in this request, we advised the State entities involved of our preliminary conclusion that such an exemption would be allowable in these circumstances if the College, the County and the other State agencies involved believed that this property is the only reasonable choice for the State and was necessary to provide competent services to the public, and if the Governor recommended an exemption concurring with this conclusion. Based on a subsequent request from the Governor reflecting a review of the request of the DGS and other agencies, and evaluation of the history of this situation, we have acted to allow an exemption to permit this transaction to continue. The exemption included several conditions and guidelines for the Comptroller to follow, including disqualification from participation on either side of the transaction, and execution of a power of attorney as previously discussed. The specific advice of the exemption and of the information and conditions on which it is based has been provided to the Governor as well as to the Comptroller and representatives of interested agencies, and is a matter of public record.

Mark C. Medairy, Jr., Chairman,
   Michael L. May,
   Charles O. Monk, II

Date: August 7, 1996