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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5916 June 8, 1981 CONFLICT OF INTEREST: Township board member acting upon a request to transfer an industrial facility's tax exemption certificate to an agricultural cooperative of which he or she is a member or stockholder TOWNSHIPS: Quorum for township board meeting A member of a township board may not participate in approving the transfer of the property tax exemption certificate for an agricultural cooperative of which he or she is a member or stockholder. Township members who are so disqualified may be counted for purposes of establishing a quorum. Honorable Harry Gast State Senator The Capitol Lansing, Michigan Citing 1974 PA 198; MCLA 207.551 et seq; MSA 7.800(1) et seq, you have requested my opinion upon the following questions: '(1) Is a township board member, who is a member of a cooperative which seeks the transfer of an industrial facilities tax exemption certificate disqualified from voting on that transfer at a township board meeting held for that purpose? '(2) May township board members who are disqualified from voting on a matter before the township board, be counted as members present for purposes of establishing a quorum of the township board? '(3) When a motion is made by a township board member who is qualified to vote on the subject matter of the motion, can the motion be seconded by a township board member who is not qualified to vote on the subject matter of the Motion?' The legislation applicable to conflicts of interest on the part of local public officials where contracts are involved is 1968 PA 317; MCLA 15.321 et seq; MSA 4.1700(51) et seq. 1968 PA 317, supra, Secs. 2 and 3 provide in pertinent part: 'Sec. 2 (1) No public servant shall be a party, directly or indirectly, to any contract between himself and the public entity of which he is an officer or employee, except as provided in section 3. '(2) No public servant shall directly or indirectly solicit any contract between the public entity of which he is an officer or employee and (a) himself; (b) any firm (meaning a co-partnership or other unincorporated association) of which he is a partner, member or employee; (c) any private corporation in which he is a stockholder owning more than 1% of the total outstanding stock . . . or of which he is a director, officer or employee; . . . nor shall he take any part in the negotiations for such a contract or the renegotiation thereof or amendment thereto or in the approval thereof; nor shall he represent either party in the transaction; except as provided in section 3. 'Sec. 3. The provisions of section 2 hereof shall apply to all public servants who are paid for working more than an average of 25 hours per week for a public entity, but such provisions shall not apply to any other public servant: (1) if the shall promptly disclose his pecuniary interest in the contract to the official body which has power to approve the same, which disclosure shall be made a matter of record in its official proceedings; and (2) if the contract is approved by a vote of 2/3 of the full membership of such approving body without the vote of a member thereof if any, making such disclosure.' Thus, if a contractual relationship exists between the public entity and the public servant or an organization in which he has a substantial interest, it is necessary for the public servant to comply with the provisions of 1968 PA 317, Sec. 3, supra, which permits certain part-time public servants to avoid the application of Section 2 by making prompt disclosure of their pecuniary interest in the contract to the body with the power to approve it, and obtaining the approval by a two-thirds vote of the full membership without the vote of the member making the disclosure. Your correspondence does indicate that three members of a five member township board are also members or stockholders of an agricultural cooperative which owns the company seeking approval of the transfer of the industrial facilities tax exemption certificate. However, the subject matter of your questions does not involve a contract. Applications for industrial facilities exemption certificates may be approved or disapproved by the legislative body of the local governmental unit pursuant to 1974 PA 198, supra, Sec. 6, and such certificates are issued or denied by the State Tax Commission pursuant to 1974 PA 198, supra, Sec. 7. The transfer or assignment of such certificates are authorized pursuant to 1974 PA 198, supra, Sec. 21: 'An industrial facilities exemption certificate may be transferred and assigned by the holder thereof to a new owner or lessee of the facility but only with the approval of the local governmental unit and the commission after application by the new owner or lessee, and notice and hearing in the same manner as provided in Sec. 5 for the application for a certificate.' 1974 PA 198, supra, does not authorize local governmental units to contract for industrial facilities exemption certificates for the grant of property tax exemption. It is the legislature which grants the exemption in the act, and not the municipality. Compare Lexington Townhouses Cooperative v City of Warren, 32 Mich App 523; 189 NW2d 138 (1971). Also compare OAG, 1979-1980, No 5848, p 145 (April 19, 1979). Absent any contract between the agricultural cooperative and the township, it is my opinion that members of the township board, who are also members of the cooperative, would not be in violation of 1968 PA 317, supra, by participating in decision of the township board approving the transfer or assignment of the industrial facilities exemption certificate. When, however, 1968 PA 317, supra, is not applicable because no contract is involved, and no other statute applies regarding conflict of interest of public officials, (1) it is still appropriate to look to the common law regarding conflict of interest of public officials. In OAG, 1977-1978, No 5404, p 720 (December 14, 1978), citing People v Township Board of Overyssel, 11 Mich 222, 225 (1863), it is stated: "[All] public officials are agents, and their official powers are fiduciary. They are trusted with public functions for the good of the public; to protect, advance and promote its interest, and not their own. And, the greater necessity exists than in private life for removing from them every inducement to abuse the trust reposed in them, . . ..' '[Fidelity] in the agent is what is aimed at, and as a means of securing it, the law will not permit the agent to place himself in a situation in which he may be tempted by his own private interest to disregard that of his principal. . . .." In Wilson, et al v Township Board of Burr Oak, 87 Mich 240; 49 NW 572 (1891), two members of a township board were personally and financially interested in the laying out of a public highway, and the Supreme Court held that it was error to permit the two members of the township board to participate in such decision. See also Smith v Hubbell, 142 Mich 637; 106 NW 547 (1906); Woodward v City of Wakefield, 236 Mich 417; 210 NW 322 (1926); and compare Stockwell v Township Board of White Lake, 22 Mich 341 (1871). Inasmuch as the three members of the township board may benefit financially, either directly or indirectly, from a property tax exemption to the cooperative of which they are members, it is my opinion that it would not be appropriate for such three members to participate in approving the transfer of the property tax exemption certificate to their cooperative. Answering your second question, it has generally been held that members of a public body who are disqualified for personal interest may not be counted to establish a quorum. In Stockwell v Township Board of White Lake, supra, the Court held that a member who was disqualified may not be counted in the quorum, and that necessity, even if it existed, did not obviate the prohibition. By definition, quorum means such number of the members of a body as are legally qualified and competent to act. The above cases have held that members of the public body who are personally interested are not qualified or competent to act. See also 59 Am Jur 2d, Parliamentary Law, Sec. 6, pp 321-323. It is, therefore, my opinion that township board members who are disqualified from voting may not be counted for purposes of establishing a quorum. In response to your third question, it is my opinion that for the same reasons as stated with respect to question one, a disqualified member may not participate to the extent of seconding a motion for a vote on the question. (2) Frank J. Kelley Attorney General (1)
(2)
The Legislature may wish to deal with this problem.
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