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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. 6276

March 1, 1985

CONFLICT OF INTEREST:

Prior disclosure of interest of a city councilperson in contract subject to approval by the city manager or city council

In the event that a city manager is authorized to approve contracts in behalf of a city, a city councilperson interested in a contract with the city must disclose his interest in each contract to the city manager prior to approval by the city manager.

Disclosure of an interest in a contract must be made by the interested city councilperson to the city council as to each contract, subject to approval by the city council prior to approval by that body.

A city council acting to approve a warrant in payment of a sum due upon a contract authorized by the city manager in which contract a city councilperson has an interest is performing an auditing function.

Honorable Doug Cruce

State Senator

The Capitol

Lansing, Michigan

You have requested my opinion on three questions relating to the conduct of public officers with respect to contracts with public entities. Your questions are based upon a factual situation in the City of Berkley where certain purchases are made as needed by city officers from a lumberyard, a Michigan corporation, partly owned and operated by a city councilperson of the city, are billed monthly, and the sum due the lumberyard appears on a warrant presented to the city council for approval prior to payment.

The Charter of the City of Berkley, Sec. 8.6(a), in part, provides:

'The Manager shall be Purchasing Agent for the city and shall make all purchases of supplies for the city, in accordance with the procedures to be established by the Council.'

Berkley Charter, Sec. 8.6(b), provides:

'All purchases and sales shall conform to such regulations as the Council may from time to time prescribe, but in either case, if an amount in excess of Five Hundred Dollars ($500.00) is involved, opportunity for competition shall be given.'

Berkley Charter, Sec. 8.6(b), is implemented by the Berkley Code. Section 2-90 of the Berkley Code authorizes the city manager to make purchases of supplies, materials, equipment or parts costing less than five hundred dollars ($500.00) to be made on the open market, and, whenever possible, such purchases shall be based on competitive quotations obtained from representatives by telephone or by direct mail requests. Section 2-90(b) of the Code requires that whenever a purchase costs more than five hundred dollars ($500.00), but less than two thousand five hundred dollars ($2,500.00) opportunity be given for competition by obtaining competitive quotations in writing. When purchases are to be made in the amount of two thousand five hundred dollars ($2,500.00) or more, the Berkley Code, Sec. 2-90(c), requires sealed competitive bids to be taken after due notice inviting proposals, and such bids shall be submitted to the city council for approval. Thus, the city manager is authorized to make purchases of supplies, materials, equipment or parts up to a cost of less than two thousand five hundred dollars ($2,500.00). When the purchase is two thousand five hundred dollars ($2,500.00) or more prior city council approval is required.

Your first question is:

Does MCL 15.321 et seq; MSA 4.1700(51) et seq, require that a city councilperson's pecuniary interest in the purchase of supplies be disclosed, recorded in the minutes, and acted upon favorably in advance of each purchase?

MCL 15.321 et seq; MSA 4.1700(51) et seq, regulates the conduct of public servants with respect to contracts with public entities. MCL 15.322; MSA 4.1700(52), provides:

'(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 of any class where such stock is not listed on a stock exchange or stock with a present total market value in excess of $25,000.00 where such stock is listed on a stock exchange or of which he is a director, officer or employee; or (d) any trust of which he is a beneficiary or trustee; 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.

In pertinent part, MCL 15.323; MSA 4.1700(53), provides:

'(1) Section 2 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 shall not apply to any other public servant if he or she promptly discloses his or her pecuniary interest in the contract to the official body which has power to approve the contract, which disclosure shall be made a matter of record in its official proceedings; and if the contract is approved by a vote of not less than 2/3 of the full membership of the approving body without the vote of the member making the disclosure.

A public servant is prohibited by MCL 15.322; MSA 4.1700(52), from being a party, directly or indirectly, to any contract between the public servant and the public entity which the public servant serves, or from soliciting or taking part in the negotiation of the agreement between the public entity, or from representing either party in the transaction in which the public servant has the relationship outlined in subsection (2) of MCL 15.322; MSA 4.1700(52). However, the prohibition is made inapplicable by MCL 15.323; MSA 4.1700(53), which provides for disclosure of interest and approval of the contract by a vote of two-thirds of the full membership of the approving body without the vote of the member making such disclosure. OAG, 1979-1980, No 5768, p 951 (September 3, 1980).

A city councilperson is a public servant within the purview of MCL 15.322; MSA 4.1700(52), and is subject to its provisions, unless excepted under MCL 15.323; MSA 4.1700(53). The councilperson in question, as part owner and as operator of a lumber yard, is interested in any contract between the lumberyard and the city.

Thus, the conduct of the councilperson with respect to the contracts between the City of Berkley and the lumberyard corporation of which the councilperson is part owner and operator is governed by MCL 15.322; MSA 4.1700(52). Therefore, the councilperson is prohibited from directly or indirectly soliciting any contract between the City of Berkley and the lumberyard of which the councilperson is part owner and operator, nor shall the councilperson take any part in the negotiations for such a contract, except as provided in MCL 15.323; MSA 4.1700(53).

Whether the council member may avail himself of the disclosure provisions of subsection (1) of MCL 15.323; MSA 4.1700(53), depends upon the application of its provision consonant with the legislative intent to the facts in this matter.

As to purchases in the amount of $2,500.00 or more from the lumberyard partly owned and operated by the city councilperson, since the contract requires the prior approval of the Berkley Council, the prior disclosure by the interested councilperson and approval of each contract by a vote of two-thirds of the full membership of the council without the vote of the interested councilperson, is required by MCL 15.323; MSA 4.1700(53), subsection (1). As to contracts for purchase from such lumberyard in the amount of less than $2,500.00, the exception provision of MCL 15.323; MSA 4.1700(53), is available upon disclosure to 'the official body which has power to approve the same.' Under the Berkley Charter, Sec. 8.6(a) and the Berkley Code, Sec. 2-90(a) and (b), the approval of such contracts is made by an individual, not a body of persons. The city manager, not the council, has the power to approve such contracts. Therefore, disclosure of the interest of the city councilperson who is part owner and operator of the lumberyard, is required to be made to the city manager of the interest of the council member in each contract purported to be entered into between the city and the lumberyard and the disclosure must be made a part of the permanent records of the office of city manager. The requirements of two-thirds vote and abstention of the public officer are inapplicable in such event since the power of approval is vested in one person and the approving officer appears to have no prohibited interest in such a contract.

MCL 15.323; MSA 4.1700(53), thus construed, may be perceived as providing an incongruent result. The Legislature may, if it so desires, amend the statute to require that all city contracts in which a councilperson has an interest be approved by the city council.

It is noted that the Berkley City Manager is authorized to make purchases in the usual and ordinary course of business, and he or she is a party competent to contract on behalf of the city in accordance with procedures established in the Berkley Code. The city manager is authorized to make purchases without obtaining prior approval of the city council where such purchases are less than two thousand five hundred dollars ($2,500.00). Berkley Code, Sec. 2-90(a) and (b). Where the city manager does so and it is within the scope of the powers conferred upon him by the city charter and code, a contract is created.

It is my opinion in answer to your first question that where the purchase cost of a contract between the City of Berkley and a lumberyard corporation partially owned and operated by a city councilperson is less than two thousand five hundred dollars ($2,500.00), the interested councilperson must disclose his interest in the contract to the city manager prior to approval of the contract by the city manager.

It is my further opinion that where the purchase cost of a contract between the city and such lumberyard is two thousand five hundred dollars ($2,500.00) or more, the interested councilperson must promptly disclose his or her pecuniary interest in the proposed contract to the city council, which disclosure shall be made a matter of record in the city council's official proceedings, and approval of the contract requires a vote of not less than two-thirds of the full membership of the city council without the vote of the interested councilperson.

Your second question is:

As to purchases in the amount of $2,500.00 or less, does MCL 15.323; MSA 4.1700(53), permit the pecuniary interest of a council member to be disclosed, recorded in the minutes and acted upon favorably after the purchase is made, but prior to the approval of the warrant for payment of the previous month's purchases?

The answer to the first question makes clear that the disclosure by the interested council member must be made prior to approval of the contract. Thus, your question must be taken as applying to those contracts approved by the city manager where a warrant for payment of the purchase contract is submitted to the council for its approval.

It should be noted that approving a warrant for payment for the previous month's purchases is an auditing function whereby legal charges are presented to the city council for either payment or rejection. Gardner v Bd of Supervisors of Newaygo County, 110 Mich 94; 67 NW 1091 (1896). As such, voting to approve or reject payment on the warrant would not, of itself, constitute an approval of the contract.

It is my opinion in answer to your second question that disclosure by a councilperson of an interest in a contract with the city in the amount of less than $2,500.00 must be made prior to the requisite approval of the contract by the city manager.

Your third question is:

Is MCL 15.323; MSA 4.1700(53), satisifed if disclosure is made of a pecuniary interest in a course of future dealings, that interest is recorded in the minutes and approval of the penuniary interest in future purchases is approved by the requisite vote, i.e., whether the council can approve in advance an open charge account with a lumberyard partially owned by a councilperson, or whether each purchase must be treated as a separate contract for the purposes of MCL 15.323; MSA 4.1700(53)?

MCL 15.323; MSA 4.1700(53), is clear and unambiguous. Its provisions should be enforced as written by the Legislature. Nordman v Calhoun, 332 Mich 460; 51 NW2d 906 (1975). MCL 15.323; MSA 4.1700(53), requires that the public officer 'shall promptly disclose his pecuniary interest in the contract.' (Emphasis added.) The statute makes no provision for a single disclosure to apply to all future contracts by the city with a business concern in which a councilperson has the requisite interest.

It is my opinion in answer to your last question that a councilperson with the requisite interest in a business concern seeking to contract with the city must make a disclosure of interest prior to approval of each contract by the approving officer or council, as the case may be.

Frank J. Kelley

Attorney General


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