This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Interest in Contract (reimbursement to board member for expenses incurred in maintaining private pond)

GENERAL MUNICIPAL LAW, §800(3)(a): Town board member has an interest in a contract with the town where she and her husband are reimbursed for expenses incurred in maintaining a private pond on their land used as part of the town's recreation program, where reimbursed costs include use of a tractor and compensation for the spouse's labor.

This is in reply to your letter asking whether a town board member would have a prohibited conflict of interest if the board member and her husband are reimbursed for costs incurred in connection with maintaining a pond located on the board member's property and used as a part of a town recreation program. These costs include gasoline, electricity, the cost of use of a tractor and compensation for the spouse's time in preparing the pond at the end of the season. We assume for purpose of this inquiry that the board member and her spouse are not otherwise paid by the town for granting to the town the right to use the pond.

Article 18 of the General Municipal Law, (§§800 et seq.) contains provisions of law relative to conflicts of interest of municipal officers and employees. Pursuant to General Municipal Law, §800(3), a municipal officer or employee has an interest in any contract with his municipality if he or she receives a direct or indirect pecuniary or material benefit as a result of that contract. In addition, an officer or employee is deemed to have an interest in contracts of his or her spouse, minor children and dependents, except contracts of employment with the municipality (General Municipal Law, §800[3][a]). That interest is prohibited if the officer or employee has the power or duty to: (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties and none of the exceptions contained in Article 18, including section 802, are applicable (General Municipal Law, §§801, 802). For purposes of article 18, a contract is defined as any claim, account or demand against or agreement with the municipality.

Based on the foregoing, it is clear that each claim submitted for reimbursement by the board member or her husband for expenses in connection with maintaining the pond constitutes a contract with the town. If the board member has an interest in that contract, that interest would be prohibited because, as a town board member, she would have powers and duties listed in section 801 in connection with the contracts (see, e.g., Town Law, §§64, 118).

As noted, a municipal officer or employee has an "interest" in a contract if he or she receives a direct or indirect pecuniary or material benefit from the contract and is deemed to have an interest in any contract of his or her spouse. If, however, materials or services are provided to a municipality by a municipal officer or employee for equal to or less than the amount actually expended by the officer or employee to provide the materials or services, then the officer or employee, at least ostensibly, would have no statutory interest in the contract (1985 Opns St Comp No. 85-1, p 1), unless the performance of the contract results in some other direct or indirect benefit to the officer or employee.

In Opn No. 85-1, supra, this Office concluded that, where a town board member's company repaired a town heating system and billed the town only for less than the cost of parts for the repairs, but not for labor, the board member did not receive a material or pecuniary benefit as a result of the contract. In the instant situation, however, it is proposed that payment be made not only for out-of-pocket expenses incurred in connection with maintaining the private pond, such as the cost of gasoline and electricity, but also for the use of a tractor and for labor in preparing the pond. Under these circumstances, since the board member and her spouse would, in effect, be paid a rental for the tractor and compensation for labor, and not simply reimbursed for out-of-pocket expenses, it is our opinion that the contract would result in a material or pecuniary benefit to the board member and her husband.

Accordingly, it is our opinion that the board member would have a prohibited conflict of interest in the proposed transaction unless an exception in section 802 is applicable. General Municipal Law, §802(2)(e) contains an exception for contracts in which an officer or employee has an interest if the total consideration payable thereunder, when added to the aggregate amount of all consideration payable under contracts in which the officer or employee is interested during the fiscal year, would not exceed $100.00. We do not have sufficient information to determine whether this exception is applicable in this instance. Further, no other exception contained in Article 18 would appear to apply to this transaction.

We note that section 804 provides that any contract willfully entered into by or with a municipality in which there is an interest prohibited under section 801 shall be null, void and wholly unenforceable. In addition, any municipal officer or employee who willfully and knowingly violates the conflicts of interest provisions is guilty of a misdemeanor (General Municipal Law, §805).

While we are not aware of any other pertinent exception to the proposed arrangement, it should be noted that section 802(1)(d) contains an exception to the prohibition in section 801 for purchases of real property or interests therein, provided the purchase and consideration therefor is approved by order of the Supreme Court upon petition of the governing board. Therefore, there would not be a prohibited conflict of interest if the town, with judicial approval, acquired a leasehold or other interest in the real property. However, written disclosure of the board member's interest in accordance with General Municipal Law, §803 would be required in that case. Moreover, in that situation, we would suggest that the village's code of ethics be consulted to determine whether it contains any pertinent provisions (see General Municipal Law, §806). Also, to avoid even an appearance of impropriety, the board member should consider abstaining from voting and participating in discussions in connection with such a conveyance.

May 23, 1988
James A. Murphy, Jr., Esq., Town Attorney
Town of Greenfield