Opinion 2001-14

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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Contracts (intermunicipal agreement does not constitute "contract" within the meaning of General Municipal Law, article 18) -- Interest in Contract (municipal officer or employee not deemed to have interest in intermunicipal agreement)

MUNICIPAL COOPERATION -- Conflicts of Interest (intermunicipal agreement does not constitute "contract" within the meaning of General Municipal Law, article 18)

GENERAL MUNICIPAL LAW §§800(2), (3), 801, 803: An intermunicipal agreement does not constitute a "contract" within the meaning of section 800 of the General Municipal Law. Therefore, a member of a town board, who is also employed by a village located partially within the town, does not have a prohibited interest in an agreement between the town and the village for the provision of services by the village that are related to his or her village employment. Although the disclosure requirements of section 803 of the General Municipal Law are not applicable, the town board member, to avoid even the appearance of divided loyalties, should disclose his or her relationship as a village employee and refrain from participation in town board discussions and decisions regarding town agreements with the village that pertain to matters relating to his or her village employment.

You ask whether a member of a town board who also serves as the head village mechanic in a village located partially within the town would have a prohibited interest in contracts between the town and village for the provision of services by village mechanics on town machinery and equipment. We are informed that the town and village have entered into an agreement under which the village has agreed to provide the use of its mechanics for repairing town-owned trucks and equipment in the event that the town's highway department is unable to perform the mechanical repairs.1 Pursuant to the agreement, the town pays the village for the mechanical work based on the mechanic's usual village hourly wages plus benefits. We are informed that the individual in question is paid by the village on an hourly basis and works a set number of hours per week, regardless of whether he performs work on any town vehicles during that week. In addition, the village mechanic, while sitting on the town board, recuses himself, as a matter of practice, from consideration of issues involving the village.2

Article 18 of the General Municipal Law generally provides that certain "interests" of municipal officers and employees in "contracts" of the municipality are prohibited (see General Municipal Law §801). Article 18 defines "contract" to include "any claim, account or demand against or agreement with a municipality, express or implied ..." (General Municipal Law §800[2]). "Interest" is defined in section 800(3) as a "direct or indirect pecuniary or material benefit accruing to a municipal officer or employee as the result of a contract with the municipality which such officer or employee serves." Article 18 also provides that a municipal officer or employee is deemed to have an interest in any contract with a firm, partnership, association or corporation of which he or she is an officer, employee or director (General Municipal Law §800[3][b],[c]).

Pursuant to General Municipal Law §801(1), unless an exception set forth in section 802 applies, an interest in a contract is prohibited if the officer or employee has the power or duty, individually, or as a member of a board, to (a) negotiate, prepare, authorize or approve the contract or authorize or approve payment thereunder, (b) audit bills or claims under the contract, or (c) appoint an officer or employee who has any such powers or duties. Any contract willfully entered into in which there is a prohibited interest is null, void and wholly unenforceable (General Municipal Law §804) and any officer or employee who willfully and knowingly violates these provisions of article 18 is guilty of a misdemeanor (General Municipal Law §805). General Municipal Law §803 requires written disclosure of certain interests in contracts.

In the situation presented, it would appear that the agreement for provision of mechanical services by the village to the town would fall within the literal definition of a "contract" under section 800(2). In addition, based on a literal reading of the definition of "interest", it would appear that, as an employee of the village, the individual in question would be deemed to have an interest in that contract, which would be prohibited because, as a town board member, the individual would have powers and duties set forth in section 801 (see, e.g., General Municipal Law §119-o; Town Law §§20[3], 64[6], 119). Further, while section 802 contains an exception to section 801 for contracts with not-for-profit corporations and associations (General Municipal Law §802[1][f]), there is no similar express exception for contracts between or among municipalities.

Considering the ends sought to be achieved by article 18, however, this Office has previously expressed the opinion that, notwithstanding the literal language of section 800, the Legislature did not intend to include intermunicipal agreements within the definition of "contract" in General Municipal Law §800 (see, e.g., 1976 Opns St Comp No. 76-1103, unreported; 25 Opns St Comp, 1969, p 51; 23 Opns St Comp, 1967, p 856). We also stated that we do not believe the Legislature intended that a municipal officer or employee be deemed to have an "interest" in a contract between his or her municipality and another municipality with which he or she is also associated as an officer or employee (23 Opns St Comp, 1967, supra).

In reaching this conclusion, we reasoned that, generally, intermunicipal agreements are not chiefly motivated by the prospect of financial gain to either party to the transaction, and noted that municipalities are held strictly accountable for moneys received and disbursed by them through annual financial reporting (23 Opns St Comp, 1967, supra). We further noted that municipalities often perform activities or enter into agreements authorized or required by statute that fall within the definition of "contract" in General Municipal Law §800, and to suggest that a conflict of interest would be present in every instance when a person holds a position with both municipalities would confuse and complicate intermunicipal cooperation, and could lead to unintended results (id.).3

We note that our conclusion that the definition of contract does not include intermunicipal agreements would seem to be supported by the Legislative Findings that accompanied the original enactment of article 18, and the Legislative history of article 18. The Legislative Findings indicate that a principal aim of article 18 was to prohibit certain "proprietary interests …" (L 1964, ch 946, §1, third par.). Similarly, the original definition of "interest" in section 800(3), as enacted by chapter 946 of the Laws of 1964, expressly referred to a benefit accruing to a municipal officer or employee as a result of a "business or professional transaction" (L 1964, ch 946, §2). Chapter 1043 of the Laws of 1965 amended this definition to replace the express reference to a "business or professional transaction" with the term "contract" (L 1965, ch 1043, §1). The Legislative history of this change, however, appears to indicate that it was intended only as a technical amendment to conform the definition of "interest" in section 800(3) with the definition of "contract" already contained in section 800(2), and was not intended to alter the underlying purpose of the statute (see, e.g., Department of Audit and Control, Report to the Governor on Assembly Intro. 5734 of 1965, June 18, 1965; see also, Division of the Budget, Budget Report on Bills, Assembly Intro. No. 5734, June 24, 1965, noting that the changes in that bill were "largely technical and serve to clarify.").

Additionally, we believe our conclusion is consistent with the last sentence of section 801, which states as follows:

The provisions of this section shall in no event be construed to preclude the payment of lawful compensation and necessary expenses of any municipal officer or employee in one or more positions of public employment, the holding of which is not prohibited by law.

This provision, generally preserving the right of an individual to be compensated for lawful public employment, is a further indication that the provisions of article 18 are not intended to prohibit intermunicipal agreements where an individual's sole relationship to the agreement is as a municipal officer or employee.4

Accordingly, it is our opinion that the agreement at issue does not fall within the definition of "contract" in General Municipal Law §800. Therefore, the individual in question would not have a prohibited interest in the agreement between the town and the village for the provision of services by village mechanics on town-owned vehicles and equipment. Further, since the disclosure requirements of General Municipal Law §803(1) relate only to certain interests in "contracts", those requirements would not be applicable.

We note, however, that each town and village is required to adopt a code of ethics setting forth, for the guidance of its officers and employees, the standards of conduct reasonably expected of them (General Municipal Law §806). Codes of ethics may regulate or prescribe conduct that is not expressly prohibited by article 18, and may provide for the prohibition of conduct (General Municipal Law §806[1]). The town should consult its code of ethics to determine whether it contains any pertinent provisions.

Further, we note that court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions which, although not constituting a literal violation of article 18, are, inter alia, inconsistent with public policy or suggest partiality (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of Tuxedo, 69 AD2d 320, 418 NYS2d 638; see also Parker v Town of Gardiner Planning Board, 184 AD2d 937, 585 NYS2d 571 lv denied 80 NY2d 761, 592 NYS2d 670; Cahn v Planning Board of the Town of Gardiner, 157 AD2d 252, 557 NYS2d 488). We believe that, to avoid even an appearance of having divided loyalties, the town board member should disclose his relationship as a village employee, and continue his practice of refraining from participation in town board discussions and decisions on issues relating to the village, at least with respect to town contracts with the village pertaining to matters directly or indirectly relating to his village employment, even if not required to do so by the town's code of ethics (see, e.g., Op Atty Gen [Inf] No. 2000-20; Matter of Kastoff v Department of Social Services, 195 AD2d 808, 600 NYS2d 349).

James E. Maher, Esq., Town Attorney
Town of Harrietstown

December 28, 2001

1 For purposes of this opinion, we assume the contract in question has been properly authorized.

2 By informal agreement with the Attorney General's Office, this Office no longer renders opinions on the subject of compatibility of public positions. Therefore, this opinion addresses only the question of whether the individual, as a town board member, has a prohibited interest in the contract in question. We understand that, by separate inquiry, the Town has asked the Attorney General's Office whether the positions of the town board member and the village mechanic are compatible under common law principles (see e.g., People ex rel. Ryan v Green, 58 NY 295).

3 For example, under such a reading of the statute, in a county having a board of supervisors, municipal cooperation agreements between the county and any town or city within the county generally would result in prohibited interests in the contracts, since the "supervisors" of the towns and the cities within the county constitute the county board of supervisors. Therefore, they are officers of both contracting municipalities and would possess powers and duties listed in section 801 with respect to the cooperation agreement (see County Law §150; General Municipal Law §119-o[1]).

4 This Office has consistently expressed the opinion that, in light of the last sentence of section 801, an individual's employment relationship with a municipality, in and of itself, does not trigger a prohibited interest in a contract (see, e.g., 1981 Opns St Comp No. 81-93, p 93; 24 Opns St Comp, 1968, p 69). In this regard, we are mindful that Dykeman v Symonds, 54 AD2d 159, 388 NYS2d 422, could be read to suggest a different conclusion. In Dykeman, supra, the issue before the court was whether a motor vehicle supervisor in a county could also serve as a member of the county board of legislators. The court referenced the prohibition in General Municipal Law §801 to support its conclusion that the individual could not hold both offices in light of the power of the county board to fix the salary of the motor vehicle supervisor. The court stated that "her employment by the county as Motor Vehicle Supervisor while she is also a member of the County Legislature is in direct violation of section 801 …" (54 AD2d at 163, 388 NYS2d at 425). The court, however, also relied on the common law principles of incompatibility of public office in reaching its conclusion. Moreover, the court did not mention the last sentence of section 801, which, as noted, specifically concerns the payment of compensation to municipal officers and employees. Therefore, we believe Dykeman, supra, should be read as an application of the common law principles of incompatibility, and not as precedent for the proposition that employment with a municipality, alone, can give rise to a prohibited interest in a contract under section 801 (see, e.g., Dupras v County of Clinton, 213 AD2d 952, 624 NYS2d 309 and Matter of County of Ontario v Finger Lakes Solid Waste, 167 AD2d 848, 561 NYS2d 954, both citing Dykeman, supra, as an incompatibility case; see also O'Malley v Macejka, 44 NY2d 530, 533, 406 NYS2d 725, distinguishing between "personal involvement" resulting in prohibited interests in contracts, and incompatibility of offices).