Opinion 97-9

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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Disclosure of Interest (negative impact of zoning change on board member's business) -- Zoning Changes (disclosure and recusal where negative impact on board member's business)

ZONING AND PLANNING -- Zoning Changes (effect of negative impact on board member's business)

GENERAL MUNICIPAL LAW, §§801, 806: A village board member who has a financial interest in a business which may be negatively impacted by a zoning change under consideration by the board should publicly disclose his or her interest in the matter. If the potential negative financial impact of the proposed zoning change on the board member is not merely speculative and more than de minimis, the board member should not participate in the discussion or vote on the zoning change.

This is in reply to your letter asking whether two village board members must recuse themselves in connection with a proposed zoning change, under consideration by the board, which could broaden the rights of certain food service businesses. You state that one of the village board members owns a food service business and another board member has a financial interest in a similar business, owned by his son. You further state that the proposed zoning change would expand the rights of other food service businesses to provide services already provided by the businesses in which the board members have an interest. Accordingly, you suggest that it could be argued that the zoning change could negatively impact the businesses of the two board members.

Article 18 of the General Municipal Law (§800 et seq.) contains the provisions of law which relate 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 or her municipality if he or she receives a direct or indirect pecuniary or material benefit as a result of that contract. That interest is prohibited if the officer or employee, individually or as a member of a board, 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 (General Municipal Law, §801), and none of the exceptions contained in article 18 are applicable (see General Municipal Law, §802). If an interest in a contract is not prohibited, General Municipal Law, §803 requires, with certain exceptions, that the interest be disclosed in writing and included in the official record of the governing board's proceedings.

A "contract", for purposes of article 18, is defined in General Municipal Law, §800(2) as any "claim, account or demand against or agreement with a municipality, express or implied". Although at least one lower court has held that an application for a building permit and subsequent issuance thereof constitutes a "contract" for conflict of interest purposes (People v Pinto, 88 Misc 2d 303, 387 NYS2d 385), it has been our view that zoning changes do not result in a contract with a municipality for article 18 purposes (see, e.g., 1991 Opns St Comp No. 91-48, p 132; 1988 Opns St Comp No. 88-68, p 135; 1985 Opns St Comp No. 85-60, p 84; 1983 Opns St Comp No. 83-108, p 133; see also Cahn v Planning Board of the Town of Gardiner, 157 AD2d 252, 557 NYS2d 488; Keller v Morgan, 149 AD2d 801, 539 NYS2d 589). Therefore, it is our opinion that the proposed zoning change is not a contract within the meaning of article 18 and, as a result, that section 801 is not applicable.

Even though section 801 does not prohibit the board members' participation in this matter, the town's code of ethics should be examined. Section 806 of the General Municipal Law requires towns to adopt codes of ethics containing, among other things, provisions with respect to disclosure of interests in legislation before the governing board and other standards relating to the conduct of officers and employees as may be deemed advisable (see also General Municipal Law, §809, concerning disclosure of certain interests in the person or entity making an application for a zoning change).

Assuming the code of ethics does not contain relevant provisions, we note that the courts of this State have held public officials to a high standard of conduct and, on occasion, have negated certain actions of municipal boards which, although not violating the literal provisions of article 18 of the General Municipal Law or a municipality's code of ethics, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest self-interest, partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation and Taxpayers Ass'n v Town Board of the Town of Tuxedo, 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521). The courts, however, have refrained from invalidating the actions of a municipal board on the basis of allegations that a board member has an interest in a matter before the board which is not prohibited by either article 18 or the municipality's code of ethics, where the individual disclosed the interest and did not participate in the proceedings (see, e.g., Cahn, supra).

Not every alleged financial interest or private business relationship is sufficient to require disclosure and recusal (see, e.g., Segalla v Planning Board of the Town of Amenia, 204 AD2d 332, 611 NYS2d 287; Ahearn v Zoning Board of Appeals of the Town of Shawangunk, Ulster County, 158 AD2d 801, 551 NYS2d 392, lv den 76 NY2d 706, 560 NYS2d 988; Town of North Hempstead v Village of North Hills, 38 NY2d 334, 379 NYS2d 792; Opns St Comp No. 91-48, p 132). For example, in Segalla, supra, the court was asked to invalidate planning board approval of an amendment to a town master plan which failed to include a proposed "floating" industrial/mining zone because one of the board members voting for the amendment, prior to his appointment to the board, argued strongly against the floating zone at a public hearing. The court upheld the amendment because the board member's alleged bias involved only personal opinion rather than any financial interest in the master plan. In so doing, the court rejected as "speculative" the claim that the amendment might, at some point in the future, benefit the planning board member because the value of his property was less likely to be adversely affected than if the floating zone was included in the master plan.

Further, in Parker v Town of Gardiner Planning Board, 184 AD2d 937, 585 NYS2d 571, lv den 80 NY2d 761, 592 NYS2d 670, the court declined to invalidate planning board approval of a proposed subdivision when one of the board members who voted for the subdivision was the president of a company which had an ongoing business relationship with one of the applicant's principals. The court noted that the board member's company had annual gross sales of between $2 and $3 million and that purchases by the applicant's principal ranged from $400 to $3,000 per year, or at most .15% of the company's annual gross sales. Under these circumstances, the court concluded that the likelihood that such a de minimis non-statutory interest would or did in fact influence the board member's judgment and/or impair the discharge of his official duties was little more than speculative and, therefore, disqualification was not required.

Accordingly, in this instance, since one board member owns a business which may be impacted by the zoning change and the other board member's son owns such a business and the board member has a financial interest therein, we believe both board members should publicly disclose these circumstances. In addition, if the potential negative financial impact of the proposed zoning change on the board members is not merely speculative and more than de minimis, they should not participate in the discussion or vote on the zoning change. We are not in a position in this instance to make determinations in this regard. Rather, they should be made initially at the local level.

April 28, 1997
John H. Gross, Esq., Village Attorney
Village of Northport