Request By:
Hon. Sam Boyd Neely, Sr.
City Attorney
211 East Broadway
Mayfield, Kentucky 42066
Opinion
Opinion By: David L. Armstrong, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of March 13 in which you raise a question relating to a possible conflict of interest involving a member of the city council who owns an interest in certain property, along with his father, who has entered into an agreement with the Mayfield Housing Authority to secure financing for the purpose of rehabilitating the property. This financing provides for a federal payback to the owner over a 15-year period. In return, the owner agrees to rent the property only to low income families and to maintain the property in an acceptable manner. You further relate that the Housing Authority has contracted with the Mayfield Community Development Agency to perform certain services with respect to a contract between the Housing Authority and the federal Housing and Urban Development Agency in Louisville. You cite KRS 61.260 as the authority for determining whether or not a conflict of interest exists. This statute prohibits a city officer from being interested in any contract with the city or its agencies.
In your letter you relate that the Mayfield Housing Authority was created by city ordinance pursuant to Ch. 80 KRS. A municipal housing authority so established has been declared to be an independent corporate body or agency in the case of City of Louisville v. Louisville Municipal Housing Commission, Ky., 261 S.W.2d 286 (1953). The court held that a municipal housing authority is in reality a hybrid agency that is neither a county, city nor state agency. We are enclosing a copy of OAG 77-767 so stating.
You also relate that the Mayfield Urban Renewal Agency was created pursuant to Ch. 99 KRS, particularly KRS 99.350. Under this statute the city has three alternatives. It may itself exercise the urban renewal powers and functions provided for under Ch. 99 KRS, or it may vest the housing commission with such authority, or as done in most cases, establish an agency known as the Urban Renewal and Community Development Agency. We assume from the stated facts that the City of Mayfield has elected to establish an agency which is also a separate independent corporate body or agency over which the city has no control other than the basic appointing power and the right to appropriate funds for the agency. See KRS 99.360. In this respect we are enclosing copies of OAG 83-230 and 70-587.
Thus, both agencies, the Municipal Housing Authority and the Urban Renewal Agency, are separate, corporate and independent bodies that have the power to execute contracts over which the city has no control.
The provisions of KRS 61.260, previously referred to, apply only to those contracts executed by or on behalf of the city concerning which an officer of the city has a pecuniary interest. Thus, the contract involving the rehabilitation of the property owned in part by the city councilman that was executed with the housing commission, and which does not include the City of Mayfield, or for that matter the Urban Renewal Agency, would not create a conflict of interest in violation of KRS 61.260. In this respect we are attaching a copy of OAG 71-208 involving a councilman contracting with the Municipal Housing Commission in which we held there was no violation of the conflict of interest statute.
Also such contract would not be in violation of either KRS 80.080 prohibiting members or employees of the Housing Authority from acquiring an interest in any project over which the Authority has control, or KRS 99.350(7) prohibiting officers or employees of the community or the Urban Renewal Agency from acquiring any interest in property within the development area. The phrase "officers or employees of the community" does refer to officers and employees of the city but only applies where the city operates the urban renewal act itself and does not create an independent agency to administer this act.
The fact that the councilman in question may have voted on block grants to the Urban Renewal Agency would not be sufficient in itself to create a common law conflict, but as a matter of public policy and to avoid the question of self-interest, the councilman should refrain from participating in and voting on any matter involving either agency. See City of Springfield v. Haydon, 216 Ky. 483, 288 S.W. 337 (1926), McQuillin, Mun. Corp., Vol. 3, Sec. 12.75, and 63 Am. Jur. 2d, Public Officers and Employees, Sec. 96.