Untitled Texas Attorney General Opinion ( 1989 )

THE ATTORNEY GENERAL
OF TEXAS
Honorable John T. Montford Opinion No. JM-1065
Chairman
State Affairs Committee Re: Whether the Lubbock Power
Texas State Senate and Light Company may contract
P. 0. Box 12068 with the Texas Tech Research
Austin, Texas 78711 Foundation if a Lubbock city
councilman is chairman of the
foundation board of directors
(RQ-1676)
Dear Senator Montford:
You request an opinion about possible conflicts of
interest involving a proposed contract between the city of
Lubbock, acting through Lubbock Power and Light, and the
Texas Tech University and Health Sciences Center Research
Foundation, a nonprofit corporation which is closely
associated with Texas Tech University. A member of the
Lubbock City Council serves as chairman of the board of
directors of the Texas Tech Research Foundation. YOU wish
to know how the laws on dual office holding, dual agency,
and conflict of interest for state and municipal officers
affect this individual's participation in the contracting
process.
Article XVI, section 40, -of the Texas Constitution
prevents one person from holding or exercising "at the same
time, more than one civil office of emolument.11 It is well
established that a city council member is a civil officer of
emolument within this provision if he receives compensation
for his service. See. e.a Tillev v. Roaers, 405 S.W.2d
220 (Tex. Civ. APP. - Beaukont 1966, writ ref'd n.r.e.) :
Attorney General Opinion MW-39 (1979): Letter Advisory No.
154 (1978). Article XVI, section 40, will not apply in this
case unless the chairman of the foundation board also holds
or exercises a civil office of emolument.
The Lubbock city attorney's office has submitted a
brief discussing the status of the foundation's directors
and a copy of the by-laws of Texas Tech University and
Health Sciences Center Research Foundation. The by-laws
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Honorable John T. Montford - Page 2 (JM-1065)
identify the foundation as a nonprofit corporation organized
to support research projects and associated educational
undertakings at the university and health sciences center
and to seek and obtain contracts, grants, and gifts for the
advancement of such research, as well as similar and related
purposes set out in articles I and II of the by-laws.
According to article IV, the eleven members of the board of
directors serve three-year terms. Seven are appointed by
the Board of Regents of Texas Tech University, and the
remaining four members are appointed by the Board of City
Development of Lubbock. Several ex-officio non-voting
members are drawn from the university administration.
Article V of the foundation by-laws provides that the
directors elect the chairman, who is the chief executive
officer of the foundation. He or his designee is
responsible for negotiating service contracts with other
agencies. Contracts and agreements with other agencies
must be approved and executed by both the chairman or his
designee and the executive director. The executive director
is appointed by the board of regents upon the recommendation
of the foundation and may be dismissed by the regents.
is custodian of the funds and the financial records of t:z
foundation. See aenerallv V.T.C.S. art. 1396-2.23B (audit
or financial report required of nonprofit corporations
assisting state agencies). Article X of the by-laws grants
the board of regents final approval of amendments to the
foundation's by-laws.
In addressing your question about dual office holding,
we must determine whether the chairman of the board of
directors is a civil officer of emolument within article
XVI, section 40, of the Texas Constitution. We will not
address any other legal issues raised by the relationship
between the university and the foundation. See aenerallv
Attorney General Opinion H-1309 (1978). Our answer will be
based on the by-laws which have been submitted to us and
will not undertake the investigation or resolution of fact
questions.
The definition of public officer also applies to a
civil officer within article XVI, section 40, of the
constitution. Attorney General Opinion MW-415 (1981). A
public officer is an individual upon whom a "sovereign
function of the government is conferred," to be exercised
for the benefit of the public laraelv independent of the
control of others. Aldine Inden. School Dist, v. Standley,
280 S.W.2d 578, 583 (Tex. 1955).
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Honorable John T. Montford - Page 3 (JM-1065)
No sovereign function of the government is conferred
upon the chairman of the foundation board of directors. He
does not exercise governmental authority over the university
by delegation from the legislature or by the board of
regents from its statutory authority to manage and operate
Texas State Technical Institute. See Educ. Code 5 135.24.
His authority derives from and is exercised on behalf of the
nonprofit corporation, a private entity. See aenerally
Attorney General Opinions JM-852 (1988) (nonprofit corpora-
tion distinguished from a state-supported institution of
higher education): JM-782 (1987) (employee of a nonprofit
corporation which provides transportation services is not an
employee of a state agency or political subdivision). The
by-laws give the board of regents control over the executive
director of the foundation and veto power over amendments to
the by-laws, but do not authorize the regents to control the
chairman of the board. Nor has the chairman any authority
to govern the university. Accordingly, he is not a public
officer, a public employee, or a civil officer within
article XVI, section 40, of the Texas Constitution. This
provision of the constitution does not prevent a member of
the Lubbock City Council from serving as chairman of the
Texas Tech Research Foundation board of directors.
In view of our decision that the chairman of the board
of directors of the foundation is not a public officer or
employee, we need not consider the conflict of interest
doctrines that apply to state officials. See, e.a., Attorney
General Opinions JM-852 (1988) (contract between city
council and university which employs city council members):
JM-817 (1987) (contract between state university and firm in
which regent has a financial interest).
You finally inquire about conflict of interest pro-
visions applicable to municipal officials. The city
attorney's brief discusses the conflict of interest
provisions of the Lubbock City Charter; We will not,
however, interpret these provisions. See Attorney General
Opinion JM-846 (1988).
Chapter 171 of the Local Government Code applies to
conflicts of interest of "local public officials," including
members of the governing body of a city. Local Gov't Code
5 171.001(1). Under the conditions described in chapter
171, a local public official is barred from participation in
a vote or decision involving a business entity in which he
has a substantial interest. Id. 5 171.003. A "business
entity" includes a nonprofit corporation. Attorney General
Opinions JM-852 (1988): JM-424 (1986). A person who owns a
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Honorable John T. Montford - Page 4 (JM-1065)
specified percentage of voting stock or a certain amount of
the fair market value of a business entity has a substantial
interest in it, as does one who receives funds from it in
excess of 10 percent of his gross income for the previous
year. Local Gov't Code § 171.002 as amended by Acts 1987,
70th Leg., ch. 362, 5 2, at 1799.) I
A memorandum from the Lubbock city attorney's office
states that the foundation's directors do not receive
compensation, but they are reimbursed for some expenses and
receive token gifts, including commemorative awards such as
plagues. These gifts have never exceeded $200 per board
member, per year. The brief from the city of Lubbock
concludes that the city council member does not have a
substantial financial interest in the foundation, since it
is highly unlikely that $200 in gifts would amount to 10
percent of his gross income. In the absence of contrary
facts, we will assume that the city council member's receipt
of $200 per year from the foundation does not constitute a
substantial interest in it. Accordingly, chapter 171 of the
Local Government Code does not apply to his participation in
votes or decisions of the Lubbock City Council on the
proposed agreement with the Texas Tech Research Foundation.
He may participate in those proceedings. See Attorney
General Opinion JM-424 (1986) (policy against dual agency
does not prohibit contracts authorized under former article
988b, V.T.C.S., recodified as chapter 171 of the Local
Government Code).
SUMMARY
The chairman of the board of directors of
the Texas Tech University and Health Sciences
Center Research Foundation, a nonprofit
corporation closely associated with Texas
Tech University, does not occupy or exercise
a civil office of emolument within article
1. Former article 98823, V.T.C.S., was recodified as
chapter 171 of the Local Government Code by the 70th session
of the legislature. Acts 1987, 70th Leg., ch. 149. The
same session of the legislature adopted amendments to former
article 988b, V.T.C.S., without reference to the legisla-
ture's repeal and recodification of that provision. The
amendments are preserved and given effect as part of the
code provision. Gov't Code 5 311.031(c).
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Honorable John T. Montford - Page 5 (JM-1065)
XVI, section 40, of the Texas Constitution.
This constitutional provision does not bar a
city councilman of the city of Lubbock from
serving as chairman of the foundation's board
of directors.
If the city councilman does not have a
substantial interest in the Texas Tech
Research Foundation as defined by chapter 171
of the Local Government Code, that statute
does not bar him from participating in votes
and decisions of the city council concerning
agreements between the city and the founda-
tion.
Ld!!h.Jk
Very truly yo r ,
JIM
.
MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
LGU MCCRRARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
p. 5551