HomeMy WebLinkAbout86-577 MaxwellLeRoy S. Maxwell, Esquire
Wayne Building
92 West Main Street
Waynesboro, PA 17268 -1591
STATE ETHICS COMMISSION
308 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
TELEPHONE (717) 783 -1610
June 20, 1986
ADVICE OF COUNSEL
86 -577
Re: Municipal Authority Members, Statements of Financial Interests, Minimal
Activity
Dear Mr. Maxwell:
This responds to your letter of May 2, 1986, wherein you requested the
advice of the State Ethics Commission.
Issue: Whether the members of a municipal authority are required to file
Statements of Financial Interests pursuant to the State Ethics Act if their
actions as public officials are minimal.
Facts: As Solicitor for the Waynesboro Hospital Authority, you have requested
the advice of the State Ethics Commission regarding the above captioned issue.
Generally, you advise that in 1980 the Waynesboro Hospital Authority,
hereinafter the Authority, was created in order to upgrade the Waynesboro
Hospital facilities and to generally improve the quality of patient care
provided by that establishment. You advise that, as a result of the
feasibility and financial studies conducted, it was determined that
approximately five million dollars would be necessary to implement the
necessary programs. The Authority was, thereafter, created pursuant to the
Municipal Authorities Act of 1945.
The Authority members were appointed by ordinance of the borough council.
There are five members of the Authority. You advise that two of the members
are presidents of local banks, one of the members is the owner of a large
manufacturing corporation. From the date of the Authority's incorporation to
the end of 1982, the Authority met monthly performing various activities
related to the 51.6 million that was horrowed from a consortium of hanks. The
First National Bank and Trust Company, Waynesboro, Pennsylvania, acted as
Trustee for this project. The Authority members obtained the services of a
LeRoy S. Maxwell, Esquire
June 20, 1986
Page 2
municipal bond counsel who prepared all of the paperwork in relation to the
bond issue. You advise that the mechanics of the financing involved a lease
of the hospital facilities to the Authority, a sub -lease of those facilities
by the Authority back to the hospital for operating purposes and an assignment
by the Authority of the sub -lease rentals to the Trustee for the retirement of
the debt and interest on the $1.6 million note. After the contractor
completed all of the contracted work and a certificate of final acceptance was
issued by the architect which was presented to the Authority members at their
meeting of April 21, 1983, the active business of the Authority became
negligible. The Authority, however, has continued to exists and currently
supervises the performance of the Waynesboro Hospital and payment of its
monthly rentals assigned to the Trustee. You advise that no funds are handled
by the Waynesboro Authority except for a petty cash fund. Meetings of the
Authority are currently held on a semi - annual basis. You advise that the
Authority must remain in place until the entire $ 1.6 million note has been
paid. The Authority members are not compensated and receive no other benefits
for service in this position. You have requested the advice of the State
Ethics Commission in relation to the above situation, specifically regarding
whether these members must file Statements of Financial Interests in
accordance with the State Ethics Act.
Discussion: Generally, as you are probably aware, the State Ethics Commission
has recently determined that members of municipal authorities, are public
officials within the purview of the State Ethics Act and, thereby, required to
conform to the requirements of the Act. Dice, 85 -021. This opinion was
issued specifically in relation to authority members who are appointed by
local municipalities and not compensated. Generally, the Commission's opinion
in this respect, resulted from a Supreme Court decision which eliminated a
previously existing exemption from the State Ethics Act. In order to review
the question that you have posed, we believe that it is incumbent upon us to
set forth the rationale and analysis of the Commission as set forth in the
Dice opinion.
The Act sets forth the relevant filing requirements as follows:
Section 4. Statement of financial interests requi red to be filed.
(d) No public official shall be allowed to take the oath
of office or enter or continue upon his duties, nor shall
he receive compensation from public funds, unless he has
filed a statement of financial interests with the
commission as required by this act. 65 P.S. 404(d).
Judicial decisions have also firmly establi shed that the filing requirement of
the Act is equally applicable to public employees and public officials, See,
Kremer v. State Ethics Commission, 56 Pa. Commw. 160, 424 A.2d 968, at 969
(1981); reversed on other grounds Pa. , 469 A.2d 593, (1983).
LeRoy S. Maxwell, Esquire
June 20, 1986
Page 3
Generally, the Ethics Act originally defined public official as follows:
Section 2. Definitions.
"Public offici al ." Any elected or appointed offici al i n
the Executive, Legislative or Judicial Branch of the State
or any political subdivision thereof, provided that it
shal 1 not include members of advi sory boards that have no
authority to expend public funds other than reimbursement
for personal expense, or to otherwise exercise the power
of the State or any political subdivision thereof.
"Public official" shall not include any appointed official
who receives no compensation other than reimbursement for
actual expenses. 65 P.S. 402.
In Snider v. Thornburgh, 469 Pa. 159, 436 A.2d 593, (1981), however, the
Supreme Court of Pennsylvania found the definitional phrase "public official"
unconstitutional insofar as it operated to exempt appointed /non - compensated
officials from the Ethics Act coverage. As a result, the Court stated that
the exclusion of appointed, non - compensated officials from the definition of
public officials is removed.
The term public official must now be defined as follows:
Any elected or appointed official in the Executive,
Legislative or Judicial Branch of the State or any
political subdivision thereof, provided that it shall not
i nclude members of advisory boards that have no authority
to expend public funds other than reimbursement for
personal expense, or to otherwise exercise the power of
the State or any political subdivision thereof. 65 P.S.
§402 (as modified by Snider v. Thornburgh, Supra.)
In order to determine whether municipal authority members are public officials
within this definition, it must be determined whether or not such authorities
are merely advisory boards that have no power to expend public funds or
otherwise exercise the power of the State or political subdivisions.
Municipal authorities are clearly independent agencies that are part of
the Commonwealth. Commonwealth v. Erie Metropolitan Transit Authority, 281
A.2d 882, 444 Pa. 345, (1971).
Appointed members of such agencies are, without doubt, "public
officials," One need look no further than the powers and duties of said
authorities in order to determine that they are more than advisory in nature
and do, in fact, have the power to exercise the power of the State. See, 53
P.S. §306. We will not here outline all of these powers as they are clearly
delineated i n the Munici pal Authorities Act.
LeRoy S. Maxwell, Esquire
June 20, 1986
Page 4
Indeed, a number of judicial pronouncements have al ready held such
authority members to be public officials. Commonwealth ex. rel. McCreary v.
Major, 343 Pa. 355, 22 A.2d 686, (1941).
In Forney v. State Ethics Commission, 56 Pa. Commw. 539, 425 A.2d 66,
(1981), it was clearly established that such members were public officials
within the purview of the Ethics Act. Except for the then existing exemption,
all authority members would have been required to file the Statement of
Financial Interests.
Based upon the foregoing, we found in our Dice opinion that members of
municipal authorities are public officials within the purview of the State
Ethics Act and are, therefore, required to file Statements of Financial
Intersts.
In addition to our opinion in Dice, the Commission has addressed several
other issues related to the filing requirement as applied to members of
municipal authorities. In Martin, 86 -003, the Ethics Commission concluded
that members of a municipal authority, although public officials within the
fi nanci al i ntersts filing requirements of the State Ethics Act, would not be
requi red to file Statements of Fi nanci al Interests by May 1, 1986, i f the only
action that the Authority members take during the year is action to terminate
the Authority's existence. The Commission determined that the Statement would
not be required of those individuals if the only official action, in which
they engage during the year, would be the termination of the existence of the
Authority. See also, Carmelia, 86 -567.
In relation to the question that you have posed, specifically the
Commission has attempted to apply the application of the Ethics Act on a
uniform basis. In this respect, the Commission has not based exclusions from
the Act upon the manner in which a particular entity, agency or individual
performs the task which they are authorized to do. Generally, we have used
objective standards in order to make our determinations under the Ethics Act.
The use of such uniform objective standards have enabled the Commission to
apply the Act in a standard manner. See, Phillips v. State Ethics Commission,
79 Pa. Commw. Ct. 491, 470 A.2d 659, (1984). In the instant situation, the
objective standards to be applied are set forth in the Pennsylvania Municipal
Authorities Act of 1945. 53 P.S. §301 et. seq. Generally, it is the
Authority that is responsible for the issuance and the payment of the bond in
relation to the projects that are proposed and implemented. The Authority has
the ultimate power and duty to insure that the project is successfully
completed and that the bond is successfully paid. In this respect, the
Authority is required to review the activities of the Trustee and to make sure
that all funds are properly accounted for and that the continued obligations
of the Authority are successfully completed. This general oversight
responsibility may not be delegated even though the Authority delegates the
performance of these duties to someone else. Thus, while the Authority may
LeRoy S. Maxwell, Esquire
June 20, 1986
Page 5
operate on a minimal level, at this point in time, there is no doubt that it
still maintains the power, duties and responsibilities to accomplish the
stated goals for which it was created. Thus, as a result of the foregoing, it
is advised that the members of the Waynesboro Municipal Hospital Authority are
requi red to file Statements of Fi nanci al Interests by May 1, of each year i n
which they serve.
Conclusion: The members of a municipal authority currently serving in office,
are requi red to file Statements of Financial Interests in accordance with the
State Ethics Act, even though the activities that they perform are considered
by them to be minimal in nature. This conclusion is reached based upon a
review of the general powers, duties and responsibilities which the Authority
is accorded by virtue of the Municipal Authorities Act of 1945. These
statutory imposed powers and responsibilities are the objective standards by
which this determination must be made.
Pursuant to Section 7(9)(ii), this Advice is a complete defense in any
enforcement proceedi ng initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, providing the requestor has
disclosed truthfully all the material facts and committed the acts complained
of in reliance on the Advice given.
This letter is a public record and will be made available as such.
Finally, if you disagree with this Advice or if you have any reason to
challenge same, you may request that the full Commission review this Advice. A
personal appearance before the Commission will be scheduled and a formal
Opinion from the Commission will be issued. Any such appeal must be made, in
writing, to the Commission within 15 days of service of this Advice pursuant
to 51 Pa. Code 2.12.
Si ncere
ohn J.
Gener ounsel