HomeMy WebLinkAbout07-501 MILLERJeffrey W. Miller, Esquire
Geary and Loperfito, LLC
158 Grant Avenue
Vandergrift, PA 15690
Dear Mr. Miller:
ADVICE OF COUNSEL
January 5, 2007
07 -501
This responds to your letters of November 15, 2006, and November 28, 2006, by
which you requested advice from the State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65
Pa. .S. § 1101 et seq., would present any prohibitions or restrictions upon township
supervisors who are members of the township pension plan with regard to voting to
allocate excess interest awarded by the pension plan administrator to the pension plan's
members' reserve account.
Facts: As Solicitor for Fairfield Township ( "Township ") in Westmoreland County,
you have been authorized by all of the members of the Township Board of Supervisors
to request an advisory from the State Ethics Commission on their behalf as to the
following.
You state that each of the Township Supervisors is also employed by the
Township as a roadmaster. Compensation for the Supervisors' duties as roadmasters
has been duly approved by the Board of Auditors. This compensation includes
participation in the Township's pension plan (the "Pension Plan ") administered by the
Pennsylvania Municipal Retirement System ( MRS "). The Township Secretary and a
non - elected road worker are also members of the Pension Plan. Each member is active
and vested in the Pension Plan, and none of the members are related by blood or
marriage to any known degree. You state that the Township does not currently fund the
Pension Plan, and you express your belief that the Pension Plan is funded by an
allocation from the State Pension Aid Fund.
Through correspondence from PMRS dated October 6, 2006, PMRS notified the
Township that it intended to award excess interest in the amount of $1,369 to the
Township. PMRS requested that the Township allocate the excess interest to the
Pension Plan's accounts in one of three ways: (1) allocate the excess interest to the
municipal reserve, in which event the allocation would not directly benefit any active or
retired members but would translate into lower employer costs in the future; (2) allocate
the excess interest to the members' reserve, in which event the excess interest benefit
would be in addition to the benefit separately promised and funded by employer and
employee contributions; or (3) allocate the excess interest to the retired members'
Miller, 07 -501
January 5, 2007
Page 2
reserve. You state that the third option is not relevant as the Township has no retired
members in the Pension Plan.
You state that the amount of the benefit to each individual member is unknown at
the present but that it could safely be assumed to represent less than one dollar per
month at present value for this single allocation. You further state that subsequent
allocations along with investment growth could conceivably yield benefits in excess of
$100 per month in years to come.
You state that the allocation election for this year was to occur on or before
November 15, 2006. You acknowledge that any action on the part of the Township
Supervisors with respect to that allocation election would be past conduct. However, it
is your understanding that PMRS periodically allocates excess interest on a yearly
basis. Because this issue may arise again in the future, you request an advisory as to
whether the Ethics Act would permit the Township Supervisors to vote to allocate
excess interest awarded by PMRS to the members' reserve. You quote PMRS Policy
Statement Rule # 97 -1 as stating: In addition, if any excess interest is allocated to
either active or retired members, it must be done in a non - discriminatory, systematic
manner, and the process shall be uniformly applied to all members," which you state
would include the two non - elected members.
You express your view that because each Supervisor has the same interest in
the matter, a vote on the matter would not be possible if a conflict of interest would
exist.
You have submitted a copy of the aforesaid October 6, 2006, correspondence
from PMRS to the Township, with enclosures including a document entitled,
"Explanations of the Allocation Form," and PMRS Policy Statement Rule # 97 -1. It is
noted that the Explanations of the Allocation Form includes the following:
Sharing Among Active and Vested Members
If excess interest money is allocated to the members'
reserve, a second decision must be made on how to divide it
among the active and vested members. There are three
choices (Items J, K, and L).
J. Equal percentage increase for all active and vested
members who had money credited to individual
accounts as of December 31, 2005 and who are still
members of the System on December 31, 3006. If
one member's assets are increased by 7 %, all active
and vested members' accounts will increase 7 %. If a
member's account balance is zero on December 31,
2005, no excess interest will be credited to that
employee's account.
K. Equal dollar increase for all active and vested
members in the plan who had money credited to their
individual accounts as of year -end 2005 and who are
still members of the System at year -end 2006. If
$7,000 in excess interest was allocated to the
members' reserve account and there are seven active
and vested members in the plan, each of the seven
account balances will increase by $1,000.
L. Increase based upon credited service within the
System relative to all other active and vested
members as of year -end 2005 who are still members
Miller, 07 -501
January 5, 2007
Page 3
of the System as of year -end 2006. For example,
excess interest allocated to the members' reserve
was $7,500 and there are three active and /or vested
members in the plan, one having twelve months of
credited service, one three months, and one sixty
months. The first account balance would increase by
$1,200, the second by $300, and the third by $6,000.
This distribution is based upon the members'
proportional longevity within the plan.
Explanations of the Allocation Form.
Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester
based upon the facts that the requester has submitted. In issuing the advisory based
upon the facts that the requester has submitted, the Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts that have not
been submitted. It is the burden of the requester to truthfully disclose all of the material
facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a
defense to the extent the requester has truthfully disclosed all of the material facts.
It is further initially noted that, pursuant to the same aforesaid Sections of the
Ethics Act, an opinion /advice may be given only as to prospective (future) conduct. If
the activity in question has already occurred, the Commission may not issue an
opinion /advice but any person may then submit a signed and sworn complaint, which
will be investigated by the Commission if there are allegations of Ethics Act violations by
a person who is subject to the Ethics Act. To the extent you have inquired as to
conduct that has already occurred, such past conduct may not be addressed in the
context of an advisory opinion. However, to the extent you have inquired as to future
conduct, your inquiry may, and shall be addressed.
The Township Supervisors are public officials subject to the provisions of the
Ethics Act. Section 1103(a) of the Ethics Act provides:
§ 1103. Restricted activities
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
65 Pa.C.S. § 1103(a).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include
an action having a de minimis economic impact or which
affects to the same degree a class consisting of the general
public or a subclass consisting of an industry, occupation or
other group which includes the public official or public
employee, a member of his immediate family or a business
Miller, 07 -501
January 5, 2007
Page 4
with which he or a member of his immediate family is
associated.
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
65 Pa.C.S. § 1102.
Section 1103(j) of the Ethics Act provides as follows:
§ 1103. Restricted activities
(j) Voting conflict. - -Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or
by any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his
interest as a public record in a written memorandum filed
with the person responsible for recording the minutes of the
meeting at which the vote is taken, provided that whenever a
governing body would be unable to take any action on a
matter before it because the number of members of the body
required to abstain from voting under the provisions of this
section makes the majority or other legally required vote of
approval unattainable, then such members shall be
permitted to vote if disclosures are made as otherwise
provided herein. In the case of a three - member governing
body of a political subdivision, where one member has
abstained from voting as a result of a conflict of interest and
the remaining two members of the governing body have cast
opposing votes, the member who has abstained shall be
permitted to vote to break the tie vote if disclosure is made
as otherwise provided herein.
65 Pa.C.S. § 1103(j).
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from using the authority of public office /employment or confidential
information received by holding such a public position for the private pecuniary benefit
of the public official / public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated.
In each instance of a conflict, Section 1103(j) of the Ethics Act requires the public
official /public employee to abstain and to publicly disclose the abstention and reasons
for same, both orally and by filing a written memorandum to that effect with the person
recording the minutes or supervisor. In the event that the required abstention results in
the inability of the governmental body to take action because a majority is unattainable
due to the abstention(s) from conflict under the Ethics Act, then voting is permissible
provided the disclosure requirements noted above are followed. See, Pavlovic, Opinion
02 -005.
In applying the above provisions of the Ethics Act to the instant matter, you are
advised as follows.
Miller, 07 -501
January 5, 2007
Page 5
In considering the elements of a conflict of interest under Section 1103(a) of the
Ethics Act, it would be a use of the authority of office for a Supervisor to make /second a
motion or vote to allocate the excess interest awarded by PMRS to the members'
reserve account of the Pension Plan. Further, action to allocate the excess interest to
the members' reserve account would result in pecuniary benefits to the members of the
Pension Plan, including the Township Supervisors. Thus, the elements of a conflict of
interest would exist unless one of the exclusions to the statutory definition of "conflict" or
"conflict of interest" would be applicable.
The statutory definition of "conflict" or "conflict of interest" includes two
exclusions, hereinafter referred to as the "de minimis" exclusion and the "class /subclass
exclusion."
The de minimis exclusion precludes a finding of a conflict of interest as to an
action having a de minimis (insignificant) economic impact. Thus, when a matter that
would otherwise constitute a conflict of interest under the Ethics Act would have an
insignificant economic impact upon a public official, a member of his immediate family,
or a business with which he or a member of his immediate family is associated, a
conflict would not exist and Sections 1103(a) and 1103(j) of the Ethics Act would not
restrict participation in such matter. See, Schweinsbur , Order 900. Given the
submitted fact that the amount of the benefit to each indivi ual member is unknown at
present, you are advised that it cannot be determined whether the de minimis exclusion
would apply in the instant matter.
In order for the class /subclass exclusion to apply, two criteria must be met: (1)
the affected public official /public employee, immediate family member, or business with
which the public official /public employee or immediate family member is associated
must be a member of a class consisting of the general public or a true subclass
consisting of more than one member; and (2) the public official /public employee,
immediate family member, or business with which the public official /public employee or
immediate family member is associated must be affected "to the same degree" as the
other members of the class /subclass. 65 Pa.C.S. § 1102; see, Graham, Opinion 95 -002
(citing Van Rensler, Opinion 90 -017); Rubenstein, Opinion 01 -007. The first criterion of
the exclusion is satisfied where the members of the proposed subclass are similarly
situated as the result of relevant shared characteristics. The second criterion of the
exclusion is satisfied where the individual /business in question and the other members
of the class /subclass are reasonably affected to the same degree by the proposed
action. Kablack, Opinion 02 -003.
In considering the first criterion, you are advised that the Supervisors would
belong to a subclass consisting of all active and vested members in the Pension Plan.
You are generally advised that if, as a result of the proposed action, the Township
Supervisors, Township secretary and non - elected road worker who constitute the active
and vested members of the Pension Plan would be affected to the same degree, the
class /subclass exclusion would apply and the Township Supervisors would not have a
conflict of interest under Section 1103(a) of the Ethics Act as to participating in voting to
allocate the excess interest award to the members' reserve account.
In considering the three options outlined in the aforesaid "Explanations of the
Allocation Form," based upon the limited submitted facts, the only option that would
clearly result in the application of the class /subclass exception would be the option
labeled "K," whereby each active and vested member of the Pension Plan would receive
the same dollar amount allocated to his or her individual account. The options labeled
"J" and "L," which would involve, respectively, an equal percentage increase or increase
based upon credited service within the system, would be unlikely to affect the Pension
Plan members to the same degree." This conclusion is based upon the nature of such
options, although the submitted facts do not include specific calculations or factors such
Miller, 07 -501
January 5, 2007
Page 6
as the years of credited service, earnings history, ages of the Pension Plan participants,
or other relevant information that could impact upon such calculations.
If neither the de minimis exclusion nor the class /subclass exclusion would be
applicable, the Township Supervisors would have conflicts of interest under Section
1103(a) of the Ethics Act as to participating in voting to allocate the excess interest
award to the members' reserve account. In each instance of a conflict of interest, a
Supervisor would be required to abstain from participation and to fully satisfy the
disclosure requirements of Section 1103(j) of the Ethics Act.
You are advised that the two voting conflict exceptions contained in Section
1103(j) of the Ethics Act are strictly limited to voting and do not authorize an individual
with a conflict to make a motion to put the matter in a posture for a vote. In Garner,
Opinion 93 -004, the Commission concluded that the General Assembly, in enacting
Section 1103(j) of the Ethics Act, intended to allow a conflicted member of a three
member board to second a motion where the two remaining board members have
opposing views or where one of the other two supervisors is absent. However, the
Garner decision was expressly limited in its application to three member boards and to
the question of seconding a motion. Garner, supra; see also Confidential Opinion, 04-
003. No such allowance exists as to boards with more than three members.
The propriety of the proposed conduct has only been addressed under the Ethics
Act; the applicability of any other statute, code, ordinance, regulation or other code of
conduct other than the Ethics Act has not been considered in that they do not involve an
interpretation of the Ethics Act. Specifically not addressed herein is the applicability of
the Second Class Township Code.
Conclusion: The Township Supervisors of Fairfield Township ( "Township ") are
( public officials subject to the provisions of the Public Official and Employee Ethics Act
"Ethics Act "), 65 Pa.C.S. § 1101 et seq. The Supervisors, who are all active members
in the Township Pension Plan, would each have a conflict of interest under Section
1103(a) of the Ethics Act with respect to voting to allocate excess interest awarded by
the Pension Plan administrator to the members' reserve account of the Pension Plan
unless one of the two statutory exclusions to the definition of "conflict" or "conflict of
interest" (referred to herein as the "de minimis" exclusion and the "class /subclass
exclusion') would be applicable. Given the submitted fact that the amount of the benefit
to each individual member is unknown at present, it cannot be determined whether the
de minimis exclusion would be applicable in the instant matter. If, as a result of the
proposed action, the Township Supervisors, Township secretary and non - elected road
worker who constitute the active and vested members of the Pension Plan would be
affected to the same degree, the class /subclass exclusion would apply and the Township
Supervisors would not have a conflict of interest under Section 1103(a) of the Ethics Act
as to participating in voting to allocate the excess interest award to the members' reserve
account. The class /subclass exception would be applicable under an allocation option
whereby each active and vested member of the Pension Plan would receive the same
dollar amount allocated to his or her individual account. If neither of the aforesaid
exclusions would apply, the Township Supervisors would have conflicts of interest
under Section 1103(a) of the Ethics Act as to participating in voting to allocate the
excess interest award to the members' reserve account. In each instance of a conflict,
a Supervisor would be required to abstain from participation and to fully satisfy the
disclosure requirements of Section 1103(j) of the Ethics Act. The two voting conflict
exceptions contained in Section 1103(j) of the Ethics Act are strictly limited to voting and
do not authorize an individual with a conflict to make a motion to put the matter in a
posture for a vote.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act.
Miller, 07 -501
January 5, 2007
Page 7
Pursuant to Section 1107(11), an Advice is a complete defense in any
enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, provided the requester 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 appeal the Advice to the full
Commission. A personal appearance before the Commission will be
scheduled and a formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually
received at the Commission within thirty (30) days of the date of this
Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be
received at the Commission by hand delivery, United States mail,
delivery service, or by FAX transmission (717 - 787 - 0806). Failure to
file such an appeal at the Commission within thirty (30) days may
result in the dismissal of the appeal.
Sincerely,
Robin M. Hittie
Chief Counsel