CONTRACTS: OFFICERS l'NTEREST: CITY: Oflicer and employee of nonprofit corporation that provides public access cable television services in connection with city franchise and contract is not disqualified from serving as mayor or council meinber, but must abstain nom participating in city actions involving franchise Op. Atty. Gen. 90a-1, July 12, 1973 superceded. Minn. Stat. §§ 238.15 and 471.87 (1996).
90e (Cr. Ref. 90a-l)
August 25, 1997
Maren Swanson
City Attorney
City of Northiield
105 East Fif’th Street PO Box 240 Northfield, MN 55057
Dear Ms. Swanson: From the information provided to us in your letters to the office of the Attomey General,
we have ascertained the following: FACTS
The City of Northiield (“Northtield”) granted a nonexclusive cable television franchise to NorCorn Video, Inc. (“NorCom”). Ordinance 444, Ordinance Summary, dated November 21, 1983 (now codified at Northiield Ordinance § 1520:00, et s_e_q.) (“Franchise”). 'I'he ordinance required NorCom to provide public access channel(s) for use by the public and pay 5 percent of its gross revenues to Northtield as a franchise fee.
ln 1985, Northfield and NorCom amended the franchise agreement to relieve NorCom of its obligation to provide local origination and public access staff, equipment, and associated commitments and to impose instead an obligation to pay to Northfield an annual grant for support of local origination and public access television activities Cable Communications Offering, Amendment Agreement No. 1, City ofNorthfield, dated May I, 1985 (“Amendment Agreement”). Northfield delegated the duties to administer/operate the use and maintenance of certain local origination/public access equipment and to operate
Maren Swanson August 25, 1997
Page 2
the public access channels to NTV 26, a nonprofit corporation of the State of Minnesota. Agreernent for the Delegation of Public Accesstocal Origination Cable Communications Functions, dated April 9, 1985 (“Delegation Agreernent”).
The Delegation Agreement also provided that N"I'V 26 would receive from Northfield 75 percent of the cable franchise fee collected by Northfleld, plus the amount of the grant Northiield received under the amended cable franchise agreement with NorCom. More or less funds would be allocated annually upon request ofNTV 26. NTV 26 has never requested an adjustment and Northfleld has always paid according to the terms of the Delegation Agreement.
'l`he amended Franchise and Delegation Agreement are still in effect and have not been renegotiated or reconsidered The Franchise and the Delegation Agreernent were not publicly bid, but were awarded upon request for proposals
Northiield’s present mayor was an incorporator of NTV 26. He is currently one of its directors and as its primary empioyce, lie is responsible for NTV 26’s operation He receives an annual salary of $25,000 from the corporation.
The service area of NTV 26 comprises the City of Northtield the City of Dundas, and some neighboring townships.
Du.ring the period 1990 to 1994, the present mayor ofNorthiield served as a city council member. Then in 1994, he was elected to his present office of mayor.
You ask substantially the following questions: QUESTION ONE
Is the mayor ofNorthiield prohibited from serving as mayor because he is an employee, incorporator and director of Northtield’s public access cable television provider?
OPINION We answer your question in the negative.
As a general proposition, circtunstances involving a public official‘s personal interest in
official contracts are addressed by Minn. Stat. § 471.87 which provides:
Maren Swanson August 25, 1997 Page 3
Except as authorized in section 471 .88, a public officer who is authorized to take part in any manner in making any sale, lease or contract in official capacity shall not voluntarily have a personal financial interest in that sale, lease, or contract or personally benefit financially therefrom. Every public officer who violates this provision is guilty of a gross misdemeanor.
According to the facts .. certained, the mayor who is also a member of the council has a direct financial interest in NTV 26 by virtue of his position as a director and primary employee who receives an annual salary.l NTV 26 has a contract with Northlield which has been in place since 1985. Delegation Agreement. The contract funds NTV 26 with cable franchise fees and additional grant funds received by Northfield from its &anchisee, NorCom. Amendment Agreernent, paragraph 2; Delegation Agreement, paragraph 2. The Amendment Agreernent with NorCorn may be renegotiated every three years with respect to fees paid. Amendment Agreement, paragraph 2. ”Ihe Delegation Agreernent with NTV 26 may be amended annually to change the amount of the funds allocated to NTV 26. Delegation Agreernent, paragraph 2. In both cases, Northfield, as the f`ranchiser and contractor, respectively, would be the entity renegotiating the fee structures through its council. Thus it appears that the mayor has a direct financial interest in one contract, (the Delegation Agreement) and an indirect interest in a second contract (the Franchise Agreement) both of which are made and amended by the council of which he is a member. Thus, if we consider only section 471 .87, the mayor would be in violation of that section and subject to the penalties provided turless one of the exceptions contained in section 471.88 applied.
However, we must also consider other relevant legislation which pertains more specifically to potential conflict of interest situations related to cable television franchises Minn.
Stat. § 23 8.15 (1996) provides:
1 It is assumed that the mayor receives no financial benefit 1 11 his position as incorporator,
since NTV 26 is a Minnesota nonprofit 501(c)(3) corporation
Maren Swanson August 25, 1997 Page 4
Members of any elected body granting fcable communications] franchises and employees of any franchising body who would be directly involved in the granting or administration of franchises for cable communications and who are employed by or knowingly have any financial interest in any cable communications company, bidding on such franchise, or the cable communications company granted the franchise, or their subsidiaries, major equipment or program supplier shall abstain from participation in the franchising of a cable communications company or the administration of such hanchise.
This plain language appears to contemplate that some members of elected bodies granting or administering franchises will have a financial interest in cable communications companies granted a “franchise” or in its subsidiaries In contrast to the broad prohibitory terms of section 471.87 discussed above, however, section 238.15 addresses the conflict by prohibiting the interested member from any participation in the granting or administration of the franchise In that respect, section 238.15 presents a situation similar to that described in Op. Atty. Gen. 90, June 9, 1994, wherein we concluded that a Housing and Redevelopment Authority (“HRA”) commissioner could enter contracts with the Housing and Redevelopment Authority, if the notice and non-participation requirements of Minn. Stat. § 469.009 (1996) governing potential conflicts of interest involving HRA commissioners were observed. Although section 238. 15 does not contain a notice provision, it does implicitly permit an elected official to retain his or her financial interest in a cable communications company granted a franchise or in its subsidiaries if he or she abstains from participation in the franchising of the company or the administration of such franchise. Our analysis in Atty. Gen. Op.
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CONTRACTS: OFFICERS l'NTEREST: CITY: Oflicer and employee of nonprofit corporation that provides public access cable television services in connection with city franchise and contract is not disqualified from serving as mayor or council meinber, but must abstain nom participating in city actions involving franchise Op. Atty. Gen. 90a-1, July 12, 1973 superceded. Minn. Stat. §§ 238.15 and 471.87 (1996).
90e (Cr. Ref. 90a-l)
August 25, 1997
Maren Swanson
City Attorney
City of Northiield
105 East Fif’th Street PO Box 240 Northfield, MN 55057
Dear Ms. Swanson: From the information provided to us in your letters to the office of the Attomey General,
we have ascertained the following: FACTS
The City of Northiield (“Northtield”) granted a nonexclusive cable television franchise to NorCorn Video, Inc. (“NorCom”). Ordinance 444, Ordinance Summary, dated November 21, 1983 (now codified at Northiield Ordinance § 1520:00, et s_e_q.) (“Franchise”). 'I'he ordinance required NorCom to provide public access channel(s) for use by the public and pay 5 percent of its gross revenues to Northtield as a franchise fee.
ln 1985, Northfield and NorCom amended the franchise agreement to relieve NorCom of its obligation to provide local origination and public access staff, equipment, and associated commitments and to impose instead an obligation to pay to Northfield an annual grant for support of local origination and public access television activities Cable Communications Offering, Amendment Agreement No. 1, City ofNorthfield, dated May I, 1985 (“Amendment Agreement”). Northfield delegated the duties to administer/operate the use and maintenance of certain local origination/public access equipment and to operate
Maren Swanson August 25, 1997
Page 2
the public access channels to NTV 26, a nonprofit corporation of the State of Minnesota. Agreernent for the Delegation of Public Accesstocal Origination Cable Communications Functions, dated April 9, 1985 (“Delegation Agreernent”).
The Delegation Agreement also provided that N"I'V 26 would receive from Northfield 75 percent of the cable franchise fee collected by Northfleld, plus the amount of the grant Northiield received under the amended cable franchise agreement with NorCom. More or less funds would be allocated annually upon request ofNTV 26. NTV 26 has never requested an adjustment and Northfleld has always paid according to the terms of the Delegation Agreement.
'l`he amended Franchise and Delegation Agreement are still in effect and have not been renegotiated or reconsidered The Franchise and the Delegation Agreernent were not publicly bid, but were awarded upon request for proposals
Northiield’s present mayor was an incorporator of NTV 26. He is currently one of its directors and as its primary empioyce, lie is responsible for NTV 26’s operation He receives an annual salary of $25,000 from the corporation.
The service area of NTV 26 comprises the City of Northtield the City of Dundas, and some neighboring townships.
Du.ring the period 1990 to 1994, the present mayor ofNorthiield served as a city council member. Then in 1994, he was elected to his present office of mayor.
You ask substantially the following questions: QUESTION ONE
Is the mayor ofNorthiield prohibited from serving as mayor because he is an employee, incorporator and director of Northtield’s public access cable television provider?
OPINION We answer your question in the negative.
As a general proposition, circtunstances involving a public official‘s personal interest in
official contracts are addressed by Minn. Stat. § 471.87 which provides:
Maren Swanson August 25, 1997 Page 3
Except as authorized in section 471 .88, a public officer who is authorized to take part in any manner in making any sale, lease or contract in official capacity shall not voluntarily have a personal financial interest in that sale, lease, or contract or personally benefit financially therefrom. Every public officer who violates this provision is guilty of a gross misdemeanor.
According to the facts .. certained, the mayor who is also a member of the council has a direct financial interest in NTV 26 by virtue of his position as a director and primary employee who receives an annual salary.l NTV 26 has a contract with Northlield which has been in place since 1985. Delegation Agreement. The contract funds NTV 26 with cable franchise fees and additional grant funds received by Northfield from its &anchisee, NorCom. Amendment Agreernent, paragraph 2; Delegation Agreement, paragraph 2. The Amendment Agreernent with NorCorn may be renegotiated every three years with respect to fees paid. Amendment Agreement, paragraph 2. ”Ihe Delegation Agreernent with NTV 26 may be amended annually to change the amount of the funds allocated to NTV 26. Delegation Agreernent, paragraph 2. In both cases, Northfield, as the f`ranchiser and contractor, respectively, would be the entity renegotiating the fee structures through its council. Thus it appears that the mayor has a direct financial interest in one contract, (the Delegation Agreement) and an indirect interest in a second contract (the Franchise Agreement) both of which are made and amended by the council of which he is a member. Thus, if we consider only section 471 .87, the mayor would be in violation of that section and subject to the penalties provided turless one of the exceptions contained in section 471.88 applied.
However, we must also consider other relevant legislation which pertains more specifically to potential conflict of interest situations related to cable television franchises Minn.
Stat. § 23 8.15 (1996) provides:
1 It is assumed that the mayor receives no financial benefit 1 11 his position as incorporator,
since NTV 26 is a Minnesota nonprofit 501(c)(3) corporation
Maren Swanson August 25, 1997 Page 4
Members of any elected body granting fcable communications] franchises and employees of any franchising body who would be directly involved in the granting or administration of franchises for cable communications and who are employed by or knowingly have any financial interest in any cable communications company, bidding on such franchise, or the cable communications company granted the franchise, or their subsidiaries, major equipment or program supplier shall abstain from participation in the franchising of a cable communications company or the administration of such hanchise.
This plain language appears to contemplate that some members of elected bodies granting or administering franchises will have a financial interest in cable communications companies granted a “franchise” or in its subsidiaries In contrast to the broad prohibitory terms of section 471.87 discussed above, however, section 238.15 addresses the conflict by prohibiting the interested member from any participation in the granting or administration of the franchise In that respect, section 238.15 presents a situation similar to that described in Op. Atty. Gen. 90, June 9, 1994, wherein we concluded that a Housing and Redevelopment Authority (“HRA”) commissioner could enter contracts with the Housing and Redevelopment Authority, if the notice and non-participation requirements of Minn. Stat. § 469.009 (1996) governing potential conflicts of interest involving HRA commissioners were observed. Although section 238. 15 does not contain a notice provision, it does implicitly permit an elected official to retain his or her financial interest in a cable communications company granted a franchise or in its subsidiaries if he or she abstains from participation in the franchising of the company or the administration of such franchise. Our analysis in Atty. Gen. Op. 90, June 9, 1994, we believe applies to this situation as well. ln that opinion we concluded that the “special” statutory provisions relating to HRA commissioners’ contractual interests prevailed over the more general prohibition contained in
section 1'-1»71.8'7.2 For similar reasons we believe that the non-participation provisions of Minn.
1 Minn. stat § 645.26, subd. 1 (1996) provides When a general provision in a law is in conflict with a special provision in the same or another law. the two shall be construed, if possible, so that effect may be
Maren Swanson August 25, 1997 Page 5
Stat. § 238.15 apply to members of an elected body having a personal financial interest in any cable communication company or its subsidiary which bid on a contract or which is a party to a contract that is being administered by the elected body. ln the June 9, 1994 opinion we also
noted that
Another arguable approach to the same result may beto observe that, by virtue of the language contained in Section 469.009, a commissioner who knows, or has reason to know of a personal conflict of` interest in an I-IRA project is simply not “authorized to take part” officially in making contracts associated with that project, and is thus not technically within the prohibition of Section 471 .87.
Likewise in this case, the mandate in section 238.15 that elected members of a h'anchising body abstain &om participation in franchise granting or operation actions would indicate that the official is not authorized to take part in franchising decisions in his or her official capacity. While there may be arguments to the contrary, we believe that the Delegatjon Agreement at issue is covered by section 238.15. Minn. Stat. § 238.02, subd. 5 (1996) defines “n'anchise” to mt n “any authorization granted by a municipality in the form of a fi'anchise, privilege, permit, license or other municipal authorization to construct, operate, maintain, or manage a cable communications system in any municipality.” Additionally, Minn. Stat. § 238.081, subd. 9 (1996) permits a franchising authority to franchise a nonprofit owned system, while Minn. Stat. § 238.081, subd. 4(3)(iv) (1996) includes in its listing of areas to be covered in the franchise “the number of channels and services to be made available for access cable broadcasting.” Thus, in light of the broad definition of “&anchise," the fact that public access is part of cable service
covered by chapter 238 nd that a franchising authority may grant a franchise to a nonprofit
given to both. lf the conflict between the two provisions be irreconcilable, the special provision shall prevail and shall be construed as an exception to the general provision, unless the general provision shall be enacted at a later session and it shall be the manifest intention of the legislature that such general provision shall prevail.
Maren Swanson August 25, 1997 Page 6
corporation, the Delegation Agreement does appear to be covered by the cable communication laws including section 23 8.1 5.
Therefore, we conclude that the mayor in these circumstances would not be affected by the conflict of interest provision of section 471 .87, but would be governed by the requirements of section 23 8.15, requiring him to abstain from participation in the franchising of the cable communications company or the administration of that franchise
ln reaching this conclusion we have considered Op. Atty. Gen. 90a-1, July 12, 1973, where we stated that a person may not serve on a village council while a franchise agreement is in effect when the person had a financial interest in the fi‘anchisee company, without first divesting himself of his interest. That opinion addressed Minn. Stat § 412.311 (1971) which
provided in part:
Except as provided in sections 471 .87 to 471.89, no member of the village council shall be directly interested in any contract made by the council.3
It did not directly address section 471 .87 or section 471.88 except to note in a footnote that none of the exceptions were applicable Neitlier did that opinion address section 238.15.
Section 238.15 was enacted during the 1973 legislative session md did not become effective until August l, 1973, after the opinion was issued. Therefore, since no exceptions to the conflict of interest rule existed at that time for franchises, that opinion must be read in its historic context
and is superseded to the extent inconsistent with this opinion.
3 Section 412.311 is applicable only to statutory cities.
Maren Swanson August 25, 1997 Page 7
In light of our conclusion here it is not necessary to address your remaining questions
concerning measures which might be taken by the mayor or council to avoid further violations of
Minn. Stat. § 471.87.
Sincerely,
HUBERT H. HUMPHREY IlI Attorriey General
KENNETH E. RASCHKE, IR. Assistant At'torney General
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