09-20 and 09-21-10 Special Called Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Agreed Upon Procedures - Five Points Town Center Project (Continued) September 21, 2010 It should also be noted that filing an affidavit and abstaining from votes is only required under the EDC's bylaws and not by state statues. Under state statutes, according to the City Attorney under (Exhibit 27), EDC Board members are not subject to conflict of interest requirements under Chapter 171 of Texas Local Government Code. He cites Attorney General Opinion JC-338 (Exhibit 28), dated 2/12/2001, which states "The directors of a local development corporation are not subject to chapter 171 of the Local Government Code, which regulates conflicts of interest of local public officials." Further, the Attorney General concluded "that a development corporation created under the [Development Corporation] Act is not a political subdivision nor any other 'local governmental entity' subject to Chapter 171 of the Local Government Code." Under EDC bylaws, however, they are considered local public officials. According to the City Attorney's letter (Exhibit 27): "the bylaws "declare" that the members of the board of directors of the development corporation are local public officials within the meaning of Texas Local Government Code Chapter 171. Therefore, in my opinion, the directors of the City of La Porte Development Corporation are not covered public officials under Texas Local Government Code, Chapter 171. However, members of the board of directors of the City of La Porte Development Corporation are bound by the provisions of Article 5, 'Potential Conflicts of Interest', Section 5.03 of the corporate bylaws." 8A. Finding The bylaws contradict recent Attorney General Opinions in stating that Board members are officials when, under state statutes, they are not under Chapter 171. 8A. Recommendation The EDC should consider amending the conflict of interest section of their bylaws to either note that they are exempt from such requirements under Texas Local Government Code or consider clarification of their policies on conflicts of interest in the bylaws to eliminate any conflict with state statutes and set clear policies for any violations. 8B. Finding The conflict of interest form used by the City and filled out by Mr. Matuszak lends itself to being filled out without fully disclosing the nature of the conflict. 8B. Recommendation In order to increase information provided relative to conflict of interest and transparency, the City and EDC should consider adopting different forms for reporting. A sample form obtained from the web site of the Texas Attorney General is attached as Exhibit 29. The party responsible for receiving such documentation on conflicts of interest should ensure that such forms are filled out in its entirety and clear and understandable language so that the nature of the conflict is readily identifiable by interested parties. 17