Can a Minnesota Housing and Redevelopment Authority commissioner bid on cabinet work for development projects that the same HRA has approved?

Plain-English summary

The City of Farmington had established a Housing and Redevelopment Authority (HRA) under Minn. Stat. § 469.003 (1992). Under § 469.012 (1992), the Farmington HRA selected redevelopment projects and contracted with private developers to build them. One of the HRA's five commissioners owned and ran a cabinet manufacturing business, and wanted to bid on cabinet work for developments that the HRA had approved.

Ernest J. Danflinger asked the AG whether two Minnesota conflict-of-interest statutes would bar the commissioner from bidding:

• Minn. Stat. § 471.87 (1992), the general public officer rule: "[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." Violation is a misdemeanor.

• Minn. Stat. § 469.009 (1992), the HRA-specific rule: a commissioner with a potential conflict of interest must give written notice to the other commissioners within one week of becoming aware of the conflict, must refrain from influencing employees on the matter, must not participate in the action or decision, and shall not be counted toward a quorum during the relevant portion of the meeting. Subdivision 3 also makes it a gross misdemeanor for an HRA commissioner to knowingly take part "in any manner" in a sale, lease, or contract in official capacity in which the commissioner has a personal financial interest.

The AG concluded that the special HRA conflict-of-interest rule (§ 469.009) controlled over the general public officer rule (§ 471.87). Under § 645.26, subd. 1 (1992) (the rule that special provisions prevail over general provisions when irreconcilable), and the case law applying that principle (Ehlert v. Graue, 292 Minn. 393, 195 N.W.2d 823 (1972), and Nathan v. St. Paul Mutual Ins. Co., 243 Minn. 430, 68 N.W.2d 385 (1955)), the legislature was understood to have provided a tailored framework for HRA commissioners that displaced the general bar.

The AG explained two ways to reach the same result. First, by statutory hierarchy: § 469.009 was the special provision, written specifically for HRA commissioners, and it allowed personal interest if accompanied by notice and nonparticipation. Second, by reading § 471.87's threshold trigger: a commissioner who knew of a personal conflict and was bound by § 469.009 to step aside was "simply not 'authorized to take part'" in the decision, and so was not within § 471.87's prohibition at all.

So the answer was: yes, the commissioner could bid on cabinet work for HRA-approved projects, provided he complied with the § 469.009 notice and nonparticipation requirements. The opinion added two caveats:

1. The commissioner's bid could still result in him participating in the project indirectly (e.g., a developer accepts his bid). Section 469.009 reached not just direct participation but situations where the commissioner had "reason to know" the organization with which he was affiliated was likely to become a project participant. So the disclosure and nonparticipation steps had to be triggered any time the commissioner planned to bid, not just where his bid was certain to succeed.
2. If the commissioner expected to bid on a "significant portion" of HRA-approved projects, he would in effect be precluded from participating in many board decisions and would be "ineffectual as a member of the HRA." The AG recommended he consider resigning.

The opinion concluded with a candid policy aside: the absolute § 471.87 ban, even as softened by the case-by-case § 471.88 exceptions, "stands in contrast" to the notice-and-nonparticipation framework of § 469.009 and the parallel state-level rule in § 10A.07. The AG suggested the Legislature could provide clearer direction.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical context: what the AG concluded

The opinion resolved a real tension between two statutes that read very differently. Section 471.87 forbade any "personal financial interest" by any "public officer" in any "sale, lease, or contract" in which the officer was "authorized to take part in any manner." That was an absolute criminal bar. Section 469.009, by contrast, contemplated that an HRA commissioner might have a financial interest in an HRA action or contract, and laid out a notice-and-nonparticipation procedure to manage it.

The AG drew on the legislative history. Until 1981, an absolute prohibition applied to HRA commissioners (then in Minn. Stat. § 462.431 (1980)). The 1981 amendment (Act of May 4, 1981, ch. 79, 1981 Minn. Laws 313-315) replaced that absolute bar with § 462.432, which is now § 469.009. The legislature had deliberately moved from a flat ban to a managed-conflict framework.

Reading § 471.87 to override that framework would have undone the 1981 amendment. The AG used the canon that special statutes prevail over general statutes when irreconcilable (Ehlert v. Graue and Nathan v. St. Paul Mutual) and the parallel reading of § 471.87's "authorized to take part" trigger to confine § 471.87 to officers who were authorized to take part. A commissioner who under § 469.009 was bound to step aside on a particular decision was, by force of § 469.009, not "authorized to take part" in that decision.

The opinion's footnote pointed out that the boundary between contract decisions (governed by § 471.87) and non-contract decisions (governed by case-by-case disqualification rules like those in Lenz v. Coon Creek Watershed Dist. and E.T.O., Inc. v. Town of Marion) was not always clear. The AG read § 469.009 as resolving the conflict for HRA contracts specifically.

The recommendation about resigning when significant participation became impractical was practical advice, not a legal command. The commissioner could comply with § 469.009 indefinitely by stepping aside on every project, but at some point the office would become a fiction.

Common questions

Q: What notice did the commissioner have to give?
A: Written notice to the other HRA commissioners, no later than one week after the commissioner became aware of the potential conflict. The notice had to describe the conflict, after which the commissioner could not attempt to influence any employee, could not participate in the action or decision, and would not be counted toward a quorum during the relevant part of the meeting.

Q: When did the conflict trigger arise?
A: Whenever the commissioner knew or had reason to know that the organization with which he was affiliated (his cabinet business) was or was reasonably likely to become a participant in a project or development affected by an HRA action or decision. The trigger was not limited to certain participation; it included indirect or likely participation.

Q: Could a commissioner avoid the trigger by abstaining without notice?
A: No. The AG cited prior opinions (Ops. Atty. Gen. 90a, Dec. 29, 1958, and 90E-5, Feb. 25, 1954) holding that § 471.87's prohibition was not avoidable by voluntary abstention. Section 469.009 imposed an affirmative duty to give written notice; it did not let a commissioner sidestep the rule by quietly recusing.

Q: What if the commissioner only occasionally bid on HRA projects?
A: The opinion suggested occasional bidding with consistent compliance was acceptable. The problem case was the commissioner whose business depended on a "significant portion" of HRA projects. There the commissioner would have to abstain so frequently that the office would become hollow, and resignation was the better course.

Q: Did this opinion address Economic Development Authorities or Area Redevelopment Agencies?
A: The opinion did not give a full answer, but a footnote noted that Minn. Stat. § 469.098 (Economic Development Authority) and § 469.113 (Area Redevelopment Agencies) likely raised similar but distinct conflict-of-interest issues. The AG flagged these as related but did not opine on them.

Q: What about the § 471.87 criminal penalty?
A: The AG read a commissioner who complied with § 469.009 as not within the scope of § 471.87's prohibition at all, on either of two grounds: (1) § 469.009 was the special provision and prevailed; or (2) a commissioner bound to step aside under § 469.009 was not "authorized to take part" within the meaning of § 471.87. Either way, compliance with § 469.009 satisfied the law.

Background and statutory framework

The Minnesota Housing and Redevelopment Authority statute (Minn. Stat. ch. 469) authorized cities to create local HRAs to address housing needs and redevelop blighted areas. Each HRA had five commissioners appointed by the mayor with city council approval (§ 469.003 (1992)). HRAs selected redevelopment projects, contracted with private developers, and exercised statutory powers including eminent domain (§ 469.012 (1992)).

Conflicts of interest were governed by a layered set of statutes:

• Pre-1981: Minn. Stat. § 462.431 (1980) absolutely barred HRA commissioners from having "any interest, direct or indirect, in any contract or proposed contract in connection with any project."
• 1981-present (then): Minn. Stat. § 462.432 (1981), recodified as § 469.009, replaced the absolute bar with a notice-and-nonparticipation framework, while preserving a gross misdemeanor under subdivision 3 for HRA commissioners who knowingly take part in HRA contracts in which they have a personal financial interest.
• General public officer rule: Minn. Stat. § 471.87 (1992) imposed an absolute criminal prohibition on any public officer's personal financial interest in any sale, lease, or contract the officer was authorized to take part in. Section 471.88 added case-by-case exceptions.
• State-level parallel: Minn. Stat. § 10A.07 imposed a notice-and-nonparticipation framework on certain state and metropolitan officials.

The AG's opinion read § 469.009 as the operative rule for HRA commissioners, displacing § 471.87 in the HRA context. The opinion left the broader general public officer conflict framework intact.

Citations and references

Statutes:
- Minn. Stat. § 462.431 (1980) (repealed, prior absolute HRA conflict bar)
- Minn. Stat. § 462.432 (1981) (recodified as § 469.009)
- Minn. Stat. § 469.003 (1992) (city HRA establishment)
- Minn. Stat. § 469.009 (1992) (HRA commissioner notice and nonparticipation)
- Minn. Stat. § 469.012 (1992) (HRA powers)
- Minn. Stat. § 469.098 (Economic Development Authority)
- Minn. Stat. § 469.113 (Area Redevelopment Agencies)
- Minn. Stat. § 471.87 (1992) (general public officer conflict of interest)
- Minn. Stat. § 471.88 (1992) (exceptions)
- Minn. Stat. § 10A.07 (state-level conflict)
- Minn. Stat. § 645.26, subd. 1 (1992) (special prevails over general)

Session laws:
- Act of May 4, 1981, ch. 79, 1981 Minn. Laws 313-315 (replacing § 462.431 with § 462.432)

Cases:
- Ehlert v. Graue, 292 Minn. 393, 195 N.W.2d 823 (1972) (special prevails over general)
- Nathan v. St. Paul Mutual Ins. Co., 243 Minn. 430, 68 N.W.2d 385 (1955) (same)
- Lenz v. Coon Creek Watershed Dist., 278 Minn. 1, 153 N.W.2d 209 (1967) (common-law disqualification)
- E.T.O., Inc. v. Town of Marion, 375 N.W.2d 815 (Minn. 1985) (same)

Other AG opinions referenced:
- Op. Atty. Gen. 90a, December 29, 1958
- Op. Atty. Gen. 90E-5, February 25, 1954

Source

• Landing page: https://www.ag.state.mn.us/Office/Opinions/
• Original PDF: https://www.ag.state.mn.us/Office/Opinions/90-19940609.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

CONTRACTS: OFFICERS' INTEREST IN: HOUSING AND REDEVELOPMENT AUTHORITIES: Housing and Redevelopment Authority Commissioner is not prohibited from performing work on projects approved by authority if notice and nonparticipation requirements of Minn. Stat. § 469.009 (1992) are met. Minn. Stat. §§ 469.009, 471.87 (1992).

90
(Cr. Ref. 430)
June 9, 1994

Ernest J. Danflinger
315 Fourth Street
Farmington, MN 55024

Dear Mr. Danflinger:

In your letter to the office of the Attorney General, you set forth substantially the following:

FACTS

Under Minn. Stat. § 469.003 (1992), each city in this state may establish a Housing and Redevelopment Authority (HRA). A Housing and Redevelopment Authority is composed of five commissioners appointed by the mayor with the approval of the governing body of the city.

The City of Farmington has established a Housing and Redevelopment Agency. Under the powers granted to it in Minn. Stat. § 469.012 (1992), the Farmington HRA selects projects for redevelopment and enters into contracts with developers. One of the current Farmington HRA commissioners is the owner and operator of a cabinet manufacturing business. This commissioner has stated his intent to bid on cabinet work for the developments which are the subject of Farmington HRA contracts for approved projects.

You ask substantially the following questions:

QUESTION ONE

Do the conflict of interest provisions set forth in Minn. Stat. § 469.009 (1992) and Minn. Stat. § 471.87 (1992) prohibit this commissioner from bidding on and participating in projects approved by the Farmington HRA?

OPINION

Subject to the conditions set forth below, we answer your question in the negative. Prior to 1981, a commissioner of a Housing and Redevelopment Authority was prohibited from having any interest, direct or indirect, in any contract or proposed contract in connection with any project. Minn. Stat. § 462.431 (1980). In 1981, that absolute prohibition was replaced by Minn. Stat. § 462.432, which adopted a notice and non-participation requirement for situations in which official actions of a commissioner or employee could substantially affect "his financial interests, or those of a business with which he is associated." Act of May 4, 1981, ch. 79, 1981 Minn. Laws 313-315. Thus it appears to have been contemplated that, after 1981, commissioners might lawfully have a personal interest in projects or contracts approved by the HRA. Those notice and non-participation provisions are now contained in Minn. Stat. § 469.009 (1992). That section provides inter alia that a potential conflict of interest is present when:

... the commissioner knows or has reason to know that the organization with which the commissioner is affiliated is or is reasonably likely to become a participant in a project or development which will be affected by the action or decision.

The statute requires a commissioner who has a potential conflict of interest to disclose that potential conflict to the commissioners of the Authority in writing no later than one week after the commissioner becomes aware of the potential conflict. That commissioner is further prohibited from attempting to influence any employee in any matter related to the action or decision in question, cannot take part in the action or decision, and shall not be counted toward a quorum during the portion of any meeting of the Authority in which the action or decision is to be considered.

In addition to the disclosure and non-participation requirements pertaining generally to actions or decisions of the Authority, Section 469.009, subd. 3, specifically provides:

A commissioner or employee of an Authority who knowingly takes part in any manner in making any sale, lease, or contract in the commissioner's or employee's official capacity in which the commissioner or employee has a personal financial interest is guilty of a gross misdemeanor.

(Emphasis added).

Therefore, it appears to be further contemplated that HRA commissioners may have a personal financial interests in sales, leases, or contracts of the Authority, but, in such cases may not knowingly participate in their official capacities. This approach differs from that taken in Minn. Stat. § 471.87 (1992), which applies generally to public officers. That section provides:

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 misdemeanor.

(Emphasis added).

Our office has previously held that this prohibition applies whenever an officer is "authorized to take part" in making a contract and may not be avoided by the officer voluntarily abstaining from participation. See, e.g., Ops. Atty. Gen. 90a December 29, 1958; 90E-5 February 25, 1954.

In seeking to resolve the apparent conflict, we turn to the rules of statutory construction as set forth by the Legislature. In particular, Minn. Stat. § 645.26, subd. 1 (1992) 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 given to both. If 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.

Where two statutes contain general and special provisions which seemingly are in conflict, the general provision will be taken to affect only such situations within its general language as are not within the language of the special provision. Ehlert v. Graue, 292 Minn. 393, 195 N.W.2d 823, 826 (1972); Nathan v. St. Paul Mutual Ins. Co., 243 Minn. 430, 68 N.W.2d 385 (1955). Thus in our view, the special notice and non-participation provisions of Minn. Stat. § 469.009 will apply to specific circumstances where a commissioner or affiliated organization has a personal interest in, or intends to participate in, a project or contract to be approved by the HRA.

Another arguable approach to the same result may be to 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 HRA 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.

From either perspective, we conclude that a commissioner may enter contracts in his or her private capacity upon HRA projects, if the notice and non-participation requirements of Section 469.009 are met. In that regard, while the commissioner's business will not be one of the developers whose projects will be directly approved by the HRA, it is possible that the commissioner could end up participating in the project through the bidding process conducted by the developer. The statute not only prohibits a commissioner from participating in decisions where the commissioner's later participation is certain, but also prohibits participation in decision making when the likelihood is indirect. Therefore, in our view, the commissioner should follow the disclosure and non-participation provisions set forth in Minn. Stat. § 469.009 whenever the commissioner intends to bid on work to be performed in a development project. If the commissioner were to contemplate bidding on work connected with a large portion of the HRA's projects, he would then be precluded from participating officially as a commissioner in connection with those projects. In such circumstances, the commissioner would be, in large part, ineffectual as a member of the HRA. Therefore, if the commissioner proposes to bid for work on a significant portion of the HRA-approved projects, he should consider resigning from his official position.

The problem you present is just one indication of the need for legislative clarification of the rules governing "conflicts of interest" in general and in government contracting in particular. The absolute criminal prohibition of Minn. Stat. § 471.87 against any public officer having any personal financial interest in, or gaining personal financial benefit however slight from, contracts, even as modified by the ad hoc series of exceptions contained in Section 471.88, stands in contrast to other statutory provisions, such as the notice and non-participation requirements contained in Section 10A.07 applicable to certain state and metropolitan local officials and in Section 469.009 discussed above. See also Lenz v. Coon Creek Watershed Dist., 278 Minn. 1, 153 N.W.2d 209 (1967) and E.T.O., Inc. v. Town of Marion, 375 N.W.2d 815 (Minn. 1985) which discuss the common rule of disqualification of public officials from participating in certain non-contract actions wherein they have a personal interest.

There is no question that opportunity, or even the public perception of opportunity, for self-dealing by public officials must be carefully avoided. However, it is submitted that not every "personal financial interest" is of sufficient magnitude to support an absolute criminal prohibition against a public officer holding or continuing to hold office if a proposed "contract" affecting that interest may arise. Furthermore, in light of the severe consequences imposed for violation of the prohibitions of Sections 471.87 and 469.009, subd. 3, we believe that public officials are entitled to clearer directions concerning when, and how, their personal interests may permissibly intersect with those of a government agency with which they serve.

Very truly yours,

HUBERT H. HUMPHREY III
Attorney General

KENNETH E. RASCHKE, JR.
Assistant Attorney General
(612) 297-1141