Can a town attorney also serve as director of a not-for-profit local development corporation that the town partially funds?

Plain-English summary

The Middletown Town Attorney serves as town attorney for the Town of Middletown. He also wanted to serve as a director on the town's local development corporation (a not-for-profit organized under Not-for-Profit Corporation Law § 1411 to promote housing and economic development). Two newly-elected town board members were also asked to serve as directors. The Town Attorney asked whether these dual roles were permissible.

The AG said both combinations are compatible.

The local development corporation's structure removed the typical concerns. Its 15 directors are nominated by the corporation's nominating committee and appointed upon the approval of the corporation's board. The town does not appoint, approve, or remove directors. The town does not direct corporation activities. The town provides only about 5% of the corporation's funding (most comes from the State Division of Housing and Community Renewal).

Under People ex rel. Ryan v Green, the compatibility test turns on subordination or inherent inconsistency. Neither applies here. Because the town does not appoint or oversee the corporation's directors, the directors are not subordinate to town officials. And because the corporation is a separate legal entity working for the benefit of town residents, the interests of the corporation and the town are aligned at the structural level.

The AG flagged the standard conflict-of-interest caveat: if the town and the corporation enter into contracts (which is common when a town provides funding to a local development corporation), or if the corporation pursues a project requiring town board approval, the town attorney and the affected town board members should recuse from participating in those specific transactions on either side. The compatibility holding does not eliminate transaction-specific conflicts; it just allows the dual roles to exist.

Currency note

This opinion was issued in 1998. 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.

Common questions

What is a local development corporation?

A not-for-profit corporation organized under Not-for-Profit Corporation Law § 1411 to provide housing, economic development, or other community-benefit services. Local development corporations work alongside municipal governments but are separate legal entities. They typically receive funding from state agencies, federal programs, and the municipality itself.

Why isn't the LDC director position subordinate to town officials?

Because the town does not appoint or approve LDC directors. The corporation's nominating committee handles nominations and the corporation's board approves them. The town has no formal role in selecting directors. Without an appointing or supervisory connection, there is no subordination.

What if the town appointed LDC directors?

Then the analysis might differ. A town-appointed LDC director would have a more direct connection to town authority, and the compatibility question would be sharper. Some LDC structures have town-appointed boards; in those cases the AG might reach a different conclusion. The 1998 opinion is specific to the Middletown structure where directors are selected internally.

Why does the 5% funding figure matter?

The AG cited it as part of the structural analysis: the town's contribution is minimal compared to State funding. A heavy town-funding relationship might raise concerns about the LDC effectively being a town instrumentality, which could change the compatibility analysis. The small percentage helped establish the LDC's independence.

When should the town attorney or board members recuse?

The opinion identifies two specific scenarios: contracts between the town and the corporation, and projects pursued by the corporation that require town board approval. In those circumstances, the dual-role official has interests on both sides of the matter and should not participate in deliberations or voting on either side.

What about other potential conflicts?

The opinion does not enumerate every possible conflict scenario. The general principle is that compatibility allows the structural dual role, but recusal is required for specific matters where the official's two roles would put them on both sides. Compliance requires ongoing attention to the specific decisions being made.

Background and statutory framework

Not-for-Profit Corporation Law § 1411 authorizes local development corporations. The statute permits formation of LDCs for community development purposes and gives them powers similar to other not-for-profit corporations.

People ex rel. Ryan v Green, 58 NY 295 (1874), is the foundational compatibility case. The 1998 opinion is a routine application of the two-prong test (subordination or inherent inconsistency).

The general framework for compatibility analysis distinguishes structural (whether the two positions can be held simultaneously) from transactional (whether specific decisions create conflicts). The 1998 opinion is firmly on the structural side and reserves transactional issues for recusal.

Citations

• Not-for-Profit Corporation Law § 1411 (local development corporations).
• People ex rel. Ryan v Green, 58 NY 295 (1874) (leading case on compatibility of office).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_98-23_pw.pdf

Original opinion text

NOT-FOR-PROFIT CORPORATION LAW § 1411.
The positions of town attorney and director of the local development corporation are compatible. The office of town board member also is compatible with the director position.

May 19, 1998
Dennis Metnick, Esq.
Town Attorney
Town of Middletown
P. O. Box 577
Margaretville, NY 12455

Informal Opinion
No. 98-23

Dear Mr. Metnick:
You serve as the town attorney for the Town of Middletown. You have asked whether you also may serve on the board of directors of the town's local development corporation. In addition, you have asked whether two newly-elected town board members may serve on the corporation's board of directors. In your request and in a subsequent telephone conversation, you have stated that the local development corporation has fifteen members on its board of directors, all of whom are nominated by the corporation's nominating committee and appointed upon the approval of the board of the corporation. You also have advised us that the local development corporation, which seeks to enhance housing and economic development in the community, receives most of its funding from the State Division of Housing and Community Renewal. The town provides approximately 5% of the local development corporation's funds. In the absence of a constitutional or statutory prohibition against dual-officeholding, one person may hold two offices simultaneously unless they are incompatible. The leading case on compatibility of office is People ex rel. Ryan v Green, 58 NY 295 (1874). In that case the Court held that two offices are incompatible if one is subordinate to the other or if there is an inherent inconsistency between the two offices. The former can be characterized as "you cannot be your own boss", a status readily identifiable. The latter is not easily characterized, for one must analyze the duties of the two offices to ascertain whether there is an inconsistency. An obvious example is the inconsistency of holding both the office of auditor and the office of director of finance.

2
There are two subsidiary aspects of compatibility. One is that the principle equally covers an office and a position of employment or two positions of employment. Also, where positions are compatible, a conflict of interests may arise out of the simultaneous holding of the positions. The conflict can be avoided by declining to participate in the disposition of the particular matter. We conclude that the positions of town attorney and director of the local development corporation are compatible. The office of town board member also is compatible with the director position. Because the town government does not appoint or approve directors or otherwise oversee or control the activities of the local development corporation, the directors are not subordinate to either the town board members or the town attorney. The offices and positions thus are not incompatible on that ground. Nor does there appear to be an inherent inconsistency between the position of director and the office of town board member or town attorney. The town and the corporation are separate legal entities. The town contributes only a minimal amount of money to the corporation. Because the purpose of the corporation is to benefit the town's residents, the interests of the corporation and the town government would appear to be consistent. You should be aware that conflicts of interest may arise, particularly if the town and the corporation enter into contracts with each other. Under those circumstances and if, for example, the local development corporation was to pursue a project that required town board approval, the town attorney and the town board members should recuse themselves from participating in the transaction on behalf of either the town or the corporation. The Attorney General renders formal opinions only to officers and departments of State government. This perforce is an informal and unofficial expression of the views of this office. Very truly yours,

SIOBHAN S. CRARY
Assistant Attorney General