Does a New York village trustee who owns property in a Business Improvement District have a conflict of interest that requires recusal on the BID budget vote?

Plain-English summary

A Cedarhurst village trustee owned commercial property inside the Village's Business Improvement District. BID property owners pay a periodic assessment (on top of regular municipal taxes) to fund BID improvements and services. The village attorney asked whether that trustee should recuse on future BID budget votes by the Village Board of Trustees.

The AG declined to give a flat yes or no, instead supplying the legal framework and recommending referral to the local board of ethics for fact-finding.

The framework comes from a line of New York cases on conflict of interest in board votes. The governing principle: a public official must avoid circumstances that compromise the ability to make impartial decisions in the public interest, and even the appearance of impropriety should be avoided to maintain public confidence in government.

On one side of the line sits Tuxedo Conservation & Taxpayers Ass'n v. Town Bd. (2d Dep't 1979). A town board member should have recused from voting on a $200 million development project where his firm was likely to receive substantial business if approved. Tuxedo also drew the line: "To say in general terms that a member of a city council cannot vote on the passage of an ordinance providing for the construction of some important public improvement, because he owns real property in the city, when the improvement is a general one, is at once to disqualify every property owner in the city from belonging to the city council." The trigger is a "personal or private" interest, not one held "in common with all other citizens or owners of property."

On the other side sits Town of North Hempstead v. Village of North Hills (1975) (no recusal required where most village property met the zoning reclassification requirements, since otherwise nearly all property owners would be disqualified from the board) and Segalla v. Planning Board (1992) (similar logic for nearly-uniform impact). Parker (1992) added the size dimension: a .15% sales interest in a subdivision applicant company was de minimis and did not require recusal.

Applied to the BID-trustee question: a trustee who owns BID property has an interest distinct from non-BID residents (only BID owners bear the assessment cost). But the question is whether that interest is substantial and direct relative to other BID owners. Recusal would be appropriate if the trustee owned a "considerable portion" of the BID's commercial property (making the impact of any assessment substantial), or if a proposed improvement was closely situated to or had a direct nexus with the trustee's property. The AG did not decide whether this trustee needed to recuse. It referred the matter to the local board of ethics for findings on the trustee’s interest and future budget proposals.

The AG declined to make the call on the facts. The opinion recommended referring the question to the local board of ethics. Under General Municipal Law § 808(3), a municipality may establish a board of ethics to render advisory opinions on conflict-of-interest questions. § 808(2) covers the county-board option where no local board exists. The AG noted: "If a board does not exist, the village board of trustees can form one easily and quickly."

A practical consequence: in the absence of proper recusal where required, the trustees' vote could be challenged and set aside by a court under Zagoreos v. Conklin.

Currency note

This opinion was issued in 2002. 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's a Business Improvement District?

A BID is a municipally-created district where property owners pay a special assessment on top of regular taxes to fund capital improvements or business-promoting services within the district. The General Municipal Law (§§ 980 et seq.) governs BIDs in New York. The municipality approves the district plan and budget; a District Management Association typically administers operations.

Why isn't owning any BID property automatically a conflict?

The AG cited cases in which an interest shared with many other property owners did not require recusal. It said BID ownership alone may not be enough to require recusal, but the trustee’s actual interest and the future budget must be examined.

What size of stake triggers recusal?

The AG did not set a percentage, but the cases provide guideposts. .15% (Parker) is de minimis. A "considerable portion" of the BID's commercial property would warrant recusal. Between those poles is fact-intensive territory the ethics board is meant to resolve.

Does it matter what's in the budget?

Yes. Yes. The AG said future expenditures matter. It identified an improvement close to, or directly connected with, the trustee’s property as a circumstance that could make recusal appropriate. It did not decide the effect of the current budget.

What's the consequence of voting without recusing when recusal was required?

The AG said that without recusal, a vote involving a substantial personal interest could be challenged and might be set aside by a court. It cited Zagoreos v. Conklin for that point.

Background and statutory framework

General Municipal Law §§ 980 et seq. governs Business Improvement Districts. § 980-c covers BID assessments; § 980-j covers contributions from the municipality; § 980-l covers municipal services in the district. Op. Atty. Gen. (Inf.) No. 96-25 confirmed that only district property may be charged for the cost of district improvements or services.

General Municipal Law § 808(2) authorizes county boards of ethics. § 808(3) authorizes municipal boards of ethics to render advisory opinions on conflicts of interest concerning municipal officers and employees.

The common-law conflict-of-interest framework comes from cases including Tuxedo (substantial pecuniary stake; recusal required), North Hempstead (shared interest; no recusal), Parker (de minimis interest; no recusal), Segalla (uniform impact; no recusal), Byer (interest extent matters), and Zagoreos (improper non-recusal can invalidate the vote).

Citations

• General Municipal Law § 808(2) (county boards of ethics).
• General Municipal Law § 808(3) (municipal boards of ethics; advisory opinions on conflicts).
• General Municipal Law § 980 et seq. (Business Improvement District Act).
• General Municipal Law § 980-c (BID assessment).
• General Municipal Law § 980-j (district plan; municipal contribution).
• General Municipal Law § 980-l (services within the district).
• Matter of Tuxedo Conservation & Taxpayers Ass'n v. Town Bd., 69 A.D.2d 320 (2d Dep't 1979) (recusal required for substantial personal interest; framing rule on "personal or private" vs common interest).
• Matter of Parker v. Town of Gardiner Planning Bd., 184 A.D.2d 937 (3d Dep't 1992) (de minimis interest does not require recusal).
• Town of North Hempstead v. Village of North Hills, 38 N.Y.2d 334 (1975) (no recusal where almost all property owners similarly affected).
• Matter of Segalla v. Planning Board, 204 A.D.2d 332 (2d Dep't 1992) (planning board member's uniform impact does not require recusal).
• Matter of Byer v. Town of Poestenkill, 232 A.D.2d 851 (3d Dep't 1996) (extent of interest matters).
• Matter of Zagoreos v. Conklin, 109 A.D.2d 281 (2d Dep't 1985) (improper non-recusal can invalidate vote).
• Op. Atty. Gen. (Inf.) No. 96-25 (only district property may be assessed for district improvements/services).
• Op. Atty. Gen. (Inf.) No. 97-5 (impartial decisions in the public interest; appearance of impropriety).
• Op. Atty. Gen. (Inf.) No. 88-60 (same principle).
• 1978 Op. Atty. Gen. (Inf.) 92 (referral to local board of ethics).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/I_2002-9_pw.pdf

Original opinion text

GENERAL MUNICIPAL LAW §§ 808(2) and (3), 980-c, 980-j, 980-l. A member of a village Board of Trustees must avoid circumstances which compromise his or her ability to make decisions solely in the public interest. Therefore, if a member of a village's Board of Trustees, who owns property within the Business Improvement District of the village, has a substantial, direct personal interest in the outcome of the Board of Trustees' vote on the Business Improvement District's annual budget, recusal from participating in the Board of Trustees' deliberations and voting on the Business Improvement District's annual budget is the appropriate course of action.

March 4, 2002
Jerome J. Levenberg, Esq.
Village Attorney
Village of Cedarhurst
200 Cedarhurst Avenue
Cedarhurst, N.Y. 11516

Informal Opinion
No. 2002-9

Dear Mr. Levenberg:
You have asked whether a village trustee who owns commercial property within the village's Business Improvement District ("BID"), and thus is required to pay an assessment over and above his regular municipal taxes to the BID's treasury based on his proportionate interest in BID property, should recuse himself from the village Board of Trustees' deliberations and voting on future BID annual budgets that will come before the village Board of Trustees for approval or disapproval.1 As a general matter, recusal would be required if the facts and circumstances suggest that the subject trustee has a substantial, personal interest in the outcome of the BID budget vote. Even the appearance of such an interest would require recusal, in order to maintain public confidence in government. In the absence of specific factual findings regarding the nature of the trustee's interest in the outcome of any Board decisions, however, we cannot assess whether recusal is necessary. While providing general guidance regarding the legal standards for conflict of interest questions, we refer you to your local Board of Ethics for a determination of such facts and resolution of this matter.

Background
The State's Business Improvement District Act (General Municipal Law §§ 980 et seq.) authorizes municipalities to establish BID's to promote commercial development within a designated territorial area of the municipality. Owners of nonexempt real property located within a BID are required to pay a periodic assessment to the municipality, over and above their regular municipal taxes. That money, collected from BID property owners only, is used to fund capital improvements to property within the district and/or services promoting business activity within the district, as set forth in the district plan. See General Municipal Law §§ 980-c, 980-j, 980-l; see generally Op. Atty. Gen. (Inf.) No. 96-25 (only district property may be charged for the costs of district improvements or services). You have explained that under the district plan, the BID annual budget is initially prepared by an executive board of the BID's District Management Association, and then submitted to the village Board of Trustees for ultimate approval or disapproval.2 You have also informed us that the BID is fairly large, and that there are many property owners within the BID.

Discussion
Generally, courts take a case-by-case approach in determining whether a conflict of interest exists. See Matter of Parker v. Town of Gardiner Planning Bd., 184 A.D.2d 937 (3d Dep't), leave denied, 80 N.Y.2d 761 (1992) ("resolution of questions of conflict of interest requires a case-by-case examination of the relevant facts and circumstances"). Your inquiry necessarily involves unknown facts and circumstances surrounding future BID budgets that will not be determined until such an issue arises in the future, including the proposed expenditures in future BID budgets, and the precise nature and extent of the trustee's interests. Thus, we can give only general guidance as to whether a conflict would arise. In resolving conflict of interest questions, one fundamental principle predominates: a public official must avoid circumstances that compromise his or her ability to make impartial decisions solely in the public interest. See Matter of Tuxedo Conservation & Taxpayers Ass'n v. Town Bd., 69 A.D.2d 320 (2d Dep't 1979); Op. Atty. Gen. (Inf.) No. 97-5; Op. Atty. Gen. (Inf.) No. 88-60. Even the appearance of impropriety should be avoided in order to maintain public confidence in government. Op. Atty. Gen. (Inf.) No. 97-5. Tuxedo made clear that recusal is required if the facts show that a board member's interest in a matter under review "'is a personal or private one, not such an interest as he has in common with all other citizens or owners of property'": 'To say in general terms that a member of a city council cannot vote on the passage of an ordinance providing for the construction of some important public improvement, because he owns real property . . . in the city, when the improvement is a general one, is at once to disqualify every property owner in the city from belonging to the city council, and committing all the material interests of the city to a class of persons who have no property rights to protect.' Tuxedo, 69 A.D.2d at 326 (quoting 133 A.L.R. 1257, 1261-1262). Thus, in Tuxedo, the court found that a town board member should have recused himself from voting on a two hundred million dollar development project, where there was a strong likelihood that his firm would receive substantial business if the project were approved. Recusal would be required in the present case as well if the facts were to show that a village trustee, his firm, or his employer, would receive a substantial financial benefit as a result of approval, or disapproval, of the BID budget. See id; see also Matter of Zagoreos v. Conklin, 109 A.D.2d 281 (2d Dep't 1985). On the other hand, recusal has not been required where a board member's interest is merely similar to that of other property owners. See Town of North Hempstead v. Village of North Hills, 38 N.Y.2d 334, 344 (1975) (recusal not required in connection with zoning reclassification ordinance where most of the property in the village met reclassification requirements, making "all but a handful of property owners in the village ineligible to sit on the board in such matters"); Matter of Segalla v. Planning Board, 204 A.D.2d 332 (2d Dep't 1992) (planning board member did not have conflict of interest preventing him from voting on zoning plan where nearly every other property owner was similarly affected by the plan). A village trustee who owns property within the BID appears to have a more direct interest in the outcome of a BID budget vote than that of other village residents who do not own BID property (because only BID property owners bear the cost of BID improvements and services). However, that interest alone may not be sufficient to require recusal. Courts also inquire into the extent of a board member's interest, and generally do not require recusal where the interest is not substantial. See Parker, 184 A.D.2d at 938; Matter of Byer v. Town of Poestenkill, 232 A.D.2d 851 (3d Dep't 1996). In Parker, for example, a planning board member had a small financial interest in a company whose application for subdivision approval was before the board. Noting that the board member's interest was only .15% of the company's sales, the court rejected the conflict of interest claim, holding that it was, at most, speculative "that such a de minimis interest would or did in fact influence [the member's] judgment." Id. at 938. In contrast, in Tuxedo, where a board member's potential financial gain was found to be substantial and inevitable, the court held that the board member should not act. See Tuxedo, 69 A.D.2d at 326. Recusal might be similarly warranted in the present case, if, for example, the facts were to show that a trustee owned a considerable portion of the commercial property within the BID. Under those circumstances, the impact of any additional assessment imposed against such trustee's property as a result of the BID budget would likely be substantial. Recusal would also be appropriate if a proposed improvement were to be closely situated to, or have a direct nexus with, a subject trustee's property, such that his interests are more likely to be affected than those of other BID property owners. With respect to future BID budgets, therefore, if the facts and circumstances existing at that time suggest that a trustee has a substantial, personal interest in the outcome of the BID budget vote, recusal from deliberations and voting would be warranted in order to avoid the appearance that the trustee's ability to make impartial judgments is compromised. In the absence of recusal, the resulting vote by the Board of Trustees would be subject to attack and might be set aside by a court. See Zagoreos, 109 A.D.2d at 297. In the absence of such factual findings, we cannot assess whether a conflict of interest (or an appearance of impropriety) would arise. Such a determination is best addressed by your local board of ethics. See 1978 Op. Atty. Gen. (Inf.) 92. Under General Municipal Law § 808(3), a municipality may establish a board of ethics to render advisory opinions on questions of conflicts of interest concerning municipal officers and employees. Where a municipality has not established a local board of ethics, ethical questions concerning local employees may be referred to the county board of ethics. See General Municipal Law § 808(2). Accordingly, we recommend that you refer this matter to the board of ethics for an advisory opinion. If a board does not exist, the village board of trustees can form one easily and quickly. In conclusion, a village trustee must avoid circumstances that compromise his or her ability to make decisions solely in the public interest. Therefore, if a village trustee has a substantial, direct personal interest in the outcome of a future BID budget vote, such that his or her vote could reasonably be interpreted as potentially benefitting such trustee's private interests, recusal from the Board of Trustees' deliberations and voting on the BID budget is the appropriate course of action. Without specific factual findings regarding the nature and extent of the trustee's interest, we cannot assess whether a conflict of interest exists, and we therefore refer you to your local Board of Ethics for further fact-finding and resolution of this matter. The Attorney General renders formal opinions only to officers and departments of the State government. This perforce is an informal and unofficial expression of views of this office. Very truly yours, JAMES D. COLE Assistant Solicitor General In Charge of Opinions By: ______ ANN P. ZYBERT Assistant Solicitor General

1 You told us that your initial concern centered on a trustee having made prior statements disapproving of the current BID budget. However, despite those statements, the trustee ultimately voted to approve the current BID budget, and the current budget was approved by the entire village Board. You explained that your concern now centers on the general issue of whether a trustee who owns property within the BID would have a conflict of interest with respect to future BID budgets.

2 With respect to the current BID budget, you have advised that the major expenditures include payments for advertising to promote district activities, and salaries for one or two BID employees who serve in a public relations capacity.