Can a city council member also chair the board of a nonprofit and still vote on city contracts with that nonprofit?

Texas AG Opinion JM-1065: Can a Councilman Chair a Nonprofit the City Does Business With?

Plain-English summary

A state senator asked the Attorney General to sort out the conflict-of-interest questions raised by an unusual overlap in Lubbock. A member of the Lubbock City Council also served as chairman of the board of directors of the Texas Tech University and Health Sciences Center Research Foundation, a nonprofit corporation closely associated with the university. The city, acting through its municipal utility Lubbock Power and Light, wanted to enter a contract with that foundation. The senator wanted to know whether the laws on dual office holding, dual agency, and conflicts of interest allowed the councilman to hold both roles and to take part in the city's decision on the contract.

The first issue was dual office holding. The Texas Constitution bars one person from holding more than one "civil office of emolument" at the same time. A city council member who is paid for his service is a civil officer of emolument, so the question turned on whether the foundation chairmanship is also such an office. The AG said it is not. A public officer is someone on whom a sovereign function of government has been conferred, to be exercised largely independent of others' control. The foundation chairman exercises no sovereign function. His authority comes from a private nonprofit corporation, not from any delegation by the legislature or the Board of Regents. The board of regents had some control over the foundation's executive director and a veto over changes to its by-laws, but did not control the chairman, and the chairman had no authority to govern the university. So he was not a public officer, and the constitution did not stop a councilman from also chairing the foundation board.

Because the chairman was not a public officer or employee, the AG did not need to work through the conflict-of-interest doctrines that apply to state officials. It turned instead to the statute that governs municipal officials: chapter 171 of the Local Government Code. That chapter bars a local public official, including a city council member, from participating in a vote or decision involving a business entity in which he has a "substantial interest." A nonprofit corporation counts as a business entity. A person has a substantial interest if he owns a set share of the entity or receives funds from it exceeding 10 percent of his gross income for the prior year.

Here the facts made the answer easy. The foundation's directors were not paid; they were reimbursed for some expenses and received token gifts like commemorative plaques, never more than about $200 per board member per year. It was highly unlikely that $200 in gifts would reach 10 percent of the councilman's gross income. Absent contrary facts, the AG assumed the councilman had no substantial interest in the foundation, so chapter 171 did not bar him from participating in the city council's votes and decisions on the proposed agreement with the foundation. He could take part in those proceedings. The opinion was careful to say it was answering only the dual-office and substantial-interest questions on the facts submitted, and it declined to interpret the conflict-of-interest provisions of the Lubbock City Charter, which the attorney general does not construe.

Currency note

This opinion was issued in 1989. 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.

Chapter 171 of the Local Government Code has been amended since 1989, including the definitions and thresholds for a "substantial interest," and the case law on what counts as a civil office of emolument has continued to develop. Anyone facing a present-day question about a local official serving on a nonprofit or private board, or voting on a contract with an entity they are connected to, should check the current version of chapter 171, the current constitutional case law, and any applicable local charter or ethics rules rather than relying on the 1989 citations used here.

Who this opinion affected (as of 1989)

City council members serving on nonprofit or foundation boards: The opinion signaled that chairing a private nonprofit board is generally not a second public office, so the dual-office ban does not automatically apply.

Local officials voting on contracts with entities they are tied to: The opinion applied the chapter 171 "substantial interest" test, showing that small reimbursements and token gifts (here about $200 a year) do not by themselves create a disqualifying interest.

University-affiliated nonprofit foundations: The opinion treated the foundation as a private entity distinct from the state university, so its board members were not state officers or employees by virtue of that role.

Common questions

Is chairing a nonprofit board a second public office that a city councilman can't hold?
Generally no. The Attorney General concluded the foundation chairmanship was not a civil office of emolument, because the chairman exercised no sovereign government function and drew his authority from a private nonprofit corporation. So the constitutional dual-office ban did not apply.

Can the councilman vote on a city contract with the nonprofit he chairs?
On these facts, yes. Because his roughly $200 a year in reimbursements and token gifts did not give him a substantial interest under chapter 171 of the Local Government Code, that statute did not bar him from participating in the council's votes and decisions on the agreement.

What makes a local official's interest "substantial" under chapter 171?
Owning a specified share of a business entity, or receiving funds from it exceeding 10 percent of the official's gross income for the previous year. A nonprofit corporation counts as a business entity for this purpose.

Did the AG resolve every conflict-of-interest question about this arrangement?
No. The opinion answered the dual-office and substantial-interest questions based on the submitted by-laws and facts, did not resolve fact questions, and declined to interpret the conflict-of-interest provisions of the Lubbock City Charter.

Background and statutory framework

The chair of the Senate State Affairs Committee asked about possible conflicts of interest in a proposed contract between the city of Lubbock, acting through Lubbock Power and Light, and the Texas Tech University and Health Sciences Center Research Foundation, a nonprofit corporation closely associated with Texas Tech. A member of the Lubbock City Council served as chairman of the foundation's board of directors.

Article XVI, section 40, of the Texas Constitution prevents one person from holding or exercising at the same time more than one civil office of emolument. A city council member who receives compensation is a civil officer of emolument within this provision. See Tilley v. Rogers, 405 S.W.2d 220 (Tex. Civ. App. - Beaumont 1966, writ ref'd n.r.e.); Attorney General Opinion MW-39 (1979); Letter Advisory No. 154 (1978). The provision would apply only if the foundation chairman also held or exercised a civil office of emolument.

The by-laws identified the foundation as a nonprofit corporation organized to support research and educational undertakings at the university and health sciences center and to seek contracts, grants, and gifts for that research. Of the eleven directors, seven were appointed by the Board of Regents of Texas Tech University and four by the Board of City Development of Lubbock, with several ex-officio non-voting members from the university administration. The directors elected the chairman, who is the chief executive officer of the foundation and is responsible for negotiating service contracts and agreements with other agencies, which must be approved and executed by both the chairman (or his designee) and the executive director. The executive director is appointed by the board of regents on the foundation's recommendation, may be dismissed by the regents, and is custodian of the foundation's funds and financial records. See generally V.T.C.S. art. 1396-2.23B (audit or financial report required of nonprofit corporations assisting state agencies). The board of regents had final approval of amendments to the by-laws.

The definition of public officer applies to a civil officer within article XVI, section 40. Attorney General Opinion MW-415 (1981). A public officer is an individual upon whom a sovereign function of the government is conferred, to be exercised for the benefit of the public largely independent of the control of others. Aldine Indep. School Dist. v. Standley, 280 S.W.2d 578, 583 (Tex. 1955). The opinion concluded that no sovereign function of government is conferred on the foundation chairman; he does not exercise governmental authority over the university by delegation from the legislature or the board of regents, and his authority derives from and is exercised on behalf of a private nonprofit corporation. See generally Attorney General Opinions JM-852 (1988); JM-782 (1987). The by-laws give the regents control over the executive director and a veto over by-law amendments, but do not authorize the regents to control the chairman, and the chairman has no authority to govern the university. Accordingly, he is not a public officer, public employee, or civil officer within article XVI, section 40, and that provision does not prevent a Lubbock City Council member from serving as chairman of the foundation's board.

Because the chairman was not a public officer or employee, the opinion did not consider the conflict-of-interest doctrines that apply to state officials. See, e.g., Attorney General Opinions JM-852 (1988); JM-817 (1987). It also declined to interpret the conflict-of-interest provisions of the Lubbock City Charter. See Attorney General Opinion JM-846 (1988). Chapter 171 of the Local Government Code applies to conflicts of interest of local public officials, including members of a city's governing body. Local Gov't Code § 171.001(1). Under the conditions described in chapter 171, a local public official is barred from participating in a vote or decision involving a business entity in which he has a substantial interest. Id. § 171.003. A business entity includes a nonprofit corporation. Attorney General Opinions JM-852 (1988); JM-424 (1986). A person has a substantial interest if he owns a specified percentage of voting stock or a certain amount of the fair market value of a business entity, or receives funds from it exceeding 10 percent of his gross income for the previous year. Local Gov't Code § 171.002 (as amended by Acts 1987, 70th Leg., ch. 362, § 2, at 1799).

A memorandum from the Lubbock city attorney's office stated that the foundation's directors are not compensated but are reimbursed for some expenses and receive token gifts such as commemorative plaques, never exceeding $200 per board member per year. In the absence of contrary facts, the opinion assumed the councilman's receipt of $200 per year did not constitute a substantial interest, so chapter 171 did not bar him from participating in city council votes or decisions on the proposed agreement with the foundation. See Attorney General Opinion JM-424 (1986) (policy against dual agency does not prohibit contracts authorized under former article 988b, V.T.C.S., recodified as chapter 171 of the Local Government Code).

Citations

Constitutional and statutory authority:

• Tex. Const. art. XVI, § 40 (one civil office of emolument at a time)
• Local Gov't Code ch. 171, §§ 171.001 (local public officials), 171.002 (substantial interest defined), 171.003 (bar on participation)
• Educ. Code § 135.24 (management authority of the board of regents)
• V.T.C.S. art. 1396-2.23B (audit or financial report of nonprofit corporations assisting state agencies)

Cases cited:

• Tilley v. Rogers, 405 S.W.2d 220 (Tex. Civ. App. - Beaumont 1966, writ ref'd n.r.e.)
• Aldine Indep. School Dist. v. Standley, 280 S.W.2d 578, 583 (Tex. 1955)

Attorney General materials referenced:

• Letter Advisory No. 154 (1978); H-1309 (1978); MW-39 (1979); MW-415 (1981); JM-424 (1986); JM-782 (1987); JM-817 (1987); JM-846 (1988); JM-852 (1988)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1065
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1065.pdf

Original opinion text

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

June 28, 1989

Honorable John T. Montford
Chairman
State Affairs Committee
Texas State Senate
P. O. Box 12068
Austin, Texas 78711

Opinion No. JM-1065

Re: Whether the Lubbock Power and Light Company may contract with the Texas Tech Research Foundation if a Lubbock city councilman is chairman of the foundation board of directors (RQ-1676)

Dear Senator Montford:

You request an opinion about possible conflicts of interest involving a proposed contract between the city of Lubbock, acting through Lubbock Power and Light, and the Texas Tech University and Health Sciences Center Research Foundation, a nonprofit corporation which is closely associated with Texas Tech University. A member of the Lubbock City Council serves as chairman of the board of directors of the Texas Tech Research Foundation. You wish to know how the laws on dual office holding, dual agency, and conflict of interest for state and municipal officers affect this individual's participation in the contracting process.

Article XVI, section 40, of the Texas Constitution prevents one person from holding or exercising "at the same time, more than one civil office of emolument." It is well established that a city council member is a civil officer of emolument within this provision if he receives compensation for his service. See, e.g., Tilley v. Rogers, 405 S.W.2d 220 (Tex. Civ. App. - Beaumont 1966, writ ref'd n.r.e.); Attorney General Opinion MW-39 (1979); Letter Advisory No. 154 (1978). Article XVI, section 40, will not apply in this case unless the chairman of the foundation board also holds or exercises a civil office of emolument.

The Lubbock city attorney's office has submitted a brief discussing the status of the foundation's directors and a copy of the by-laws of Texas Tech University and Health Sciences Center Research Foundation. The by-laws identify the foundation as a nonprofit corporation organized to support research projects and associated educational undertakings at the university and health sciences center and to seek and obtain contracts, grants, and gifts for the advancement of such research, as well as similar and related purposes set out in articles I and II of the by-laws. According to article IV, the eleven members of the board of directors serve three-year terms. Seven are appointed by the Board of Regents of Texas Tech University, and the remaining four members are appointed by the Board of City Development of Lubbock. Several ex-officio non-voting members are drawn from the university administration.

Article V of the foundation by-laws provides that the directors elect the chairman, who is the chief executive officer of the foundation. He or his designee is responsible for negotiating service contracts with other agencies. Contracts and agreements with other agencies must be approved and executed by both the chairman or his designee and the executive director. The executive director is appointed by the board of regents upon the recommendation of the foundation and may be dismissed by the regents. He is custodian of the funds and the financial records of the foundation. See generally V.T.C.S. art. 1396-2.23B (audit or financial report required of nonprofit corporations assisting state agencies). Article X of the by-laws grants the board of regents final approval of amendments to the foundation's by-laws.

In addressing your question about dual office holding, we must determine whether the chairman of the board of directors is a civil officer of emolument within article XVI, section 40, of the Texas Constitution. We will not address any other legal issues raised by the relationship between the university and the foundation. See generally Attorney General Opinion H-1309 (1978). Our answer will be based on the by-laws which have been submitted to us and will not undertake the investigation or resolution of fact questions.

The definition of public officer also applies to a civil officer within article XVI, section 40, of the constitution. Attorney General Opinion MW-415 (1981). A public officer is an individual upon whom a "sovereign function of the government is conferred," to be exercised for the benefit of the public largely independent of the control of others. Aldine Indep. School Dist. v. Standley, 280 S.W.2d 578, 583 (Tex. 1955).

No sovereign function of the government is conferred upon the chairman of the foundation board of directors. He does not exercise governmental authority over the university by delegation from the legislature or by the board of regents from its statutory authority to manage and operate Texas State Technical Institute. See Educ. Code § 135.24. His authority derives from and is exercised on behalf of the nonprofit corporation, a private entity. See generally Attorney General Opinions JM-852 (1988) (nonprofit corporation distinguished from a state-supported institution of higher education); JM-782 (1987) (employee of a nonprofit corporation which provides transportation services is not an employee of a state agency or political subdivision). The by-laws give the board of regents control over the executive director of the foundation and veto power over amendments to the by-laws, but do not authorize the regents to control the chairman of the board. Nor has the chairman any authority to govern the university. Accordingly, he is not a public officer, a public employee, or a civil officer within article XVI, section 40, of the Texas Constitution. This provision of the constitution does not prevent a member of the Lubbock City Council from serving as chairman of the Texas Tech Research Foundation board of directors.

In view of our decision that the chairman of the board of directors of the foundation is not a public officer or employee, we need not consider the conflict of interest doctrines that apply to state officials. See, e.g., Attorney General Opinions JM-852 (1988) (contract between city council and university which employs city council members); JM-817 (1987) (contract between state university and firm in which regent has a financial interest).

You finally inquire about conflict of interest provisions applicable to municipal officials. The city attorney's brief discusses the conflict of interest provisions of the Lubbock City Charter. We will not, however, interpret these provisions. See Attorney General Opinion JM-846 (1988). Chapter 171 of the Local Government Code applies to conflicts of interest of "local public officials," including members of the governing body of a city. Local Gov't Code § 171.001(1). Under the conditions described in chapter 171, a local public official is barred from participation in a vote or decision involving a business entity in which he has a substantial interest. Id. § 171.003. A "business entity" includes a nonprofit corporation. Attorney General Opinions JM-852 (1988); JM-424 (1986). A person who owns a specified percentage of voting stock or a certain amount of the fair market value of a business entity has a substantial interest in it, as does one who receives funds from it in excess of 10 percent of his gross income for the previous year. Local Gov't Code § 171.002 (as amended by Acts 1987, 70th Leg., ch. 362, § 2, at 1799).[1]

[1] Former article 988b, V.T.C.S., was recodified as chapter 171 of the Local Government Code by the 70th session of the legislature. Acts 1987, 70th Leg., ch. 149. The same session of the legislature adopted amendments to former article 988b, V.T.C.S., without reference to the legislature's repeal and recodification of that provision. The amendments are preserved and given effect as part of the code provision. Gov't Code § 311.031(c).

A memorandum from the Lubbock city attorney's office states that the foundation's directors do not receive compensation, but they are reimbursed for some expenses and receive token gifts, including commemorative awards such as plaques. These gifts have never exceeded $200 per board member, per year. The brief from the city of Lubbock concludes that the city council member does not have a substantial financial interest in the foundation, since it is highly unlikely that $200 in gifts would amount to 10 percent of his gross income. In the absence of contrary facts, we will assume that the city council member's receipt of $200 per year from the foundation does not constitute a substantial interest in it. Accordingly, chapter 171 of the Local Government Code does not apply to his participation in votes or decisions of the Lubbock City Council on the proposed agreement with the Texas Tech Research Foundation. He may participate in those proceedings. See Attorney General Opinion JM-424 (1986) (policy against dual agency does not prohibit contracts authorized under former article 988b, V.T.C.S., recodified as chapter 171 of the Local Government Code).

SUMMARY

The chairman of the board of directors of the Texas Tech University and Health Sciences Center Research Foundation, a nonprofit corporation closely associated with Texas Tech University, does not occupy or exercise a civil office of emolument within article XVI, section 40, of the Texas Constitution. This constitutional provision does not bar a city councilman of the city of Lubbock from serving as chairman of the foundation's board of directors.

If the city councilman does not have a substantial interest in the Texas Tech Research Foundation as defined by chapter 171 of the Local Government Code, that statute does not bar him from participating in votes and decisions of the city council concerning agreements between the city and the foundation.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General