Volume 41 - Issue 9 - March 3, 2022

State of Kansas

Governmental Ethics Commission

Opinion No. 2022-01

Written February 23, 2022, to Lee W. Hendricks, Stumbo Hanson, LLP, 2887 SW MacVicar Ave., Topeka, KS 66611.

Synopsis: A lease agreement in which a local governmental officer is the tenant is not a substantial interest in the landlord.

Cited herein: K.S.A. 75-4301a, 75-4302a, 75-4303a, and Opinions 2008-11, 2010-06, 2011-04.

Dear Mr. Hendricks,

In response to your January 21, 2022, letter request, this opinion is provided by the Kansas Governmental Ethics Commission (commission), concerning application of the local conflict of interest laws, K.S.A. 75-4301a et seq. The commission’s jurisdiction is limited to applicability of this law. This opinion, provided pursuant to K.S.A. 75-4303a(a), does not address whether some other statutory system, common law theory, agency rule or regulation applies to your inquiry.

Factual Statement

We understand that your firm requests this opinion as counsel for the City of Edgerton. Your letter provides the following facts regarding a conflict based upon the relationship a member of the city council has with their landlord, Hillsdale Land & Cattle, LLC (“Hillsdale”):

Northpoint Development (“Northpoint”) is an industrial property developer and has been a partner with Edgerton in the growth and expansion of Logistics Park Kansas City. Northpoint would best be described as the master developer of Logistics Park, and is a party to two master development agreements with the City. Northpoint would best be described as the master developer of Logistics Park, and is a party to two master development agreements with the City. Northpoint has numerous subsidiary companies, some of which own properties in and around the City of Edgerton. One of those subsidiaries is Hillsdale. The city has had very few agenda items requiring a vote involving Hillsdale specifically, but did vote on a request from the entity to annex and rezone a property into the City limits in December of 2020. That was prior to the tenancy at issue, and it is worth noting that the councilmember involved in this request voted against Hillsdale’s requests. The City does however have numerous agenda items annually which involve Northpoint.

The allegation is that due to the one-year, written lease the councilmember has with Hillsdale, he should [… file] notice of a substantial interest involving Hillsdale/Northpoint and should […abstain] from voting on any matters involving both entities. […The] lease […] is a one-year lease and includes an anti-assignment, non-sublease clause.

The councilmember has not received any financial benefit from the lease. The councilmember doesn’t have any ownership interest in either business, isn’t compensated by either business, and isn’t a partner, director, or officer of either business.

Questions

1. Does the councilmember have a substantial interest in Hillsdale?
2. If so, would the substantial interest extend to Northpoint?
3. Does a substantial interest bar the councilmember from voting on non-contractual matters involving Hillsdale or Northpoint?

Analysis and Opinion

Edgerton, Kansas, is a “governmental subdivision” and a member of its council is a “local governmental officer.” K.S.A. 75-4301(f), 75-4301(d). The councilmember in question is subject to the requirements of the local level conflict of interest laws, K.S.A. 75-4301, et seq.

Substantial interests, as provided in K.S.A. 75-4301a(a)(1)–(a)(5), subject to thresholds and other limitations, require that the councilmember: (1) have a pecuniary interest in a business, (2) receive compensation from a business or combination of businesses, (3) receive goods or services without reasonable and valuable consideration, (4) hold a position in a business, or (5) receive compensation which is a portion or percentage of a fee or compensation to a business. The facts do not provide a basis for the councilmember to have a substantial interest in Hillsdale or its parent Northpoint. The facts only reveal a lease agreement between Hillsdale and the councilmember in which the latter is the tenant. The lease agreement prohibits subleasing. The tenant does not receive compensation, goods and services without reasonable consideration, or a portion of fees or commissions paid to Hillsdale or Northpoint. The tenant does not hold a position or pecuniary interest in Hillsdale or Northpoint.

Without a substantial interest in Hillsdale or Northpoint, the third question is moot. However, the commission has addressed the issue in prior opinions, including Opinion 2008-11 (ordinance), Opinion 2010-06 (special use permit) and Opinion 2011-04 (building permit).

Sincerely,

Nicholas Hale, Chairman
By Direction of the Commission

Doc. No. 049902