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09.e Conflict of Interest memo_NelsonFrom: Chris Nelson <cnelson@eckberglammers.com> Sent: Tuesday, January 18, 2022 11:17:01 AM To: k.cammilleri <k.cammilleri@ci.scandia.mn.us> Cc: p.ray <p.ray@ci.scandia.mn.us>; Heather Blesener <hblesener@eckberglammers.com> Subject: Conflict of Interest follow-up Hello Ken, As we discussed last Friday, Councilmember Ray called me regarding questions her constituents had regarding the vote that was held regarding the Big Marine Sewer System at the Council work session on January 5. In particular, two questions: (1) whether Councilmember Kronmiller was an interested party in the vote because he lives on the Big Marine Sewer System; and, (2) whether the Council should hold votes in the Council work session. With regard to the second item, it is my understanding Scandia has always treated its work session as in effect a second council meeting, with votes occurring in both the work session meeting and council meeting. Per our discussion, this is a matter to be discussed with the Council in the February work session – whether to re-organize the work session to be a true work session, a brief work session with a shorter council meeting following, or converted to a second council meeting. I recommend addressing this, to ensure the work session is treated as a true discussion session, or noticed as a special meeting of the Council if votes will or may occur. In this particular case, I note the agenda indicates only a “discussion” would be had on the ARPA funds, rather than a vote. I believe at the very least a confirmation vote should occur at a regular meeting. On the first question, Councilmembers can potentially have contractual conflicts of interest and noncontractual conflicts of interest with City business. Contractual conflicts of interest are addressed in Minnesota Statutes Sections 471.87 and 471.88. These statutes do not apply to the present situation, however, because any conflict of interest in this case would be noncontractual. Noncontractual conflicts of interest are harder to discern and involve an analysis, by the Council, that often boils down to whether the Councilmember gets direct personal financial benefit. There have been very few cases related to noncontractual conflicts. The cases available indicate that noncontractual conflicts of interests are analyzed pursuant to a multi-factor test articulated in case law, to determine whether the conflict disqualifies the member from participation in discussion and vote on the item. The test was first articulated in Lenz v. Coon Creek Watershed Dist., 153. N.W.2d 209, 219 (Minn. 1967) and states as follows: Each case must be decided on the basis of the particular facts present. Among the relevant factors that should be considered in making this determination are: (1) the nature of the decision being made; (2) the nature of the pecuniary interest; (3) the number of officials making the decision who are interested; (4) the need, if any, to have interested persons make the decision; and (5) the other means available, if any, such as the opportunity for review, that serve to insure that the officials will not act arbitrarily to further their selfish interests. No factor is dispositive. In the present case, the nature of the decision being made, for example, is a somewhat routine budgetary decision, allocating funds to improve City infrastructure, which is a legislative rather than adjudicative decision. Conflicts of interest are more likely to be found when a Council is making a quasi-judicial decision mostly because those types of decisions are more likely to create a situation where specific, personal benefit can be shown. Councilmember Kronmiller is one of the 111 homes serviced by the Big Marine Sewer System, so the allocation of ARPA funds is likely to reduce any rate increase or special assessment that may be imposed on his property, but it also will benefit the other homes as well. Any rate increases or assessments are hypothetical at this point as no decisions have been made regarding rates and assessments, and any pecuniary interest is not unique to the Councilmember because the Big Marine Sewer System services 111 properties. It is my understanding that only Councilmember Kronmiller is on the Big Marine System, which may reduce the need to have him participate in the decision, although there is a Council split on fund allocations. Finally, in the present case, there is no administrative opportunity for review – any review of the Council’s decision would be by the District Court. The process for determining noncontractual conflict of interest lies with the Council, which then can be reviewed by a Court. This determination by a Court would be based on the particularly facts of the case, analyzed pursuant to the Lenz factors above. As with all multi-factor, fact-specific analyses, different persons may come to different conclusions. My research indicates Minnesota courts have rarely voided Council actions pursuant to a Lenz analysis, but it is not unprecedented. See E.T.O, Inc. v. Town of Marion, 375 N.W.2d 815 (Minn. 1985). Based on my review, it would be difficult to prove that the Council Member gained a private, personal direct financial benefit. This analysis relates only to whether Councilmember Kronmiller has a noncontractual conflict which would render the allocation of ARPA funds void if challenged in Court. Equally as important, though not necessarily illegal, is the appearance of conflict and public perception, which is also an important consider in this decision, and all council decisions. Even if the ARPA allocation would withstand a legal challenge, there may be a sufficient appearance of conflict in this case that would be damaging to the City and the Council as a whole, and decrease trust of the public in its Council. Sincerely, Chris Nelson Attorney 1809 Northwestern Avenue | Stillwater, MN 55082 Direct: 651-351-2137 | Fax: 651-439-2923 eckberglammers.com |||