Conflicts of Interest
Robert R. Meinig, MRSC Legal Consultant
Revised July 2004
Washington law governing conflicts of interest in municipal government is principally statutory, although a basic conflict of interest prohibition is contained in article 11, section 8 and article 30 of the state constitution, which together prohibit mid-term or post-election pay increases for officials who fix their own compensation. Under this constitutional prohibition, city or town councilmembers may not enact a pay increase for the office of a councilmember which would apply to any of the current councilmembers' terms. (The council could, on the other hand, increase the mayor's salary immediately, as long as the mayor does not vote on the increase.) The same prohibition applies to county commissioners or councilmembers, who also fix their own salaries. If a city or county establishes a salary commission (see RCW 35.21.015, for cities, and RCW 36.17.024, for counties), salaries established by that commission are not subject to this prohibition.
The basic statutory prohibitions concerning conflicts of interest concern contractual interests and are contained in chapter 42.23 RCW. The basic purpose of this chapter is stated in RCW 42.23.010. The chapter governs only municipal officers, not municipal employees, and governs all contracts by such officials, including contracts of employment, sales, leases, and purchases.
The basic prohibition of the chapter, contained in RCW 42.23.030, prohibits a municipal officer from having a "beneficial" (financial) interest, directly or indirectly, in two types of contracts. The first is contracts that are or may be made by, through, or under the officer's supervision, in whole or in part. The "supervision" element of this prohibition has to do with the making of the contract, not with implementing the contract after it has been made. See Seattle v. State, 100 Wn.2d 232, 245-47 (1983). So, where the officer concerned is, for example, a city councilmember, the basic prohibition is triggered for all contracts because of the council's authority over the making of all city contracts and regardless of whether the councilmember in question votes or not. The second type is contracts made for the benefit of the municipal officer's office. In addition, the statute prohibits an officer from accepting any compensation, gift, or award in connection with such contracts from any person having a beneficial interest in them. It is worth noting that the community property interest of one spouse in the earnings of another has been held by the courts to be a sufficient beneficial interest to trigger the prohibition contained in this statute. The interest of other relatives of a municipal official in a contract would not, however, trigger the prohibition.
The basic contractual conflict of interest prohibition in RCW 42.23.030 is subject to a number of specific exceptions. The most significant one, which applies to officials in cities with a population of less than 10,000 and counties with a population of less than 125,000, exempts from the prohibition contracts where the amount received by the municipal officer or the officer's business under the contract does not exceed $1500 in any calendar month or, for cities under 10,000 population, where the total amount of the contract does not exceed $18,000 in a calendar year. See RCW 42.23.030(6)(a), (b). This exception does not include a sale or lease of municipal property to an official; such sales or leases are prohibited regardless of the monetary amount represented by the contract. RCW 42.23.030(6)(c).
Chapter 42.23 RCW also provides an exception where the interest in a contract is deemed "remote." Under RCW 42.23.040, a "remote interest" means:
- That of a nonsalaried officer of a nonprofit corporation;
- That of an employee or agent of a contracting party where the compensation of suchemployee or agent consists entirely of fixed wages or salary;
- That of a landlord or tenant of a contracting party; or
- That of a holder of less than one percent of the shares of a corporation or cooperative which is a contracting party.
In the event of such a remote interest in a contract, the municipal officer involved must disclose the extent of his or her interest prior to the formation of the contract, and that person's vote, if any, in authorizing, approving, or ratifying the contract may not be counted. The remote interest exception does not apply if the officer having the remote interest influences or attempts to influence any other officer of the municipality to enter into the contract.
The penalty for violation of the prohibitions contained in chapter 42.23 RCW is that a contract made in violation of the chapter is void, and any officer violating its provisions is liable to the municipality for a penalty in the amount of $500 and may be subject to forfeiture of office. RCW 42.23.050. Although chapter 42.23 RCW does not itself impose criminal penalties for a violation of its provisions, it recognizes that criminal penalties may be derived from other statutes. Obviously, the consequences for a municipal officer for violation of this statute can be severe.
Chapter 42.23 RCW also has a section, added in 1994, which identifies four "prohibited acts" by municipal officials. RCW 42.23.070. The prohibitions address: (1) a municipal officer using his or her position to obtain special privileges; (2) accepting compensation or a gift from a source other than the employing municipality for a matter related to the officer's services as a municipal officer; (3) engaging in a business or professional activity that the officer might reasonably expect would induce him or her to disclose confidential information gained by virtue of his or her official position; and (4) disclosing confidential information or using such information for personal gain.
Some cities and counties have enacted codes of ethics which include the prohibitions in chapter 42.23 RCW, in addition to other ethical guidelines.
Other Conflict of Interest Prohibitions
There are other conflict of interest issues of which municipal officials should be aware. These include common law conflict of interest, the doctrine of incompatible offices, and the appearance of fairness doctrine.
The Washington Supreme Court in 1909 recognized the common law doctrine "as old as the law itself" that one should not judge his or her own cause. See Smith v. Centralia, 55 Wash. 573, 104 Pac. 797 (1909) (which invalidated an alley vacation, where one of the voting councilmembers was a petitioner for the vacation). Thus, even if the statutory conflict provisions do not apply, one still must consider whether this court-created doctrine would prohibit a particular vote or action.
The doctrine of incompatible offices is one established by common law to the effect that an individual may not hold multiple offices if those offices are deemed incompatible. Incompatibility may exist, for example, where the functions of the two offices are inconsistent or, more generally, where occupationof both offices is detrimental to the public interest. Perhaps the clearest example of incompatibility is where one office is subordinate to another in some aspect of its functions and duties. The result of violation of this doctrine is that the officer must resign from one of the incompatible offices. It should be noted that, for officers of a code city, there is a statutory prohibition against councilmembers or mayors holding any other public office within the municipality. RCW 35A.12.030.
The appearance of fairness doctrine also involves, to some extent, conflict of interest issues. For more information, see our appearance of fairness Web page.