November 2, 1988

Roger A. Schiager 
Sioux Falls City Attorney 
224 West Ninth Street 
Sioux Falls, South Dakota 57103

Official Opinion No. 88-52

Sioux Falls Housing and Redevelopment Commission

Dear Mr. Schiager:

You have requested an official opinion on the following factual situation:

FACTS: 

The Sioux Falls Housing and Redevelopment Commission (the "Commission"), has entered into an Annual Contributions Contract (the "ACC") with the United States Department of Housing and Urban Development ("HUD"). Under the ACC, HUD provides funds to the Commission to be used to make assistance payments to the owners of existing dwellings for the purpose of aiding lower-income families in obtaining a decent place to live and to promote economically mixed housing. 

The Commission then enters into housing assistance payments contracts whereby the Commission makes a monthly payment to the owner on behalf of a qualifying low-income family to be applied to the rent to be paid by the family to the owner under the lease. The family pays the balance of the monthly rent to the owner. The money used by the commission to make the payment to the owner for the benefit of the family comes from funds received by the commission from HUD under the ACC. 

Corporation A, an owner of residential rental property in Sioux Falls, presently has some tenants who are the beneficiaries of housing assistance payments made by the commission to Corporation A pursuant to housing assistance payments contracts between Corporation A and the Commission. Upon the expiration of the lease, the family is free to rent other housing and to continue to receive the benefit of assistance payments paid by the commission  to a new landlord under a contract, assuming that the family continues to qualify for them. 

Mr. X, an employee and vice-president of Corporation A, has been appointed a member of the commission. Mr. X owns no stock in Corporation A. Further, Mr. X has no involvement in Corporation A's housing assistance payments contracts with the commission.

Based upon the foregoing facts, you have asked the following question regarding the appointment of Mr. X to the Commission:

QUESTION: 

Considering SDCL 11-7-25 which prohibits a commissioner from having an interest in the projects provided for in SDCL 11-7, does Mr. X have a direct or indirect interest in the housing payments made to Corporation A, thereby precluding Mr. X from being a member of the commission?

Initially, it should be noted that in addition to the statutory concerns addressed herein, the South Dakota Constitution, Article XI, §  11 provides that the "making of a profit directly or indirectly, out of state, county, city, town or school district money" is a felony. Under the circumstances you have described, the South Dakota Constitution would not bar Mr. X's participation on the housing commission because he would not be making a profit  from the housing assistance contracts.

Although SDCL 11-7-25 is the specific statutory authority governing conflicts of interest involving the housing commission, I would also refer you to SDCL 6-1-1 and SDCL 6-1-2, insofar as they also relate to conflicts of interest involving government officials.

SDCL 6-1-1 provides a general prohibition against such conflicts, while SDCL 6-1-2 provides exemptions from this prohibition. Considering only those statutes, Mr. X would be acting in contravention of South Dakota law if he served on the housing commission and was an officer of the corporation providing services to the housing commission.

However, as I previously stated, SDCL 11-7-25 specifically controls the situation you have described and provides an additional exemption to the list found in SDCL 6-1-2. SDCL 11-7-25 states: 

No commissioner or employee of a commission may voluntarily acquire any interest, direct or indirect, in any project or in any property included or planned to be included in any project, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials or services to be furnished or used in connection with any project.  If any commissioner or employee of a commission previously owned or controlled an interest, direct or indirect, in any property included or planned to be included in any project, or presently has such interest, he immediately shall disclose such  interest in writing to the commission, and such disclosure shall be entered upon the minutes of the commission. A violation of this section is a Class 2 misdemeanor. (Emphasis supplied.)

This statute allows a housing commissioner who previously owned or controlled an interest, directly or indirectly, in property included in a project, or who presently has an interest, to disclose his interest in writing to the commission. The disclosure must be entered upon the minutes of the commission. SDCL 11-7-25 does not foreclose a person who previously held an interest, directly or indirectly, in property included in a project, or who presently has an interest, from becoming a member of the commission.

This prohibition precludes a person from acquiring a new interest in a project after he has become a commissioner. Accordingly, if "X" corporation were to purchase a housing project or a building which is used in connection with housing assistance payments, after Mr. "X" became a commissioner, such a purchase would be in violation of SDCL 11-7-25 and Mr. "X" would commit the indicated misdemeanor.

Therefore, the answer to your question is that, based upon the currently existing facts and circumstances, Mr. X is not prohibited from becoming a commissioner on the housing commission.

Respectfully submitted,

Roger A. Tellinghuisen
Attorney General