MEMBERSHIP ON BOARD OF DIRECTORS OF PUBLIC CORPORATION

CITIES AND TOWNS ‑- COUNTIES ‑- PORT DISTRICTS ‑- INDUSTRIAL DEVELOPMENT ‑- BONDS ‑- INCOMPATIBLE OFFICES ‑- MEMBERSHIP ON BOARD OF DIRECTORS OF PUBLIC CORPORATION

Exercising the authority granted to it by RCW 39.84.040 a municipality, in creating a public corporation in connection with the issuance of industrial development revenue bonds under chapter 39.84 RCW, may provide in the ordinance establishing the corporation that one or more positions on its board of directors shall be filled by a member (or members) of its governing body serving ex officio; however, if the number of members of the governing body who are to serve,ex officio, on the board of directors of corporations is less than the total number of members of the governing body, the ordinance should also, itself, state the criteria for determining which members of the governing body are also to serve as directors of the corporation. 

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                                                                 August 18, 1983 

Honorable Robert V. Graham
State Auditor
Legislative Building
Olympia, Washington 98504

 Cite as:  AGO 1983 No. 17                                                                                                               

  Dear Sir:

             By letter previously acknowledged you requested our opinion on the following question:

             "In creating a public corporation in connection with the issuance of industrial development revenue bonds under chapter 39.84 RCW, may a municipality provide in the ordinance creating the corporation that one or more positions on the board of directors shall be filled by a member (or members) of the governing body of the subject municipality serving ex officio?"

             We answer your foregoing question in the affirmative for the reasons set forth in our analysis.

              [[Orig. Op. Page 2]]

                                                                      ANALYSIS

             The legislature, by its enactment of chapter 300, Laws of 1981, authorized cities, towns, counties and port districts of this state to issue industrial development revenue bonds and otherwise engage in projects for the purpose of facilitating economic development and employment opportunities within the state.  That legislation is now codified as chapter 39.84 RCW.  The underlying basis for the enactment of this law was a companion constitutional amendment which was submitted to, and approved by, the voters at the November 3, 1981 election and is now designated as Wash. Const., Art. XXXII, § 1 (Amendment 73).  In addition, it is also to be noted at the outset that both the constitutional amendment and the legislative enactment were drafted in light of the provisions of § 103(a) of the federal Internal Revenue Code of 1954, as amended, relating to the issuance of tax exempt obligations (including industrial development revenue bonds) by a state, a territory, or a possession of the United States or any political subdivision thereof.

             As a consequence, primarily, of this last noted point, the legislature, in § 3 of the act (now codified as RCW 39.84.030) provided for the formation, by those municipalities desiring to utilize the law, of public corporations.  For ease of immediate reference we quote, in full, the provisions of that section of the law:

             "(1) For the purpose of facilitating economic development and employment opportunities in the state of Washington through the financing of the project costs of industrial development facilities, a municipality may enact an ordinance creating a public corporation for the purposes authorized in this chapter.  The ordinance creating the public corporation shall approve a charter for the public corporation containing such provisions as are authorized by and not in conflict with this chapter.  Any charter issued under this chapter shall contain in substance the limitations set forth in RCW 39.84.060.  In any suit, action, or proceeding involving the validity or enforcement of or relating to any contract of the public corporation, the public corporation is conclusively presumed to be established and authorized to transact business and exercise its powers under this chapter upon proof of the adoption of the ordinance creating the public corporation by the governing body.  A copy of the [[Orig. Op. Page 3]] ordinance duly certified by the clerk of the governing body of the municipality shall be admissible in evidence in any suit, action, or proceeding.

             "(2) A public corporation created by a municipality pursuant to this chapter may be dissolved by the municipality if the public corporation:  (a) Has no property to administer, other than funds or property, if any, to be paid or transferred to the municipality by which it was established; and (b) all its outstanding obligations have been satisfied.  Such a dissolution shall be accomplished by the governing body of the municipality adopting an ordinance providing for the dissolution.

             "(3) The creating municipality may, at its discretion and at any time, alter or change the structure, organizational programs, or activities of a public corporation, including termination of the public corporation if contracts entered into by the public corporation are not impaired.  Any net earnings of a public corporation, beyond those necessary for retirement of indebtedness incurred by it, shall not inure to the benefit of any person other than the creating municipality.  Upon dissolution of a public corporation, title to all property owned by the public corporation shall vest in the municipality."

             In addition, by § 4 (now RCW 39.84.040), the legislature provided that:

             "The ordinance creating a public corporation shall include provisions establishing a board of directors to govern the affairs of the public corporation, what constitutes a quorum of the board of directors, and how the public corporation shall conduct its affairs."

             Your question involves the implementation in this last quoted section of the law and (repeated for ease of reference) asks:

             "In creating a public corporation in connection with the issuance of industrial development revenue bonds under chapter 39.84 RCW, may a municipality provide in the ordinance creating the corporation that one or more positions on the board of directors [dirctors] shall be filled by a  [[Orig. Op. Page 4]] member (or members) of the governing body of the subject municipality serving ex officio?"

             In turn, as we understand it, the reason for your request is a concern as to the possible applicability of two overlapping common law doctrines‑-the doctrine of incompatible public offices and the rule, summarized in McQuillan, Municipal Corporations, § 12.75, that public officers may not appoint themselves to another office.  Cf., our informal memorandum opinion to you of April 15, 1983, copy enclosed; and see also, such prior formal opinions as AGO 59-60 No. 157 (fire district commissioner may not be appointed district secretary); AGO 63-64 No. 92 (county commissioner may not appoint himself chairman of the local civil defense council); and AGO 1973 No. 25 (city council member may not serve as city firefighter).

             There are, however, two further propositions which also bear on your question.  First, in order for either of the foregoing common law doctrines to apply there must be two separate public offices involved.  And secondly, since both of those sanctions derive from the common law‑-and not from a statutory enactment‑-either or both of them may be overridden by specific legislation.  Accord, RCW 4.04.010 which, in describing the extent to which common law prevails in our state, reads as follows:

             "The common law, so far as it is not inconsistent with the Constitution and laws of the United States, or of the state of Washington nor incompatible with the institutions and condition of society in this state, shall be the rule of decision in all the courts of this state."

             Let us, therefore, turn first to the question of whether a position on the board of directors of a public corporation, when created pursuant to such an ordinance as you have described, nevertheless constitutes a separate public office.  In our previous opinions applying the doctrine of incompatible offices we have consistently used the following five element test of what constitutes a "public office":

             "'. . . five elements are indispensable in any position of public employment, in order to make it a public office of a civil nature:  (1) It must be created by the Constitution or by the legislature or created by a municipality or other body through authority conferred by the legislature; (2) it must possess a delegation of a portion of the sovereign power of government, to be  [[Orig. Op. Page 5]] exercised for the benefit of the public; (3) the powers conferred and the duties to be discharged must be defined, directly or impliedly, by the legislature or through legislative authority; (4) the duties must be performed independently and without control of a superior power, other than the law, unless they be those of an inferior or subordinate office, created or authorized by the legislature and by it placed under the general control of a superior officer or body; (5) it must have some permanency and continuity and not be only temporary or occasional.'"1/

             Here, the first, third, fourth and fifth of those elements would appear to us to be present.  A public corporation established pursuant to chapter 39.84 RCW, supra, is, by the express terms of that law, created by a municipality through authority conferred by the legislature; its powers and duties are defined by the same law, in RCW 39.84.080; its functions, while not independently performed, are nevertheless within the ambit of element (4) because it is, in the sense of that part of the rule, a subordinate entity under the control of the governing municipality; and, finally, it has more than merely a temporary or occasional existence.  When we turn to element (2), however, we are initially confronted with the following language of the final sentence of RCW 39.84.060, codifying § 6, chapter 300, Laws of 1981,supra:

             ". . . A municipality shall not delegate to a public corporation any of the municipality's attributes of sovereignty, including, without limitation, the power to tax, the power of eminent domain, and the police power."

             On the other hand, it seems to us at least arguable that this element of the above‑stated test is nevertheless also present because of the nature of at least some of the powers which have been granted directly to a public corporation by the legislature itself in RCW 39.84.080, codifying § 8 of the subject act.  That, it will be noted, is the same section as we cited to show the presence of element (3);i.e., the possession of powers and duties defined, directly or impliedly, by the legislature or through legislative authority.

              [[Orig. Op. Page 6]]

            However, if this last noted provision of the law is deemed to be sufficient to cover both of those elements of a public office to be present a further issue then is presented under the above‑noted common law doctrines:  Is the position of director of a public corporation truly a separate public office under an ordinance (such as is referred to in your question) adopted pursuant to RCW 39.84.040, supra, which states that one or more positions on the board of directors of the corporation shall be filled by a member (or members) of the governing body of the subject municipality serving ex officio?  Arguably, at least, it is not.  Rather, the ordinance in question could well be viewed as merely imposing additional functions on those members of the governing body who also serve, ex officio, as directors of the corporation.  For, as defined inBlack's Law Dictionary, Rev. Fourth Ed., at page 661, the term "ex officio" means, simply:

             "From office; by virtue of the office; without any other warrant or appointment than that resulting from the holding of a particular office."

             The inference to be drawn from that definition is that rather than actually holding two separate offices an individual serving ex officio may, instead, be deemed to be holding only a single office with additional duties or functions.

             But even if that analysis is also deemed to be faulty‑-and the position of director of a public corporation under chapter 39.84 RCW is considered to be both a "public office" and one which is separate and distinct from the basic office held by a member of the governing body of the creating municipality, we next must consider another point.  Where a particular individual holds a second office (assuming that it is one)ex officio, he clearly does so by virtue of his occupancy of the first, or primary office‑-and not as a consequence of any appointment to that second office or position.  Likewise, he continues to hold the second office or position, by operation of law, for as long as he also occupies the first or primary office.  Therefore, under an ordinance such as you have described, there would be no appointment-removal procedure to trigger either of the two common law doctrines with which you are concerned.  Once such an ordinance has been adopted the governing body of the creating municipality would not thereafter be appointing some or all of its own members to directorships on the corporation or thereafter removing them from those directorships.  Instead, consistent with theex officio concept (even if two  [[Orig. Op. Page 7]] separate offices are deemed to be involved), the directorships would be filled, and potentially later vacated, solely by operation of law.

             Finally, let us bear in mind once again the essential nature of a common law doctrinevis-a-vis a conflicting legislative enactment.  As we have explained earlier, both the doctrine of incompatible public offices and the related rule regarding self-appointments may be overridden by a conflicting state law.  Logically, therefore, those common law doctrines ought also to be susceptible to being overridden by local legislation enacted pursuant to a general delegation of legislative authority‑-such as, in this instance, is contained in RCW 39.84.040,supra.  Repeated for ease of reference that statute, codifying § 4, chapter 300, Laws of 1981,supra, provides that:

             "The ordinance creating a public corporation shall include provisions establishing a board of directors to govern the affairs of the public corporation, what constitutes a quorum of the board of directors, and how the public corporation shall conduct its affairs."

             In doing so, however, the governing body of a municipality must spell out, in the ordinance, how that board is to be composed.  And if, in its judgment, it believes that the board should be composed of members of the governing body itself, servingex officio, and appropriately says so in the ordinance, that exercise of its delegated legislative authority should be sufficient to overcome the common law to the contrary.

             Conclusion:

             With one caveat we therefore answer your question, as above stated, in the affirmative.  Exercising the authority granted to it by RCW 39.84.040, supra, it is our opinion that in creating a public corporation in connection with the issuance of industrial development revenue bonds under chapter 39.84 RCW, the governing body of a municipality may provide in the ordinance establishing the corporation that one or more positions on its board of directors shall be filled by a member (or members) of that governing body servingex officio.  Our caveat, in turn, is this:  If the number of members of the governing body who are to serve, ex officio, on the board of directors of corporations is less than the total number of members of the governing body the ordinance should also, itself, state the criteria for determining which members of the governing body are also to serve as directors of the  [[Orig. Op. Page 8]] corporation.2/   Otherwise, the possibility of characterizing the selection process as tantamount to an appointment would exist and, to that extent, undermine the overall rationale upon which our conclusion (as above stated) is based.

             This completes our consideration of your question.  We trust that the foregoing will be of assistance to you.

 Very truly yours,
KENNETH O. EIKENBERRY
Attorney General

PHILIP H. AUSTIN
Senior Deputy Attorney General