FPPC Revises Regulations Regarding Conflicts of Interest Involving Real Property

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The Fair Political Practices Commission recently changed its conflict of interest regulation concerning real property owned or leased by public officials. The old rule was that if an official owned (or had a long-term lease for) property within 500 feet of a proposed decision, the official was presumed to have a rebuttable conflict of interest. Public officials could rebut the presumption by obtaining an appraiser’s or realtor’s opinion that the decision would have no financial impact on the official’s property. This was referred to as the “one penny rule,” since an official could have a conflict if the decision would have even a penny’s worth of financial impact on the official’s property.

While 500 feet is still an important standard, it is no longer a bright line test. The FPPC has eliminated the “one penny rule.” Under the new rule, an official who owns real property within 500 feet of a property that is the subject of a government decision is presumed to have a disqualifying conflict of interest and may not participate in the decision unless the official obtains a favorable FPPC advice letter stating the official does not have a conflict of interest. The FPPC has stated it expects to provide these advice letters in a timely manner.

Importantly, officials with properties beyond 500 feet are no longer presumed not to have a conflict. Officials may now have a conflict if the property is more than 500 feet away if the property is impacted by the following qualitative factors:

  1. development potential
  2. income producing potential
  3. highest and best use or
  4. the character of the parcel of real property by substantially altering traffic levels or intensity of use, view, privacy, noise levels, air quality, or any other factors that would affect market value

This new rule also includes a catchall reasonably prudent person standard, meaning that, if a governmental decision would cause a reasonably prudent person to believe that the decision would affect the market value of the official’s property, the official has a conflict. This standard applies even if the official’s property is beyond 500 feet of the proposed decision.

Finally, the new rule now treats business properties and rental properties differently from residential properties and requires an analysis as to how the decision will affect the business (rather than the real property).

The FPPC believes these revisions will provide a more realistic standard that relies more on actual analysis rather than an arbitrary circle. While this may be true, it is now more difficult and time-consuming considering the increased uncertainty regarding the inclusion of new qualitative factors to determine whether an official has a conflict of interest. In some cases, an official will require FPPC guidance before he or she knows whether a conflict of interest exists on a project.

Click here to see the FPPC’s staff memo “Determining the Material Financial Effect of a Decision on a Real Property Interest.”

Topics:  Appraisal, Conflicts of Interest, FPPC, Leases, Public Officials

Published In: Elections & Politics Updates, Commercial Real Estate Updates, Residential Real Estate Updates, Zoning, Planning & Land Use Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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