Conflicts Disclosure Law Changes Affect TML and Affiliates

Chapter 176 of the Local Government Code requires certain city vendors (and city officials – including a mayor, a councilmember, a city manager, or an employee who exercises discretion in purchasing) to file conflicts disclosure forms in certain instances.  Essentially, any vendor that contracts (or seeks to contract) with a city, and that provides either taxable income over $2,500 or gifts over $100 in the preceding 12 months to an official with that city, must file a “conflict of interest questionnaire” with the city secretary.  (The receiving official must file a “conflicts disclosure statement.”)

In the past, the law never applied to the Texas Municipal League or its affiliates because: (1) neither TML nor any affiliate “pays” taxable income to any city official; and (2) any gifts were typically in the form of food, transportation, entertainment, and lodging, all of which were exempt from reporting.   House Bill 23, which became effective on September 1, 2015, modified several provisions in Chapter 176.

Of particular interest to TML and its affiliates, the bill now requires that a vendor and each city official file a form if the vendor gives the official a gift of lodging, entertainment, or transportation of more than $100 in the preceding 12 months.   (Food received as a guest does not require reporting.)  TML is a “vendor” under the law because it offers paid membership services to member cities.  Thus, if TML provides a gift valued at more than $100 to a member city official (or a person related to the official within the first degree), TML has to submit a conflict of interest questionnaire to that city, and the city official must file a conflicts disclosure statement.  The TML Legal Department has prepared a memo detailing to requirements of the amended law.

Affiliates will not usually be a “vendor” subject to the law because they do not offer paid membership services to member cities.  Instead, the affiliate members are typically individuals.  An affiliate would be a “vendor” only if the affiliate contracts (or seeks to contract) with a city. If an affiliate contracts (or seeks to contract) with a city (e.g., renting they city’s city convention center for a conference), the affiliate would need to file a conflict of interest questionnaire if a city official from that city receives gifts of any type (including lodging, transportation, or entertainment) from the affiliate of more than $100 in the preceding 12 months.   The city official must also file a conflicts disclosure statement.  For example, an affiliate may pay travel expenses of more than $100 in the preceding 12 months to its president, who is the city manager in the City of X.  If that affiliate enters into a contract with the City of X convention center for its annual conference, the filing requirements for both the affiliate and city manager are triggered.

The bottom line:  Any affiliate that provides gifts of any type to a city official in a city with which the affiliate contracts should be aware of and comply with the disclosure requirements.  

The punishment for failure to file a required form under the bill ranges from a Class C to a Class A misdemeanor, depending on the amount of the contract.  The bill provides a defense to prosecution if the vendor or city official files a required form within seven days of learning of a violation.

Any TML staff member or affiliate with questions about the above information may contact Scott Houston, TML General Counsel, at shouston@tml.org or 512-231-7464 about specific relationships or expenditures.