Government Code section 1090 prohibits public officials, such as city employees, from being financially interested in contracts made by them in their official capacities. The Attorney General recently addressed whether a private attorney contracting with a city to perform city attorney legal services can act as "bond counsel" for the same city and be paid a percentage of the bond issuance for providing such services. The Attorney General concluded that section 1090 prohibits an arrangement under which a contract city attorney's compensation for providing the city with additional "bond counsel" services is based on a percentage of the city's bond issuances.
Analyzing section 1090, the Attorney General first concluded that a private attorney hired to perform city attorney services under contract is considered a "public official" for purposes of section 1090 since that section is intended to also apply to independent contractors performing public functions. Therefore, private attorneys hired by contract to work as city attorneys are subject to section 1090.
The Attorney General also determined that a contract city attorney would be involved in making the contract concerning bond issuance since the attorney would advise city officials surrounding the bond issuance. The city attorney's financial interest was clear since he or she would only be paid if the bonds issue and would be paid a larger amount for a larger bond issuance. Since there were no statutory exceptions that applied, the Attorney General concluded that section 1090 prohibits basing a contract city attorney's compensation for providing the city with "bond counsel" services on a percentage of a city's bond issuances. The Attorney General noted that this arrangement would be permissible under the Political Reform Act, but noted that section 1090 and the Political Reform Act do not always result in the same conclusion.
The Attorney General's office cautioned that it was not opining that contract city attorneys can never advise municipal clients on a decision that may create the need for additional legal services. The focus was whether the action formed a separate public contract that may result in the city attorney being paid more or less depending on whether the city signed the contract. The typical city attorney services contract would likely not implicate section 1090 since it generally will not provide for a financial interest in specified future public contracts.
Government Code section 1090 and the Political Reform Act govern conflicts of interest for public officials. The Attorney General noted that, while they both serve similar purposes—avoiding conflicts of interest—they will not always result in the same conclusion about whether a conflict exists. Therefore, an agency must examine both to determine whether a conflict of interest exists. The Attorney General also recognized that its decision could more widely impact city attorney arrangements, but clarified that generally a city attorney can advise clients on decisions that may create additional work without violating section 1090 as long as the action does not create a separate public contract.
Atty. Gen. Op. 12-409 (Jan. 28, 2016) [2016 WL 492900].