Must a county mayor or city mayor who sits on a Tennessee development district board resign from both the board and their elected office before applying for the development district's executive director job?

Subject

Whether an elected local official who serves on the South Central Tennessee Development District board must resign from both the board and the elected office before applying for the development district's executive director position.

Plain-English summary

Senator Joey Hensley asked whether a county mayor or city mayor who sits on the South Central Tennessee Development District (SCTDD) board can apply to be the district's executive director without resigning. The AG said no: that elected official has to resign from the board and from the underlying elected office before they can lawfully apply.

The reasoning runs through Tennessee's general conflict-of-interest statute, Tenn. Code Ann. § 12-4-101(a)(1). It is unlawful for any officer, committee member, director, or other person whose duty it is to "vote for, let out, overlook, or in any manner to superintend any work or any contract" in which a development district (among other listed entities) is interested, to be "directly interested" in that contract. Being directly interested includes having a contract with the official personally, or with a business in which the official is a sole proprietor, partner, or controlling owner. The Tennessee Supreme Court has long said this provision is broad and should be liberally construed to protect the public from official corruption and oppression.

When a board member applies for the executive director position, they are seeking a contract (the employment) with the district. That makes them "directly interested." Even if they recuse themselves from the vote, they are still in a position to "overlook" or "superintend" the selection process. The AG concluded that a court would likely hold the board member must resign from the board before applying. Penalties for violation are severe: forfeiture of all pay or compensation associated with the contract, dismissal from the board, and ten years of ineligibility for the same or similar position.

But it does not stop there. The development district board statute (Tenn. Code Ann. § 13-14-104) lists categories of elected officials who automatically serve on the board: county mayors, city/town mayors, the chief executive officer of any metropolitan government in the district, and certain other appointees. The statute uses "shall consist," which Tennessee courts read as mandatory. A county mayor cannot resign from the board while still serving as county mayor; the seat tracks the office. So the elected official has to resign the underlying mayoralty too, in order to leave the board and become eligible to apply.

The AG noted that this conclusion tracks a 2012 AG opinion (Op. 12-37) reaching the same result for a board member of a human resource agency seeking the executive director role.

What this means for you

County mayors, city mayors, and metropolitan government executives serving on a development district board

The opinion holds that an elected official who sits on the board must resign both the board seat and the elected office before applying for the executive-director position. It states that recusing from the hiring vote is not enough, because § 12-4-101(a)(1) reaches anyone in a position to "overlook" or "superintend" the contract, not only those who vote. It identifies the penalties under § 12-4-102: forfeiture of all pay associated with the contract, dismissal from the board, and ten years of ineligibility for the same or a similar position.

Development district boards and executive committees

The opinion holds that a board member who applies for the executive-director job is "directly interested" in that contract under § 12-4-101(a)(1). Its analysis is that the conflict is cured only by the member's resignation, not by abstention from the vote.

Other elected officials sitting on similar boards

The opinion notes that § 12-4-101(a)(1) lists multiple entities (municipal corporations, counties, the state, development districts, utility districts, human resource agencies, and other statutory political subdivisions), and that Tenn. Att'y Gen. Op. 12-37 reached the same result for a human resource agency board member.

Municipal and county attorneys

The opinion's holding turns on three points: the official seeks a contract (employment) with an entity on whose board the official sits; § 12-4-101 expressly covers that entity; and § 13-14-104's "shall consist" language makes the board seat track the elected office, so leaving the board requires leaving the office.

Common questions

Why is "directly interested" so broad?

The Tennessee Supreme Court has read § 12-4-101 broadly for over a century. State ex rel. Abernathy v. Robertson (1914), Madison County v. Alexander (1906), and Hope v. Hamilton County (1898) all support a liberal construction "to protect the public from official corruption and oppression." The statute reaches not just direct contracting but anyone who can vote on, let out, overlook, or superintend the contract. So even if you abstain from voting, you can still violate the statute by remaining in a position to influence the selection.

Can I just abstain from the executive director vote?

No. The AG was explicit that abstention is not enough. The statute reaches "overlooking" and "superintending" the contract too. Sitting on the board during the search, while applying, would still place you in a position to influence the process.

Why do I have to resign my elected office, not just the board seat?

Because the development district board statute makes the elected official a board member by operation of law. Tenn. Code Ann. § 13-14-104 says the board "shall consist" of certain elected officials. Tennessee Supreme Court precedent (Home Builders Ass'n of Middle Tenn. v. Williamson Cnty., 2010) reads "shall" as mandatory. So the only way for a county mayor to leave the board is to stop being county mayor.

What are the penalties exactly?

Tenn. Code Ann. § 12-4-102: forfeiture of "all pay or compensation associated with the contract," dismissal from the board, and ineligibility "to serve in the same or a similar position for ten years." The Tennessee Supreme Court called these penalties "drastic and far-reaching" in Savage v. Mynatt, 299 S.W. 1043 (Tenn. 1927).

Does this apply to other government boards or just development districts?

Tenn. Code Ann. § 12-4-101(a)(1) lists multiple entities: municipal corporations, counties, the state, development districts, utility districts, human resource agencies, and "other political subdivision created by statute." The same analysis would apply to those entities. The 2012 opinion (Op. 12-37) reached human resource agencies on similar facts.

Can the district give me a waiver?

No. The conflict statute does not provide for waivers. The remedy is resignation, not authorization.

What if I want to keep my elected office and just decline the executive director job?

Then no problem. You can stay in your elected office and on the board indefinitely, as long as you do not seek a contract with the district where you are directly interested.

Background and statutory framework

The Development District Act of 1965, Tenn. Code Ann. §§ 13-14-101 et seq., creates regional development districts responsible for area-wide economic planning. Governor Ellington established Tennessee's nine development districts by Executive Order No. 17 (Oct. 14, 1968, as amended June 23, 1970). The South Central Tennessee Development District is one of those nine.

The board of each district is set by Tenn. Code Ann. § 13-14-104: "the county mayor of each county within the district, the mayor of each municipality within the district, the chief executive officer of any metropolitan government within the district, one (1) representative from a local agency in each county dealing with problems of industrial development or promotion appointed by the county mayor, and one (1) state senator and one (1) state representative" with constituencies in the district. The "shall consist" language is mandatory; the board membership tracks the listed offices.

The board has significant powers, including appointing an executive committee, receiving and expending funds for staffing (§ 13-14-106(a)(2)), and developing personnel procedures for hiring, promotion, demotion, and dismissal of employees (§ 13-14-106(b)(3)). The South Central Tennessee Development District has used these powers to establish an executive committee and the position of executive director.

The Development District Act has no internal conflict-of-interest provisions. So Tennessee's general conflict statute, Tenn. Code Ann. § 12-4-101(a)(1), governs. That statute makes it unlawful for any "officer, committee member, director, or other person whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract in which any municipal corporation, county, state, development district, utility district, human resource agency, or other political subdivision created by statute shall or may be interested, to be directly interested in any such contract." "Directly interested" includes contracts with the official personally or with a business in which the official is a sole proprietor, partner, or controlling owner.

Tennessee Supreme Court cases State ex rel. Abernathy v. Robertson, Madison County v. Alexander, and Hope v. Hamilton County established the principle of liberal construction "to protect the public from official corruption and oppression." Penalties under § 12-4-102 are forfeiture of pay, dismissal from the board, and ten years of ineligibility. Savage v. Mynatt described those penalties as a "drastic and far-reaching" expression of legislative intent to protect public funds.

The AG concluded that applying for an executive director position is a contract in which the board member is "directly interested." Tenn. Att'y Gen. Op. 12-37 (Mar. 19, 2012) reached the same conclusion for a human resource agency board member. Because the development district statute makes the elected official's seat track the underlying elected office, the official must resign both the board seat and the elected office to lawfully apply.

Citations

• Tenn. Code Ann. §§ 13-14-101 et seq. (Development District Act of 1965)
• Tenn. Code Ann. § 13-14-102, -102(a) (purposes; "efficient planning and orderly economic development")
• Tenn. Code Ann. § 13-14-103 (planning responsibility)
• Tenn. Code Ann. § 13-14-104 (mandatory board membership)
• Tenn. Code Ann. § 13-14-106(a)(2) (funds for staffing)
• Tenn. Code Ann. § 13-14-106(b)(3) (personnel procedures)
• Tenn. Code Ann. § 12-4-101(a)(1) (general conflict-of-interest prohibition)
• Tenn. Code Ann. § 12-4-102 (penalties: forfeiture, removal, ten-year ineligibility)
• State ex rel. Abernathy v. Robertson, 5 Tenn. Civ. App. 438 (1914) (liberal construction of conflict statute)
• Madison Cnty. v. Alexander, 94 S.W. 604 (Tenn. 1906) (same)
• Hope v. Hamilton Cnty., 47 S.W. 487 (Tenn. 1898) (same)
• Savage v. Mynatt, 299 S.W. 1043 (Tenn. 1927) (penalties as "drastic and far-reaching")
• Home Builders Ass'n of Middle Tenn. v. Williamson Cnty., 304 S.W.3d 812 (Tenn. 2010) ("shall" is mandatory)
• Tenn. Att'y Gen. Op. 12-37 (Mar. 19, 2012) (same result for human resource agency boards)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2024/op24-015.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
September 4, 2024
Opinion No. 24-015
South Central Tennessee Development District—Appointment of Executive Director

Question

Must an elected local official who is a board member of the South Central Tennessee Development District resign from the board, as well as from his or her elected office, before applying for the position of executive director of the district?

Opinion

Yes.

ANALYSIS

The Development District Act of 1965 provides for the creation and functioning of regional development districts. Tenn. Code Ann. §§ 13-14-101, et seq. Districts created under this Act are given the responsibility for area-wide economic planning in their respective districts. See id. §§ 13-14-102, -103. Tennessee has nine development districts. The districts encompass one or more counties or parts of counties and are formed in a manner "conducive to [the] efficient planning and orderly economic development of the state." Id. § 13-14-102(a).

A board of directors governs each district. The board "shall consist of the county mayor of each county within the district, the mayor of each municipality within the district, the chief executive officer of any metropolitan government within the district, one (1) representative from a local agency in each county dealing with problems of industrial development or promotion appointed by the county mayor, and one (1) state senator and one (1) state representative whose senatorial or representative districts lie wholly or in part in the development district." Id. § 13-14-104.

Among other things, the board can "appoint an executive committee to act for it and determine the authority of such committee." Id. The board is also authorized to "[r]eceive and expend funds . . . for staffing," id. § 13-14-106(a)(2), and "[d]evelop written personnel procedures . . . for the hiring, promotion, demotion and dismissal of all employees," id. § 13-14-106(b)(3).

Pursuant to this authority, the South Central Tennessee Development District has established an executive committee and the position of executive director.

The question presented is whether a board member of the South Central Tennessee Development District who sits on the board by virtue of his or her elected local office must resign from the board, as well as from his or her elected office, before applying for the position of executive director.

The Development District Act of 1965 includes no specific conflict-of-interest provisions. Tennessee's general conflict-of-interest statute, which expressly includes development districts, governs:

It is unlawful for any officer, committee member, director, or other person whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract in which any municipal corporation, county, state, development district, utility district, human resource agency, or other political subdivision created by statute shall or may be interested, to be directly interested in any such contract. "Directly interested" means any contract with the official personally or with any business in which the official is the sole proprietor, a partner, or the person having the controlling interest. . . .

Tenn. Code Ann. § 12-4-101(a)(1) (emphasis added). This statutory language is broad. And the Tennessee Supreme Court has stated that "it should be liberally construed" "to protect the public from official corruption and oppression." State ex rel. Abernathy v. Robertson, 5 Tenn. Civ. App. 438, 454 (5 Higgins) (1914); see also Madison Cnty. v. Alexander, 94 S.W. 604, 604-05 (Tenn. 1906); Hope v. Hamilton Cnty., 47 S.W. 487, 488 (Tenn. 1898).

A board member who violates the provisions of § 12-4-101(a)(1) must forfeit all pay or compensation associated with the contract at issue, and he or she must be dismissed from membership on the board and is ineligible to serve in the same or a similar position for ten years. Tenn. Code Ann. § 12-4-102. The severity of these penalties evidences an "intent of the lawmakers to meet a serious menace to public funds by drastic and far-reaching provisions." Savage v. Mynatt, 299 S.W. 1043, 1044 (Tenn. 1927).

While no precedent directly answers the question presented, we believe a court would likely hold that § 12-4-101(a)(1) requires a board member of the South Central Tennessee Development District to resign from the board before applying for the executive director position. A board member applying for the executive director position is "directly interested" in the contract. And liberally construing the conflict-of-interest statute, the board member could be found to be "overlook[ing]" or "superintend[ing]" such a contract even if he or she is never called upon to vote on it. The board member could influence the selection process—exactly what the prohibition against "overlooking" or "superintending" a contract is intended to avoid.

The board member would also have to resign from his or her elected office to apply for the executive director position if the elected office is a mayoral or chief executive position. Section 13-14-104 states that the board of directors "shall consist" of certain elected local officials—"the county mayor of each county within the district, the mayor of each municipality within the district, [and] the chief executive officer of any metropolitan government within the district." As a general rule, "when the word 'shall' is used in a statute it is construed to be mandatory, not discretionary." Home Builders Ass'n of Middle Tenn. v. Williamson Cnty., 304 S.W.3d 812, 819 (Tenn. 2010). By necessity, then, the board member would have to resign from the elected local office to be removed from the board and eligible to apply. Again, this conclusion is in conformity with the statute's longstanding overarching purpose to avoid conflicts between public officials and their private interests. See Tenn. Att'y Gen. Op. 12-37 (Mar. 19, 2012) (opining that board member of a human resource agency must resign from board and his or her elected office before pursuing appointment as the executive director of the agency).

JONATHAN SKRMETTI
Attorney General and Reporter

J. MATTHEW RICE
Solicitor General

LAURA T. KIDWELL
Assistant Solicitor General

Requested by:
The Honorable Joey Hensley
State Senator
425 Rep. John Lewis Way N.
Suite 742 Cordell Hull Building
Nashville, Tennessee 37243