Opinion AGO 10-1103.

• Case Date: December 27, 2012
• Court: California

California Attorney General Opinions 2012. Opinion AGO 10-1103. TO BE PUBLISHED IN THE OFFICIAL REPORTSOFFICE OF THE ATTORNEY GENERAL State of CaliforniaKAMALA D. HARRIS Attorney GeneralOPINION of KAMALA D. HARRISAttorney General DIANE EISENBERG Deputy Attorney GeneralNo. 10-1103 December 27, 2012THE HONORABLE ROCKY CHAVEZ, MEMBER OF THE STATE ASSEMBLY, has requested an opinion on the following questions:1. May a director of a County Water Authority who represents a member agency of the Authority vote on a contract between the member agency and the Authority?2. If a director of a County Water Authority who represents a member agency of the Authority may not vote on a contract between the member agency and the Authority, is the director also restricted in other activities related to the contract?3. May a director of a County Water Authority who represents a member agency of the Authority vote on an action coming before the board of the Authority in which the member agency has a financial interest, if the action is not a vote on a contract between the member agency and the Authority?CONCLUSIONS 1. If a director of a County Water Authority is an officer of the member agency that he or she represents, then the director may not vote on a contract between the member agency and the Authority. If a director of an Authority is not an officer of the member agency, then the director generally may vote on a contract between the member agency and the Authority. 2. A director of a County Water Authority who represents a member agency of the Authority may participate in actions related to a contract between the member agency and the Authority, other than voting on the contract. 3. A director of a County Water Authority who represents a member agency of the Authority may vote on an action coming before the board of the Authority in which the member agency has a financial interest, if the action is not a vote on a contract between the member agency and the Authority. ANALYSIS The County Water Authority Act (Act)(fn1) authorizes two or more public agencies(fn2 )to establish a County Water Authority (Authority) to provide water for its member agencies. An Authority is empowered to acquire water and water rights, enter into contracts, construct and maintain works and facilities, and incur debt and impose taxes to finance its projects.(fn3) The powers of an Authority are generally exercised by its board of directors.(fn4) Each member agency appoints at least one representative to an Authority's board of directors.(fn5) Each member agency may also appoint one additional representative for each "full 5 percent of the assessed value of property taxable for Authority purposes which is within the public agency."(fn6) Each director's voting shares are proportional to the total financial contribution to the Authority that is attributable to that director's member agency.(fn7) The San Diego County Water Authority (SDCWA) is currently the only Authority organized under the Act. SDCWA consists of twenty-four member agencies, including cities, county water districts, irrigation districts, municipal water districts, and the Camp Pendleton Military Reservation. SDCWA provides wholesale water supply service to its member agencies, and those agencies in turn retail the water to residents and businesses in San Diego County.(fn8) We are informed that a private company is developing a seawater desalination plant in the City of Carlsbad. In the course of the development process, nine member agencies of SDCWA committed to purchase water from the plant once it is operational. However, in order to make the project financially feasible during its early years of operation, the plant operator and the nine subscribing member agencies requested financial incentives-essentially subsidies-from SDCWA. The nine agencies planned to ask the SDCWA board(fn9) to approve contracts with each of them for the incentive payments. It was these proposed contracts that led to the original request for this opinion. In the meantime, the Authority has provisionally adopted an alternative scheme that does not entail incentive contracts with the nine member agencies.(fn10) However, we are told, other situations are likely to arise in which SDCWA is required to act on proposed contracts with individual member agencies. We are therefore asked (1) whether a County Water Authority board member may vote on a contract between the Authority and the member agency that the board member represents; (2) whether an Authority board member is restricted in activities other than voting with respect to a potential contract between the Authority and the member agency that the board member represents; and (3) whether an Authority board member may vote on actions, other than a contract between the Authority and the member agency that the board member represents, that involve the financial interests of the member agency. To answer these questions, we look closely at relevant provisions of the Act. Section 6(b) provides, in full:

The board of directors shall consist of at least one representative from each public agency, the area of which is within the authority. The representatives shall be designated and appointed by the chief executive officers of those public agencies, respectively, with the consent and approval of the legislative bodies of the public agencies, respectively. Any member of the governing body of a member agency may be appointed by that member agency to the board of the authority to serve as the agency's representative. A majority of the members of the governing body of an agency may not be appointed by the agency to serve as representatives on the board of the authority, and, for a member agency that is not a water district, only one of the representatives of that agency may be a member of the governing body of the agency. Any director holding dual offices shall not vote upon any contract between a county water authority and the member public agency he or she represents on the authority's board. As used in this subdivision, "water district" has the same meaning as in subdivision (a) of Section 10.(fn11)

Section 6(e) provides, in relevant part:

Each member of the board of directors shall be entitled to vote on all actions coming before the board and shall be entitled to cast one vote for each five million dollars ($5,000,000), or major fractional part thereof, of the total financial contribution paid to the authority that is attributable to the public agency of which the member is a representative provided that no public agency shall have votes that exceed the number of the total votes of all the other public agencies.(fn12)

In construing section 6, as with any statute, our primary purpose is "to ascertain the intent of the Legislature so as to effectuate the purpose of the law." (fn13) In determining the Legislature's intent, we look first to the words of the statute, giving the language its usual, ordinary import.(fn14) The statute must be construed "in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible."(fn15) When necessary or helpful, the legislative history of the statute and the circumstances of its enactment may be considered.(fn16) 1. Voting on Contracts between Member Agency and Authority As a preliminary matter, but one necessary to our discussion, we briefly review the doctrine of incompatible offices. Under this doctrine, as codified in Government Code section 1099, public offices are deemed incompatible when (1) either office may exercise a supervisory, auditing, or removal power over the other; (2) there is a possibility of a significant clash of duties or loyalties between the offices; or (3) public policy considerations make it improper for one person to hold both offices.(fn17) The doctrine of incompatible offices applies only when both positions are "public offices" as opposed to positions of employment.(fn18) We have previously determined that a director of a County Water Authority holds a public office for purposes of the doctrine,(fn19) as do members of the governing bodies of a variety of public agencies that are authorized to organize and join an Authority.(fn20) The consequence of holding incompatible offices is that the person is deemed to have forfeited the first office upon acceding to the second.(fn21) One of the main purposes of an Authority is to provide its member agencies with adequate supplies of water.(fn22) Ordinarily, when one public entity furnishes a commodity or service to another, having the same public officer represent the interests of both seller and buyer presents precisely the type of inherent conflict of interest that the doctrine of incompatible offices is designed to prevent.(fn23) However, it has long been recognized that the Legislature may abrogate or modify the prohibition against holding incompatible offices whenever it chooses.(fn24) Pursuant to Government Code section 1099(a), the proscription does not apply where the "simultaneous holding of the particular offices is compelled or expressly authorized by law."(fn25) In section 6(b) of the Act, the Legislature has expressly authorized a member agency to appoint one of its officers "to the board of the authority to serve as the agency's representative."(fn26) As we have previously explained, in the context of a statutory scheme similar...