BILL NUMBER: SB 689	CHAPTERED  09/07/99

	CHAPTER   349
	FILED WITH SECRETARY OF STATE   SEPTEMBER 7, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 7, 1999
	PASSED THE SENATE   AUGUST 23, 1999
	PASSED THE ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JUNE 30, 1999
	AMENDED IN ASSEMBLY   JUNE 23, 1999
	AMENDED IN ASSEMBLY   JUNE 21, 1999

INTRODUCED BY   Senator Johnston

                        FEBRUARY 24, 1999

   An act to amend Sections 1091 and 1091.5 of the Government Code,
relating to conflicts of interest.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 689, Johnston.  Conflicts of interest.
   (1) Existing law prohibits certain public officials and employees
from being financially interested in any contract made by them in
their official capacity, or by any body or board of which they are
members.  An officer is not deemed to be interested in a contract
entered into by a body or board of which the officer is a member if
the member has only a remote interest in the contract and other
requirements are met.  A remote interest is required to be publicly
disclosed and thereafter the public body may authorize, approve, or
ratify the contract in question, but the officer is disqualified from
voting.
   This bill would define as an additional remote interest that of a
person receiving salary, per diem, or reimbursement for expenses from
a government entity.
   (2) Existing law further provides that an officer or employee
shall not be deemed to be interested in a contract if his or her
interest is any of specified interests, including that of
compensation for employment with a governmental agency other than the
governmental agency that employs the officer or employee, provided
that the interest is disclosed to the body or board at the time of
consideration of the contract and the interest is noted in its
official record.
   This bill would revise that interest to be that of a person
receiving salary, per diem, or reimbursement for expenses from a
government entity unless the contract directly involves the
department of the government entity that employs the officer or
employee.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1091 of the Government Code is amended to read:

   1091.  (a) An officer shall not be deemed to be interested in a
contract entered into by a body or board of which the officer is a
member within the meaning of this article if the officer has only a
remote interest in the contract and if the fact of that interest is
disclosed to the body or board of which the officer is a member and
noted in its official records, and thereafter the body or board
authorizes, approves, or ratifies the contract in good faith by a
vote of its membership sufficient for the purpose without counting
the vote or votes of the officer or member with the remote interest.

   (b) As used in this article, "remote interest" means any of the
following:
   (1) That of an officer or employee of a nonprofit corporation,
except as provided in paragraph (8) of subdivision (a) of Section
1091.5.
   (2) That of an employee or agent of the contracting party, if the
contracting party has 10 or more other employees and if the officer
was an employee or agent of that contracting party for at least three
years prior to the officer initially accepting his or her office and
the officer owns less than 3 percent of the shares of stock of the
contracting party; and the employee or agent is not an officer or
director of the contracting party and did not directly participate in
formulating the bid of the contracting party.
   For purposes of this paragraph, time of employment with the
contracting party by the officer shall be counted in computing the
three-year period specified in this paragraph even though the
contracting party has been converted from one form of business
organization to a different form of business organization within
three years of the initial taking of office by the officer.  Time of
employment in that case shall be counted only if, after the transfer
or change in organization, the real or ultimate ownership of the
contracting party is the same or substantially similar to that which
existed before the transfer or change in organization.  For purposes
of this paragraph, stockholders, bondholders, partners, or other
persons holding an interest in the contracting party are regarded as
having the "real or ultimate ownership" of the contracting party.
   (3) That of an employee or agent of the contracting party, if all
of the following conditions are met:
   (A) The agency of which the person is an officer is a local public
agency located in a county with a population of less than 4,000,000.

   (B) The contract is competitively bid and is not for personal
services.
   (C) The employee or agent is not in a primary management capacity
with the contracting party, is not an officer or director of the
contracting party, and holds no ownership interest in the contracting
party.
   (D) The contracting party has 10 or more other employees.
   (E) The employee or agent did not directly participate in
formulating the bid of the contracting party.
   (F) The contracting party is the lowest responsible bidder.
   (4) That of a parent in the earnings of his or her minor child for
personal services.
   (5) That of a landlord or tenant of the contracting party.
   (6) That of an attorney of the contracting party or that of an
owner, officer, employee, or agent of a firm which renders, or has
rendered, service to the contracting party in the capacity of
stockbroker, insurance agent, insurance broker, real estate agent, or
real estate broker, if these individuals have not received and will
not receive remuneration, consideration, or a commission as a result
of the contract and if these individuals have an ownership interest
of 10 percent or more in the law practice or firm, stock brokerage
firm, insurance firm, or real estate firm.
   (7) That of a member of a nonprofit corporation formed under the
Food and Agricultural Code or a nonprofit corporation formed under
the Corporations Code for the sole purpose of engaging in the
merchandising of agricultural products or the supplying of water.
   (8) That of a supplier of goods or services when those goods or
services have been supplied to the contracting party by the officer
for at least five years prior to his or her election or appointment
to office.
   (9) That of a person subject to the provisions of Section 1090 in
any contract or agreement entered into pursuant to the provisions of
the California Land Conservation Act of 1965.
   (10) Except as provided in subdivision (b) of Section 1091.5, that
of a director of or a person having an ownership interest of 10
percent or more in a bank, bank holding company, or savings and loan
association with which a party to the contract has a relationship of
borrower or depositor, debtor or creditor.
   (11) That of an engineer, geologist, or architect employed by a
consulting engineering or architectural firm.  This paragraph applies
only to an employee of a consulting firm who does not serve in a
primary management capacity, and does not apply to an officer or
director of a consulting firm.
   (12) That of an elected officer otherwise subject to Section 1090,
in any housing assistance payment contract entered into pursuant to
Section 8 of the United States Housing Act of 1937 (42 U.S.C. Sec.
1437f) as amended, provided that the housing assistance payment
contract was in existence before Section 1090 became applicable to
the officer and will be renewed or extended only as to the existing
tenant, or, in a jurisdiction in which the rental vacancy rate is
less than 5 percent, as to new tenants in a unit previously under a
Section 8 contract.  This section applies to any person who became a
public official on or after November 1, 1986.
   (13) That of a person receiving salary, per diem, or reimbursement
for expenses from a government entity.
   (c) This section is not applicable to any officer interested in a
contract who influences or attempts to influence another member of
the body or board of which he or she is a member to enter into the
contract.
   (d) The willful failure of an officer to disclose the fact of his
or her interest in a contract pursuant to this section is punishable
as provided in Section 1097.  That violation does not void the
contract unless the contracting party had knowledge of the fact of
the remote interest of the officer at the time the contract was
executed.
  SEC. 2.  Section 1091.5 of the Government Code is amended to read:

   1091.5.  (a) An officer or employee shall not be deemed to be
interested in a contract if his or her interest is any of the
following:
   (1) The ownership of less than 3 percent of the shares of a
corporation for profit, provided that the total annual income to him
or her from dividends, including the value of stock dividends, from
the corporation does not exceed 5 percent of his or her total annual
income, and any other payments made to him or her by the corporation
do not exceed 5 percent of his or her total annual income.
   (2) That of an officer in being reimbursed for his or her actual
and necessary expenses incurred in the performance of official duty.

   (3) That of a recipient of public services generally provided by
the public body or board of which he or she is a member, on the same
terms and conditions as if he or she were not a member of the board.

   (4) That of a landlord or tenant of the contracting party if the
contracting party is the federal government or any federal department
or agency, this state or an adjoining state, any department or
agency of this state or an adjoining state, any county or city of
this state or an adjoining state, or any public corporation or
special, judicial, or other public district of this state or an
adjoining state unless the subject matter of the contract is the
property in which the officer or employee has the interest as
landlord or tenant in which event his or her interest shall be deemed
a remote interest within the meaning of, and subject to, the
provisions of Section 1091.
   (5) That of a tenant in a public housing authority created
pursuant to Part 2 (commencing with Section 34200) of Division 24 of
the Health and Safety Code in which he or she serves as a member of
the board of commissioners of the authority or of a community
development commission created pursuant to Part 1.7 (commencing with
Section 34100) of Division 24 of the Health and Safety Code.
   (6) That of a spouse of an officer or employee of a public agency
in his or her spouse's employment or officeholding if his or her
spouse's employment or officeholding has existed for at least one
year prior to his or her election or appointment.
   (7) That of a nonsalaried member of a nonprofit corporation,
provided that this interest is disclosed to the body or board at the
time of the first consideration of the contract, and provided further
that this interest is noted in its official records.
   (8) That of a noncompensated officer of a nonprofit, tax-exempt
corporation, which, as one of its primary purposes, supports the
functions of the body or board or to which the body or board has a
legal obligation to give particular consideration, and provided
further that this interest is noted in its official records.
   For purposes of this paragraph, an officer is "noncompensated"
even though he or she receives reimbursement from the nonprofit,
tax-exempt corporation for necessary travel and other actual expenses
incurred in performing duties of his or her office.
   (9) That of a person receiving salary, per diem, or reimbursement
for expenses from a government entity, unless the contract directly
involves the department of the government entity that employs the
officer or employee, provided that the interest is disclosed to the
body or board at the time of consideration of the contract, and
provided further that the interest is noted in its official record.
   (10) That of an attorney of the contracting party or that of an
owner, officer, employee, or agent of a firm which renders, or has
rendered, service to the contracting party in the capacity of
stockbroker, insurance agent, insurance broker, real estate agent, or
real estate broker, if these individuals have not received and will
not receive remuneration, consideration, or a commission as a result
of the contract and if these individuals have an ownership interest
of less than 10 percent in the law practice or firm, stock brokerage
firm, insurance firm, or real estate firm.
   (11) Except as provided in subdivision (b), that of an officer or
employee of or a person having less than a 10-percent ownership
interest in a bank, bank holding company, or savings and loan
association with which a party to the contract has a relationship of
borrower or depositor, debtor, or creditor.
   (b) An officer or employee shall not be deemed to be interested in
a contract made pursuant to competitive bidding under a procedure
established by law if his or her sole interest is that of an officer,
director, or employee of a bank or savings and loan association with
which a party to the contract has the relationship of borrower or
depositor, debtor or creditor.