The Utah State Auditor has reported on the citizens' complaint about the retroactive health benefits. (highlights added)
December 17, 2012
Board of
Directors
Heber Light &
Power Co.
31 South 100 West
Heber City, Utah
84032
Dear Board of
Directors:
We appreciate the
response from Mr. Joseph Dunbeck to our inquiry regarding the
allegations at Heber Light & Power. Specifically, it is alleged
that Board members: a) planned, prepared, instituted, and accepted
compensation for themselves in lieu of a health insurance benefit,
and b) received stipends for attendance of meetings, both in state
and out of state.
We have determined the following:
Heber Light &
Power is subject to the laws regulating its government members.
The
Attorney General’s Office considered in its Informal Opinion No.
87-31 what laws apply to an Interlocal Cooperation Act entity,
specifically, whether the requirements of the Uniform Fiscal
Procedures Act for Utah Cities applied to the Tri-City Golf Course
Committee, an Entity created by agreement among American Fork City,
Pleasant Grove City, and Lehi City.
The
Attorney General’s Informal Opinion considered first the Utah
Supreme Court case, CP National Corporation v. Pubic Service
Commission, 638 P.2d 519 (1981), which addressed not the
“negative” application of the laws, i.e., what laws apply
to regulate an interlocal entity, but the “positive”
application, i.e., what powers an interlocal entity
has. The Court held that “the intent of the act [Interlocal
Cooperation Act] appears to be to allow municipalities collectively
to exercise powers which they already possess individually.” Id.
at 521.
Based
on the above court case, the Attorney General’s Informal Opinion
indicated that the Interlocal Cooperation Act similarly applies to
the “negative” or regulatory laws to which an interlocal entity
is subject, stating that “[i]t is clear…that an entity created
under the Inter-local Co-Operation Act cannot exercise powers in
excess of those possessed by its creators….[C]ities may not grant
powers to an interlocal agency which they do not possess themselves
individually. It necessarily follows that cities have no power or
authority to act in contravention to the requirements of the Fiscal
Procedures Act and they cannot endow their interlocal progeny with
such power or authority.” Opinion at p. 2.
Given
this authority, the State Auditor’s Office has always held that
interlocal agreements should be subject to the same regulatory
environment as the creating entities. However, it is one thing to say
laws applying to a municipality shall also apply to the interlocal
entity, and another to actually apply them. In attempting to apply
municipal statutes related to employee benefits, including
compensation, we encounter some legal quandaries, addressed below.
We cannot answer
the question whether the compensation in lieu of health benefits
violates the Municipal Code, and suggest seeking a legal opinion
from the appropriate authority.
In
regards to whether a municipal officer, regulated by the provisions
of Utah Code 10-3-818 with regard to salary, can receive any
compensation from the interlocal entity, or whether that result in an
inappropriate increase in salary under 10-3-818, or an inappropriate
economic privilege under Utah Code 10-3-1304, note the
following:
Utah
Code 10-3-818 provides specifically:
(1) The elective and statutory officers of
municipalities shall receive such compensation for their services as
the governing body may fix by ordinance adopting compensation or
compensation schedules enacted after public hearing.
(2) Upon its own motion the governing body may review
or consider the compensation of any officer or officers of the
municipality…for the purpose of determining whether or not it
should be adopted, changed, or amended. In the event that the
governing body decides that the compensation or compensation
schedules should be adopted, changed, or amended, it shall set a time
and place for a public hearing at which all interested persons shall
be given an opportunity to be heard.
And,
the Municipal Officers’ and Employees’ Ethics Act (Utah Code
10-3-1304) provides that:
(2) It is an offense for an elected or appointed
officer…to:
….
(b) Use or attempt to use the officer’s or employee’s
official position to:
(i) further substantially the officer’s or
employee’s personal economic interest; or
(ii) secure special privileges for the officer or
employee or for others….
In
conjunction with these two sections are the instructions provided in
the Interlocal Cooperation Act (Utah Code 11-13-222) that:
(1) Each officer and employee performing services for
two or more public agencies under an agreement under this chapter
shall be considered to be:
(a) an officer or employee of the public agency
employing the officer or employee’s services even though the
officer or employee performs those functions outside of the
territorial limits of any one of the contracting public agencies;
….
(3) All of the privileges, immunities from liability,
exemptions from laws, ordinances, and rules, pensions and relief,
disability, workers compensation, and other benefits that apply to an
officer, agent, or employee of a public agency apply to the same
degree and extent when the officer, agent, or employee performs
functions or duties under the agreement outside the territorial
limits of that public agency.
Utah
Code 11-13-222 of the Interlocal Cooperation Act seems to support
the Attorney General’s Informal Opinion specifically with reference
to matters like compensation of officers and employees, underscoring
the fact that the employing municipality’s regulations are
controlling.
The
question of interpretation remains. We know, of course, that the
officers already receive compensation, and the question being asked
is simply whether the additional compensation is appropriate. That
is a legal question that we do not have the authority to answer.
At the very
least, a hearing should have been held to allow public input as
required by the Municipal Code.
If
it is determined that a municipal officer may receive compensation as
an officer of an interlocal entity, it seems clear to us that the
provisions of Utah Code 10-3-818 requiring a municipality to
hold a public hearing would apply to the interlocal entity. Based on
Mr. Dunbeck’s response, it appears that a public hearing was not
held regarding compensation of board members until two months after
the board approved the budget which included the increased
compensation.
In conclusion, we believe
that both the Attorney General’s Informal Opinion and Utah Code
11-13-222 make Utah Code 10-3-818 and 10-3-1404 applicable to
Heber Light & Power. However, we recommend that you contact the
Attorney General’s Office and/or seek clarification of the laws
through legislation.
We can say that to the
extent it is determined appropriate for municipal officers/board
members to receive compensation for their services to Heber Light &
Power, a public hearing should have been held to vet the decision by
the board to participate in the entity’s health insurance plan.
Because it was not, the policy should be voided until the appropriate
procedures have been followed.
We appreciate the
courtesy and assistance extended to us by the personnel of Heber
Light & Power during the course of the investigation. If you
have any questions, please contact Ryan Roberts, Audit Supervisor, at
(801) 538-1721.
Sincerely,
Auston
G. Johnson, CPA
Utah
State Auditor
