The following information is taken from the Local Government Code, Chapter 171

Every time an ESD Commissioner participates in contracting with the ESD or owns real property that may be affected by the ESD’s actions, the official must consider whether his or her discussion, decision, or vote on an item will violate either Texas conflict of interest laws or local conflict of interest provisions. Chapter 171 conflict of interest laws only cover two types of conflicts of interest:

  • Business Entity Conflicts: Conflicts due to an ESD commissioner’s substantial interest in a “business entity” that has an issue before the ESD
  • Real Property Conflicts: Conflicts due to an ESD commissioner’s substantial interest in “real property” that would be affected by the ESD’s action.

There are four ways that a person could be deemed to have a “substantial interest” in a business entity that would raise a potential conflict of interest. A person has a substantial interest in a business entity if the person has stock, other ownership, income and/or close family member with any of the following interests.

Stock Interest: Official owns 10 percent or more of the total voting stock or shares of the business entity.

Other Ownership Interest: Official owns 10 percent or more or $15,000 or more of the fair market value of the business entity.

Income Interest: Official received 10 percent or more or $15,000 or more of the fair market value of the business entity.

Close Family Member with any of the Above Interests: A close relative of the local official has any of the following types of interest in a business entity. A local official is considered to have the same interest in a business entity that his close relatives have in that same entity. In this context, close relatives of an official would include persons who are related to the official by blood or by marriage. Such relatives would include an official’s father, father-in-law, mother, mother-in-law, daughter, daughter-in-law, son, son-in-law, and the spouse of the official.

There are two ways that a person could be deemed to have a “substantial interest” in “real property” (such that it would amount to a potential conflict of interest). A person has a substantial interest in real property if he or she has:

Ownership Interest in the Real Property: If the official has a $2,500 or more legal or equitable interest in real property that would be affected by the local entity’s action

Close Family member with Ownership Interest in the Real Property: If a close relative of the local official has a $2,500 or more legal or equitable interest in real property that would be affected by the local unit’s action. An official is considered to have the same interest in a piece of real property that his close relatives have in the real property.

What to do if Conflict of Interest Exists

If a local official has a conflict of interest under the two-part test of chapter 171, the official must take three actions:

  1. File an Affidavit

The official must file an affidavit with the local unit’s official record keeper stating the nature and extent of his interest in the matter. This affidavit must be filed before any vote or decision on the matter.

  1. Abstain from the Discussion on the Item

The official must abstain from discussions or other proceedings regarding the item.

  1. Abstain from Voting on the Item

The official must not vote on the item.

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