KBS Reference Desk: Board Member with Substantial Interest Closed Meeting Attendance

Q:       A board member owns a stake in real property that the school board is trying to acquire. Can the remainder of the school board exclude the interested board member from the closed meeting deliberations regarding the acquisition?

 A:        No. A board member with a “substantial interest” in a business entity or real property about which the board will be deliberating may remain in the closed meeting; however, the interested board member must remain silent during the deliberations and abstain from further participation in the matter.   

Board members have a “substantial interest” in a business entity or real property about which the board may deliberate or act when (1) the person owns 10% or more of the voting stock or shares of the business entity or owns either 10% or more or $15,000 or more of the fair market value of the business entity or funds received by the person from the business entity exceed 10% of the person’s gross income for the previous year; (2) involving real property if the interest is an equitable or legal ownership with a fair market value of $2,500 or more; or (3) if a person related to the official in the first degree by consanguinity or affinity under Chapter 573, Government Code, has a substantial interest under this section. Tex. Loc. Gov’t Code § 171.002. Importantly, having a “substantial interest” alone requires no action by the trustee distinct from any other board member. However, when the result of the board’s vote will have a special economic effect on the business entity that is distinguishable from the effect on the public or it is reasonably foreseeable that action on real property will have a special economic effect on the value of the property distinguishable from its effect on the public, the trustee must file an affidavit with the board secretary disclosing the substantial interest and refrain from “further participation in the matter.” Tex. Loc. Gov’t Code § 171.004(a)-(b). Any failure of a trustee to do so is a Class A misdemeanor. Id. at 171.003(b).

Of critical importance to analysis of the question above is the fact that the phrase “further participation” is not defined in the statute. The Attorney General tackled this issue head on in a 2005 decision where he explained that “[i]n the context of Texas statutes on meetings, ‘attend’ means mere passive presence, while ‘participate’ means active engagement in the subject matter at issue in the meeting.” Hence, the AG determined that “a member of a governmental body does not ‘participate’ in a matter for purposes of Local Government Code section 171.004 by merely attending an executive session on the matter and remaining silent during the deliberations.” While recognizing no statutory prohibition to closed session attendance, the Attorney General cautioned, however, that to avoid an appearance of impropriety, a government official with a substantial interest is discouraged from attending a closed meeting where the real property or business entity is discussed. See Tex. Att’y Gen. Op. No. GA-0334 (2005). The Attorney General’s opinion regarding this issue is available at

https://www2.texasattorneygeneral.gov/opinions/opinions/50abbott/op/2005/pdf/ga0334.pdf.

Please contact your local school attorney if you seek additional information or have specific questions regarding procedures and requirements for closed board meetings under the Open Meetings Act. Additional information can also be found in board policy BBFA (LEGAL) and (LOCAL).

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