The nonprofit that was set up is a 501(c)(3) charitable organization that is allowed to apply for city grants.  The mayor appoints commissioners to the grants-in-aid commission.  The council selects the GIA awardees.  The mayor and councilmember of the district are both mandated to be members of the board of directors of this 501(c)(3) organization.  Other potential conflicts of interest are possible (and likely) with this set up.  This is bad public policy.