This article caught my eye. It raises a critical open records issue. That issue is whether a private nonprofit receiving substantial public funds can escape public scrutiny until it has been in existence for a full year.

Commonwealth Center for

Commercialization, Inc, or C3, is a private nonprofit whose governing body consists of current and former officials in the Cabinet for Economic Development and its Office of Entrepreneurship. C3's current governing body also includes university officials and private citizens.

It was created as an alternative to Kentucky Science and Technology Corp., a "former longtime state contractor" that "handled most of the work associated with the 2001 Kentucky Innovation Act."

The act "mandates that the state use a 'science and technology organization' to administer entrepreneurial programs like small business grants and make investments to innovate Kentucky-based startup companies."

C3's duties include "running the Kentucky Enterprise Fund, a State-funded pool of investments in early stage companies and administering the required state matching funds for federal small business grants."

According to Brian Medford, Executive Director of the Cabinet's Office for Entrepreneurship and interim president of C3—an unpaid position at this time—, this is part of "the ongoing sea change to the state's entire strategy for supporting innovators, growing tech startups, and commercializing university [intellectual property]."

The Cabinet argues that"Kentucky lags well behind competitive states in these and other key areas of its entrepreneurial ecosystem"

This sounds suspiciously like the arguments the Cabinet advanced in support of HB 387, the failed 2019 attempt to expand existing exemptions to the open records law and create new exemptions that would make currently accessible records relating to economic development entirely inaccessible on the pretext that Kentucky cannot compete with surrounding states.

Each time I hear this argument, I question why its proponents offer no actual examples of lost economic development prospects.

Access advocates from surrounding states, with whom I conversed after HB 387 was introduced, noted that the same arguments are made by lawmakers in their states to secure passage of economic development legislation aimed at curtailing the public's right to know. Hmmmmm. . . .

Here's the rub. Over the objections of lawmakers on the legislature's contract review committee, C3 has already received $720,000 on its way to fulfillment of the $8.5 million that the Cabinet for Economic Development awarded in May.

The signatories to the contract were, interestingly, then Cabinet Secretary Terry Gill for the Cabinet. Gill left state government three weeks later and now serves on C3's governing board.

Medford signed the contract on behalf of C3. This suggests a less than arms length transaction.

The contract review committee is scheduled to take up the issue again at its meeting tomorrow, July 11. And the linked article from WDRB's Chris Otts suggests that at least some of its members are not happy.

Even the Cabinet apparently had qualms about paying out the full amount C3 recently invoiced the state—$2.2 million—for expenses not yet incurred rather than reimbursement for expenses already incurred.

The Cabinet's records are public records for open records purposes.But it has aggressively pushed for less transparency in economic development by seeking expanded and new exemptions in the open records law.

It's transparency track record on Braidy Industries is unimpressive. The courts will decide if it has been sufficiently transparent in that case.

But what of C3's records? This is the $8.5 million question!

KRS 61.870(1)(h) defines as a public agency that is subject to the open records law "any body which, within any fiscal year, derives at least 25% of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds."

To the extent of that "body's" state or local funding, its records are subject to the open records law.

In 2012, lawmakers amended that statutory definition. After 2012, "funds derived from a state or local authority in compensation for goods or services that are provided by a contract obtained through a public competitive procurement process" are not included in the 25% calculation.

What little I know about the backstory on the 2012 amendment is not pretty. I thought it was a bad idea then. I continue to believe it is now.

The problem here is not that the C3 contract was competitively bid, the funds it receive(s) for "managerial services" are excluded from the 25% calculation, and its records therefore are not public records.

C3's contract is identified as a "no-bid" contract—no competitive bidding. That exclusion offers it no "out."

The problem here is that it has not yet existed for a "fiscal year."

In an open records decision issued in 2017, the attorney general concluded that Braidy Industries was not a public agency because, at that time, it had not existed for a "fiscal year."

https://ag.ky.gov/orom/2017/17ORD248.doc

The "in any fiscal year" language was also added in 2012. Until Braidy Industries, it had not posed a problem. Most "bodies" doing business with the state have been around a while.

I disagree with the attorney general's position in the 2017 decision. Taken to its logical conclusion, a "body" that receives 25% or more of its funds —even 100% of its funds— could fold on the 364th day of its existence and the records documenting how state or local authority funds—taxpayer money—was spent would never be accessible to the public.

The correct approach for "bodies" that have not existed a full "fiscal year" is to examine what percentage of their total funding *on the date the open records request was submitted* consisted of state or local authority funds expended by them in the Commonwealth. This prevents any "body" receiving state or local funds under a no-bid contract from slipping through the transparency net.

This much I know. The definition of public agency in the open records law is intentionally broad. It is, and should be construed to be, inclusive.

"An interpretation of KRS 61.870(1) which does not include" a body receiving at least 25% of its funds from state or local authority under a no-bid contact "as a public agency is clearly inconsistent with the natural and harmonious reading of KRS 61.870 considering the overall purpose of the the open records law" even if it has not yet existed for a full fiscal year.

I'm not sure how the courts would look at this issue, and it may be a moot point.

C3's status as a public agency may also turn on the method by which the members of its governing body are appointed. KRS 61.870(1)(i) defines public agency to include "any entity where a majority of its governing body is appointed by a public agency, a member or employee of such a public agency, or by any combination thereof."

All indications are that the members of C3's governing body are appointed by a public agency—the Cabinet for Economic Development.

The clearest advantage to a determination that C3 is a public agency under KRS 61.870(1)(i) is that both its records *and* its meetings would be accessible to the public.

There is no corresponding 25% definition of public agency in the open meetings law, but the appointment of members of a governing body definition appears in *both* open records and open meetings.

It's unknown whether any open records requests have been submitted to C3 yet.

The Cabinet offers its assurances that it is "moving deliberately and transparently to build this better version of Kentucky." Presumably, this includes C3.

Both the Cabinet *and* C3 had better be prepared to "show us the money!"