Request By:
Mr. Denis B. Fleming, Jr.
General Counsel
Cabinet for Economic Development
Capital Plaza Tower
Frankfort, Kentucky 40601
Opinion
Opinion By: Frederic J. Cowen, Attorney General; Amye B. Majors, Assistant Attorney General
Mr. Jon L. Fleischaker, attorney for the Courier-Journal and Louisville Times Company, has appealed to the Attorney General pursuant to KRS 61.880 your denial of staff writer David Heath's March 27, 1991, request to inspect certain documents in the possession of the Cabinet for Economic Development. Those documents are identified as the computer files on all companies certified in the Louisville-Jefferson County Enterprise Zone since the program started.
Mr. Heath originally directed his request to the Louisville-Jefferson County Office for Economic Development, one of eleven regional administrative offices for the Kentucky Enterprise Zone Authority. On March 25, 1991, he was advised by Mr. Paul Guagliardo, Assistant Director of Law for the City of Louisville, that although OED would release the computer files, it would delete financial information on fixed net assets and capital investments made by companies certified in the zone. Mr. Guagliardo indicated that the legislation by which the Enterprise Zone was created, "vests ultimate authority in the Kentucky Enterprise Zone Authority and documents are compiled by that entity for implementation of the program." Continuing, he observed:
In order to insure consistency in Open Records treatment of Enterprise Zone Authority information, we must rely on the statutory agency responsible for compiling and maintaining the information. The information in our computer is the same as that obtained by the Authority when it approves applications for tax credits under the enterprise zone legislation. It is our understanding that the Authority is of the opinion that confidential financial information submitted as part of the application process is exempt under the Open Records Law.
Mr. Guagliardo thereafter referred Mr. Heath to your office "for further discussion of the availability or nonavailability of financial information. "
In his open records request to the Cabinet for Economic Development, Mr. Heath argued that Kentucky law:
[R]equires existing businesses to notify the state that it [sic] intends to either increase its workforce or capital investment by 20 percent in order to be certified in an enterprise zone. Certification brings with it many tax benefits. Because the criteria is established by law and because the cost is borne by Kentucky taxpayers, citizens should have the right to the precise basis of certification for each company.
You denied Mr. Heath's request in a letter dated April 2, 1991, relying on KRS 61.878(1)(a) and (b). In support of your position, you stated that the requested information "constitute[s] confidential, protected financial information, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, " pursuant to KRS 61.878(1)(a). You cite OAG 85-119 and OAG 80-454 as further support for this view. In addition, you asserted that the information Mr. Heath seeks to inspect "constitute[s] records confidentially disclosed to a state agency in connection with an application for state assistance," and is therefore exempt under KRS 61.878(1)(b) and OAG 84-98.
In his letter of appeal to this Office, Mr. Fleischaker indicates that the Louisville-Jefferson County Office of Economic Development has, in the past, routinely released information relating to capital investments and employment figures for businesses located in the enterprise zone. Since Mr. Heath's request, and OED's deferral to the Cabinet for Economic Development, this information has been deleted from records released to The Courier-Journal . Given the Cabinet's and OED's earlier practice, Mr. Fleischaker takes issue with your assertion that the information is "confidential" and "protected." Moreover, he argues:
Even if the records were not routinely disclosed, we do not believe their release would constitute a clearly unwarranted invasion of personal privacy. The businesses involved have sought substantial tax benefits, based on the investment they claim to be making in the zone and the jobs they claim to be creating. Allowing the public to know whether the tax breaks are justified by disclosing the investment and employment figures simply is not 'a clearly unwarranted invasion of personal privacy. '
With respect to your reliance on KRS 61.878(1)(b), he states:
The exemption in KRS 61.878(1)(b) is also inapplicable. Information disclosed in order to receive special tax treatment is simply not mentioned in that section, and such information does not fit into any of the categories which are listed there. Moreover, release of investment and employment figures, information which is often available through property assessments and other sources, would not 'permit an unfair advantage to competitors of the subject enterprise', which is a prerequisite for application of the KRS 61.878(1)(b) exemption. Mr. Fleming's letter does not even allege that any such unfair advantage would occur by release of the requested records.
Mr. Fleischaker therefore asks that we review the Cabinet's denial of Mr. Heath's request to determine if your position is consistent with the Open Records Act. For the reasons set forth below, we conclude that you improperly denied the request.
OPINION OF THE ATTORNEY GENERAL
We have frequently noted that it is "a basic policy of KRS 61.8780-61.884 that free and open examination of public records is in the public interest and the exceptions provided for by KRS 61.870-61.884 or otherwise provided for by law shall be strictly construed, even though such examination may cause inconvenience or embarrassment to public officials or others." KRS 61.882(4). We are thus bound by a rule of strict construction in interpreting the exceptions to the Open Records Act, codified at KRS 61.878(1)(a) through (j).
It is clear that your invocation of KRS 61.878(1)(b) to authorize nondisclosure of the requested information constitutes a liberal construction of that exception which is not warranted by the express language of the statute, and the policy which underlies it. That section provides, in relevant part, for the nondisclosure of:
Records confidentially disclosed to any agency and compiled and maintained . . . in conjunction with an application for a loan . . . and if openly disclosed would permit an unfair advantage to competitors of the subject enterprise.
To successfully raise this exception, an agency must establish that the requested records: (1) were confidentially disclosed to it; (2) in conjunction with an application for a loan; and (3) that release of the records would permit an unfair advantage to competitors of the subject enterprise. The Cabinet has failed to sustain its burden of proving that the records withheld satisfy this three part test.
Although you state that the financial information contained in the records is confidentially disclosed to your agency, you do not refute Mr. Heath's assertion that the same information has been disseminated to the public in the past. In his letter of appeal, Mr. Fleischaker attaches a copy of a document released by OED and the Cabinet as recently as May 16, 1991, listing the capital investment and employment figures for nine businesses located in the enterprise zone. An earlier newspaper article, dated November 2, 1990, suggests that this same information has been disclosed on previous occasions.
Moreover, since we are bound by a rule of strict construction, we reject your claim that the second part of the test, requiring that the records be disclosed in conjunction with an application for a loan, is satisfied anytime a person or entity applies for state assistance. We are not persuaded that OAG 84-98 is dispositive of the present case, although we there held that an application for an industrial revenue bond could be analogized to an application for a loan.
Finally, you do not attempt to establish that businesses seeking certification will be placed at a competitive disadvantage by disclosure of this information. Inasmuch as you have offered no explanation as to how release of the requested information would permit an unfair advantage to competitors of these businesses, and we can discern none, we must conclude that your denial of Mr. Heath's request under KRS 61.878(1)(b) was improper. OAG 91-44.
Whether the information is exempt under KRS 61.878(1)(a) is a closer question. Although this Office has previously held that information which reveals the affairs of a business, such as profits, taxes, deductions and salaries may be exempt from public inspection pursuant to KRS 61.878(1)(a), OAG 82-2, OAG 84-93, OAG 85-119, OAG 87-57; we have also recognized that where an agency is conducting the public's business, "the public has a right to know the identity of the recipients of the benefits of the agency's program which outweighs any privacy interest of the recipients. " OAG 80-310; See also OAG 79-388.
KRS 61.878(1)(a) exempts from mandatory disclosure:
Public records containing information of a personal nature where the public disclosure thereof would constitute a clearly unwarranted invasion of personal privacy.
In determining whether disclosure of information constitutes an unwarranted invasion of privacy, this Office has traditionally applied a balancing test. The interest of the public in being informed about the conduct and affairs of government is weighed against the individual, here a business entity's, privacy interest.
Board of Education of Fayette County v. Lexington-Fayette Urban County Human Rights Comm., Ky.App., 625 S.W.2d 109 (1981). Applying this analysis to the present case, we conclude that the public's interest in monitoring the activities of the Enterprise Zone Authority to determine if the businesses certified for the zones qualify for the benefits received by virtue of their investments and the number of jobs they claim to create, outweighs those businesses' interest in maintaining the confidentiality of this information.
The legislation authorizing the creation of enterprise zones is aimed at encouraging "new economic activity in . . . depressed areas of the Commonwealth by means of reduced taxes and the removal of unnecessary governmental barriers to the production and earning of wages and profits and the creation of economic growth." KRS 154.650. To qualify for certification an existing business must "creat[e] new activity within the enterprise zone of not less than a twenty percent (20%) increase in the number of employes or by a twenty percent (20%) increase in capital investment . . . ." KRS 154.655(5)(b). It is apparent that the requested information is directly relevant to a determination whether the businesses being certified are in compliance with the statute. For this reason, it is imperative that the public be allowed access to this information.
Moreover, a business which seeks to avail itself of substantial public benefit runs the risk of closer public scrutiny and should therefore have a reduced expectation of privacy. As we noted in OAG 79-388, at p.2:
We believe that the applications . . . [that applicants] make for benefits under . . . [a] program are not exempt from public inspection under the Open Records law because they infringe on personal privacy. The applicant is required to bare all of his circumstances to the agency. We do not believe that legitimate applicants will be deterred from applying for the benefits of the program simply because there is the possibility that some person or the public generally has access to his application.
To the extent that the requested information does not relate to the businesses' personal financial data, but merely reflects their compliance with the requirements for certification codified at KRS 154.655(5), we find that the public is entitled to know. This opinion should not be interpreted as a mandate for the blanket release of all financial information of a private business. As previously indicated, this Office has consistently held that information which reveals the affairs of the business, such a profits, taxes, deductions, and salaries, are exempt pursuant to KRS 61.878(1)(a). Only information pertaining to the capital investment and number of employees of the subject enterprises must be released.
As required by statute, a copy of this opinion will be sent to the requesting party, Mr. Jon L. Fleischaker. Mr. Fleischaker or the Cabinet may challenge it by instituting proceedings within 30 days for injunctive or declaratory relief in the circuit court pursuant to KRS 61.880(5).