Request By:
[NO REQUESTBY IN ORIGINAL]
Opinion
Opinion By: Albert B. Chandler III, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Meetings Decision
The question presented in this appeal is whether the Marion City Council violated the Open Meetings Act when it went into a closed session at its May 17, 1999, meeting for the stated purpose of discussing real property. For the reasons that follow, we find that although it did not comply with the procedural requirements of the Open Meetings Act in responding to The Crittenden Press's complaint concerning this closed session, and although it initially relied on the wrong exceptions, the Marion City Council subsequently justified its actions on the basis of KRS 61.810(1)(g).
On May 27, 1999, Chris Evans, editor of The Crittenden Press , submitted a written complaint to Mayor Mick Alexander, alleging that the Marion City Council's closed session discussion of the Siemens sale and leaseback agreement at its May 17 meeting constituted a violation of the Open Meetings Act. Mr. Evans argued that the exception for closed session discussions of real estate may be invoked only when "the public discussion would change the purchase price of the specific piece of property. " The exception could not properly be invoked by the Marion City Council to authorize closed session discussions of the sale and leaseback agreement, Mr. Evans asserted, because the purchase price has been determined and "was published in The Crittenden Press on January 21, 1999 when the city announced it was buying the Siemens property and it had already been figured into the city's 1999-2000 budget." As a proposed remedy for this violation, Mr. Evans recommended that the City Council "discuss these issues in open session as required by law."
On June 3, 1999, Mayor Alexander responded to Mr. Evans's complaint. Mayor Alexander defended the City Council's decision to conduct a closed session discussion of the Siemens sale and leaseback agreement on the basis of KRS 61.810(1)(b), arguing that "no price is final until an actual signed agreement is entered." The city entered into an agreement on May 27, and The Crittenden Press was furnished with a copy of the sales contract and lease agreement at that time. Mayor Alexander also argued that the closed session was authorized by KRS 61.810(1)(g) relating to discussions concerning a specific proposal if open discussion would jeopardize the citing, retention, expansion, or upgrading of a business. It was his position that the decision to conduct closed session discussions of the Siemens transaction was prompted by a concern "for the betterment of the community through the retention of jobs and economic growth," and "not to keep secrets. " This appeal followed.
Upon receipt of this office's notification of appeal, Robert B. Frazer, legal services officer for the City of Marion, submitted a supplemental response to Mr. Evans's complaint. With respect to the city's delay in responding to the complaint, he explained that the council did not originally treat it as a complaint arising under KRS 61.846(1), and therefore "a response did not seem warranted." When it was identified as such, in an editorial appearing in The Crittenden Press , Mr. Frazer made immediate arrangements to respond. The city issued its response on June 3.
Mr. Frazer confirmed the views expressed by Mayor Alexander, adding that "further negotiations were being conducted until [May 27] as to rent, maintenance expenses and other matters that have to do with the physical structure of the building . . . [which] could have resulted in the price being adjusted by Siemens." In addition, Mr. Frazer noted, "the city was trying to honor the request of Siemens . . . to keep confidential these negotiations . . . [relative to] the expansion of the existing site in Crittenden County." In support, Mr. Frazer attached a letter from Stephen D. Davidson, President of the Crittenden County Economic Development Corporation, and Hans J. Heimann, Vice President and General Manager, Automotive Modules and Relays Division, Siemens Electromechanical Components, Inc.
In his letter, Mr. Davidson explained:
My responsibility in this matter as president of the Crittenden County Economic Development Corp (CCEDC) was to negotiate the sale of the building and property to the City of Marion and the subsequent lease-back of the facility to Siemens (See enclosed letter, dated December 19, 1998). This process began in mid-December 1998, and after a January 1999 article in The Crittenden Press , executives from the corporate offices of the Siemens Electromechanical Components, Inc. Division in Peachtree, Georgia, asked that we keep all further negotiations confidential. We learned that Siemens planned to expand and upgrade its Marion operations due to a pending closing of one of its plants in another state and that any open discussions of the "deal" could easily jeopardize the expansion, as well as the property acquisition. This is verified by an enclosed letter, dated June 9, 1999, from Hr. Hans J. Heimann, Vice President and General Manager of the Electromechanical Components Division of Siemens.
Thus, because of the sensitive nature of the negotiations, and because I was negotiating the matter on behalf of both Siemens and the City of Marion, I asked that all discussion by the City Council, related to the acquisition of the property and the expansion of the existing business, be in closed session under provisions of the Open Meetings Law. This process was honored by the Council until the negotiations were completed and the final contracts were signed by officials of the City of Marion and executives of Siemens on June 4, 1999.
In his letter, Mr. Heimann expressed his appreciation to the city for "keeping the potential deal confidential during this period," thus bringing it to a successful conclusion.
Having considered the arguments advanced by the City Council in support of its closed session discussion of the acquisition of the Siemens property, and bearing in mind that the exceptions to the Open Meetings Act "must [be] narrowly construed and applied . . . so as to avoid improper or unauthorized closed, executive, or secret meetings,"
Floyd County Board of Education v. Ratliff, Ky., 955 S.W.2d 921, 923 (1997), we find that its reliance on KRS 61.810(1)(b) was misplaced. That exception excludes from the general rule of openness:
Deliberations on the future acquisition or sale of real property by a public agency, but only when publicity would be likely to affect the value of a specific piece of property to be acquired for public use or sold by a public agency.
In construing this provision, the Attorney General has observed:
OAG 80-350, p. 3; see, e.g., 93-OMD-56 (holding that Board of Commissioners of the Allen County War Memorial Hospital did not violate the Open Meetings Act when it went into closed session to deliberate the proposed sale of the hospital building and the property on which it was located since publicity would likely affect the value); 94-OMD-22 (holding that Anderson County Board of Education properly conducted closed session to discuss the acquisition of property since publicity would be likely to affect the property's value); 98-OMD-147 (holding that City of Sebree properly relied on KRS 61.810(1)(b) in conducting closed session discussion of sale price offered in settlement negotiations) ; compare 95-OMD-57 (holding that the Lexington-Fayette Urban County Government improperly invoked KRS 61.810(1)(b) since LFUCG was obligated under memorandum of understanding with the state to reimburse the state for property acquired by the state on a particular date and at a particular price).
In the appeal before us, the record does not support the Marion City Council's position that it was warranted in conducting a closed session discussion of the purchase of the Siemens property under KRS 61.810(1)(b). The City Council does not refute Mr. Evans's statement that the purchase price was published in The Crittenden Press on January 21, 1999, when the city announced that it was buying the property, and that the expenditure had "already been figured into the city's 1999-2000 budget." We are not persuaded that ongoing discussions concerning the terms of the leaseback to Siemens would have a direct financial affect on the public's interest, as contemplated in KRS 61.810(1)(b) and OAG 80-530, when a purchase price had been agreed to and budgeted for.
Nevertheless, we believe that discussions concerning the acquisition of the Siemens property were inextricably linked to the apparently undisclosed fact that Siemens had expressed an interest in expanding and upgrading its Marion operations as a result of the closing of one of its plants in another state. While it is certainly true that "private businesses, when dealing with a public agency, must expect that the transaction will take place in the open where it is subject to public scrutiny," OAG 80-530, p. 3, the Open Meetings Act "recogniz[es] that there are extraordinary circumstances which may warrant a public agency in conducting its business in a closed session. . . ." 98-OMD-105, p. 3. Among the exceptions to this general rule of openness is the exception codified at KRS 61.810(1)(g). In construing this exception, the Attorney General has observed:
What formerly appeared among the exceptions to open and public meetings as KRS 61.810(7) was an exemption for "Meetings between public agencies and industrial prospects." As a result of the 1992 amendments to the Open Meetings Act (1992 Acts, Chapter 162, HB 16), KRS 61.810(7) was repealed and the phrase "industrial prospects" was stricken. What was substituted for KRS 61.810(7) is what now appears as KRS 61.810(1)(g) and which provides as one of the exceptions to open and public meetings:
Under the new provision a meeting between the city and a representative of a business entity or a meeting of the city [council] pertaining to a specific proposal could only be closed if an open and public discussion would jeopardize, among other things, the locating of the business in the area.
94-OMD-119, p. 3. Whereas prior to 1992 proper invocation of the exception depended upon the presence of a representative of the industrial prospect, OAG 80-530, the amended KRS 61.810(1)(g) was broadened to include "discussions concerning a specific proposal," with or without the representative, 94-OMD-119, but only if open discussion would jeopardize the business entity's undisclosed interest in siting or retention, or as here, expansion and upgrading of the business. Compare 94-ORD-119 (KRS 61.810(1)(g) not properly invoked where business involved had publicly announced at a ceremony attended by the Governor that it intended to locate in the area).
Although it was slow to invoke the proper exception, we believe that the City Council offers ample support for its position that confidentiality was required in its discussion of the acquisition of the Siemens property inasmuch as this issue was part and parcel of Siemens's decision to expand and upgrade its operations in Marion. Both Mr. Davidson, President of Crittenden County's Economic Development Corporation, and Mr. Heimann, Vice President of the Automotive Modules and Relays Division of Siemens, attested to the need for confidentiality to consummate the expansion project. Had the City Council invoked KRS 61.810(1)(g) at its May 17, 1999, meeting, we believe that its closed session would have been authorized. This conclusion is, of course, subject to the caveat that the exception "does not embrace everything tangential to the topic," OAG 80-530, p. 3 citing
Jefferson County Board of Education v. Courier-Journal, Ky.App., 551 S.W.2d 25 (1977), but is strictly confined to discussions concerning a specific proposal if open discussion would jeopardize Siemens's interest in expanding or upgrading its business in Marion, Kentucky.
In closing, we note that the Marion City Council's failure to respond in writing and within three business days, to Mr. Evans's complaint constituted a procedural violation of the Open Meetings Act. KRS 61.846(1) provides, in part:
The public agency shall determine within three (3) days, excepting Saturdays, Sundays, and legal holidays, after the receipt of the complaint whether to remedy the alleged violation pursuant to the complaint and shall notify in writing the person making the complaint, within the three (3) day period, of its decision. If the public agency makes efforts to remedy the alleged violation pursuant to the complaint, efforts to remedy the alleged violation shall not be admissible as evidence of wrongdoing in an administrative or judicial proceeding. An agency's response denying, in whole or in part, the complaint's requirements for remedying the alleged violation shall include a statement of the specific statute or statutes supporting the public agency's denial and a brief explanation of how the statute or statutes apply. The response shall be issued by the presiding officer, or under his authority, and shall constitute final agency action.
Mr. Evans submitted his complaint to the City Council on May 27. The Council responded, through Mayor Alexander, on June 3, four business days after receipt of the complaint, and one day after the three day statutory deadline. This violation is mitigated by the fact that the City Council was not aware that Mr. Evans's May 27 letter constituted a formal complaint under KRS 61.846(1). Nevertheless, we urge the Marion City Council to treat any such correspondence as a formal complaint under the Open Meetings Act to avoid future disputes arising from noncompliance with the cited provisions.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.846(4)(a). The Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.