Request By:
Deborah H. Patterson
Joseph L. Hardesty
Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
At issue in these consolidated appeals is whether M.A. Mortenson Company, the "Construction Manager-at-Risk" for the Louisville Arena project, violated the Kentucky Open Records Act in denying the September 25, 2008, request of W.W. Chilton III for various records in the possession of Mortenson, including bid proposals from "all contractors tendering proposals for the Auger Cast Piles, Earthwork, and Site Utilities Packages for the Louisville Arena project," all documents associated therewith, and records concerning Mortenson's budget for each bid package. 1 The fundamental question presented is whether Mortenson "derives at least twenty-five percent of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds," and is therefore properly characterized as a "public agency" within the meaning of KRS 61.870(1)(h). Given the limited and conflicting evidence presented in relation to the percentage of state and local funds expended by Mortenson in the Commonwealth, this office must conclude that Mortenson is not a public agency notwithstanding the significant policy considerations that weigh in favor of disclosure on the facts presented. In reaching this determination, the Attorney General departs from the approach historically taken by this office when applying KRS 61.870(1)(h) so as to effectuate the legislative intent expressed in the plain language of that provision, to wit, to ensure that otherwise private "bodies" operating under contract with state or local authorities, from which those "bodies" derive funding, can be held accountable for the expenditure of those funds.
In response to Mr. Chilton's request, Joseph L. Hardesty, legal counsel, initially advised that Mortenson was "currently reviewing" the request "and determining its obligations, if any" under the Act. Following an exchange of correspondence between the parties, Mr. Hardesty ultimately concluded that Mortenson "does not constitute a 'public agency' and does not otherwise have any obligation to make its records available" to Mr. Chilton under the Act, noting that he "discussed the nature of Mortenson, its business, the scope, extent and nature of its operations in Kentucky and elsewhere, the sources from which it derives the funds expended by it in Kentucky," and "other relevant issues" with Mortenson.
Shortly thereafter, Ms. Patterson initiated this appeal. Ms. Patterson indicated that "between February 2007 when the Louisville Arena Authority awarded Minnesota company M.A. Mortenson some $ 14.5 million in construction management fees and today, when Mortenson is presumably claiming an alleged final contract amount of approximately $ 270 million, there has been no public scrutiny over the substantial subcontracting awards" for the project. According to Ms. Patterson, the "few public records that are accessible regarding the enormous public expenditures for the Arena certainly lead to more than a suspicion that Mortenson 'derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state and local funds.'" First, "various documents and public announcements" indicate that Mortenson will derive "over $ 250 million from the [LAA] in connection with the Arena project." There is also "no doubt that Mortenson is expending funds in the Commonwealth in connection with this project." Attached to Ms. Patterson's letter is a copy of the relevant portion (Sections 5.02 and 5.05) of the Agreement between LAA and Mortenson, pursuant to which LAA, a public agency, "pays Mortenson every month for work done during that month, a payment which specifically covers costs for subcontractors, suppliers, materialmen and vendors." In addition, Mortenson "is established firmly in Kentucky, having registered to do business here and operating out of a Louisville office with a long-term lease." Because Mortenson is "both receiving and spending huge sums of Kentucky taxpayer money," Ms. Patterson argued, the company's "unwavering resolve to block any and all public scrutiny of the Arena project is troubling." It is her position that Mortenson is required, at a minimum, to "prove by hard facts that KRS 61.870(1)(h) does not apply."
Upon receiving notification of Ms. Patterson's appeal from this office, Mr. Hardesty responded on behalf of Mortenson, arguing that "[n]o reported decision of the Attorney General nor any Kentucky court has ever determined that such a private, for-profit business entity constitutes a public agency for purposes of the Act." Assuming, arguendo , that the Act were to apply to such entities, Mr. Hardesty asserts that "KRS 61.870(1)(h) is the only definitional provision possibly at issue, as Mortenson is a private Minnesota business corporation not founded under Kentucky law." As evidenced solely by the affidavit of Sandra Sponem, Chief Financial Officer of Mortenson, a copy of which is attached to his response, "Mortenson derives far less than twenty-five percent of its revenues or its monies expended by it from Kentucky state or local authorities. " 2 Relying upon prior decisions of this office, Mr. Hardesty asked the Attorney General to find that Mortenson is not a public agency and, therefore, has no statutory obligation to make its records available for public inspection.
Arguing that Mortenson "asks this Office to turn a blind eye to the language in KRS 61.870(1)(h) that focuses only on expenditures in the state ," Ms. Patterson subsequently refuted each of Mr. Hardesty's arguments. 3 Ms. Patterson asserted that "in accordance with well-settled principles of statutory construction, this Office must reject Mortenson's abbreviated interpretation of KRS 61.870(1)(h)." In her view, the relevant inquiry for determining whether an entity qualifies as a public agency under KRS 61.870(1)(h) "is what percentage of the money it expends in the Commonwealth came from state or local funds - not what percentage of its total revenue is derived from Kentucky state or local authorities and/or what percentage of its total construction project costs are spent on Kentucky projects, as offered by Mortenson. . . . Mortenson does not supply those numbers." According to Ms. Patterson, Mortenson is required to disclose what percentage of the funds it expends in the Commonwealth is derived from state and local funds in order to demonstrate that it does not qualify as a public agency under KRS 61.870(1)(h). 4
Unable to resolve the threshold issue of whether Mortenson is a public agency based upon the limited evidence of record, this office requested additional information from the company in accordance with KRS 61.880(2)(c) and 40 KAR 1:030, Section 3. More specifically, this office asked Mr. Hardesty to "specify the amount of funds that Mortenson expended in the Commonwealth of Kentucky, and only the Commonwealth of Kentucky, during the fiscal year ending on December 31, 2007, and in the first three quarters of the current fiscal year. " 5 This office also requested that Mr. Hardesty "specify the percentage of those funds expended in the Commonwealth of Kentucky during each of those periods which derived only from state or local authority funds." Finally, Mr. Hardesty was encouraged to include with his response any documentation which supported the position of his client.
In response, Mr. Hardesty reiterated his earlier argument, noting that the information requested "appears to be inconsistent with the manner in which the Attorney General has interpreted KRS 61.870(1)(h) in the past," and further observing that the "applicable testing period is an entire fiscal year, rather than a partial fiscal year. " That being said, Mr. Hardesty advised that during the fiscal year which ended on December 30, 2007, "Mortenson expended $ 18,216,556 in the Commonwealth of Kentucky, 1% of which was derived from state or local authorities. " During the first three quarters of the last fiscal year (January-September 2008), "Mortenson expended $ 7,112,717 in the Commonwealth of Kentucky, 16% of which was derived from state or local authorities. " Attached to Mr. Hardesty's response is a signed affidavit in which Ms. Sponem verifies the accuracy of these figures. Mr. Hardesty provided no further documentation to substantiate Mortenson's position.
In reply, Ms. Patterson argued that without supporting documentation, "there is no way to ensure that Ms. Sponem is properly applying the statutory standard to Mortenson's in-state expenditures and public money receipts." Relying upon a month-by-month breakdown of Mortenson's 2008 invoices "for payment directed to and paid by [LAA]," copies of which Mr. Chilton obtained via requests to LAA, Ms. Patterson questioned whether Mortenson had calculated the relevant percentages correctly, emphasizing the apparent discrepancies between the invoice amounts and the figures relied upon by Mortenson. 6 As Ms. Patterson correctly observed, Mortenson asserted that its status must be measured by an entire fiscal year, but "presents no substantiation for its position in any time period." 7
Because the parties offer conflicting evidence regarding the percentage of state and local authority funds expended by Mortenson in the Commonwealth, and this office is unable to compel Mortenson to produce documentation substantiating the figures upon which it relies, the Attorney General concludes that Mortenson is not a "public agency" within the meaning of KRS 61.870(1)(h). 8 Notwithstanding this holding, the Attorney General finds that Ms. Patterson's interpretation of KRS 61.870(1)(h) is correct. This office acknowledges that her interpretation of the provision represents a significant departure from prior decisions in which the "expended by it in the Commonwealth" language was not meaningfully applied. 9 In so doing, this office reminds the parties that in Commonwealth v. Chestnut, Ky., 250 S.W.3d 655, 663 (2008), the Kentucky Supreme Court expressly recognized the prerogative of the Attorney General to depart from precedent, declaring that the "Attorney General was permitted to reexamine - and even reject - its former interpretation of the law." 10 Based upon the reasoning below, the Attorney General reverses that line of decisions in which this office did not effectively analyze what percentage of state or local authority funds the "body" expended in the Commonwealth, and hereby adopts the interpretation of KRS 61.870(1)(h) advanced by Ms. Patterson.
Prior to 1992, KRS 61.870(1) defined the term "public agency" as:
[E]very state or local officer, state department, division, bureau, board, commission and authority; every legislative board, commission, committee and officer; every county and city governing body, council, school district board, special district board, municipal corporation, court or judiciary agency, and any board, department, commission, committee, subcommittee, ad hoc committee, council or agency thereof; and any other body which is created by state or local authority in any branch of government or which derives at least twenty-five (25) percent of its funds from state or local authorities .
(Emphasis added.) In 1992, the statute was amended by resolving it into eleven component subsections at KRS 61.870(1)(a) through (k). Thus KRS 61.870(1) formerly limited the pertinent analysis to "bodies" which derived at least twenty-five percent of their funds from state or local authority funds. Since July 15, 1994, KRS 61.870(1)(h) has defined "public agency" as "[a]ny body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." (Emphasis added.) The General Assembly altered the language of KRS 61.870(1)(h) by expanding its language to encompass any "body" receiving any state or local funding so long as that funding represents at least twenty-five percent of the total funds it expends in the Commonwealth. In so doing, the General Assembly did not fix the period within which this determination was to be made (calendar year, fiscal year, calendar year or fiscal year to date of request), or indicate who is responsible for tracing state or local authority funds and how state or local funds are to be traced. Nor, as noted above at footnote 8, did the General Assembly invest this office with authority to compel disclosure of financial records by "bodies" disputing their status as public agencies. The absence of specific parameters within KRS 61.870(1)(h) has impeded our ability to effectively implement the apparent legislative intent. 11
Having given due consideration to the well-reasoned arguments advanced by Ms. Patterson on behalf of her client, this office concludes that decisions issued between 1992 and the present, and involving "bodies" that disputed their status as public agencies, did not adequately take into account the "expended by it in the Commonwealth of Kentucky" language that was added in 1992. This appeal provides the occasion for the Attorney General to reevaluate and modify his position. As with any decision involving statutory interpretation, our duty "is to ascertain and give effect to the intent of the General Assembly." Beckham v. Board of Education of Jefferson County, Ky., 873 S.W.2d 575, 577 (1994), citing Gateway Construction Co. v. Wallbaum, Ky., 356 S.W.2d 247 (1962). In discharging this duty, the Attorney General is "not at liberty to add or subtract from the legislative enactment nor discover meaning not reasonably ascertainable from the language used." Id . To the contrary, this office must refer to the literal language of the statute as enacted rather than surmising the meaning that may have been intended but was not articulated. Stogner v. Commonwealth, Ky. App., 35 S.W.3d 831, 835 (2000). However, "[a] corresponding rule of construction is that a statute should be construed, if possible, so that no part of its provisions are rendered meaningless." Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth, Ky., 983 S.W.2d 488, 492 (1998). Guided by these fundamental principles of statutory construction, the Attorney General finds that KRS 61.870(1)(h) must be construed in a manner that gives full legal effect to the phrase "expended by it in the Commonwealth of Kentucky." Accordingly, this office looks to the amount of state or local authority funds expended by the "body" in the Commonwealth as well as the amount of funds derived from state or local authorities.
Applying this interpretation of KRS 61.870(1)(h) to the facts presented, this office must conclude that Mortenson is not a "public agency" within the meaning of KRS 61.870(1)(h) because the record on appeal does not conclusively establish that Mortenson derives at least 25% of the funds it expends in the Commonwealth from state or local authority funds. In responding to the KRS 61.880(2)(c) request made by this office, Mr. Hardesty provided the affidavit of Ms. Sponem without supporting documentation. As noted, Mortenson maintains that during the fiscal year ended on December 31, 2007, it "expended $ 18,216,566 in the Commonwealth of Kentucky, 1.8% of which Mortenson derived from state or local authorities. " During the first three quarters of the last fiscal year (January through September 2008), "Mortenson expended $ 7,112,717 in the Commonwealth of Kentucky, 16.7% of which was derived from state or local authorities. "
Upon receipt of Mr. Hardesty's response, Ms. Patterson again challenged Mortenson's failure to produce any supporting documentation, arguing that "not only could Ms. Sponem's calculations be incorrect, they seemingly must be incorrect , given the only available documentation on the issue." Based upon the "invoices for payment directed to and paid by" LAA in 2008, Ms. Patterson calculated that Mortenson "would have derived a total of $ 13,534,343.40 from public funds in connection with the Arena project." For the first three quarters of 2008, the invoices total $ 2,890,677.37. Accordingly, Ms. Patterson questioned "how Ms. Sponem can say that in the first three quarters of 2008 - where Mortenson allegedly expended $ 7,112,717 in the Commonwealth - that only 16.7% of that derived from state or local funds. At the end of September 2008, Mortenson had invoiced [LAA] for $ 2,890,677.37 worth of work." Standing alone, that figure represents 41% of the funds that Mortenson "says it expended during the same period." When she included the additional $ 10,643,666.03 that Mortenson "derived from the public coffers" during the remaining three months of 2008, Ms. Patterson determined that Mortenson "would have had to expend over $ 47 million in the Commonwealth in October, November and December 2008 (as compared to the $ 7 million in the previous nine months) to escape KRS 61.870(1)(h) and the attendant public scrutiny over public funds. "
Although Ms. Patterson raises valid concerns regarding Mortenson's refusal to provide supporting documentation, and the resulting inability of this office to ensure that it has properly applied the correct standard in concluding that it does not constitute a "public agency" under KRS 61.870(1)(h), KRS 61.880(2)(c) does not authorize the Attorney General to compel the production of evidence necessary to resolve these discrepancies. Mortenson has repeatedly declined to offer any financial records in support of Ms. Sponem's affidavits; however, as noted above, the Attorney General is not empowered to require Mortenson to comply with our KRS 61.880(2)(c) request. Although KRS 61.880(2)(c) assigns the burden of proof to public agencies resisting disclosure of records, where, as here, the "body" disputes its status as a "public agency, " that body cannot properly be assigned the statutory burden of proof.
Here, "Mortenson stands by the data presented in Ms. Sponem's affidavits." According to Ms. Sponem, during Mortenson's fiscal year ended on December 31, 2007, 1.8% of the funds that Mortenson expended in the Commonwealth derived from state or local authorities. During the first three quarters of the last fiscal year, 16.7% of the funds that Mortenson expended in the Commonwealth derived from state or local authorities. Ms. Patterson questions these figures, but presents insufficient probative evidence to refute them. Acknowledging that KRS 61.870(1)(h) lacks specific parameters for analysis, and that this office lacks authority to compel disclosure of documents from "bodies" disputing their status as public agencies, the Attorney General finds that Mortenson is not a "public agency" within the meaning of KRS 61.870(1)(h), and its records are not accessible under the Open Records Act, inasmuch as Mortenson apparently does not derive at least "25% of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds."
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), 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.
Footnotes
Footnotes
1 On December 1, 2008, Deborah H. Patterson initiated this appeal on behalf of Mr. Chilton.
2 More specifically, Ms. Sponem attested that she "has first-hand knowledge of and is competent to testify to" the following:
2. That, as the Chief Financial Officer, she has personal knowledge of the financial affairs of Mortenson;
3. That during Mortenson's fiscal year ended on December 31, 2007, Mortenson derived 0.02% of its revenue from Kentucky state and local authorities and expended 0.02% of its construction project costs on projects for Kentucky state and local authorities;
4. That during the first three quarters (January through September) of Mortenson's current fiscal year, Mortenson derived 0.06% of its revenue from Kentucky state and local authorities and expended 0.06% of its construction project costs on projects for Kentucky state and local authorities.
3 Ms. Patterson credibly distinguished 08-ORD-064, upon which Mr. Hardesty relied, noting that the "lack of physical presence in the state appears to have been this Office's basis for deeming the Act inapplicable," and makes a persuasive argument regarding Mortenson's presence in, and extensive contacts with Kentucky, correctly observing that "Kentucky taxpayers have just as compelling an interest in how their money is spent by an entity 'headquartered' outside the state as one headquartered in-state." Because our analysis relative to KRS 61.870(1)(h) focuses exclusively on the sources from which the entity's funding is derived, and the percentage thereof expended in the Commonwealth, analysis of this argument is unnecessary. To the extent 08ORD-064 or any prior decisions of this office suggested that situs was a determining factor, those decisions are hereby reversed.
4 Ms. Patterson also noted that Mr. Chilton attempted to access the records in dispute via request to LAA, "only to be told that Mortenson, its construction manager, possessed all of the relevant documents." See 08-ORD-206. In her view, if Mortenson is "the repository for a preponderance of documents relating to the expenditure of massive public funds for this public project as [LAA] maintains, then it should be subject to the Open Records Act by virtue of such an arrangement."
5 Ms. Sponem's affidavit, upon which Mortenson relied exclusively, used the specified time frames, Mr. Chilton's original written request is dated September 25, 2008, and the Agreement between LAA and Mortenson is dated August 20, 2007. This office framed its KRS 61.880(2)(c) request for additional information accordingly.
6 On February 9, 2009, Mr. Hardesty responded to Ms. Patterson's objections concerning the relevant calculations, observing that she "raises arguments that confuse the relationship between Mortenson's right to seek payment and the actual expenditure of funds."
7 In light of this assertion by Mortenson, "as a precaution," Mr. Chilton submitted a second request on January 14, 2009, that is admittedly identical to his September 25, 2008, request. When Mortenson again denied the request on the same basis, Ms. Patterson initiated a second appeal, noting that if "Mortenson contends that the figures for the last quarter of 2008 are relevant, it should have produced them - with documentation - in the pending appeal and certainly in response to the January 2009 request." Because the requests, and consequently the questions of law presented are identical, the appeals have been consolidated for purposes of review.
8 Our authority under KRS 61.880(2)(c) to "request additional documentation" extends to agencies, not to "bodies" that dispute their status as such. This puts the Attorney General in an untenable position relative to compulsory disclosure of supporting documentation.
9 "It is elementary that a statute should be construed, if possible, so that no part of it is meaningless or ineffectual." Brooks v. Meyers, Ky., 279 S.W.2d 764, 766 (1955).
10 Significantly, the Court went on to find that "any shock the [agency] suffered when the Attorney General changed course certainly caused the [agency] to suffer no lasting prejudice, even though the [agency] was barred from seeking the Attorney General to reconsider his [decision], because the [agency] had the right, which it obviously exercised, to appeal the Attorney General's" decision to circuit court. Id .
11 KRS 61.870(2) was also amended to provide:
"Public record" means all books, papers, maps, photographs, cards, tapes, discs, diskettes, recordings, software, or other documentation regardless of physical form or characteristics, which are prepared, owned, used, in the possession of or retained by a public agency. "Public record" shall not include any records owned or maintained by or for a body referred to in subsection (1)(h) of this section that are not related to functions, activities, programs, or operations funded by state or local authority .
(Emphasis added.) Through the inclusion of this language, the General Assembly clarified that a body subject to the Open Records Act by virtue of KRS 61.870(1)(h) was accountable through its records only to the extent that those records "related to functions, activities, programs, or operations funded by state or local authority. " From these amendments it can be inferred that the General Assembly's goal in amending KRS 61.870(1) and (2) was to ensure the public's right of access to records documenting the expenditure of state or local authority funds, regardless of where the funds were expended, by a body not otherwise subject to the Act.