Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether Clotfelter-Samokar, P.S.C., a private Kentucky Professional Services Corporation based in Lexington, Kentucky, violated the Kentucky Open Records Act in denying John Rogers' September 30, 2011, request for "a list of expenditures of your company, including check number, date, amount and payee for all checks written from January 1, 2011 to August 31, 2011[, including but not limited to], checks written to consultants, salaried individuals and organizations." 1 More precisely, the question presented is whether Clotfelter-Samokar is a "public agency" within the meaning of KRS 61.870(1). Resolution of this determinative question turns on the application of KRS 61.870(1)(h), as reinterpreted in 09-ORD-033, to Clotfelter-Samokar.
Because Clotfelter-Samokar has expressly acknowledged that at least some of the funds it expends in the Commonwealth are derived from state or local authority funds, the Attorney General finds that Clotfelter-Samokar is a "public agency" within the meaning of KRS 61.870(1)(h) if those funds constitute twenty-five percent (25%) or more of the funds it expends in the Commonwealth, and is accountable to the extent of those public funds, i.e. , funds derived from a contract(s) with a state or local authority or those otherwise derived from a state or local authority, which are, by definition, public records per KRS 61.870(2), notwithstanding its attempt to characterize funds derived from "governmental sources in exchange for its performance of professional engineering services pursuant to competitive, arms-length agreements" as non-public funds. The fact that Clotfelter-Samokar "derived less than one-hundred percent (100%) of the funds expended by it in the Commonwealth of Kentucky from January 1, 2011, through August 31, 2011, from payments received [from] such sources" is not dispositive. However, if those funds do not constitute at least 25% of the funds Clotfelter-Samokar expends in the Commonwealth, it cannot properly be characterized as a "public agency" for purposes of the Open Records Act, nor can it be said to have violated the provisions thereof in denying Mr. Rogers' request.
In responding to Mr. Rogers' request, legal counsel for Clotfelter-Samokar advised that his client "is a private, for profit company and KRS 61.870(1)(h) and KRS 61.872 are not applicable to it." Mr. Rogers initiated this appeal shortly thereafter. 2 Upon receiving notification of Mr. Rogers' appeal from this office, legal counsel supplemented his response, initially reiterating that his client "is a private, for profit Kentucky professional service corporation" organized on July 31, 1989, "and is a professional engineering firm." He further advised that Clotfelter-Samokar "is not organized pursuant to any enabling statutory authority and is therefore not a creature of statute created for public purposes. Its President, officers and directors are not publicly elected officials and have no association with any federal, state, or local governmental agency or authority." Clotfelter-Samokar "offers its services . . . to both the private sector and public sector," counsel noted. Although it "may receive payments from various government entities (like local school boards)," he continued, "those payments are in exchange for professional services performed on discrete projects pursuant to contracts typically awarded after a competitive selection process." Counsel emphasized that his client "does not receive funding from any state or local authorities other than in payment for professional services ." (Emphasis added.) 3 In short, Clotfelter-Samokar "does not receive 100% of its revenues from governmental organizations." 4
Because this fact is not dispositive, and the record on appeal was devoid of any relevant evidence that would enable this office to resolve the threshold question of whether Clotfelter-Samokar derives at least 25% of the funds it expends in the Commonwealth from state or local authority funds, the Attorney General asked its counsel, pursuant to KRS 61.880(2)(c) and 40 KAR 1:030, Section 3, to "provide us with an affidavit and available documentation supporting [his client's] position that it is not a public agency as defined in KRS 61.870(1)(h) or any other provision of KRS 61.870(1)." In a timely written response, Clotfelter-Samokar declined to submit an affidavit or documentation, requesting instead consideration of the "objections to the production set forth" in counsel's response to Mr. Rogers' appeal. Counsel for Clotfelter-Samokar reiterated his client's position that "fees it receives from governmental authorities in exchange for services do not qualify as governmental funding [.]"
By letter dated November 17, 2011, this office renewed its request for additional information to assist us in reaching a correct resolution of the instant appeal, specifically asking Clotfelter-Samokar for "an affidavit from the Chief Financial Officer (or individual with comparable authority qualified to answer the question) establishing whether it meets or exceeds" the funding threshold of KRS 61.870(1)(h), notwithstanding its "characterization of the funds [it] admittedly receives from state or local authorities. " Citing 10-ORD-115, this office clarified that the fact Clotfelter-Samokar "receives funding from state or local authorities 'in exchange for services' rendered is not dispositive. " In closing, this office advised counsel that in the absence of such an affidavit, this office would have to assume that his initial response, advising that KRS 61.870(1)(h) was not applicable to Clotfelter-Samokar, "was based on a correct understanding of how that provision has been applied. See SCR 3.130(3.3)." Counsel responded in a timely manner, providing an affidavit from Clotfelter-Samokar's President David M. Samokar; however, it did not contain the requested and necessary information, but instead merely confirmed all of counsel's earlier assertions.
Because Clotfelter-Samokar "did not receive any governmental grants, subsidies, or funding as those terms are generally defined and understood," Mr. Samokar advised, it "derived 0% of the money expended by it in the Commonwealth of Kentucky from January 1, 2011, through August 31, 2011, from such sources." Mr. Samokar also reiterated that Clotfelter-Samokar "did, from time-to-time, receive payments from governmental sources in exchange for its performance of professional engineering services pursuant to competitive, arms-length agreements." All of the payments received, he noted, "were in exchange for identifiable services provided." Finally, Mr. Samokar confirmed that his company "derived less than one hundred percent (100%) of the funds expended by it in the Commonwealth of Kentucky" during that period "from payments received [from] such sources." As previously indicated, the fact that Clotfelter-Samokar apparently derives public funds only in the form of payments for services rendered in accordance with state or local contracts rather than grants, subsidies, etc. is not dispositive nor is the fact that it does not derive 100% of the funds it expends in the Commonwealth from such contractual payments; rather, the dispositive question is whether it derives at least 25% of the funds it expends in the Commonwealth from state or local authority funds notwithstanding its attempts to distinguish how those funds are characterized.
"Public agency" is broadly defined at KRS 61.870(1) in eleven different ways codified at subsections (a)-(k). Despite the expansive language of KRS 61.870(1), its companion, KRS 61.870(2) (broadly defining "public records" ), and the clearly expressed legislative intent that the Open Records Act must be strictly construed so as to ensure the broadest possible access to public records, 5 the Attorney General has recognized, on a number of occasions, that a private corporation or company, whether not-for-profit or for-profit, is not a public agency for purposes of the Open Records Act unless it "derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." See KRS 61.870(1) as construed in 97-ORD-114; 99-ORD-65; 02-ORD-41; 05-ORD-012; 06-ORD-220; 08-ORD-024; 09-ORD-033; 09-ORD-083; 11-ORD-021; 11-ORD-040; 11-ORD-142. No evidence has been presented to suggest that Clotfelter-Samokar would qualify as a public agency under KRS 61.870(1)(a), (b), (c), (d), (e), (f), (g), (j), or (k); 6 likewise, 61.870(1)(i) is facially inapplicable to Clotfelter-Samokar given that its governing body is apparently not appointed by a public agency. Thus, KRS 61.870(1)(h) is the only subsection that is potentially applicable.
In 09-ORD-033 (Deborah H. Patterson/M.A. Mortenson Company, issued February 19, 2009), the Open Records Decision which culminated in William H. Chilton, III v. M.A. Mortenson Company , 09-CI-02749 (Jefferson Circuit Court-Division Thirteen, November 24, 2009)(holding that KRS 61.870(1)(h) is unconstitutional), 7 this office was asked to determine whether Mortenson, the "Construction Manager-at-Risk" for the Louisville Arena Authority, was a "public agency" within the meaning of KRS 61.870(1)(h) . This office adopted the interpretation of KRS 61.878(1)(h) set forth by the appellant, which admittedly represented "a significant departure from prior decisions in which the 'expended by it in the Commonwealth' language was not meaningfully applied." 8 09-ORD-033, p. 6.
In that appeal, the Attorney General acknowledged 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, " ultimately concluding, based on the affidavit of Mortenson's Chief Financial Officer, which the appellant presented "insufficient probative evidence to refute," that Mortenson was not a "public agency" within the meaning of KRS 61.870(1)(h). A copy of that decision is attached hereto and incorporated by reference. This office reached the same conclusion based upon the unrefuted affidavit provided on behalf of the "body" whose status was in dispute on several recent occasions. See 09-ORD-083; 09-ORD-085; 09-ORD-096; 10-ORD-113; 11-ORD-109; 11-ORD-142. Most recently, this office concluded that Abel Construction Company, Inc. is not a "public agency" within the meaning of KRS 61.870(1)(h) based upon the unrefuted affidavit of its Vice President and Chief Financial Officer, which confirmed that Abel did not satisfy the 25% threshold of that provision. 11-ORD-191 (In re: John Rogers/Abel Construction Company, Inc., issued November 15, 2011), p. 6. A copy of the latter decision is also enclosed for the parties' reference. See also 11-ORD-197 (In re: John Rogers/Peel & Holland, Inc., issued November 21, 2011); 11-ORD-203 (In re: John Rogers/Arnold Consulting Engineering Services, Inc., issued December 2, 2011); 11-ORD-204 (In re: John Rogers/Gresham, Smith and Partners, issued December 2, 2011); 11-ORD-206 (John Rogers/Sullivan & Cozart, Inc., issued December 7, 2011).
The instant appeal is distinguishable from the appeals which resulted in the foregoing decisions in this critical respect. Although Clotfelter-Samokar ultimately provided an affidavit, none of the requested financial information was contained therein. Instead, Clotfelter-Samokar merely reiterated all of its earlier assertions regarding the character of the public funds it derives from contracts with state or local authorities. The fact remains that Clotfelter-Samokar derives a certain, if unspecified, percentage of the funds it expends in the Commonwealth from state or local authority funds; accordingly, this office concludes that Clotfelter-Samokar is a "public agency" if the funds it receives in the form of payments for services rendered under contracts with state or local authorities constitute 25% of the funds it expends in the Commonwealth notwithstanding its attempt to exclude such funds or its assertion that it does not derive 100% of the funds it expends from those sources which, as previously noted, is not determinative. However, if Clotfelter-Samokar does not derive at least 25% of the funds it expends in the Commonwealth from state or local authority funds, it cannot be properly characterized as a "public agency" for purposes of the Open Records Act, nor can it be said to have violated the provisions thereof in denying Mr. Rogers' request. See 12-ORD-005.
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.
Distributed to:
John RogersLee Kessinger, III
Footnotes
Footnotes
1 This office has long recognized that a "public agency" is not statutorily required to create a record or compile a list in order to comply with a request under the Act; however, in lieu of doing so a "public agency" must provide the requester with an opportunity to inspect existing non-exempt records which may contain the information being sought. See 09-ORD-145, pp. 8-9. Generally speaking, however, the financial and operational records of a "public agency" are open for inspection. 05-ORD-065, p. 9. See OAG 76-648 (holding that "wherever public funds go, public interest follows"); OAG 82-169 (holding that "the contracts, vouchers, and other business records of a public agency are open to public inspection under the Kentucky Open Records Law"); OAG 90-30 (holding that "amounts paid from public coffers are perhaps of uniquely public concern"); OAG 91-7 (holding that "records of bills paid, payroll check stubs or cancelled checks, and all other records which show funds received and disbursed are public records" ). See also 10-ORD-140.
2 Although Mr. Rogers cited 11-ORD-143 in his letter of appeal, the facts of that appeal were unique insofar as the Attorney General had the benefit of publicly available information derived from the Audit Report concerning Utility Management Group, LLC, generated by the Auditor of Public Accounts, which independently confirmed that Utility Management Group, LLC was a "public agency" per KRS 61.870(1), and copies of the contracts between UMG and the City of Pikeville as well as UMG and the Mountain Water District. Neither the record on appeal nor independent research disclosed any reason to conclude that UMG had any source of revenue other than said contracts or that any of the funds it expended in the Commonwealth were not derived from either the City or MWD, both of which are unquestionably public agencies. However, that decision, contrary to Clotfelter-Samokar's apparent belief, did not hold that a body must derive 100% of the funds it expends in the Commonwealth from a state or local authority. If anything, 11-ORD-143 undermines the position of Clotfelter-Samokar insofar as the decision recognizes that funds derived from a public agency by virtue of a contract with an otherwise private body constitute public funds which must be included when determining whether a body satisfies the 25% threshold of KRS 61.870(1)(h).
3 This office refers the parties to 11-ORD-199 (In re: John Rogers/Green Construction Co., Inc., issued November 22, 2011), a copy of which is attached hereto and incorporated by reference, and which involved an identical request, for the legal analysis regarding the merits of the other substantive arguments made on behalf of Clotfelter-Samokar, which is equally applicable in this case. See also 11-ORD-143. It suffices to say that all of the arguments have been rejected in prior decisions applying KRS 61.878(1)(a), KRS 61.878(1)(c)1., and/or KRS 61.870(1)(h), either implicitly or explicitly. In addition, prior decisions recognizing that Medicare and Medicaid funds received as reimbursement for medical services can be excluded when determining whether the 25% threshold has been met, such as 93-ORD-90, upon which Clotfelter-Samokar also relied, are restricted to their unique facts. In 02-ORD-222, the contractor unsuccessfully tried to analogize payments it received under a state contract with Medicare and Medicaid funds present in 93-ORD-90 and 00-ORD-91. See 10-ORD-115 (Open Records Decisions applying 93-ORD-90, as well as 93-ORD-90 itself, make it apparent "that all Medicaid dollars were implicitly regarded as state funds, with the sole exception of 02-ORD-98," and "with the exception of 02-ORD-98, we have always considered the important distinction under 93-ORD-90 to be fees-for-services versus a contract with a state agency, not federal versus state dollars" ). Under the standard of 10-ORD-092, this office found in 10-ORD-115 that by virtue of the body's contract with a state agency, sufficient oversight by the state of the federal Medicaid dollars received was present for those funds to be included when calculating the relevant percentage.
4 Counsel was correct in asserting that any records not related to "functions, activities, programs, or operations funded by state or local authority" have been excluded from the definition of "public record" codified at KRS 61.870(2), and thus would not have to be disclosed.
5 KRS 61.871.
6 Though not dispositive standing alone, information publicly available on the Secretary of State's website confirms that Clotfelter-Samokar is a "Kentucky Professional Services Corporation," with "Active" status, in "Good" standing, whose principal office is located in Lexington, Kentucky. By conventional indicia, in other words, Clotfelter-Samokar is a private business that is not subject to the Open Records Act unless it satisfies the KRS 61.870(1)(h) threshold . See 11-ORD-040; 11-ORD-142; 11-ORD-191.
7 In University Health Care, Inc. v. The Courier-Journal , No. 10-CI-04753 (Jefferson Circuit Court-Division Twelve, March 11, 2011), another Division of Jefferson Circuit Court acknowledged the holding of William W. Chilton v. M.A. Mortenson Company , above, but went on to find "that, while deference is, of course, given to the decisions of its brothers and sisters on the Bench, those determinations in no way affect the conclusions of this Court." Having done so, the Court ultimately held that KRS 61.870(1)(h) "is not unconstitutionally vague, ambiguous or unintelligible." University Health Care, above, at p. 7. These conflicting opinions from different divisions of the same circuit amply illustrate why this office has taken the approach of continuing to follow existing precedent, both in general, and specifically in relation to KRS 61.870(1)(h), until a published opinion by either the Supreme Court or the Court of Appeals to the contrary is rendered and, relative to KRS 61.870(1)(h) in particular, why this office is compelled to apply it as written until such time as the General Assembly amends it or one of those Courts expressly finds it unconstitutional in a published opinion.
8 In so doing, this office reminded the parties that in Commonwealth v. Chestnut, 250 S.W.3d 655, 663 (Ky. 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."