Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether A & K Construction, Inc., a private, for-profit Foreign Corporation, 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 A & K 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 A & K. However, A & K has declined to provide this office with any evidence, such as an affidavit, regarding what percentage of the funds it expends in the Commonwealth of Kentucky is derived from state or local authority funds, despite being afforded three opportunities to do so.
Because A & K has 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 A & K 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 thus must disclose records documenting the expenditure 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). 11-ORD-199, p. 3. Conversely, if those funds do not constitute 25% of the funds A & K expends in the Commonwealth, A & K 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.
By letter dated October 12, 2011, legal counsel for A & K denied Mr. Rogers' request, advising that his client is a "private, for-profit, closely-held, Tennessee corporation operating as a general contractor in multiple states." Counsel further explained that A & K "does not administer any state program and has no relationship with the Commonwealth except when it happens to be the successful bidder on a particular construction project. " Although A & K "receives payments from the Commonwealth," counsel acknowledged, "it is not 'funded' by the state and does not run programs 'funded' by the state." In his view, "A & K is not 'public,' is not an 'agency, and is not a 'body' within the meaning of the statute, nor does it contract to perform a traditional or essential government role or function." Counsel elaborated upon this argument in great detail, relying extensively on 10-ORD-115 in support of his client's position, further asserting that KRS 61.870(1)(h) is unconstitutional, 2 and making various other substantive arguments. 3 In sum, A & K emphatically argued that "money earned in an arms-length transaction by a private entity in a private, non-government role is not state 'funding. '" (Original emphasis removed.)
In response to Mr. Rogers' October 19 appeal, counsel for A & K adopted the content of its original response, further observing that 11-ORD-143, upon which Mr. Rogers relied, is factually distinguishable. 4 Because the record on appeal was devoid of any relevant evidence that would enable this office to resolve the dispositive question of whether A & K 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, counsel reiterated his client's earlier position that "although it performs construction work for the state when it is the successful bidder, it received no state 'funding' at all within the meaning of the Open Records Act. " Without waiving this argument, counsel also repeated his earlier assertions regarding the deficiencies of KRS 61.870(1), such as the lack of "instruction as to when the 'funds' are to be considered to be 'expended' in the Commonwealth, e.g. upon entry of a subcontract or purchase order from a supplier or upon progress payments to those entities[.]" Although counsel also confirmed that none of the other definitional sections codified at KRS 61.870(1) apply to A & K, and complied with our KRS 61.880(2)(c) request to an extent by providing the affidavit of Vice-President of Finance Ken Durbin, the affidavit was devoid of the requested information, and merely affirmed that "[a]ll of the factual statements contained in A & K's denial letter and response . . . are true and correct, from my personal knowledge."
This office subsequently renewed its request for assistance by letter dated November 22, 2011, specifically advising that none of the information provided was "specific enough to enable this office to resolve the threshold issue presented in this matter." Accordingly, the Attorney General asked that counsel "provide this office with an affidavit from Mr. Durbin establishing what percentage of the funds expended by A & K Construction, Inc. in Kentucky is derived from state or local authorities, or, at a minimum, whether that percentage meets or exceeds the twenty-five percent (25%) threshold of KRS 61.870(1)(h). See 11-ORD-191; 11-ORD-197." In so doing, this office acknowledged his client's "position regarding the character of the funds derived from payment of the 'contract price on a construction project, ' but respectfully disagree[d] based, in short, on the reasoning found in prior decisions." The Attorney General asked that A & K "please include such funds in determining this percentage notwithstanding your characterization of the funds." The Attorney General further acknowledged that counsel's "points regarding the inherent challenges of applying KRS 61.870(1)(h) are well-taken," but explained that our duty is to "continue applying it as written." To that end, this office requested that A & K please base its calculation "on either the current calendar year or fiscal year, whichever corresponds with your internal accounting methods." A & K declined, through counsel, to provide further information, "on the basis that it is not a 'public agency' within the ORA." This lack of cooperation precludes the Attorney General from conclusively resolving the question presented.
"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 A & K 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 A & K 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 A & K ultimately provided an affidavit, none of the requested financial information was contained therein. Instead, A & K 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 A & K 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 A & K 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 characterization of such funds. However, if A & K 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; 12-ORD-006; 12-ORD-010.
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 RogersC. Thomas Miller
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 This argument has no merit for the reasons outlined in footnote 7.
3 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. However, 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 A & K, 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., KRS 61.870(1)(h), and/or KRS 61.870(2), 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, cited in 10-ORD-115, upon which A & K 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 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 A & K's apparent belief, did not hold that a body must "administer a state program, " receive statutorily authorized fees, contract for a fixed and regular amount of compensation, or derive its funding exclusively from state or local authorities. If anything, 11-ORD-143 undermines the position of A & K 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).
5 KRS 61.871.
6 Though not dispositive standing alone, information publicly available on the Secretary of State's website confirms that A & K is a "Foreign Corporation," with "Active" status, in "Good" standing, whose principal office is located in Paducah, Kentucky. By conventional indicia, in other words, A & K 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."