Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Meetings Decision
The question presented in this appeal is whether the Lancaster City Council properly relied on KRS 61.810(1)(g) in conducting a closed session discussion of a contract for the sale of water to the Garrard County Water Association at its January 14, 2013, special meeting. Based on the analysis in 94-OMD-119 and subsequent open meetings decisions, as well as the legislative recognition that "the exceptions provided for by KRS 61.810 . . . shall be strictly construed," 1 we find that the council's reliance on the exception was misplaced and that the closed session was unauthorized.
On January 15, 2013, Garrard Central Record publisher J. Walker Cox submitted a written complaint to the city council's presiding officer, Mayor Brenda Powers, in which he alleged that the council's January 14 closed session violated the Open Meetings Act because the topic discussed did not satisfy the requirements of KRS 61.810(1)(g). That exception authorizes closed session:
[d]iscussions between a public agency and a representative of a business entity and discussions concerning a specific proposal, if open discussions would jeopardize the siting, retention, expansion, or upgrading of the business[.]
Mr. Cox maintained that the exception was inapplicable because no specific proposal was discussed, the Water Association having rejected the council's December 2012 proposal, and no representative of the Association participated in the closed session. As a means of remedying the alleged violation, Mr. Cox proposed that the city council admit the violation, release any recording of the closed session, and agree to comply with the Open Meetings Act at future meetings.
In an undated response, the council denied the allegations of Mr. Cox's complaint. Noting that KRS 61.810(1)(g) no longer requires the presence of a representative of the business entity, the council reaffirmed the belief that discussions concerning modifications to the rejected contract proposal justified the closed session under KRS 61.810(1)(g). It was the city council's position that "[t]he specific proposal still remains the water contract and to have any of those negotiations discussed in a public setting could result in the loss of the entire contract with [the Association]." The council therefore refused to implement the proposed remedial measures.
Shortly after he received the city council's response Mr. Cox initiated this appeal. By way of background, he explained:
The City has been in contract negotiations with Garrard County Water Association (GCWA) since the City received the final funding from the United States Department of Agriculture Rural Development (RD) needed to proceed with its plan to build a new $ 12.1 million water plant. The Letter of Conditions, in order for the city to receive about 60 percent of the funding in grants and loans from RD, was signed by Lancaster Mayor Brenda Powers on July 18, 2012 and includes the requirement of a contract between the City and GCWA for minimum water purchase and a significant rate increase, due to the fact that 70 percent of the water produced by Lancaster City Water is sold to GCWA and Crab Orchard Water at wholesale.
In the months that followed, meetings discussing why, when, where and who should build a new water plant were held in public meetings and reported in the Newspaper with an actual contract proposal delivered to GCWA by the City in early December. That contract was made public with a copy to the Newspaper on Dec. 8, 2012. GCWA rejected the contract proposal during its January 8, 2013, board meeting citing no specific reasons in a call to Mayor Powers on January 9. GCWA President Paul Reynolds told the Newspaper that GCWA's board of directors would be discussing the specifics of a counter proposal among themselves that they would vote on during their February 5, 2013, board meeting. The city countered with the meeting in question, held on January 14, listing only an executive session to discuss the contract.
Mr. Cox concluded that "the city had no reason to enter into a closed session to discuss the very same proposal that had already been rejected and that had been made public."
In supplemental correspondence, the city council confirmed these facts but emphasized that receipt of funding for construction of the new water plant is contingent on the execution of a contract for the sale of water to the Water Association, asserting that "[t]he city must receive a contract certain from the . . . Association in time to advertise for bids for the new plant and ultimately access grant revenue." The council explained that the closed session discussion focused on adjustments to the rate amounts, minimum purchase amounts, and the length of the contract previously proposed and rejected, and that public discussion of these topics would be detrimental to the negotiation process. Existing authority does not support the council's reliance on KRS 61.810(1)(g).
In 94-OMD-119, the Attorney General analyzed the propriety of a city commission's closed session discussion of an industrial prospect under the recently amended KRS 61.810(1)(g). The Attorney General focused on the fact that the industry had previously announced its interest in locating in Kentucky. Despite the commission's claim that an incentive package had not been finalized, jeopardizing the industry's plan to locate a plant in the city, this office 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 commission 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-ORD-119, pp. 3-4.
The Attorney General echoed this position in subsequent open records decisions. For example, in 01-OMD-45 this office rejected a fiscal court's reliance on KRS 61.810(1)(g) to authorize closed session discussion of cost estimates for remodeling a post office building. At page 7 of that decision we explained that the discussions:
did not involve a representative of a business entity with previously undisclosed plans to locate, expand, or upgrade its business in [the c]ounty; nor did the discussions center on a specific proposal submitted by a business entity relative to siting, retention, expansion, or upgrading of the business. Again, the fiscal court's argument ignores the first condition of the exemption. The purpose underlying KRS 61.810(1)(g), namely to promote and facilitate economic development by private industry in the Commonwealth, is not served by closed session discussions between an architect under contract with, or otherwise employed by, the county, and county officials, concerning cost estimates for the renovation and remodeling of a building owned by the county and dedicated to public use. Again, although similar financial interests might be implicated, the protection afforded by KRS 61.810(1)(g) does not extend to these discussions, and the fiscal court's reliance on the exception was misplaced.
01-OMD-45, pp. 7-8.
Based on this analysis, the Attorney General subsequently rejected public agency reliance on KRS 61.810(1)(g) to support closed session discussions of "potential company plans relating to siting, retention, expansion, or upgrading of seventeen business interests, in light of existing economic conditions in Kentucky," rather than of a specific proposal, by the seventeen member Governor's Council of Economic Advisors (01-OMD-227); discussions of proposals submitted to a public hospital board by a private hospital corporation relating to a change in relationship with the private hospital corporation that might, as an unavoidable consequence, lead to the expansion and upgrading of the facilities (03-OMD-089); and discussions relating to the selection of a consultant to aid the Louisville Arena Task Force in the siting of the new arena (05-OMD-148). Compare 99-OMD-104 (KRS 61.810(1)(g) properly invoked to conduct closed session discussion concerning corporation's undisclosed interest in expanding and upgrading its operation in county and confidentiality was required to consummate the project). Critical to each of these decisions was the recognition that KRS 61.810(1)(g) applies only to negotiations between a public agency and a business entity whose undisclosed interest in siting, retention, expansion, or upgrading its business would be compromised by open discussion. Indeed, the earliest opinions analyzing KRS 61.810(7), 61.810(1)(g)'s predecessor statute, recognized that, unless public discussion would jeopardize a business transaction, "private businesses, when dealing with a public agency, must expect that the transaction will take place in open where it is subject to public scrutiny." OAG 80-53, p. 3.
In sum, KRS 61.810(1)(g) "is no longer limited to public agencies and industrial prospects, as it now covers public agencies and a business entity . . . ." 92-OMD-1735, p. 2 (rejecting public hospital board's invocation of KRS 61.810(1)(g) to justify closed session discussion with three physicians of certain business opportunities which could be adversely affected by premature public disclosure). Nevertheless, "it concerns the siting, retention, expansion, or upgrading of a private business entity rather than the siting, retention, expansion, or upgrading of a public agency. " Id. (emphasis added). Here, as in 92-OMD-1735, the city council asserts the right of the public utility to stand in the shoes of a private business entity in relation to the invocation of KRS 61.810(1)(g) to authorize closed session discussions of expansion and upgrading of the public utility. Moreover, the public utility's interest in expanding and upgrading has, by its own admission, been widely discussed and publicized. Although receipt of public funding for the expansion and upgrading of the utility are contingent on successful contract negotiations for the sale of water to the Water Association, it is not the Water Association, an ostensibly private business entity, 2 whose expansion and upgrading were discussed in the January 14 closed session but, instead, the terms of a water contract acceptable to the Water Association. Simply stated, neither of the conditions for invocation of KRS 61.810(1)(g) were met when the city council retired to closed session to discuss modifying the terms of the proposed contract. For this reason, and under the requisite strict construction of the exception, 3 we find that the city council's reliance on KRS 61.810(1)(g) was misplaced and that its January 14 closed session was unauthorized.
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 proceedings.
Distributed to:
J. Walker CoxBrenda PowersMary E. Wesley
Footnotes
Footnotes
1 KRS 61.800 provides:
The General Assembly finds and declares that the basic policy of KRS 61.805 to 61.850 is that the formation of public policy is public business and shall not be conducted in secret and the exceptions provided for by KRS 61.810 or otherwise provided for by law shall be strictly construed.
2 The public or nonpublic status of the Water Association is not at issue in this appeal.
3 KRS 61.800, see note 1 above.