Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
This matter having been presented to the Attorney General in an open records appeal, and the Attorney General being sufficiently advised, we find that the Tourism, Arts, and Heritage Cabinet failed to meet its statutorily assigned burden of proof in denying Darryl T. Owens' January 14, 2011, request for "all of the records required to be provided to the Cabinet under KRS 148.855(3)(a) by the developers of the 'ark encounter' park in order to receive the Cabinet's preliminary approval for incentives." While Kentucky has never required an itemized index correlating each document withheld to a specific exception, such as that required by the federal courts in
Vaughn v. Rosen, 484 F.2d 820 (D.C. Cir. 1973) cert. denied 415 U.S. 977 (1974), we agree with Representative Owens that the Cabinet must "describ[e] the characteristics of each record claimed to be proprietary or confidential in nature," and, in relying on KRS 61.878(1)(c)1, "describe the nature of the competitive disadvantage . . . envision[ed]."
On January 20, 2011, the Cabinet advised Representative Owens that the requested information is "exempt from disclosure under KRS 61.878(1)(c)1 because it was confidentially disclosed to this agency or required by the agency to be disclosed to it, and generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity disclosing the records." The Cabinet disclaimed the obligation to identify potential competitors or "speculate on the nature of the unfair commercial advantage that the statutory exemption protects against." Shortly thereafter, Representative Owens initiated this appeal challenging the blanket denial of his request as an inappropriate construction of "the letter of the specific provision cited [and] the foundational intent of the open records law generally, which creates a presumption in favor of disclosure. "
In supplemental correspondence directed to this office, the Cabinet explained that the disputed records include "preliminary information concerning marketing plans, financial institution information, project financing, the applicant's recent financial statements, tax returns, financial history, financial projections for the proposed project (including estimated project costs and land costs), employment projections, attendance projections, advertising budgets, target markets, and projected revenue." Continuing, the Cabinet observed:
[D]isclosure of the records sought by Representative Owens would disadvantage the Cabinet in its efforts to recruit business and would deter companies from applying for incentives out of fear that the confidentiality of proprietary information would be compromised. The Cabinet also feels that competing tourism projects and prospective applicants for future tourism projects would financially benefit from the release of this proprietary information, to the detriment of the current applicant.
The Cabinet analogized an application for Kentucky Tourism Development Act incentives under KRS Chapter 148 to an application for Kentucky Economic Development Finance Authority incentives under KRS Chapter 154 and protected by KRS 61.878(1)(c)2b since both "require information regarding the applicant's financial history and condition, and its business models and plans." It relied on
Hoy v. Kentucky Industrial Revitalization Authority, 907 S.W.2d 766 (Ky. 1995), a case recognizing an agency's right to withhold records submitted by a private entity seeking credits under Chapter 154 oyHoyH of the Kentucky Revised Statutes. In closing, the Cabinet advised:
[T]he records sought by Representative Owens were those required by the Cabinet for preliminary approval of incentives. Ultimately, when the Cabinet and an applicant reach a final agreement about incentives, and reduce that agreement to writing, the decision becomes final and the public has every right to know that financial incentives are involved. The final application would be produced under the open records act as the agreement informs the public what tax money has been pledged to induce business to the Commonwealth. Preliminary offers and proposals are just that, preliminary, and are further protected from production by KRS § 61.878(1)(i) and (j).
Representative Owens did not request preliminary offers and proposals. His request focused on records submitted to the Cabinet as required by KRS 148.855(3)(a). These records do not consist of preliminary drafts or notes, preliminary recommendations, or preliminary memoranda in which opinions are expressed. In general, records that qualify for protection under KRS 61.878(1)(c)1 and 2 as records confidentially disclosed to the agency, and generally recognized as confidential or proprietary, enjoy continuing protection even after final action is taken. The Cabinet cannot establish that the disputed records are preliminary records. It fails to establish that the records identified in Representative Owens' request qualify for protection under KRS 61.878(1)(c)1 and 2.
Neither we, nor Representative Owens for that matter, contest the necessity of withholding certain records confidentially disclosed to the Cabinet, generally recognized as confidential or proprietary, which would permit an unfair advantage to competitors of the entity that disclosed them if made public. We do, however, believe it is incumbent on the Cabinet to identify the records withheld, to demonstrate that those records are, indeed confidential or propriety, and to describe the nature of the competitive harm from disclosure of the records. This position is consistent with the statutory requirement that denial of an open records request contain "a statement of the specific exception authorizing the withholding and a brief explanation of how the exception applies to the record withheld, " KRS 61.880(1), and the assignment of the burden of proof "in sustaining the action" to the agency. KRS 61.880(2)(c). In construing these provisions, Kentucky's courts have declared that public agencies are required "to provide particular and detailed information in response to a request for documents."
Edmondson v. Alig, 926 S.W.2d 856, 858 (Ky. App. 1996). This the Cabinet failed to do.
KRS 148.855(3)(a) requires submission of a tourism attraction project application for incentives that includes a litany of specifically described records and information. A cursory review of this extensive listing confirms that presence of documentation that cannot be characterized as financial records, employment and attendance projections, budgets, markets, and revenues, is not generally recognized as confidential or proprietary, and will not competitively disadvantage the entity submitting it if disclosed but will promote the public's interest in monitoring the Cabinet's assessment of the applicant's eligibility for incentives. This is particularly true in light of the fact that both the Cabinet and representatives of Ark Encounter have promoted the project in press conferences and on the internet, disclosing information for which exemption is now claimed. Such disclosure is tantamount to a waiver of the exemption.
In general, a public agency bears the burden of establishing that the records withheld under the exemption were confidentially disclosed to it, are generally recognized as confidential and proprietary, and, if disclosed to the public, would place the entity that disclosed them at a competitive disadvantage. Thus, at page 6 of 96-ORD-135, this office observed:
Without going into an exhaustive and highly technical explanation, and thus defeating the purpose for which the exception was invoked, we believe that [the agency] could have offered a brief description of the competitive harm the private entities might suffer as a result of disclosure, and some proof, beyond a bare assertion, that the disputed records are generally recognized as confidential or proprietary.
A copy of 96-ORD-135 is attached hereto and incorporated by reference. In 96-ORD-135, and numerous open records decisions issued before and since, this office rejected unsubstantiated claims that records in the custody of public agencies qualified for exclusion from public inspection under KRS 61.878(1)(c)1.
The Cabinet suggests that the rationale supporting nondisclosure of records under KRS 61.878(1)(c)2.b., relating to records submitted in conjunction with the application for KRS Chapter 154 incentives, supports nondisclosure of records submitted in conjunction with the application for KRS Chapter 148 incentives. With specific reference to Ark Encounter, the Cabinet focuses on the possibility that it (the Cabinet) might be disadvantaged "in its efforts to recruit businesses" and that other companies "might be deterred . . . from applying for incentives out of fear that the confidentiality of proprietary information would be compromised." These are not the criteria used in assessing the propriety of its reliance on KRS 61.878(1)(c)1. The Cabinet refuses "to identify what competitor might obtain a commercial advantage from the disclosure of the information or to speculate on the nature of the unfair commercial advantage that the statutory exemption protects against." These, along with proof that the records were confidentially disclosed and are generally recognized as confidential or proprietary, are the criteria for assessing the propriety of agency reliance on KRS 61.878(1)(c)1. Because the Cabinet's response largely consisted of a recitation of the exemption, and caselaw construing it in a different factual context, the response was deficient and the Cabinet failed to meet its statutorily assigned burden of proof in denying Representative Owens' request in full. Because much of the information required of the Cabinet under KRS 148.855(3)(a) and 300 KAR 2:010 Section 2(3) has been disseminated publicly, it is unlikely that it could do so.
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.