Opinion
Opinion By: Andy Beshear,Attorney General;Gordon Slone,Assistant Attorney General
Open Meetings Decision
The issue presented in this appeal is whether the Board of Education of the Dawson Springs Independent School District ("Board") violated the Open Meetings Act, specifically KRS 61.815(1)(c), by taking final action on future acquisition of real property in a closed session of a public meeting. For the reasons that follow, we find that the Board violated the Open Meetings Act.
Melissa Larimore, The Dawson Springs Progress , by letter dated July 6, 2018, complained to Vicki Allen, Board Chair, that the Board took action on the "future acquisition or sale of real property" while in closed session on June 25, 2018, and that that action was illegal under KRS 61.815(1)(c), which states "No final action may be taken at a closed session. " Ms. Larimore cited the case of
Bd. of Comm'rs of the City of Danville v. Advocate Commc'ns Inc., 527 S.W.3d 803 (Ky. 2017), for the proposition that, while a discussion that would be likely to affect the value of a specific property may occur in closed session, a decision to bid on and to buy the property made in closed session was not in accordance with the Open Meetings Act. Ms. Larimore requested that the Board acknowledge its action in open session at its next meeting.
Ms. Allen responded by letter dated July 10, 2018, explaining that the Board went into closed session, in part, pursuant to KRS 61.810(1)(b) 1, for the purpose of discussing the future acquisition of real property. Ms. Allen stated that the Board used the exception, KRS 61.810(1)(b), because, "in a small community like Dawson Springs, even identifying the location of the property the Board was considering in open session could have affected its values." She stated that there "was a concern that if the Board identified the property and discussed its need to acquire the property to alleviate parking issues, these discussions could prompt someone to drive up the price at auction to get the district to pay a higher price. . . . The property purchased by the district was assessed with a PVA value of roughly $ 83,500 and the district was able to purchase it for $ 18,750, saving the district and our taxpayer's money."
Ms. Larimore ("Appellant") appealed the response by the Board to this office by letter dated September 5, 2018, complaining that the Board violated the Open Meetings Act by taking final action in closed session. On appeal, Michael Owsley, English, Lucas, Priest & Owsley, LLP, responded on behalf of the Board. The Board stated that Bd. of Comm'rs of the City of Danville involved an "absolute auction, " while the auction relevant to the June 25 closed session was an "auction with reserve." The Board stated that, in an absolute auction, any bid essentially forms the contract, thus making the bid a final action. In an auction with reserve, the seller, in placing the property up for auction is merely advising the public of its willingness to entertain bids. Any bid in an auction with reserve is simply an offer, but does not form a contract. "Therefore no final action was completed during the closed session of the Board." The Board stated that approval by the Kentucky Department of Education was required before it can finalize purchase of real property and "that approval was not obtained until September 6, 2018," and final approval of the transaction was to be at the Board meeting on September 17, 2018. The Board denied that it took final action in closed session, but did discuss "the maximum price the superintendent was authorized to bid for the property, but the contract to actually purchase the property was not entered into until after the bidding had concluded."
Analysis : KRS 61.815(1) sets forth the requirements for conducting closed sessions by a public agency, and, in particular, KRS 61.815(1)(c) states that "No final action may be taken at a closed session [.]" We find that the Board's authorization to the District Superintendent of a maximum amount to bid on property constituted "final action" and that the Board thus violated KRS 61.815(1)(c) .
The case referenced by both Appellant and the Board, Bd. of Comm'rs of the City of Danville , grew out of an appeal to this office of an action by the Board of Commissioners of the City of Danville ("Danville Board of Commissioners"). In that case, the City of Danville leased property for its public works department, but had budgeted $ 2,000,000 for the purchase of the property. The property came up for sale at an absolute auction scheduled for August 10, 2012. The Danville Board of Commissioners went into closed session at a regularly scheduled meeting on July 23, 2012, and authorized bidding at the auction up to $ 1,500,000. Following the July 23 meeting, Danville's mayor engaged a local realtor to act as the City's agent/bidder. The mayor and the agent signed an agreement with the auctioneer of the property that required the successful bidder to enter into a non-contingent auction purchase agreement. At auction, the City was the successful bidder for a purchase price of $ 1,237,500. The mayor, the seller, and the participating realtors signed the auction purchase agreement contract. The contract did not contain any contingency for approval by the Danville Board. On August 27, 2012, the Danville Board of Commissioners discussed the purchase in open session.
The Danville Advocate-Messenger complained to the Danville mayor that the Danville Board of Commissioners had violated the Open Meetings Act in its July 23 meeting. The Danville Board of Commissioners did not respond to the complaint and the Danville Advocate-Messenger appealed to this office for a decision as to whether the Danville Board of Commissioners had violated the Open Meetings Act. In our decision, 12-OMD-179, we stated:
Although ratification of the purchase did not occur until August 13, that purchase being contingent on a successful bid in an amount not to exceed the building's appraised value, we agree with The Advocate-Messenger that the Commission's collective commitment to a course of action aimed at the acquisition of the BISCO Building constituted final action and that it contravened KRS 61.815(1)(c) by taking final action in closed session at its July 13 meeting.
12-OMD-179, p. 5. The Kentucky Supreme Court, in Bd. of Comm'rs of the City of Danville , held that the Danville Board of Commissioners' decision in the closed session did not comply with the Open Meetings Act.
Bd. of Comm'rs of the City of Danville v. Advocate Commc'ns Inc., 527 S.W.3d 803 (Ky. 2017).
We find the differences in the current appeal, as compared to 12-OMD-179, to be insufficient to reach a different conclusion on whether the Board violated the Open Meetings Act. The Board focuses on the fact that the auction in this instance was "with reserve," whereas the auction in 12-OMD-179 was an "absolute" auction. This difference merely means that the seller of the property was not obligated to accept the Board's bid. The Board, like the Danville Board of Commissioners, had authorized a maximum offer to be made that, if accepted by the seller, would constitute an offer and acceptance. The Kentucky Supreme Court in Bd. of Comm'rs of the City of Danville did not state that, in an auction with reserve, the offeror (the Board) could invalidate the sale after acceptance of its offer by the seller. We find it of no consequence that the auction in this appeal was made with reserve.
The Board stated that Department of Education ("Department") approval was necessary before the sale was final, and that approval was not received until September 6, 2018. 2 The District Superintendent had communicated with the Department on June 22, 2018, and was informed of the Department's requirements to approve the purchase. While the Department did not formally approve the purchase until September 6, it is evident that the Board was aware of those requirements at its June 25 meeting. The Board provided records relating to the auction of the property and those records do not indicate that the Board made its bids conditional upon the subsequent approval of the Department. Emails provided by the Board, dated July 23, 2018, show that the Superintendent informed the Department that it had "signed and closed on the property on Friday the 20th." The requirements for formal approval by the Department were mere formalities, subsequent to the purchase of the property by the Board on July 20, 2018.
As in 12-OMD-175, we find that ratification of the purchase by the Board and by the Department of Education did not occur until after the purchase was made. The Board's collective commitment to a course of action aimed at the acquisition of real property constituted final action and violated KRS 61.815(1)(c) by taking final action in closed session at its June 25, 2018, meeting.
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 shall be notified of any action in circuit court, but shall not be named as a party in that action or in any subsequent proceedings.
Footnotes
Footnotes
1 KRS 61.810(1) provides that:
(1) All meetings of a quorum of the members of any public agency at which any public business is discussed or at which any action is taken by the agency, shall be public meetings, open to the public at all times, except for the following:
. . .
(b) Deliberations on the future acquisition or sale of real property by a public agency, but only when publicity would be likely to affect the value of a specific piece of property to be acquired for public use or sold by a public agency[.]
2 The Department of Education, Division of District Support, issued a letter on September 6, 2018, giving its approval based upon title opinion by an attorney, commitment for title insurance, a plat of the property, and indicating the fund source of "Cash-General Fund."