Opinion
Opinion By: Andy Beshear,Attorney General;James M. Herrick,Assistant Attorney General
Summary : City of Williamstown improperly invoked KRS 61.878(1)(c) for a water rate study it commissioned from Kentucky Rural Water Association. City partially violated Open Records Act by withholding portions of study pursuant to KRS 61.878(1)(i) or (j) that did not constitute opinions or recommendations adopted as basis of final action, but did not violate the Act as to those opinions or recommendations not so adopted.
Open Records Decision
The question presented in this appeal is whether the City of Williamstown ("City") violated the Open Records Act in its denial of Grant County News reporter Amanda Kelly's May 6, 2019, request for "the findings of a water rate study completed by Kentucky Rural Water Association." For the reasons that follow, we find that the City partially violated the Act, but could properly withhold portions of the report that constituted preliminary recommendations and opinions not adopted as the basis of final action.
The Kentucky Rural Water Association ("KRWA"), as described by the City, is "a collection of municipal owned water and waste water system[s] that have joined together for training, conferences, and legislative issues." The City, which has been a member of KRWA since its inception in 1979, supplies water to customers at both wholesale and retail levels. Due to the inauguration of a new water plant in 2018, the City commissioned the water rate study from KRWA in an effort "to determine what [the] wholesale and retail rates should be after adding the new plant and the related debt into the rate." On April 16, 2019, KRWA presented its study to a closed session of the Williamstown City Council, which discussed the study on that occasion and in two subsequent closed sessions on April 23 and 30, 2019.
Mayor Rick Skinner denied Ms. Kelly's request for the study on May 9, 2019, stating: "The information contained within the Water Rate Study ... are [ sic ] preliminary recommendations/memoranda and proprietary in nature given that the City of Williamstown is in [the] business of selling water to residents and wholesale customers. Therefore, pursuant to KRS 61.878(1)(c) and KRS 61.878(1)(i and j), the City of Williamstown denies your Open Records Request." On May 14, 2019, this office received an appeal from Grant County News editor Bryan Marshall, who argued that KRS 61.878(1)(c) does not apply simply because the City is "in the business of selling" water, and that the study cannot be merely "preliminary" when it has already formed the basis for an amendment to the City's water rate ordinance that received its first reading on May 6, 2019.
The City argues on appeal that the information in the water rate study "would provide an unfair commercial advantage to competitors" of the City in the business of wholesale and retail water service. This argument falls under KRS 61.878(1)(c)1., which excludes from the obligation of public disclosure:
records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity that disclosed the records[.]
To invoke this exception, a public agency must establish that the material in question (1) has been confidentially disclosed to the agency, (2) is generally recognized as confidential or proprietary, and (3) would permit competitors of the disclosing entity an unfair commercial advantage if disclosed. 17-ORD-002.
We find this exception inapplicable by its own terms. KRS 61.878(1)(c)1. applies only to records "disclosed to an agency" that would unfairly advantage competitors of "the entity that disclosed the records." Here, the City itself owns the rate study, which it commissioned from KRWA with public funds. Thus, it is not a record disclosed to the City, but the City's own record.
Even if we construed KRS 61.878(1)(c)1. more liberally, so as to find that the rate study was a record "disclosed to" the City by KRWA, the City has not established that its public disclosure would cause competitive harm to KRWA, "the entity that disclosed the records." The only competitive harm the City alleges is to the City itself. Thus, KRS 61.878(1)(c)1. is inapplicable on its face.
We therefore turn to the other exceptions invoked in the City's response. KRS 61.878(1)(i) and (j) create exceptions to the Open Records Act in the cases of, respectively:
(i) Preliminary drafts, notes, correspondence with private individuals other than correspondence which is intended to give notice of final action of a public agency; [and]
(j) Preliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended[.]
This office has recognized that these exceptions may apply to "reports and analyses prepared by outside agencies, as well as consultants, on behalf of a public agency." 17-ORD-141 n.5.
In its initial response to this appeal, on May 21, 2019, the City did not expressly argue that the water rate study was a "draft," but claimed that it was "not static, not final," and "non-adopted." We do not find the study to be a "preliminary draft" under KRS 61.878(1)(i), because it does not "represent a tentative version, sketch, or outline of a formal and final written product," but rather the formal and final written product itself, as presented to the city council in closed session. 05-ORD-179; see also 18-ORD-028.
Primarily, the City characterizes the study as a document containing "preliminary data or recommendations." We interpret this as an argument under KRS 61.878(1)(j).
In
University of Kentucky v. Courier-Journal & Louisville Times Co. , 830 S.W.2d 373, 378 (Ky. 1992), the Kentucky Supreme Court made clear that "materials that were once preliminary in nature lose their exempt status once they are adopted by the agency as part of its action." In 01-ORD-47, we summarized the manner in which "preliminary" records under KRS 61.878(1)(i) and (j) may retain or lose their exemption after final agency action is taken:
Until final administrative action is taken, or a decision is made to take no action, the requested records are protected by KRS 61.878(1)(i) and (j). If the records are adopted as part of that final action, they will forfeit their preliminary characterization. If not adopted, they will retain their preliminary character.
It is not necessary that the record be explicitly adopted or incorporated by reference, so long as it constitutes a basis for the final agency action. "In our view, the courts purposefully employed the broader concept of 'adoption' rather than 'incorporation,' relative to preliminary investigative reports and records, to avoid a narrow, legalistic interpretation." 01-ORD-83 (citing City of Louisville, supra ).
In a supplemental response to the appeal, on June 19, 2019, the City indicated, with respect to retail water rates, that the "study is completed as we have placed in ordinance the new service charge increase." As to wholesale water rates, however, the City asserted that it had as yet implemented no rate change in response to the study, and argued that "the water study recommendations and suggestions may never be formally adopted by the City Council due to competitive risks involved with the City's wholesale customers and the City's wholesale competitors."
To the extent that the rate study formed the basis for the City's retail rate increase, any recommendations the City adopted regarding retail rates have lost their preliminary character. By contrast, the recommendations as to wholesale rates, not yet having been adopted, remain preliminary at this time.
We have reviewed the rate study in camera pursuant to KRS 61.880(2)(c) and 40 KAR 1:030, Section 3. The document consists of nine pages. The first page contains certain factual recitations along with advice. The factual statements do not constitute opinions or recommendations, and therefore are not "preliminary" under KRS 61.878(1)(j). The suggestions or recommendations on that page, however, may be treated as preliminary, but only to the extent that the City has not used them as a basis for final agency action. The recommendations pertaining to retail rates, therefore, are no longer preliminary, except for any specific proposals the City did not adopt. The recommendations pertaining to wholesale rates remain preliminary.
The third and fourth pages consist of factual information along with recommendations regarding retail water rates. The factual information is not preliminary. Furthermore, since the City represents that the study is now final as to retail water rates, any information on those two pages that was once preliminary has lost its preliminary character.
The seventh page consists of calculations and recommendations regarding wholesale rates. Since the City has taken no action on wholesale rates at this time, we find that this page may be characterized as a preliminary opinion or recommendation.
The eighth page consists of factual information as well as proposals regarding wholesale rates. The current information is not an opinion or recommendation, and therefore is not preliminary. The "proposed" portions of that page, however, are preliminary until such time as they are adopted as the basis of final action.
The second, fifth, sixth, and ninth pages of the study are mere compilations of factual information, which do not represent opinions or recommendations. The City has articulated no basis for treating these factual recitations as "preliminary." Thus, those pages are not subject to exemption under KRS 61.878(1)(j).
We therefore conclude that the City violated the Open Records Act by withholding the KRWA water rate study in its entirety, where only portions of the study consisted of preliminary opinions and recommendations. As to retail rates, the opinions and recommendations in the study have subsequently lost their preliminary character; however, those opinions and recommendations relating to wholesale rates remain preliminary at this time.
Pursuant to KRS 61.878(4), "[i]f any public record contains material which is not excepted under this section, the public agency shall separate the excepted and make the nonexcepted material available for examination." In accordance with this requirement, the City may redact from the rate study the portions that remain preliminary, but it must make the remainder of the study available.
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 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.