Wisconsin Lawyer: Getting the Best of Both Worlds: Open Government and Economic Development:

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  • Wisconsin Lawyer
    February
    11
    2009

    Getting the Best of Both Worlds: Open Government and Economic Development

    Christa Westerberg

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    Recent appellate opinions have clarified Wisconsin’s open government laws as applied to economic development issues. By following the public records and open meetings laws, and by understanding when the very limited exceptions may apply, the public, local governments, and developers can all reap the benefits of economic development.

    Wisconsin LawyerWisconsin Lawyer
    Vol. 82, No. 2, February 2009

    Money in Grass

    Open government and economic development often are seen as two competing ideals that can never happily coexist. On one hand, Wisconsin’s public records and open meetings laws apply to all governmental business, subject to “extremely narrow and well-defined exceptions.”1 On the other, government entities afraid of jeopardizing a potential development project may feel compelled to keep the details of that project secret, especially in today’s difficult economic climate.2 This perceived conflict between open government and economic development has been exacerbated by the lack of case law addressing the intersection of these two principles, leading to inconsistent application of the state’s public records and open meetings laws.

    Recent appellate opinions have clarified Wisconsin’s open government laws, particularly as applied to economic development issues. This article addresses these opinions and suggests guidance on following the public records and open meetings laws in economic development situations, particularly at the local government level. With a little care, open government and economic development can coexist, with the public reaping the rewards of both.

    Presumption of Openness

    Economic development is not mentioned or other-wise singled out in Wisconsin’s public records and open meetings laws.3 Thus, economic development occurring in the government context is treated like any other public business, meaning the usual presumption of openness applies. Both the public records and open meetings laws declare that a representative government depends on an informed electorate and that accordingly, “it is ... the public policy of this state that all persons are entitled to the greatest possible information regarding the affairs of government.”4 The Wisconsin Supreme Court has recognized that “[the] statement of policy in § 19.31 is one of the strongest declarations of policy to be found in the Wisconsin statutes.”5

    Just as the usual presumptions of the public records and open meetings laws apply to economic development situations, so too do both laws’ definitions, requirements, and exemptions. This article does not attempt to address all these provisions,6 but addresses common open government questions in the economic development context. These include whether the laws apply to an economic development entity in the first place, specific provisions of each law that apply in economic development situations, and potential pitfalls to avoid.

    Entities That May Be Subject to Open Government Laws

    A variety of entities are or may be subject to Wisconsin’s public records and open meetings laws, and for most of these, the applicability of the laws is clear.

    The public records law applies to “authorities” and the open meetings law applies to “governmental bodies,” both of which encompass state or local agencies, boards, commissions, committees, councils, departments, public bodies corporate and politic created by rule or order, and formally constituted subunits of the foregoing.7 The public records law additionally applies to state and local offices and elected officials.8Entities conducting economic development that fall within these definitions include various state agencies such as the Department of Commerce; political subdivisions such as counties, cities, villages, and towns; governing bodies and committees of political subdivisions; and other local commissions or task forces.

    Several other types of entities also are subject to the public records and open meetings statutes. “Governmental corporations” fall within the laws’ definitions of authority and governmental body and are generally understood to include corporations created by constitution, statute, or ordinance.9 As such, they usually are publicly funded, serve a public purpose, and are subject to control or oversight by a public body. For example, community development corporations created by political subdivisions under Wis. Stat. section 66.1335(1) would fit within this definition.

    The public records and open meetings laws additionally apply to “quasi-governmental corporations.” This term is undefined by statute and had eluded appellate interpretation until a recent Wisconsin Supreme Court case, State of Wisconsin v. Beaver Dam Area Development Corporation.10 The case was a declaratory judgment action brought by the state against the nonprofit Beaver Dam Area Development Corporation (BDADC), which conducts economic development activities for the city of Beaver Dam.11 The court concluded that based on the totality of the circumstances the BDADC was a “quasi-governmental corporation” subject to the public records and open meetings laws because it resembled a governmental corporation in “function, effect, and status.”12

    The court’s decision did not create a bright-line test for whether a corporation is quasi-governmental, stating instead that the determination must be made on a case-by-case basis.13 Factors in Beaver Dam that swayed the court’s analysis provide guidance for determining when a corporation is quasi-governmental. A primary consideration in Beaver Dam was funding, because the BDADC was supported exclusively by city tax dollars and interest earned on tax dollars and because the city provided the BDADC with office space, supplies, and clerical support.14 This holding is consistent with prior case law emphasizing the importance of openness when public tax dollars are concerned.15

    Christa 
Westerberg

    Christa Westerberg, U.W. 2002, is a shareholder at Garvey McNeil & McGillivray S.C., Madison. She is vice president of the Wisconsin Freedom of Information Council.  

    Aside from funding, the Beaver Dam decision identified other aspects of the BDADC that qualified it as a quasi-governmental corporation subject to the public records and open meetings laws. These included: 1) its public function to promote economic development, as shown by the fact that the city was its sole client and its services had previously been performed by a city office; 2) its appearance as a governmental corporation, because it was in a city building and was included on the city’s Web site; and 3) the city’s retention of some control of the BDADC, because two city officials served on the BDADC’s board ex officio, the BDADC had to submit an annual management plan to the city, and the city retained the right to review the BDADC’s records.16The court also listed other factors that might indicate a quasi-governmental corporation that have been cited by other jurisdictions and authorities, although they were not present in the Beaver Dam situation.17

    Future cases undoubtedly will further interpret quasi-governmental corporation; there also have been suggestions that the legislature may intervene on this issue.18 In the meantime, persons interested in economic development should remember the Beaver Dam court’s caution that a governmental body cannot “circumvent[] the legislative directive for an open and transparent government by paying an entity to perform a governmental function.”19 In this situation, further inquiry as to compliance with the public records and open meetings laws is warranted.

    One final category of entities is subject to Wisconsin’s public records law, albeit indirectly: contractors. The law provides that “authorities” must make available “any record produced or collected under a contract entered into by the authority with a person other than an authority to the same extent as if the record were maintained by the authority.”20 The Wisconsin Supreme Court has recently clarified that contractors are not themselves authorities, but that their records are available through open records requests made to municipalities and governmental entities that retain contractors.21

    The provision for contractors’ records may bring entities that escape categorization as quasi-governmental corporations into the ambit of the public records law. In other words, if an economic development corporation is not quasi-governmental, and is therefore not itself an authority under Wis. Stat. section 19.32(1), its records still may be subject to disclosure if it contracts for economic development services with an authority.

    Most economic development entities will be clearly either subject to or exempt from the public records and open meetings laws. If there is doubt about whether an entity is a quasi-governmental corporation, entities should look carefully at the factors identified in Beaver Dam and, given the laws’ presumption in favor of public access, err on the side of openness.

    Provisions of Open Government Laws That May Apply to Economic Development

    An entity subject to Wisconsin’s open government laws must follow several different requirements. For open meetings, the biggest issues an entity will likely face in considering an economic development project are whether to discuss the project in open or closed session and how much detail to provide in the public notice. For public records, the issue likely will be whether to disclose records relating to an ongoing or recently completed development prospect.

    The open meetings law applies to meetings of governmental bodies.22 Courts have interpreted the term meeting to include even informal actions, such as information-gathering, but to exclude social or chance gatherings.23 A meeting triggers three basic requirements: 1) The meeting must be open to the public, unless an exemption to the open session requirement applies; 2) there must be advance notice; and 3) the meeting must be held in a place reasonably accessible to members of the public.24  

    An exhaustive list of reasons governmental bodies may meet in closed session is set forth in Wis. Stat. section 19.85(1). Perhaps most relevant to economic development situations is the exemption in section 19.85(1)(e), allowing “[d]eliberating or negotiating the purchasing of public properties, the investing of public funds, or conducting other specified public business, whenever competitive or bargaining reasons require a closed session.”

    This exemption received its first direct interpretation by an appellate court in State ex rel. Citizens for Responsible Development v. City of Milton, decided in 2007.25 The Milton city council had discussed a potential ethanol plant development in 10 closed meetings over several months, approving a development agreement in the final closed session. The court of appeals held the meetings should have been open, reasoning that the word “require” in Wis. Stat. section 19.85(1)(e) places a weighty burden on the entity invoking the exemption to show that competitive or bargaining reasons necessitated the closed session.26

    The court rejected several reasons the city gave for closing the meetings under section 19.85(1)(e), validating only the city’s claim that the closed sessions were necessary to avoid disclosing its bargaining position to the plant developer and a landowner from whom the city was considering purchasing property. As the Wisconsin Attorney General has done,27the court indicated that closed sessions should be used to protect the city’s interests instead of the developer’s.28 It thus rejected the developer’s request for confidentiality as a reason for closing the meetings.29 The court also concluded that the city’s desire to close the meetings to avoid losing the development to another municipality was insufficient, noting that “[a]ll Wisconsin municipalities are governed by Wisconsin’s Open Meetings Law.”30 If all governmental bodies must meet in open session, the logic goes, no such body can be placed at a competitive disadvantage by keeping its doors open.

    The Milton court also clarified that although it was legitimate for the city to close some portions of meetings for competitive or bargaining purposes, that “does not mean the entirety of the meetings fell within the narrow exception under § 19.85(1)(e).”31 Put another way, the closed session must be limited to the portion of the meeting when the government body’s competitive and bargaining interests will be discussed.

    While Milton set a high bar for closing meetings under Wis. Stat. section 19.85(1)(e), the Beaver Dam court pointed out that informal meetings between companies and government staff do not constitute meetings that must be held in open session.32 Accordingly, some degree of confidentiality may be maintained if governmental bodies themselves do not discuss a proposed development, or if they discuss the development without naming the prospective company. However, separate meetings with individual members of a governmental body to discuss the development should be avoided, since such meetings will likely constitute impermissible walking quorums.33

    Whether the meeting is open or closed, proper notice must be provided. Notice requirements are set forth in Wis. Stat. section 19.84 and include the time, date, place, and subject matter of the meeting. The subject matter element was interpreted recently by the Wisconsin Supreme Court in State ex rel. Buswell v. Tomah Area School District.34The Buswell court set forth a reasonableness test for determining whether notice is sufficiently specific under the circumstances. The test considers the burden on the body providing notice of making available more specific information, the degree of public interest in the subject matter, and whether the subject of the meeting is routine or novel.35 In Buswell, the court rejected a school board’s notice for a closed-session meeting that stated “TEA Employee Contract Approval”; the board decided at that meeting to approve a master contract with the teachers’ union.36

    When applied in the economic development context, the Buswell test suggests more specific notice is needed for meetings concerning potentially controversial development projects, projects receiving public subsidies or contracts, or projects that otherwise attract heightened public interest. For example, a notice stating that a closed session under Wis. Stat. section 19.85(1)(e) will occur to discuss “potential development” would likely be insufficient, while a notice stating “negotiations relating to potential development agreement for big box general retailer at intersection of Highways X and Y” would more likely pass muster.

    Finally, meetings should be in a location reasonably accessible to the public. The attorney general has opined that “public policy favors the holding of meetings of governmental bodies in public places, such as a town hall, fire station or schoolhouse, rather than a private home.”37 Two dissenting justices in the Beaver Dam case suggested that the “BDADC’s current arrangement of meeting at the private business places of Board members over the lunch hour is likely deficient.”38 While no case definitively resolves this issue, meetings held in private locations should, at a minimum, be large and accessible enough to accommodate any spectators.

    As to records, entities subject to the public records law may wonder whether, upon a proper request, they must disclose documents related to a potential development prospect. Records disclosures are always subject to a balancing test of whether the public’s interest in disclosure outweighs harm to the public from disclosure.39The Beaver Dam court suggested that timing may make all the difference: “In a case involving disclosure of information relating to economic development,” the balance may tip in favor of nondisclosure if premature release “could undermine an important public policy objective in the context of economic development.” On the other hand, “when releasing the records could not be expected to interfere with ongoing negotiations, the public interest in disclosure may outweigh the public interest in nondisclosure.”40Additionally, exemptions to open session set forth in Wis. Stat. section 19.85(1) may justify nondisclosure, as might the provision in Wis. Stat. section 19.36(5) permitting withholding of records that contain a trade secret.41If the request seeks records in which a third party has sought confidentiality, an additional test may apply.42

    Potential Pitfalls

    A few situations that arise in the economic development context deserve specific mention.

    Often, governmental bodies are asked or seek to attend tours of factories, farms, or other properties under consideration for development in their own communities. Such tours are meetings and are therefore subject to the usual requirements of the open meetings law, including an accurate description in the notice of the meeting place.43Additionally, if members of the governmental body travel to the site together, that is, in one vehicle, the travel is likely a meeting as well.44A recent informal letter from the Wisconsin Attorney General’s office thoroughly explains rules and potential violations in a case in which members of a county planning and zoning committee toured a gravel pit site in a single car with company representatives.45 Because the letter concluded that “a vehicle moving down the highway is not a place ‘reasonably accessible to members of the public,’” the best course may be for tour accommodations to be large enough to allow interested members of the public to attend and listen, for example, traveling by bus instead of car.46

    Another common question is whether voting can be conducted in closed session, usually on the theory that because the vote could always be something less than a “yes,” the vote is still a part of negotiations. One court of appeals case suggests that the answer is no: “None of the exemptions listed in sec. 19.85 permits the Board to vote on any matter in closed session.”47 However, citing ambiguity on this issue, the Wisconsin Department of Justice’s open meetings compliance guide recommends “that a governmental body vote in open session, unless the vote is clearly an integral part of deliberations authorized to be conducted in closed session under Wis. Stat. § 19.85(1). Stated another way, a governmental body should vote in open session, unless doing so would compromise the need for the closed session.”48 Motions and roll call votes taken in closed session still must be recorded and open to public inspection.49

    Finally, as suggested in Buswell, Milton, and other open government cases, potentially contentious developments and decisions “are most in need of public discussion.”50 While the instinct may be to conceal these developments to avoid a public uproar, fear of controversy is not a legitimate reason for closing a meeting and in fact may only increase the uproar when the project finally becomes public. As the Milton court stated, “Permitting the governed to express opinions about prospective purchases may be time consuming, frustrating, counterproductive and might increase costs. But the Wisconsin legislature has decided that complete information regarding the affairs of government is the policy of Wisconsin.”51 Furthermore, public involvement in the discussion might improve the eventual development in ways that make an otherwise objectionable development publicly acceptable, such as by suggesting landscaping enhancements. If an entity believes closing meetings or withholding records is warranted in the case of a potentially controversial project, it should document its process well so that it can survive the stricter level of scrutiny the courts have recently indicated is appropriate when such actions are reviewed.

    Conclusion

    In light of recent cases, the path to strong economic development and open government is no longer so treacherous. Governmental bodies and authorities should observe the state’s policy favoring open government in economic development situations, especially when public purposes and public funds are at stake. However, these entities can when necessary use the limited exemptions and exceptions recognized in statute and case law to protect their competitive or bargaining purposes or if there is a demonstrated public interest in doing so.  

    Endnotes

    1Journal/Sentinel, Inc. v. School Bd. of Shorewood, 186 Wis. 2d 443, 447, 521 N.W.2d 165 (Ct. App. 1994).

    2See State v. Beaver Dam Area Dev. Corp., 2008 WI 90, ¶ 126, __ Wis. 2d __, 752 N.W.2d 295 (Prosser, J., dissenting).

    3Wis. Stat. §§ 19.31-.39; Wis. Stat. §§ 19.81-.98.

    4Wis. Stat. §§ 19.31, .81(1).

    5Zellner v. Cedarburg Sch. Dist., 2007 WI 53, ¶ 49, 300 Wis. 2d 290, 731 N.W.2d 240 (citing Munroe v. Braatz, 201 Wis. 2d 442, 549 N.W.2d 451 (Ct. App. 1996)).

    6For extensive discussions of the public records and open meetings laws’ requirements, see Melanie R. Swank, The Wisconsin Public Records and Open Meetings Handbook (State Bar CLE 3d ed. 2008); Wis. Dep’t of Justice, Wisconsin Open Meetings Law: A Compliance Guide (2007), available at www.doj.state.wi.us/dls/spar.asp#opmeet; Wis. Dep’t of Justice, Wisconsin Public Records Law: Compliance Outline (2007), available at www.doj.state.wi.us/dls/2008-PRCO/2008_Pub_Rec_Outline.pdf; see also Wisconsin Freedom of Information Council Web site, www.wisfoic.org/.

    7Wis. Stat. §§ 19.32(1), .82(1).

    8Wis. Stat. § 19.32(1).

    980 Op. Att’y Gen. 129 (1991).

    102008 WI 90, __ Wis. 2d __, 752 N.W.2d 295.

    11The author submitted an amicus brief in support of the state on behalf of multiple parties, including a group in Beaver Dam called Citizens for Open Government, the Wisconsin Freedom of Information Council, the Wisconsin Newspaper Association, and the Wisconsin Broadcasters Association.

    122008 WI 90, ¶ 9, __ Wis. 2d __.

    13Id. ¶¶ 45, 46, n.10, n.11 (noting that other jurisdictions use totality of circumstances approach, which is employed in many civil rights-style cases).

    14Id. ¶ 66.

    15State ex rel. Buswell v. Tomah Area Sch. Dist, 2007 WI 71, ¶ 26, 301 Wis. 2d 178, 732 N.W.2d. 804 (government “must be accountable to the people who underwrite government finances”); Journal/Sentinel, 186 Wis. 2d at 459 (“Taxpayers of a community have the right to know how and why their money is being spent.”).

    16Beaver Dam, 2008 WI 90, ¶ 79, __ Wis. 2d __.

    17These factors include whether: public and private funds were commingled; a public agency had a substantial financial interest in the entity for whose benefit the private entity was acting; the private entity’s services were an integral part of the public agency’s decision-making process; the entity is exempt from taxes; the entity is subject to governmental audits; and the entity is entitled to assert governmental immunities. Id. ¶ 63 n.14 (citing News & Sun-Sentinel Co. v. Schwab, Twitty, & Hanser Arch. Group, 596 So. 2d 1029 (Fla. 1992); Denver Post Corp. v. Stapleton Dev. Corp., 19 P.3d 36, 41 (Colo. Ct. App. 2000); Ann Taylor Schwing, Open Meetings Laws § 4.100 (2d ed. 2000)).

    18Dan Benson, Development Groups Weigh Impact of Verdict, Milwaukee J. Sentinel (July 27, 2008).

    19Beaver Dam, 2008 WI 90, ¶ 4, __ Wis. 2d __.

    20Wis. Stat. § 19.36(3).

    21WIREdata Inc. v. Village of Sussex, 2008 WI 69, ¶¶ 73, 77-78, 310 Wis. 2d 397, 751 N.W.2d 736 (noting requests made directly to contractor are not proper under public records law).

    22Wis. Stat. § 19.82(2).

    23State ex rel. Badke v. Village Bd. of Greendale, 173 Wis. 2d 553, 573, 494 N.W.2d 408 (1993) (holding that information-gathering is a type of governmental business; otherwise “the public ... may never be exposed to the actual controlling rationale of a government decision”); Wis. Stat. § 19.82(2).

    24Wis. Stat. §§ 19.81(2), .83(1), .82(3), .84.

    25Citizens for Responsible Dev. v. City of Milton, 2007 WI App 114, 300 Wis. 2d 649, 731 N.W.2d 640. The author represented the plaintiffs-appellants in this case.

    26Id. ¶ 14.

    27E.g., 81 Wis. Op. Att’y Gen. 139, 140 (1994) (“The obvious purpose of section 19.85(1)(e) is to permit a governmental body to meet in closed session where to do otherwise would compromise the governmental body’s bargaining position by revealing its negotiating strategy.”).

    28Citizens for Responsible Dev., 2007 WI App 114, ¶ 14, 300 Wis. 2d 649.

    29Id.

    30Id. ¶ 17.

    31Id. ¶ 19.

    32Beaver Dam, 2008 WI 90, ¶ 81, __ Wis. 2d __.

    33State ex rel. Newspapers Inc. v. Showers, 135 Wis. 2d 77, 92, 398 N.W.2d 154 (1987).

    34Buswell, 2007 WI 71.

    35Id. ¶¶ 27-32.

    36Id. ¶ 41.

    3767 Wis. Op. Att’y Gen. 125, 127 (1978).

    38Beaver Dam, 2008 WI 90, ¶ 139, __ Wis. 2d __ (Prosser, J., dissenting).

    39State ex rel. Youmans v. Owens, 28 Wis. 2d 672, 681, 137 N.W.2d 470 (1965).

    40Beaver Dam, 2008 WI 90, ¶ 87, __ Wis. 2d __.

    41Id. ¶ 82.

    42Mayfair Chrysler-Plymouth Inc. v. Baldarotta, 162 Wis. 2d 142, 168-69, 469 N.W.2d 638 (1991), superceded on other grounds, Wis. Stat. § 19.36(8).

    43Letter from Bruce Olsen, Assistant Attorney General, Wis Dep’t of Justice, to Lucille Karstens (July 31, 2008), available at http://wisfoic.org/agopinions/2008_07_31_Karstens.pdf.

    44Id. at 5-6.

    45Id.

    46Id. at 5 (quoting Wis. Stat. § 19.82(3)).

    47State ex rel. Schaeve v. Van Lare, 125 Wis. 2d 40, 53, 370 N.W.2d 271 (1985).

    48 Wis. Dep’t of Justice, Wisconsin Open Meetings Law: A Compliance Guide 20 (2007), available at www.doj.state.wi.us/dls/spar.asp#opmeet.

    49Wis. Stat. § 19.88(3); see also Letter from Thomas C. Bellavia, Assistant Attorney General, Wis. Dep’t of Justice, to Don Huebscher (May 23, 2008), available at www.wisfoic.org/agopinions/2008_05_23_Huebscher.pdf.

    50Citizens for Responsible Dev., 2007 WI App. 114, ¶ 18, 300 Wis.2d 649.

    51Id. ¶ 17.