Law Offices
Cobb Cole & Bell
150 Magnolia Avenue
Post Office Box 2491
Daytona Beach, Florida 32115-2491
Telephone (904) 255-8171
telecopier (904) 255-0093
writer's direct dial: (904) 255-1811 ext. 252
internet: jkane@ccb.com
July 16, 1999
John E. Evans, Chair
Economic Development Coalition
P.O. Box 2475
Daytona Beach, Florida 32115
Facsimile 322-4787
Dear John E.:
This responds to your letter of June 18. The "BV concept" you suggest deserves serious consideration because it raises the key issues concerning the way government organizes its economic development activities. Since the community is now engaged in a serious discussion of these issues, I want to enlarge my comments on this concept and develop some relevant distinctions.
These comments address the particular question of open government laws as applied to governmental economic development practices.(1)
Still, the discussion must be placed within the context of the ongoing discussion of substantive issues raised by members of the County Council and others, including the Economic Development Coalition. These questions include, among others, whether Volusia County Business Development Corporation has placed too much emphasis on low-wage industries, whether VCBDC has effectively monitored the performance of businesses to whom grants have been made, and whether VCBDC is dealing with regional issues of economic development appropriately.
The Sunshine issues orbit the periphery of this discussion and distract from the substantive issues. Although VCBDC has finally conceded that it is subject to Sunshine laws, its principals stoutly maintain that economic development cannot be done in the Sunshine. Thus they are devoting attention to devising ways of escaping or avoiding the Sunshine laws and have not so far directly addressed the substantive issues that concern the Council. Judging from your letter, I assume the Coalition follows VCBDC in the view that economic development work will not thrive in the Sunshine.
I believe this view is worse than mistaken. My thesis is that the preoccupation with avoiding the Sunshine law is neither necessary, possible, nor wise. The "bugaboo" of Sunshine is overdrawn, efforts to avoid it are ineffective, and attempts at avoidance frustrate accountability and distract attention from the substantive issues.
It is possible to properly organize and successfully conduct economic development practice in full compliance with the Sunshine laws. To do so, we need to move in a new direction along parallel courses. We need, first, a countywide economic development corporation that corresponds to VCBDC, whether that be a reformed version of VCBDC or a new and similar organization. The reformed organization must be grounded on the full and candid understanding that it is an agency to which the Sunshine laws apply and should be subject to measures that assure accountability and oversight of its performance. And we need, also, a truly private civic organization devoted to the economic development of the countywide region. This organization would have no public entanglement and hence no exposure to the Sunshine.
As I will explain below, I find the BV concept as explained in your letter to be lacking either set of characteristics. The concept strips the entity of the integral functions now performed by VCBDC, but it does not create the truly private association that the region needs. And, the concept will not achieve its goal of avoiding Sunshine.
To get to that point, I want to begin by developing each prong of my thesis that the avoidance of Sunshine law is neither necessary, possible, nor wise. Then I will explain my concerns with the BV concept and sketch the parallel ideas for effectively pursuing economic development in compliance with the Sunshine law.
The preoccupation with avoiding
Sunshine is unwise
The most harmful consequence of the preoccupation with avoiding the Sunshine law has been the frustration of accountability. In the name of escaping the bugaboo, VCBDC has successfully drawn a veil between itself and the County Council and other governmental agencies on whose behalf it acts. Although I do not question the good faith of anyone involved, this is not a coincidence. The Sunshine law is about governmental accountability, and it will always follow that avoidance of Sunshine is avoidance of accountability.
Avoidance of accountability has been taken to radical extremes in recent times. Not too long ago an experienced member of the Council complained that when she voted on a substantial incentive package for the Monarch facility in Port Orange, she had not understood the nature of its business. Drew Page conceded he had withheld such key information because he did not want it to become a public record. That was intended as a full and sufficient answer. In fact, it was no answer at all. The Council is now on the verge of pressing the pertinent question, which is why any such information about a matter on the agenda of the County Council should not be a public record. If we pursue the matter, we will see there is no valid answer.
Accountability is the most important concern now because all those substantive issues that now concern the Council can be grouped together under the single heading of accountability. What bothers the Council is its inability to direct the policy and practice of this agency, which is to say that the agency escapes accountability to the Council. This will not change until the Sunshine bugaboo has been exorcised. Unless and until the Council comes to understand that avoidance of Sunshine is neither necessary, possible, nor wise, it will lack the means to pierce the veil and exert appropriate control over the economic development policy and practice of this agency.
This is my first concern. We have been unwise in elevating the avoidance of Sunshine to predominance as the central policy value around which our economic development efforts are organized. Present consternation with accountability is the direct and inevitable consequence. Thus even if it served some genuine purpose and were legally possible, it still would not be a good idea to practice economic development as we have done in recent years.
The economic development function is an
intrinsic governmental function that cannot be
veiled from the Sunshine laws.
The economic development process
Even if there were wisdom in avoiding the Sunshine law, it would not be possible to do so. As stated earlier, the economic development process is fundamentally a governmental process that inescapably must be conducted in the light of the Sunshine law. Nothing short of an amendment to the Florida Constitution could change the core fact that the Sunshine law applies to the governmental process involved in economic development. Thus the present conversation is about government and not about business.
As we use the phrase "economic development," it refers to the process of formulating and implementing governmental policies and practices intended to foster economic development through the direct transfer of governmental subsidies or incentives to private businesses. The present discussion is not, therefore, about private enterprise but about public business. The central question is how the government should organize its efforts to foster economic development.
Today in Volusia we agree that local government should stimulate economic development by offering subsidies and incentives to induce private businesses to locate or expand in Volusia. These involve the transfer of public funds and benefits to private business. They may include direct subsidy payments and indirect subsidies such as tax abatements, fee waivers, regulatory exemptions, favorable contract zoning, and the like, all for the exclusive benefit of a specific business. Generally, we refer to these benefits as "incentives."
The incentives have only one purpose--to induce the business prospect to locate (or expand) a business in Volusia. The underlying assumption made by a community that offers such incentives is that the location decision will be influenced by the incentive and that the indirect economic benefits of locating the business in the community are greater than the direct cost to the taxpayers of the incentive.
The assumption that the incentive influences the locational decision is plausible because economists generally concur that locational decisions are based on three factors:
(1) transportation costs which vary according to distances between a producer and its customers; (2) input costs such as labor and land which vary from place to place; and (3) economies and diseconomies of agglomeration which are a function of the amounts of an activity clustered in one area.
Gilbert, Selling the City Without Selling Out: New Legislation on Development Incentives Emphasizes Accountability, 27 Urban Lawyer 427 (1995) ("Selling the City)".
To the extent that incentives reduce the input costs, they create a relative incentive to locate here.
Although the economists do not often list the intangible factors influencing the locational decision, our practical experience teaches that the subsidy package performs an important additional function by signaling to the business decision-maker that his or her business is welcome in the community. This is important because business managers understand that a hostile or indifferent community environment can significantly affect the costs of operating a business.
Thus the two principal effects of the incentive are to reduce the input costs and to convey the message of welcome and give comfort as to the business environment of the community.
When it offers economic development incentives, the community enters a marketplace where the prospect is the buyer, the community is the seller, and the location of the enterprise is the economic good. This is a distorted market in which the excess of supply over demand gives the business (buyer) monopsony power and creates intense competition among the communities competing to sell their locational goods. See Siegel, Fiscal Incentives and the Economic Development Game (University of Texas 1997) [http://uts.cc.utexas.edu/~journal/1997/siegle.html]. To recruit businesses through incentives, the community must compete with all other communities that otherwise satisfy the locational criteria.
The incentive subsidy competes with other such subsidies. It cannot compete with such locational factors as transportation, agglomeration economies, or substantial input costs. In other words, a community cannot overcome fundamental diseconomies through subsidies. The community must first satisfy the relevant criteria, and then it may deploy the incentive as a variable to operate against similar incentives from other communities.
If it is sound, the strategy of offering a locational incentive is based on one clear assumption about the business prospect. That is, this prospect will behave as a rational economic actor and accept the best offer from those locations that otherwise satisfy the locational criteria. This may seem simplistic, but it is a necessary premise of a subsidy program. Before any public official offers public funds to a private business for the purpose of inducing the locational decision, the leader must verify that the subsidy actually will influence the decision. That requires the offeror to assure himself that the incentive is a necessary precondition to the decision. Otherwise, the subsidy is a nonfactor in the locational decision, and even if the prospect were to come to this community, the incentive would have been a gratuitous expenditure. In other words, it would have been a waste of scarce public resources and a breach of the public trust.
It is worth remembering also that such economic development policies are strictly pragmatic creatures. We seem to have approved the practice out of a sense of necessity and despite its conflict with core values under which we normally expect our government to operate.
Economic development practices violate the principle of equality. We expect the government to treat all similarly situated citizens even-handedly, but these incentives are delivered on an individualized, discriminatory, and markedly uneven basis. Indeed, the incentive must be discriminatory if it is to achieve its intended effect. Existing businesses are taxed for the purpose of subsidizing other businesses solely on the happenstance that the business to be subsidized has not yet arrived whereas the business to be taxed already has settled here.
We also believe quite firmly that the private sector should be distinct from the public sector. The process of creating economic goods through profit-making activities is reserved to the private sector. Our state constitution forbids the transfer of public monies to a private interest except incidental to the achievement of a sufficient public purpose. Yet, economic development incentives involve the government directly in the economy and very clearly transfer public monies to private hands.
Solely on the pragmatic ground that these principles must be subordinated to the overriding cause of stimulating private development, the community seems to have come to an uneasy accommodation between principle and exigency and thus to support economic development incentives. Yet it is only a few years since the proposal to subsidize Martin-Marietta to remain here was so controversial that the Volusia Manufacturers Association itself would not adopt a resolution supporting it. And it is but a few years more since the efforts to create what is now the Adams Mark property drew intense opposition from existing hoteliers.
Economic development, therefore, is heavily freighted with high public interest. The radical idea of directly subsidizing private business may have gained uneasy acceptance, but it remains a suspect compromise the execution of which warrants close scrutiny. We can justify this practice only when we understand that it has a clearly identified and concrete public purpose as its primary objective, we are assured there is a reasonable expectation that this purpose will be substantially and effectively accomplished, and we are confident that the government retains sufficient control to assure that the public purpose is carried out.
Private Business Recruitment
The practice of extending governmental incentives is but a small part of the economic equation that brings new business to our community. Private business and private organizations must be deeply involved in the process as well. The governmental incentive operates at the margin of these factors. When I say the present conversation is about public business, therefore, I do not claim for the public domain any part of the private sector. I only draw the distinction between governmental efforts to recruit business and private efforts to recruit business.
As I have mentioned, our community greatly needs an enhanced and empowered private sector operation. And I think the first step toward empowering such an operation is making the sharp separation of private from public.
The Public Right of Access to Records and Meetings
As Applied to Economic Development Policies and Practices
Because the process of economic development consists of offering public incentives to locate private business prospects in our community, the process is intrinsically governmental, public, and political. Each relevant governmental agency must make broad policy decisions concerning the nature of businesses to be recruited and the kind and quantity of incentives to be offered. Then it must take concrete steps to implement this policy by soliciting candidates for the incentives, judging among these candidates, awarding grants of subsidies to businesses deemed appropriate, and enforcing the public purpose of the incentive through monitoring and oversight of the recipient. This is strictly governmental business, not private business.
In light of Florida's strong constitutional policy of open government, it should come as no surprise that this governmental business is fully subject to the open government laws. Under the Florida Constitution, "[e]very person has a right to inspect or copy any public record [and a right of access to] all meetings of a collegial public body . . . at which official acts are to be taken or at which public business of such body is to be transacted or discussed . . . ." Fla. Const., Art. I, §24. See Note 1 above.
Therefore, the governmental business of creating and implementing policies to attract industries through subsidies must be conducted in the public eye. All records concerning this business which are made or received by a governmental official are public records, and all meetings of two or more members of a collegial body at which such matters are discussed are public meetings.
It is the economic development process which is subject to open government laws. No amount of tinkering with the identity of the persons who carry out the functions comprising this process will alter the public character of the business they conduct. Therefore, the open government laws apply to ostensibly private organizations that accept the delegation of an integral role in the process of making decisions or that accept the delegation of economic development functions and perform them on behalf of government.
This is why it is a part of my central thesis that it is not possible to remove the economic development process from the Sunshine law. What we call economic development is simply making and implementing governmental policies concerning taxation, impact fees, expenditure of public funds, land use regulation, and other decisions affecting the quality of life of the community. It is vain to imagine that this segment of public affairs lawfully could be sequestered from public scrutiny. Thus efforts to avoid the bugaboo of Sunshine are doomed to failure--a waste of time and a needless distraction from pressing public business.
The integral role of VCBDC
This prong of my thesis can be brought home by looking more closely at the function of VCBDC. For several years the county government and most cities have relied largely on this entity to act on behalf of the county government in developing and implementing economic development policy for the countywide community. It was formed in 1986 on the initiative of County government for the principal purpose of coordinating the disparate economic development activities within the community. On the recommendation of Tom Kelly, the Council set aside a modest amount for the operating budget of the entity, and Kelly recruited a small group of business leaders from the principal regions of the county. It has grown significantly from that small beginning.
VCBDC has assumed the leading role in developing and implementing economic development policy in the county. The County now appropriates more than $300,000 to the operating expenses of VCBDC, and following policies recommended by VCBDC, the Council has appropriated millions of dollars to the Economic Opportunity Fund and provided by ordinance that VCBDC is the agency for distribution of this fund to private businesses.
Thus VCBDC is the officially recognized intermediary between county government and businesses seeking for official information and public assistance in expanding here or siting here. To a large extent it is also accepted as such by cities and other local agencies.
VCBDC performs several key functions that give it an integral role in the economic development process. It develops policy concerning the nature of business organizations to be recruited to the area, it actively markets the area to such targeted industry groups and solicits their interest in locating here. It receives and processes inquiries from recruited (and other) prospects, investigates their suitability for assistance, and determines whether or not the business will be offered incentives. Then it puts together a package of incentives that may involve county and city government participation (as well as other levels of government). Ultimately, it presents the prospect and its proposed incentive package to the participating governmental entities and recommends their approval.
In this process, a key implement of recruitment is the EOF. VCBDC's primacy in the award of grants from this fund strengthens its hand in the recruiting process and lends substantial credibility to its status as the officially recognized business recruiter for the countywide region.
The critical factor of its success has been its officially recognized hegemony over economic development practice. It was organized for the specific purpose of integrating and coordinating the disparate and often conflicting development activities of the cities and organizations around the county. The core assumption on which it operates is that economic growth in any area of the county, however advantageous it may be for the particular locale, is good for the entire countywide region because it elevates the county tax base and generates economic activity that will not be confined to any specific municipal jurisdiction. Conversely, when the many areas and organizations compete rather than cooperate in efforts to promote economic growth, the core assumption holds that each participant has far greater capacity to frustrate the efforts of its neighbors than to further its own interest. The competition becomes zero sum, as business prospects are chilled by the divisive effect of the competing recruiters, each of which is deadly effective in pointing out the competitor's defects.
Building on its officially recognized status, therefore, VCBDC performs an integral role in the decisions of our local governments to grant subsidies and concessions to businesses that locate here. Because governments rely on it for this role, the organization is able to speak with credibility to the business executive concerning what will (and will not) be available from government. As Drew Page puts it, "We are in the business of making commitments but not deliveries."
For convenience in referring to these aspects of the role played by VCBDC, I will call this the "integral role."
Sunshine law as applied to VCBDC
Because it performs this integral role in the governmental decision-making process, VCBDC comes squarely within the Sunshine laws. If there had been any question on this, the first opinion of the Attorney General concerning Hollywood Economic Growth Corporation ("HEGC") would have laid it to rest. Op. Fla. Atty Gen., 98-24 ("HEGC I"). In this opinion, which concerned the role of HEGC in administering a HUD Section 108 loan program, the Attorney General advised as follows:
HEGC's role in the HUD loan program involves three activities. First, the corporation will market the program under HUD guidelines in order to identify potential applicants. Second, HEGC will prequalify the eligibility of the applicants and their proposed projects. This will involve a certain amount of financial analysis being done by the corporation. Finally, HEGC will provide assistance to potential applicants in completing their applications and preparing those applications for submission to the city. [T]here is no question that HEGC will be acting on behalf of the city in undertaking these responsibilities: If HEGC does not market the HUD program to identify potential applicants, the city must do so, and if HEGC does not prequalify the eligibility of applicants and projects, the city must at some point screen these applicants to determine their eligibility for participation in this program. By accepting HEGC's offer of assistance, the City of Hollywood has, in effect, delegated to the corporation the authority to act on the city's behalf in the initial screening procedure for participation in the loan program. Such assistance will substantially benefit the city by streamlining the loan process. The corporation thus stands in the shoes of the city insofar as section 286.011, Florida Statutes, is concerned. To conclude otherwise would permit a significant exception to the Government in the Sunshine Law.
Under the present circumstances, VCBDC presents an even richer set of facts and circumstances that compel the same conclusion. It is acting on behalf of the County and of various municipalities in the process of siting and expanding businesses.
Since VCBDC is acting on behalf of government in both the formulation and implementation of governmental economic development policies, it must comply with the Sunshine law. Though VCBDC previously argued it was merely a private organization, VCBDC finally conceded last month that it is subject to the open government laws.
No sooner had it conceded that point, however, than it turned its efforts to avoidance of the laws. Judging from your letter, that seems also to be the objective of the Coalition.
Thus we are now in the midst of an incongruous discussion of how to make the economic development organization more compliant with public policy, more accountable to governmental oversight, and less visible to public scrutiny. I have said this effort is not only unwise but doomed to failure as a matter of law. Now I want to argue that the concern with the Sunshine bugaboo is overdrawn, misplaced, and unnecessary.
There is no valid reason why economic development
cannot effectively be practiced in the Sunshine.
The first prong of my thesis is that avoidance of the Sunshine laws is unnecessary. There is no valid reason why VCBDC (or any other such entity) cannot perform its function in full compliance with the Sunshine law. Historically, VCBDC principals have taken the contrary position. They argue that the Sunshine law frustrates the economic development mission, making it impossible for such an organization as VCBDC to achieve its purpose.
If this contention were valid, it would be a matter of serious concern. Since our community indeed agrees that governmental stimulation of the economy is necessary and desirable, it would be a great shame if the Sunshine laws actually thwarted this effort. In fact, if that were the case, it would be incumbent on our leaders to seek the passage of a statutory exemption. The constitution allows the Legislature to enact such exemptions if they are justified by a public necessity and are no broader than necessary to meet the necessity. Therefore it is quite important to ask whether it is true that Sunshine laws are thwarting our efforts to achieve prosperity for the area.
The answer is quite easily found. To begin with, the generalized objection to practicing economic development in the Sunshine must be dismissed as stemming from nothing more compelling than the instinctive dislike of oversight and supervision.(2) This is the same instinct that makes Sunshine laws a very good idea. Aside from the generalized complaint, however, VCBDC officials make three specific arguments that can be stated and considered on their merits. To show that avoidance of Sunshine is unnecessary, I now want to address the cogency of these contrary arguments.
Initial Confidentiality
One argument asserts the need for initial confidentiality of business relocation plans. A business that is considering a relocation wants to keep that plan confidential until a firm decision has been reached because of the adverse effect on employee morale that such uncertainty generates. At some point, of course, the business owes its employees notice of the impending move, which is in some cases required by law but in all cases required by fairness. Nevertheless, the process of searching for a new location and attending to all the details of the move necessarily takes considerable time, and business managers want to have a firm decision in place before notifying their workforce, vendors, and customers of the move.
Even though this is a purely private concern of the prospective business, it imposes a constraint on an entity such as VCBDC. Unless that entity can assure the prospect that its plans will be held in confidence, it will find that the prospect is often unwilling to engage in discussions. Thus in order to participate in this market, an economic developer must have the legal and practical ability to keep the plans confidential, and of course the public records and public meetings laws would deny that confidentiality if they applied at this point. Therefore, if Sunshine laws applied to this information, the economic developer would be severely hampered in performing its mission.
This is a valid argument for exemption from Sunshine. The need for confidentiality to enable the economic developer to perform its function is a public necessity that justifies a narrowly tailored exemption that fits the necessity. And there is such an exemption.
The exception is granted to entities known as "economic development agencies." These are defined as "any private agency, person, partnership, corporation, or business entity when authorized by the state, a municipality, or a county to promote the general business interests or industrial interests of the state or that municipality or county." Florida Statutes, Section 288.075. When requested in writing by the prospect, the "records of an economic development agency which contain or would provide information concerning plans, intentions, or interests of [the prospect] to locate, relocate, or expand any of its business activities in this state" are exempt from the public records law. Id. Once the exemption has been invoked, the government may not enter into a binding agreement with the prospect until ninety days after the information subsequently has been made public.
This exemption allows the prospect confidentiality while considering the decision to move. Once the decision has been made and a proposed incentive package is ready for public consideration, the ninety day waiting period allows the public the opportunity to assimilate and respond to the proposed package.
Two instructive corollaries can be drawn from the structure of this exemption. First, the inclusion of private organizations within the exemption demonstrates that the Legislature long ago recognized that organizations such as VCBDC are subject to the open government laws when performing their integral role in the economic development process. Second, the waiting period following public revelation of the proposed subsidy shows that the Legislature recognizes that the necessity for initial confidentiality cannot entirely override the public right of access. Before such a deal is finalized, the public must be privy to this information. Thus the exemption provides a recognizable balance of the competing interests.
Confidentiality of Business Records
Apart from their interest in keeping any plan to relocate secret, VCBDC principals argue that private businesses who seek EOF grants and similar subsidies have legitimate privacy interests in the business records which must be submitted in the process of meeting and performing the conditions of such grants. If these private business records must be disclosed under the public records laws, businesses will be deterred from seeking the grants. This deterrence exists regardless of whether the business is newly-locating to the county or is expanding an existing facility.
There is a kernel of validity to this concern. It makes the point that the disclosures required of such companies should not be overly broad or invasive of trade secrets or confidential business plans. I have been working with Ed Dunn as counsel for VCBDC to develop a more narrowly tailored approach to the disclosures required of EOF applicants.
However, this argument carries only so far. Actually, it is not true that disclosure of financial information by an entity seeking financing is destructive of business competitive footing. A glance at a typical prospectus filed by a publicly-traded company will show that public disclosure of financial information is a commonplace of capitalism. To be sure, the Coca Cola company does not disclose the recipe for its cola in its annual report, but it reveals all of that information that a properly designed disclosure requirement for EOF grants would reveal.
Ultimately, if a company wants to obtain public financing from the taxpayers, it must accept the requirement of public disclosure of relevant financial information, just as it would accept such disclosures if it were seeking financing in the capital markets through a public offering. Any argument that such disclosures would make business competition impossible or that it would betray the fiduciary duty of management to shareholders misses this point or imagines an unnecessarily overbroad disclosure.
In the end, the applicant must make a business decision as to whether the financial incentive is sufficiently valuable to justify the disclosures necessary to obtaining the assistance.
The Poker Metaphor
The third and last objection covers the broadest ground. It argues that when VCBDC is engaged in the process of negotiating an incentive package with a prospect, the terms of the negotiation must be kept secret in order to prevent potential competitors from knowing the terms of Volusia's offer. This argument holds that when information describing our offer is made public, the competitors are able to steal away the prospect by offering a better deal. Otherwise, and this is a critical part of the argument, the competitors would not know the prospect was "in play" and would not know what we have offered.
This is often drawn as a metaphor to the game of poker. Publicity concerning the terms of the offer is compared to disclosure of a poker hand to the competing players. The metaphor fits poorly. An apter metaphor would compare to an auction by sealed bids. If businesses were recruited by sealed bid, then the premature revelation of Volusia's bid would be obviously prejudicial. However, this process is not a sealed bid auction but an open competition for the partronage of a monopsonist. The proposal is given directly to the prospect, who is free to disclose that proposal to anyone he chooses, especially to the competition.
Ill-fitting though it may be, the poker metaphor seems to have captured the fancy of the proponents of the third argument. Larry Arrington is so fond of this metaphor that he has hung in his office a cartoon showing Volusia County playing economic development poker against neighboring counties while the press holds a mirror to show the other players Volusia's cards.
Despite the rustic appeal of the poker metaphor, this argument is fallacious to the point of absurdity. The economic development process is neither a game of bluff and chance, nor an auction by sealed bids. It is an open competitive process in a market distorted by monopsony.
The poker metaphor argument is infected with two specific core fallacies.
First, if the argument were credible, it would dictate that the economic development process should be conducted entirely in secrecy. Its logic would not allow the public to learn the terms of such an incentive package until both the county and the prospect were irrevocably bound. Until then, the opportunity for a competitor to avail of publicity concerning the offer and usurp the prospect continues. Therefore, if revelation of the terms of the offer entails a harm to the process, the harm is present at all times before the prospect is bound to contract. Thus the first problem with the argument is that it does not have within its logic an ending point. If we accept this reasoning, we must secretly contract to deliver incentives to business prospects and never open the matter to public scrutiny until the deal is done and public scrutiny is moot.
Of course, a policy that allows government officials to secretly bind the taxpayers to the deliver public subsidies to private businesses would not only be illegal but unacceptable. Neither the constitution nor the public would allow that. A moment of reflection on the Martin-Marietta episode should be enough to make that point.
But worse, the poker metaphor argument is simply confused. The only justification for offering public subsidies to private business is to create an incentive to locate or expand here. The premise of the incentive policy is that the private business owner is susceptible to economic motivation to make his move. We offer money, in other words, because we think we can "buy" the siting decision. If that premise is true, then it follows that the decision to site here is "for sale." And if that is true, then the person with the greatest incentive to tell the competition about the terms of our offer is the ONLY person the "poker metaphor" allows us to tell--the business prospect.
The premise of the poker metaphor argument is that the business prospect will not engage in comparisons of Volusia's offer with those of other communities to which it could relocate. The argument assumes that our prospects are not shopping our offer, are not playing our offer against others, are not aware of their market power as monopsonists.
Thus the poker metaphor argument implies its own contradiction. If the premise of the argument is valid--that the prospect can be enticed away from Volusia by a better offer from another community, then its conclusion is false--that the prospect will not shop the terms of our deal with other communities.
The poker metaphor argument is clearly illogical, which is enough to place it on the discard pile. Beyond that, the premise is empirically wrong. Any prospect that is managed by businessmen with sufficient acumen to merit our interest will be motivated to engage in comparative shopping to see if another community could offer a better incentive. That is the way business is done.
I have been told that on this point I wrongly assume our prospect would be so crass and unethical as to play our offer off against another. But only by forgetting the fundamentals of capitalism could someone truly think it would be unethical or immoral for a prospect to shop our offer. It is not that the prospect is unethical but that its ethical (and legal) duties run not to this community but to its shareholders. Management of the prospective company actually has a fiduciary duty to maximize the wealth of shareholders, and failure to shop the offer would breach that duty.
It would seem that this basic concept of business practice is a sophistication that our business recruiters ought to master.
Accordingly, the party with the greatest motivation to use the knowledge of our offer to generate a better offer from a competitor is the prospect itself. Once we tell the prospect what we will offer, the offer is not a secret any longer. If the prospect is allowed to know the terms of our offer, as it obviously must be, then there is no justification for keeping that information secret from the public. If and to the extent that the prospect is interested in competing offers, the prospect will obtain them.
The accommodation of competing interests
under the Sunshine law.
For these reasons, it is my conclusion that the legitimate interests in confidentiality associated with the economic development process can be comfortably addressed by the existing statutory exemption and by a certain modicum of circumspection in the disclosures required of prospects. I fully reject the poker metaphor argument.
We should also recall that one of the important functions of the incentives is the intangible value of demonstrating that the prospective business is welcome in the community. Given the fact that our community is unlikely to win a bidding war with larger and wealthier communities, in fact, the intangible function of the incentive is probably the most important function. If there is value in showing the prospect a welcoming face, it follows that public exposure of the incentive package is not merely harmless but actually beneficial. If the public responds positively to news of the prospect's intention to locate here and to the terms of an incentive to be offered, there is greater intangible value than could possibly be communicated in the secretive contriving that characterizes our present practice.
Comments on the BV Concept
This brings me at last to comments on the "Summit" conference and on the BV concept you described. I applaud the conference have no suggestions to change the agenda. Economic development is a complex problem because the growth we want results from the interaction of some factors over which we have some control and other factors over which we have no control. I hope the conference will develop a consensus on addressing the factors within our control.
The biggest factor within our control is the extent to which the communities and organizations in the countywide region effectively cooperate in development efforts. When Tom Kelly took steps to organize VCBDC about 15 years ago, his primary objective was to integrate economic development activities by creating an effective medium for cooperation among the competing cities, chambers, and similar organizations. A good question for consideration at the Summit is to what extent VCBDC has achieved that objective and how and along what lines cooperation might be improved. I am glad to see from the program that this seems to be a central theme.
You also asked for my comments on the "BV concept" for reorganizing VCBDC. As I understand the proposal, it would transfer to county officials all responsibility for administering the EOF, replace the existing private board of VCBDC with a mixed public and private board of various officials, and significantly reduce the role of VCBDC in the process of siting industries in the community.
The question of shifting administration of the EOF to the county should be considered independently of any Sunshine issues. To be sure, VCBDC has finally come to accept that whoever plays an integral role in decisions on grants of government funds to private businesses is acting on behalf of government. Whether a nonprofit entity or the county staff performs the function, it is government business that will be open to the Sunshine laws.
At the same time, it would be wrong to assume that VCBDC's role with respect to the EOF is the only reason that it is subject to the open government laws. Eliminating the EOF in itself would not change the present status of VCBDC as an agency of government. I think the BV concept recognizes this point because it not only would transfer away the EOF function but also would eliminate most other functions presently performed by VCBDC.
This stripping of functions is intended to bring the new entity within the purview of the second AGO issued with respect to HEGC. I previously discussed HEGC I, and now a second opinion concerning this organization is relevant.
After issuance of HEGC I, Hollywood development officials changed their story. The president of HEGC represented that its attorney had misunderstood and misstated its role, and so he gave the Attorney General a new set of facts on which to opine, and the General issued a new opinion. See Op. Fla. Atty Gen., 98-47 ("HEGC II"). Under the revised facts, HEGC merely counseled businesses and did not advise local government nor perform an integral role in the process. The stripped down role was described as follows:
HEGC does not act in an advisory capacity to a governmental unit that is subject to the Sunshine Law. Rather, HEGC appears to act primarily in the interests of private business concerns and the business community in advising them of the availability of opportunities of which they may take advantage, and in counseling them regarding their suitability to participate in these programs.
[HEGC] has not been delegated any authority to act on the city's behalf. The HEGC is not performing functions integral to the city's decision-making process in the HUD 108 program nor is the corporation advising the city on the acceptance of any participants to the program.
On these new facts, the Attorney General concluded that HEGC was not subject to the Sunshine Law as an agency acting on behalf of government when it was performing the restated functions with respect to the HUD 108 loan program.
For purposes of this discussion, I accept both opinions at face value and leave for another day the discussion of questions raised by the second and its curious provenance. The essential point of the opinion is that a private organization that does not in fact accept a delegated function from government nor play an integral role in decision-making process is not an agency of government within the meaning of the Sunshine Law. That much is elementary.
In the realm of economic development activities, it is not difficult to imagine a business development organization that would not be subject to open government laws. All that is required is a truly private organization that exists for the purpose of encouraging business development within a community. We have perhaps a dozen such entities in the county at this time, most of which are chambers of commerce. Of the typical chamber, it is accurate to say, as HEGC II said of HEGC, that:
[A chamber] does not act in an advisory capacity to a governmental unit that is subject to the Sunshine Law. Rather, [a chamber] act[s] primarily in the interests of private business concerns and the business community in advising them of the availability of opportunities of which they may take advantage, and in counseling them regarding their suitability to participate in these programs.
[A chamber] has not been delegated any authority to act on the [government's] behalf. [A chamber] is not performing functions integral to the city's decision-making process in [economic development grants] nor is the [chamber] advising [government] on the acceptance of any participants to the program.
Personally, I think it would be a great milestone if we could achieve a truly private countywide organization that would answer to the second description of HEGC. That would be a genuine countywide chamber of commerce or similar civic organization, and it would have enormous potential to bring about progress in our region.
The creation of such an organization might well be an objective that comes out of the upcoming meeting. I certainly hope it will be considered.
Even if we had such an organization, however, there would still be a need for some organization or entity to perform the "integral role" now performed by VCBDC, i.e. an organization that operated like the one described in HEGC I. Although the imagined civic organization could assume and perform those functions, it would then no longer be a truly private entity and would come within the Sunshine laws
More to the point of the present discussion, however, I do not understand the BV concept as such a truly private countywide organization. It contemplates a public/private entity that would succeed to the mission of VCBDC but without the capacity to perform the integral role.
Thus understood, I have two comments on the BV concept.
By stripping the new entity of those functions that comprise what I have called the "integral role" of VCBDC, I think the BV concept would render the new entity ineffective. In adopting the hands-off approach described in HEGC II, the concept eliminates the essential economic development function from the local landscape. At the same time, the organizational structure of the new entity would not answer the call for a truly private countywide chamber or civic organization devoted to economic growth. On this concept, I fear we would lose much that is useful and productive in the VCBDC operation and gain little in return.
What would happen to the integral functions? If no entity performed the integral role, in fact, there would be little prospect of effective economic development. Inevitably, some entity would perform them and thus be subject to the Sunshine laws. Moreover, if a governmental entity assumes these functions, the exemption for economic development agencies under Section 288.075 would not be available. The net result would be an increase, not a decrease, in exposure of the process to the Sunshine laws, including loss of the ability to protect the initial confidence of prospects.
There is a second concern arising out of the public/private nature of this organization. The "public" members of the governing body are public officials who would come to this board in the course of performing their official duties. Because of this, and without regard to the agency status of the corporate entity, the public records law will apply to any record made or received by the public members in respect to their duties on this board. At the least, this would make their copies of the minutes of meeting, handouts, and other documents distributed to board members subject to the public records laws.
This point may have been overlooked in the BV concept. From the penultimate paragraph on page 4 of your memorandum, I notice that you assume that membership on this board would give officials access to information that "will better prepare those entities to evaluate, respond, and make decisions on the support of economic development...." It should be obvious that such information is public record information.
If this at first seems inconsistent with the HEGC II, it will be appropriate to notice that this opinion deals only with the application of the public meeting law (the Sunshine law in its narrow sense) to the corporate entity. It does not address the distinct question of the public records law as applied to records of the entity held by public officials who sit, ex officio, on its board.
If the purpose of the BV concept is to avoid the Sunshine laws, that purpose would not be achieved so long as the board is includes public officials. Precisely that information which businesses want to keep confidential, wily nily, would become public record information.
On the basis of these concerns, I want to say that the BV concept is afflicted with a basic flaw. It strips VCBDC of its integral role in economic development solely for the purpose of avoiding the Sunshine laws, and then it seeks to escape the consequences of that decision by creating a "public/private" board that unwittingly brings these laws back into play.
The BV concept is quite useful as an example of how the attempt to avoid Sunshine ends up by degrading the practice we are trying to improve. Still it is a useful counterpoint, and I hope you will agree that it is a point of departure for considering new direction.
New Directions
My suggestion for a new direction in the organization of economic development efforts was mentioned earlier, and the same suggestion has been made to VCBDC in previous discussions. I think we need to move in a parallel fashion along two courses.
First, the countywide community needs an economic development corporation to act on behalf of government in the formulation and implementation of economic development policy. This organization would perform what I have described as the integral role. In theory, the entity could be a governmental body or the creature of an interlocal agreement among governments, but I think the corporate form is best suited for this entity. That will give it the powers and relative autonomy of a corporation. Also, the exemption for initial confidences under Section 288.075 is not available to a department of city or county government.
At the same time, however, by abandoning the false goal of avoiding the Sunshine laws, local governments will be free to structure this organization in a way that more effectively integrates the governmental economic development efforts and preserves accountability and oversight as appropriate for a key agency of government.
This entity would correspond to VCBDC. Though I think VCBDC should be reformed to assure compliance with Sunshine and accountability, I know of no reason why it should not continue to be the economic development agency of our countywide region. The reforms that are most essential involve the frank acknowledgement that the corporation is an "agency" of government for purposes of the Sunshine laws. With that acknowledgement, we will then see now to penetrate the veil and institute such controls, oversight, and accountability as is appropriate.
The policy-making role should be opened up to the public, and the questions of what kinds of industries we recruit, what wage-levels we require, what incentives we will grant, and what controls and monitoring we will require should be put on the table before the public and decided as the public policy questions that they are. At the level of policy-making, these decisions should be made by the governing bodies of the participating governmental bodies. This is public policy. The economic development corporation should play a clearly advisory role and then should implement the policies under effective oversight and accountability.
Regional cooperation continues to be an essential condition of development. To that end, the integrating role of VCBDC among the county, cities, and other economic development organizations should be strengthened. This might suggest that the governing board be enriched with ex officio representatives of the county and other local governments as well as other private groups whose efforts should be coordinated.
In a post-bugaboo era, it will be possible to freely populate the board of the VCBDC entity with public officials and to clearly and officially proclaim its official status as the lead agency of the countywide region. Strengthening its official status as the clearinghouse of all such activity in the countywide region should contribute to greater effectiveness, provided this can be achieved within a context of consensus among the many disparate interests that must be melded.
Second, the countywide community needs a truly private civic organization devoted to the promotion of sound economic development of the community. We have many chambers and committees around our community, but we do not have a single countywide organization. We need that. Perhaps the Coalition could spark the creation of such a body because it certainly exists as a possible precursor at this time.
The key distinction is between the public and the private. We should not conflate the two. The activities of truly private organizations are not subject to the Sunshine law. Rather, such organizations benefit from the fact that the Sunshine law allows them access to the workings of government and thus the ability to influence those workings.
Creating a truly private countywide civic organization devoted to sound economic development is regarded by many as an impossible task. My experience with Volusia Vision makes me more optimistic. The pessimistic line of thinking inevitably leads to the top-down approach of the "public-private" model, where a group attempts to legitimize its voice as that of the community through association with public officials. There is nothing wrong with the public-private model, and in fact the reforms of VCBDC might add public members to that board.
The problem arises, however, when we attempt to treat the public-private body as if it were private. If we lack the civic energy to move beyond dependance on government to spur the creation of groups that are essentially intended to be private and civic in nature, then we should accept the fact that the community lacks an effective private sector on the countywide level. Then when we lean on the government as a substitute, we must understand that the result is a governmental entity, and not a private entity.
I would not accept that fact willingly. I want to believe there is within the countywide region sufficient civic energy to coalesce into an effective and truly private business organization.
A healthy private sector should spawn private organizations that are necessary to support economic development. As a matter of fact, the Coalition comes far closer to realizing this goal than does the BV concept. Perhaps attention should be paid to how to nurture the Coalition itself into the countywide private body.
Conclusion
I certainly appreciate your efforts to improve our local community, and I hope that my comments here are accepted in that light. While I cannot find the answer to our concerns in the BV concept, I have found the concept provided a very useful and challenging opportunity to organize and develop the thoughts expressed here.
I look forward to continuing our discussion of Sunshine and economic development at the seminar next Friday.
Kind regards.
Sincerely,
Jonathan D. Kaney Jr.
JDK:kp
1. 1Floridians enjoy a constitutional right of access to public meetings and public records. Fla. Const., art I, § 24. Although this constitutional right is self-executing, it is chiefly implemented through the open government statutes known as the Sunshine Law and the Public Records Law. See Fla. Stat. § 286.011, (requiring meetings to be held in public); Fla. Stat., § 119.07 (granting access to public records). These laws were enacted in the public interest for the protection of the public and must be broadly construed to effect their remedial and protective purposes. Canney v. Board of Public Instruction, 278 So. 2d 260 (Fla. 1973). The open government laws are to be construed liberally to frustrate all evasive devices. Wood v. Marston, 442 So. 2d 934 (Fla. 1983). In keeping with popular usage, I will refer to the open government laws collectively as the "Sunshine laws."
2. 2In this category, we can place the objections raised by VCBDC to allowing public access to the job evaluations of its key executives. There is simply no reason connected to the effectiveness of the economic development mission that justifies that objection.
