Regional economic development group's meetings will be private, members say

Nathan Baker • Updated Nov 25, 2017 at 11:28 PM

Regular meetings of a three-county group tasked with shaping the economic growth of Northeast Tennessee will be members-only, limiting discussions to select government officials and the business representatives who pay thousands of dollars to take part.

The Northeast Tennessee Regional Economic Partnership receives more than $500,000 yearly from taxpayers and public utility ratepayers in Washington, Carter and Unicoi counties, but Ron Scott, chair of the organization’s board of directors, said its “investors” — the private business representatives who pay membership dues — desired more confidentiality to discuss marketing and prospective businesses new to the area.

Under the new regional economic development model, according to Scott and Mitch Miller, the CEO of the new nonprofit organization, members of the partnership’s board of directors will meet monthly in private to discuss its programs and marketing efforts. Members of the media would be invited to quarterly meetings where the board and its staff would give them updates on the organization’s activities.

The two men said neither the partnership’s staff, nor its board of directors will negotiate tax incentives with companies. Instead, they’re asking the existing public joint economic development boards in each county to approve a set list of weighted incentives the partnership’s staff can show to prospective businesses.

When a company decides to enter into negotiations, it will be handed off to the mayor of the county under consideration, they said.

Miller and Scott said taxpayers’ interests will be represented on the partnership board by public officials — the mayors of each county, a representative from municipal governing boards and a person from the three public economic development boards.

For that representation, last year Miller said Johnson City and Washington County will each contribute $175,000 to the partnership; Jonesborough will pay $7,000; Unicoi County, Erwin and the Town of Unicoi will jointly pay $50,000; Carter County will pay $40,000; and Elizabethton will pay $35,000. The Johnson City Energy Authority pledged more than $80,000 to the partnership.

Private businesses buy memberships in the partnership based on multi-tiered membership rates. According to the partnership’s bylaws, all memberships will cost at least $15,000 by 2018.

Scott said the new structure, which allows for private meetings, is an advantage over the required public meetings of each county’s joint economic development board, because prospective companies’ names can be openly discussed.

“The advantage is that people aren’t going to do business with this region if they’re concerned that their name’s going to be public during the interim pieces,” he said. “You’ve got the issues of staff getting concerned and things like that with relocations.”

In economic development, Miller said there’s a time for secrecy and a time for public discussions.

“From the economic development side, confidentiality does matter a lot,” he said. “I’ll be the first to say that. I understand and appreciate the press’ role in covering what goes on in this community, I do. From the perspective we look at it with confidentiality, though, in the early on stages as we market, as we bring folks in and talk about the opportunities to do business here, there’s a reason to keep some of that stuff behind closed doors, but as it moves forward, we hope that brings more opportunity to conduct business in a public setting.”

In the past, Miller, as the CEO of the Washington County Economic Development Council, has advocated for confidentiality in economic development, but ultimately was forced to deal in the open by Tennessee’s open records law.

In 2015, he and Washington County Mayor Dan Eldridge pushed for the County Commission to approve an incentives package for a business operating in the area, but they refused to reveal the name of the company.

After commissioners, some of whom did not know the company’s identity, voted the incentives through the committee process, a public records request filed by the Press under the Freedom of Information Act forced Eldridge and Miller to turn over public emails naming Dentsply, a Johnson City manufacturer, as the beneficiary of the incentives.

Earlier this year, as work continued to form the Regional Economic Partnership, Miller withheld public records showing Johnson City’s NN Inc. failed to meet its job creation requirements stipulated by a contract for tax incentives until after the city’s Industrial Development Board met to vote to recommend the contract’s timeline for job creation be changed.

Scott acknowledged transparency “mishaps” in the past by economic development groups, but said separating the government and private business should prevent them.

“Our goal is to walk the walk and show that we can do this right with transparency, without the mishaps that we’ve had in the past,” he said. “Some of those mishaps are growing pains. We went from a very different guy who started this thing out in 2010, Reynolds, then we brought Mitch in, and he’s developed his position very well, but we’ve made a lot of mistakes, and we’re very self-aware of that, and we’re trying to learn from them.”

He said the organization’s new website, which is still under construction, will include a public documents section detailing approved tax incentive and other economic development agreements.

Is it legal?

As a nonprofit corporation organized under section 501(c)(6) of the Internal Revenue Code, the Regional Economic Development Partnership is in the same tax exempt category as chambers of commerce organizations, business leagues, real estate boards, boards of trade and professional football leagues.

The group’s attorney, Steve Darden, said because it wasn’t created or authorized by an act of a local legislative body, the partnership isn’t covered by state open meetings and records laws, despite receiving a significant portion of its funding from public sources.

“I’m just telling you it was not created by a governmental body and it’s not a public body,” Darden said before declining to further discuss the legal reasoning behind his opinion. “Analyzing NeTREP and its creation, its competition and its function, it wasn’t created by government, and it’s not a governing body.”

Under the state’s open meetings law, governing bodies must allow members of the public to attend. The statute defines a governing body as “(t)he members of any public body which consists of two (2) or more members, with the authority to make decisions for or recommendations to a public body on policy or administration.”

In an Attorney General’s opinion issued in 2003 questioning whether a Unicoi County Economic Development Board formed independent of the county commission was subject to open meetings and record laws, the attorney general found the board was not a public body under the state Supreme Court’s definition, which requires public bodies to originate with state, city or county legislative action.

In that same opinion, the attorney general said if more than two public officials from one public body meet to discuss business pertaining to the body, it is a meeting of a governing body.

For the past few months, the Regional Economic Partnership’s founding board members have met, more than five of whom are shared with the Washington County Economic Development Council’s board, which does fall under the Open Meetings Act.

Darden said the act was not violated when the Economic Development Council members met, because they were discussing Regional Economic Partnership business.

Deborah Fisher, executive director of the Tennessee Coalition for Open Government, a state advocacy organization, said avoiding open meetings requirements isn’t quite as cut and dry.

If the Regional Economic Partnership is acting as a functional equivalent of government, it could be a public body.

In April, a Tennessee appeals court found a nonprofit economic development organization was subject to open meetings laws after the court applied a four-part test for functional equivalency established by the state Supreme Court.

“They looked at four factors: the level of government funding, whether and to what extent it performs a government function, the extent of government involvement with regulation of or control over the entity and whether it was created by government.

“No single one of these factors is required. It has to be some combination of them, and as a whole, they weigh all of the factors.”

In that case, which centered on the Jefferson County Economic Development Oversight Committee, the appellate court said the organization did meet enough of the test’s four parts to be considered a functional equivalent of a governmental body.

In an email, Darden pointed to the last factor of the test, that it was not created by legislative action, to exclude the Regional Economic Partnership from open meetings requirements. He also said the court in the Jefferson County case found evidence of decision making by the board that indicated it was performing a governmental duty.

“Those are very important distinguishing factors that differentiate NeTREP from the organization being considered by the Tennessee Court of Appeals in the Jefferson County case,” he wrote.

In June 2016, the Carter County Commission, the legislative body for the county, did vote to “approve our membership, namely Carter County’s membership, the twenty-four (24) member Commission body representing Carter County, in the Regional Partnership proposed by Washington County.”

Whether the action constitutes a creation or delegation of authority by the legislative board may be an issue for a court to decide, if the regional partnership’s status is challenged.

Fisher said she believes the court’s decision makes it more difficult for nonprofit economic development groups to operate in secrecy in the state using taxpayer dollars.

“Here you have some individuals who have a track record of secrecy in economic development,” she said. “The way they’re setting it up, now economic development recruitment of three counties is not subject to open records and public meetings law.

“Yes, I would be concerned. I think that there’s a real question on whether they’re right about that law.”

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