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Leaders still can't decide if 3-county economic group will be open to public

Nathan Baker • Jan 7, 2017 at 10:48 PM

Local officials building a tri-county economic development organization say they still haven’t taken the time to consider whether the group’s meetings and records will be open to the public, though some leaders question whether it’s legal to keep them behind closed doors.

This week, six months after first asked by a Johnson City Press reporter if the proposed Northeast Tennessee Regional Economic Development Partnership would be required to hold open meetings under state sunshine laws, Washington County Economic Development Council CEO Mitch Miller, NETREP’s originator, and Steve Darden, its attorney and architect, said it’s still too early to know.

“Between the holidays, and trying to get this thing off the ground, we’ve mostly been getting out and talking to potential partners in the private sector,” Miller said Wednesday. “I haven’t talked with Steve to see if we’ll be able to have public meetings.”

Miller said the group of politicians, economic development officials and business representatives in Washington, Carter and Unicoi counties seeking to found the partnership are waiting until the Internal Revenue Service approves the organization’s 501(c)(6) nonprofit status before holding a meeting to discuss the legalities of open meetings and records.

In August, Darden submitted draft bylaws for the organization to the IRS with an application for nonprofit status. The group hoped to receive approval before the end of 2016, but Miller said the process is taking longer than expected.

Miller said he now expects an answer from the agency by the end of the month.

A 501(c)(6) organization is not considered a governmental body like the current economic development groups operating in each of the counties forming the partnership.

Under Tennessee Public Chapter 1101, each county in the state is required to designate and maintain an economic and community development board to foster communication between government and businesses within their jurisdictions. The 1101 organizations are required to meet quarterly, and their meetings and records are subject to sunshine laws.

Once the NETREP is formed, each of the three counties’ 1101 organizations will still meet at least four times a year, according to Darden, but their actions will be subject to recommendations from NETREP. Most of the Washington County Economic Development Council’s staff will transfer to NETREP to perform functions similar to their current duties once it’s officially formed.

Different from the current economic development groups required by the state, 501(c)(6) is a federal tax designation applied to business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues. In many cases, such nonprofit groups’ meetings and records are not required to be open to the public.

In 2014, in the midst of a drawn-out legal fight concerning whether Greene County leaders acted appropriately in approving a US Nitrogen fertilizer plant, Chancellor Douglas T. Jenkins ruled the Greene County Partnership, a group of public and private members formed in 1993 under IRS section 501(c)(4) to drive economic development in the county, was not a governmental entity and not subject to Open Meetings Act disclosures. The group was dismissed from a lawsuit seeking information about the deal to build the plant in the county.

Like the Greene County Partnership, the Northeast Tennessee Regional Economic Partnership will include representatives from both public and private spheres to influence and direct business activity in the region.

On Thursday, Darden said deciding whether NETREP’s meetings will be open was “down on the priority list,” behind securing membership donations from area businesses and governing bodies.

“It’s still premature for me to comment, I haven’t rendered a legal opinion on that yet,” he said. “I’m not sure when the client wants that done.

“At the appropriate time, we’ll be very happy to share with you what the determination is, but it’s still premature,” Darden continued. “I don’t really want to answer any more questions about it. When we have come to a point when the client is asking for an opinion, we’ll let you know.”

Johnson City Commissioner Ralph Van Brocklin, who, as mayor, represented the city on the Washington County Economic Development Council during its conversations to create the partnership, agreed that none of the meetings discussed NETREP’s open government requirements.

“But I assume we will continue to hold them open,” he said. “I don’t know if they could be closed and not run in violation of the open records law.”

Van Brocklin said he believes it’s important for residents to be able to understand what economic development groups are attempting to accomplish. The way to achieve that, he said, is by being transparent.

“It will impact everybody in these communities,” he said. “I don’t think it’s a good idea to have closed meetings, there’s nothing to be gained in doing so.”

Unicoi County Mayor Greg Lynch, currently a member of the Unicoi County Joint Economic Development Board, the county’s 1101 organization, said he believes NETREP will follow all applicable laws.

He believes there are situations when private deliberations might be beneficial, however, like when the group is attempting to recruit new businesses to the area.

“If you have to open up everything you do to the public, you wouldn’t have any advantage over other other jurisdictions,” he said, saying many private businesses value privacy.

“If there’s a clause in there that protects the potential industrial recruitment, I would hope the public would be gracious enough to accept that, and the press as well.”

Lee Brown, Chairman of Unicoi’s EDB, likewise said privacy can be important for securing large employers.

“I have had to sign non-disclosure agreements in the past,” he said. “Companies are very sensitive about people knowing about their business and when they’re ready to tell people about what they’re planning to do. By making it public, it could destroy a project.”

Miller and Washington County Mayor Dan Eldridge voiced similar concerns in 2015 while requesting approval for a $1 million incentive package from the Washington County Commission to keep manufacturer Dentsply — and its 200 jobs — in Johnson City.

Citing a signed nondisclosure agreement, which turned out to be an email in which a company representative asked for discretion, Miller and Eldridge kept the company’s identity a secret through the incentive approval process, despite questions from commissioners and members of the public.

The company’s name wasn’t revealed until several Freedom of Information Act requests made under the state’s open records laws forced the officials to turn over hundreds of emails related to the deal. Taxpayers learned the company’s identity shortly before commissioners voted to approve the deal.

Though Miller and Eldridge fretted over the ramifications of revealing Dentsply’s intentions before the money was spent, the company still agreed to carry out the lease agreement with the county.

Whether Miller and Darden have considered NETREP’s Sunshine Law requirements or not, the amount of public funding going to the partnership may give them little to consider.

According to Miller, Unicoi County’s EDB pledged $50,000 to the partnership for a full year’s membership. Desiring to contribute separately, the Elizabethton City Council pledged $35,000 and the Carter County Commission committed to $40,000. Most of Johnson City’s, Jonesborough’s and Washington County’s contributions to the WCEDC will go to the partnership, although some will be left back to the 1101 organization for audits, fees, notices and other housekeeping items. Those contributions are $171,206 for both the city and the county and $7,000 from Jonesborough. The Johnson City Power Board has pledged $82,228 to the partnership.

If all counted, the combined $556,640 could push the partnership over a threshold in the state’s open government law requiring “board meetings of a nonprofit corporation that receives dues, service fees or any other income from local government officials or such local governments that constitute at least thirty percent of its total annual income” to be open.

Since the spring, consultants have been working to secure pledges for the partnership toward a goal of $5.5 million over five years, or $1.1 million annually.

Miller said the public contributions are counted in the $1.1 million goal, which would put them well over the 30-percent mark — even over 50 percent — for requiring public meetings.

Still, until Miller and Darden decide the time is appropriate, their plans for transparency for the organization will remain unclear.

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