August: ‘Quasi-public’ does not mean ‘private’

2004 Columns

Wisconsin’s open meetings law does not mince words.”The public,” it declares, “is entitled to the fullest and most complete information regarding the affairs of government as is compatible with the conduct of governmental business.” Some Wisconsin communities, however, are seeking to avoid this clear mandate through the use of quasi-public entities funded with public dollars. A case in point is the city of Beaver Dam.

In 1997, Beaver Dam formally privatized its economic development department, replacing it with a new entity, the Beaver Dam Area Development Corporation. The purpose of this development corporation is to engage in economic development activities in the city or on land that could become part of the city. All of its funding comes directly or indirectly from the city. It receives 90% of Beaver Dam’s room tax, including money that used to go to the city’s water ski team.

The development corporation also gets city money to loan out for “development incentives”; it can spend the repaid loan money as it pleases. The corporation uses the city’s phones, copy machines, fax machine and postal meter, and gets free clerical support. It does not have to pay rent for its executive director’s office for the next 20 years.

But the development corporation claims it is independent of the city. As a private corporation, it closes its meetings to the public and keeps its records private and unavailable for public inspection.

In early 2003, the state Department of Commerce asked 14 Wisconsin communities to compete for an anonymous company’s large development project. The executive director of Beaver Dam’s development corporation took the lead role in wooing what ended up being a proposed Wal-Mart distribution center.

For at least a year, the development corporation worked on a secret deal between the city and Wal-Mart. The retailer was promised almost $6.2 million in financial incentives and the city was obligated to seek $500,000 in state funds for infrastructure. The development corporation also drafted land options for the site Wal-Mart wanted. (The agreement obligated the city to reimburse Wal-Mart $4 million for lands it would be buying from a private company, whose president, curiously, served on the board of the development corporation until after it offered Wal-Mart the $6.2 million incentive package.)

The taxpayers of Beaver Dam first became aware of the city’s deal with Wal-Mart on Oct. 30, 2003, the night the city council received and quickly voted to approve what its development corporation had negotiated. Some of these taxpayers, outraged at being kept in the dark about the city’s costly deal with Wal-Mart, formed “Citizens for Open Government,” which hired my law firm to challenge the project and its approval process.

Later, when the city held required public hearings on the rezoning and annexation petitions Wal-Mart needed to build its distribution center, several members of the public demanded that the city explain what was going on and how the distribution center might affect their interests. The mayor responded by saying that the schedule for Wal-Mart’s approvals, drafted by the development corporation, did not allow for questions and answers.

While not universal, the practice of creating quasi-public development agencies to bypass public scrutiny is not limited to Beaver Dam. Last year, the chair of Horicon’s Community Development Authority told me that his agency was created to “funnel” projects through the approval process, since it does not have to comply with the open meetings law. At least, he did not think it had to comply.

Beaver Dam went one step further by making its development arm officially private. But creating a private shell for a public office with public functions does not make public business none of our business.

On July 19, after receiving a complaint from the Citizens for Open Government, state Attorney General Peg Lautenschlager filed suit against the Beaver Dam Area Development Corporation, saying it is a governmental body or quasi-governmental corporation within the meaning of the open meetings law. In a press release, Lautenschlager noted that a government agency “cannot ‘spin off’ a private entity . . . then consider itself above the state laws that ensure the public has open access to the public’s business.”

If the court agrees and makes the development corporation accountable to the people of Beaver Dam, it will send an important message to all of the other quasi-governmental organizations in Wisconsin that take public money and do public work but act as if they are above public accountability.

Your Right to Know is a monthly column produced by the Wisconsin Freedom of Information Council, devoted to protecting public access to meetings and records. Diane L. Milligan is an attorney for Garvey & Stoddard, S.C., which represents Citizens for Open Government.