Call to Order and Roll Call
The second meeting of the Interim Joint Committee on Local Government was held on Wednesday, July 26, 2017, at 10:00 AM, in Room 154 of the Capitol Annex. Representative Michael Meredith, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Representative Michael Meredith, Co-Chair; Senators Ralph Alvarado, Denise Harper Angel, Christian McDaniel, Morgan McGarvey, Dorsey Ridley, Albert Robinson, Wil Schroder, Dan "Malano" Seum, and Damon Thayer; Representatives Danny Bentley, George Brown Jr, Ken Fleming, Kelly Flood, Toby Herald, DJ Johnson, Kim King, Adam Koenig, Stan Lee, Brian Linder, Jerry T. Miller, Robby Mills, Phil Moffett, Steve Riggs, Rob Rothenburger, Attica Scott, and Arnold Simpson.
Guests: Representative Dan Johnson, House District 49; J.D. Chaney, Kentucky League of Cities; Christine Upton, Kentucky Municipal Clerks’ Association; Shellie Hampton and Rich Ornstein, Kentucky Association of Counties; Eric Kennedy, Kentucky School Boards’ Association; Robin Kinney and Tracy Goff-Herman, Office of the Commissioner of Education; Jody Maggard, Perry County School System; Commissioner Sandra Dunahoo and Neil Cornett, Department for Local Government; Commissioner Terry Manuel, Jim Cundy, and David Kirkpatrick, Department for Libraries and Archives; David Thompson and Ashley Pack, Kentucky Press Association; Marc Wilson, Top Shelf Lobby; Commissioner Steve Milby, Duane Curry, and David Startsman, Department of Housing, Buildings and Construction; Jack Couch, KIPDA; Vince Lang, Kentucky County Judge/Executives Association; Bill May, Kentucky County Clerks’ Association; and Judy Taylor, Lexington-Fayette Urban-County Government.
LRC Staff: Mark Mitchell, John Ryan, Joe Pinczewski-Lee, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Flood, seconded by Representative Rothenburger, the minutes of the June 28, 2017 meeting were approved.
Local Publication Requirements
Mr. J.D. Chaney, Deputy Executive Director of the Kentucky League of Cities (KLC), said that the League is interested in finding the most cost efficient and effective way for local governments to publish required notices and appreciates working with Mr. David Thompson of the Kentucky Press Association. There must also be an effective way to engage the public and find the right balance. The Program Review and Investigations Committee compiled a report on the costs and policy considerations for state-mandated local public notices. He encouraged members to read the report.
Ms. Christine Upton, President of the Kentucky Municipal Clerks Association (KMCA), said that the KMCA feels strongly that KRS Chapter 424 should be updated to incorporate modernized strategies for informing the public. More individuals in Kentucky have access to the internet than who subscribe to the local newspaper. The newspaper in Hopkinsville, with a population of 32,000, has 6,500 subscribers some of which do not live in the city. In the first six months of 2017, the City of Hopkinsville’s website has been accessed by over 53,000 users and has had almost 163,000 page views. It seems it is not only more economically feasible to notify the public via the governing body’s website, but it also provides notification to a larger audience. The public is beginning to expect cities to use their website, as well as other social media avenues, to inform the public.
Each 8.5 x 11 printed page of an ordinance costs the City of Hopkinsville approximately $200 to publish. Most ordinances are more than one page. Because of this cost, cities often elect to publish ordinances in summary which gives a more narrow scope of the law to the public than publishing the full ordinance. The City of Hopkinsville averages $15,000 a year in required publication expenses, which may not seem like a lot of money compared to the city’s overall budget, but to smaller cities it is.
Regarding the statutes that address rates that newspapers can charge for publication of public notices, KRS 424.150 indicates public agencies shall be charged the lowest rate generally charged for advertising, KRS 424.160 indicates the rate shall not exceed the lowest non-contract classified rate paid by advertisers. Additionally, volume discounts given to commercial customers shall be extended to public agencies. Since newspapers’ records are confidential, there is no way to verify that newspapers are charging their lowest rates as required by statute. The City of Hopkinsville often receives publication proofs and quotes that seem excessive in cost compared to other publications it has had in similar size. It is not unless the city points that out that it is offered a lower rate.
The purpose of KRS Chapter 424 is to provide notice to the public of legislative activities. There are no cities opposed to providing the public notice, and KMCA fully supports transparency. KMCA would like to do it in the most cost efficient and effective way.
Representative Meredith said that the Program Review Committee’s report could be viewed on LRC’s website, or staff could send a copy upon request.
Ms. Shellie Hampton, Director of Government Relations with the Kentucky Association of Counties (KACo) said that the areas for which a county is mandated to publish in a newspaper include financial statements; budgets; bids, leases, and non-professional contractual services; local administration regulations; taxes; election ballots; delinquent property tax lists; invitations to bid on bonds; ordinances; audits; and notice of public hearings. While the means by which counties carry out their duties continue to evolve, statutes keep counties reliant on forms of communication that are not always timely for the people or the press. The explosion of social media options, including Facebook and Twitter accounts operated by newspapers, have changed the way information is released by not only the press, but also by elected officials, and has changed the way it is absorbed by the public.
Counties are not suggesting that they should turn solely to digital forms of public notice. A deeper look into the blending of both published and digital content would recognize current and future trends and practices of public information consumption, while maintaining good stewardship of tax dollars entrusted to county governments. During the last few legislative sessions, attempts have been made to do that blending. In 2014, SB 101, sponsored by Senator McDaniel, would have allowed for the option to post public notice content online instead of purchasing newspaper space. Senate Bill 101 would have required one ad detailing the subject matter, noting the website where the full document could be viewed, and listing a phone number of the local government for any questions. The website would have been maintained by the local government or a third party under contract to provide electronic notices. The ad on the website would have been available for a set amount of time, and the bill would have required proof of the posting.
KACo is ready to work with the stakeholders to continue to provide timely public notice in hopes of engaging its constituents at the local level.
Mr. Eric Kennedy, Director of Governmental Relations with the Kentucky School Boards Association (KSBA), said that the cost of publishing notices in the newspaper is a concern for KSBA because it represents school boards, which are elected to manage the affairs of the communities’ schools. Among the most important duties of school board members is to properly, effectively, and transparently use the state funds appropriated by the General Assembly and to provide educational opportunities to children. To supplement state support, school boards also have tax levying authority to raise additional funding locally.
Since 2008, the split between local support and the SEEK formula has shifted significantly. While the SEEK has been largely protected from budget reductions, school costs have increased causing local school boards to increase local school taxes to generate the necessary funds. Pension costs will increase next year, and absent comprehensive tax reform that brings in additional revenues, KSBA understands that all government programs will be faced with budget cuts, possibly even SEEK.
The KSBA supports 2017 SB 118, a proposal which the KSBA hopes will pass the next session of the General Assembly. SB 118 would have codified what was the practice for over a decade through budget language, which was to allow the annual financial statement to be posted on the school district website in lieu of newspaper publication. A survey of school district expenses before and after the budget language was vetoed for last year, demonstrated that publishing the information in newspapers cost school districts statewide almost $600,000 more. In light of the “perfect storm” of financial stress districts are under, this money simply must be used in the classroom.
The KSBA is asking the legislature to help as school district leaders find every possible efficiency that can be used to free up every cent it can to provide educational services. KSBA has met with the Kentucky Press Association (KPA) to find ways to make the annual reports costs as low as possible. The KSBA is grateful for KPA’s help and has sent KPA’s suggestions to all school districts for the reports that will soon be appearing in the local newspapers.
At the same time, KSBA believes in taxpayer transparency over use of tax dollars. Many issues that are possibly of concern with internet notice only are not as much of an issue for schools. Every school district in the state has a website, which follows a standardized web address format and is subject to state and federal restrictions for accessibility. Many types of legal information are already required to be posted on the websites, and, in fact, the annual financial report is also posted online now along with monthly detailed financial information. The posting online is in addition to newspaper publication. If school districts are allowed to present information on the internet, it will allow for adequate and transparent public notice just as it did during the many years it was allowed through budget language.
Senate Bill 1, which passed unanimously during the 2017 session of the General Assembly, contained a similar provision that was codified into law for the school report card, which until that time was also to be published in the newspaper but was subject to the same budget provision allowing for internet posting. School districts were required to publish the report card in the newspaper for last year, but KSBA is grateful for SB 1’s provision for the full report to be posted on the internet. Senate Bill 1 will allow school districts to save money to be used for the students in the classroom, and KSBA hopes a similar change will be made for annual financial reports and other notices.
Ms. Robin Kinney, Associate Commissioner of Finance and Operations with the Kentucky Department of Education, said that the flexibility for publishing annual school financial statements afforded in budget language was the right thing to do. It was efficient and satisfied the local constituents. The vetoed budget language required returning to the previous standard of newspaper publication.
Mr. Jody Maggard, Finance Officer for the Perry County School System, noted a sharp decline in unmined minerals tax revenue. The Kentucky Association of School Business Officers (KASBO) conducted a survey of the school districts to obtain the cost of publication of financial statements from 2015 to 2016. In 2015, school districts paid a total of $28,945.38 to advertise the school district’s financial information which is an average of $174.37 per district. In 2016, school districts paid a total of $267,284.22, an average of $1,610.15 per district not including Jefferson County. Publishing the financial statements will cost Jefferson County school district in excess of $500,000 in 2017.
School districts are in no way advocating for a lack of transparency. Each school district has a website, uses social media, and has open board meetings, with availability for the public to speak on any matter that is of concern. The Program Review Committee’s report found that 85 percent of Kentucky households have a computer.
Commissioner Sandra Dunahoo of the Department for Local Government (DLG), said that DLG provides guidance to local governments and special purpose government entities. DLG also serves as a conduit for federal monies to local governments and oversees the state implementation of those federal programs which involves advertising. Sometimes in order to meet federal and state requirements, two advertisements must be submitted. DLG is committed to accountability and transparency.
Mr. Neal Cornett, Executive Assistant to the Commissioner’s Office of DLG, said that under the Office of State Grants, the Area Development Fund’s and the Joint Funding Administration’s advertising requirements are limited to purchases of goods and services under the Model Procurement Code (MPC). Coal and mineral severance expenditures are likewise governed by the MPC. The Local Government Economic Assistance Fund (LGEAF) requires a public hearing that must be advertised pursuant to KRS Chapter 424.
Regarding the Office of Federal Grants, the Community Development Block Grant (CDBG) Program guidelines require local governments to follow state and federal law on public advertisements. Public meetings for local governments applying for the Recreational Trails Program and the Land and Water Conservation Fund may be done online or in a local newspaper.
The Kentucky Infrastructure Authority’s (KIA) State Revolving Funds (SRF) meets the Environmental Protection Agency’s public awareness requirements by identifying approved projects on the website. SRF environmental reviews requiring public notice must comply with KRS Chapter 424. Public comment on environmental review are conducted on the Kentucky’s Division of Water website. SRF borrowers are required to bid projects for no less than seven days and no more than 21 days in the local newspaper of largest circulation.
In response to a question from Representative Meredith, Mr. Cornett said DLG houses budgets and financial statements of local governments.
Regarding Special Purpose Government Entities (SPGEs), failure to submit information or submission of noncompliant information results in a published notice subject to KRS Chapter 424. Dissolution of an SPGE must be published subject to KRS Chapter 424. Commissioner Dunahoo added that there is public internet access to DLG’s database.
Commissioner Terry Manuel of the Kentucky Department for Libraries and Archives (KDLA), said that KDLA does not publish the same types of notices as other entities but is interested in the issue from an archives and management perspective.
Mr. Jim Cundy, Branch Manager of KDLA’s Archives and Records Management Division, said that new and various ways of distributing information have become legion with the advent of widespread computer networks. For example, newspapers are online, and social media sites such as Facebook have become standard communication tools. Young people are increasingly going online for news, while neighborhood and local agency websites provide avenues to reach the public quickly and, literally, where they live. Clearly, this presents local government agencies with opportunities to reach their constituents in a much more efficient and cost-effective manner than in the past.
However, this presents many issues from an archives and records management standpoint. First, public notices distributed via digital media and maintained in digital formats are public records. Public records, such as legal notices, are subject to archives and records management requirements as established in KRS 171.410-171.740. One of these requirements is that these materials have a records retention period that is approved the State Archives and Records Commission and applies to the information in the record, regardless of its format. Local agencies must be able to make records accessible for the entire life of the record in order to meet obligations such as documenting agency business, protecting the rights of citizens, and responding to open records requests.
A legal notice is a permanently valuable record because it provides proof that local agencies have complied with the terms of KRS Chapter 424. If records are disseminated via digital media, it is reasonable to assume that local agencies have created them digitally and will want to retain them in a digital format as well. In the case of legal notices published by local government agencies, this means preserving a digital record permanently. Changes in technology and the susceptibility of these records to be altered electronically present challenges to preserving them.
The Archives and Records Management Division care deeply about and take very seriously the proper management of local government records in a digital environment.
Mr. Mark Wilson with Top Shelf Lobby and representing The Gannett Company, said newspapers offer an active readership, and the public is more likely to see the advertisement in one rather than on a website as noted in LRC’s study. Also noted in the study is that less than 1 percent of a local government’s budget is spent on public notices. Gannett stands ready to look into solutions to provide transparency in a more cost efficient manner as it pertains to public notice advertising.
Mr. David Thompson, Executive Director of the Kentucky Press Association (KPA), said that discussing public notice advertising has been at the forefront of KPA’s preparations every legislative session since 2005 when talk about moving notices to government websites started.
In September of 2005, KPA sat down with KLC, KACo and county commissioners and magistrates’ representatives to see what could be changed in KRS Chapter 424. KPA, on its side, knew that concessions had to be made to reduce the costs to governments. Over two months, groups discussed particular segments of KRS Chapter 424 and worked on language that was agreeable to all. It was then presented to each respective board, got their support, and came in 2006 with a rewrite of the Public Notice Advertising Law. In the end, the concessions that KPA made resulted in about a 32 percent decrease to the costs to public agencies. During the 2006 session of the General Assembly, HB 171 passed, co-sponsored by Representatives Lee and Riggs.
Last year, KPA worked with the LRC’s Program Review Committee staff on the previously mentioned study. The results of that study found that, generally, the expenses for public agencies to meet the requirements in KRS Chapter 424 and publish their notices in local newspapers amounted to about one percent of a public agency’s budget.
The KPA talked with a representative of the KSBA and gave them suggestions about how school districts can decrease the cost of publishing their financial statements. In KRS 424.220, school districts are required to list only payments of $1,000 or more to vendors. Each vendor is listed but one time with the total amount paid to that vendor for the year. However, KPA discovered that many school districts did not limit the financial statement to $1,000 or more. Most listed all vendors and total payments. KPA told the KSBA to make sure its members do not list payments of less than $1,000 total to any vendor. In discussing that with KPA’s Board of Directors, KPA has already approved its support to increase that minimum threshold to $5,000.
The KPA also suggested that KSBA have its school districts provide the statement in a text or word document format so that newspapers can easily take out any extraneous white space and also reduce the point size. Unfortunately, several school districts last year provided portable document format (PDF) files of their financial statements and it was impossible for newspapers to make the necessary adjustments.
There have been attempts in other states to move notices to the web. One state—either Wyoming or Utah—is the only state to pass it legislatively but that was reversed soon after when it became obvious it was not workable.
Open government or transparency is a three-legged stool. One leg is open meetings, one is open records, and one is public notices. Without all three, there is no balance for government transparency.
Representative Meredith commented that the committee understands that there needs to be uniformity and balance between government transparency and cost.
In response to a question from Senator McDaniel, Mr. Kennedy said that in the Jefferson County Public School’s case, the veto of the budget provision took everyone by surprise, and that a PDF formatted notice was used. The cost for the school had they advertised fully would have been $360,000.
In response to a question from Senator McDaniel, Mr. Thompson said that the qualification of a newspaper is keyed on where the newspaper’s main office is located. The type of mailing permit and paid circulation play a role, too.
Representative Miller commented that local publication requirements constitute an unfunded mandate and need to be modernized.
In response to a question from Senator Bowen, Mr. Thompson stated that it could be five years at the earliest estimate to ten to 15 years before everything is done only online. Some local newspapers will never be only online. Newspaper online subscriptions are not that expensive so they are not making money. Notices are already aggregated and placed online by the Kentucky Press Association.
In response to a question from Representative Scott, Ms. Upton said examples of social media for publication include websites, Facebook, Twitter, Instagram, and Snap Chat.
Representative Linder commented that he was going to talk to his constituents in his district to see what they prefer in regard to internet publication options. It should be left up to the taxpayers.
In response to a question from Representative King, Mr. Thompson said publishing is not just printing but putting the newspaper together for distribution.
In response to a question from Representative King, Mr. Kennedy said that he envisioned active notifications in the near future for the receipt of public notices, such as “push” notifications to alert subscribers of certain media of the existence of notices online.
Senator Schroder encouraged members to review the list of school districts and their publishing costs. He said he would be filing SB 118 again for the 2018 session. The taxpayers are subsidizing newspapers. School money is being used for notifications, too.
Consideration of Referred Kentucky Administrative Regulation
The committee considered referred Administrative Regulation 815 KAR 7:120, promulgated by the Department of Housing, Buildings and Construction (HBC), which established the uniform Kentucky Building Code. Commissioner Steve Milby, Mr. David Startsman, General Counsel, and Mr. Duane Curry, Director of Building Code Enforcement represented the Department and discussed the changes relative to greenhouse structures and plans review fees therefrom.
In response to a question from Representative Riggs, Mr. Curry responded that HBC was working with Senator West during the session on the subject encompassed in the regulation.
Representative Meredith stated that a written report of the review would be submitted to the LRC.
Representative Meredith announced that the next meeting will be August 23rd at the Department of Criminal Justice Training in Richmond.
There being no further business, the meeting was adjourned at 11:40 a.m.