Program Review and Investigations Committee




<MeetMDY1> October 13, 2016


Call to Order and Roll Call

The Program Review and Investigations Committee met on Thursday, October 13, 2016, at 10:00 AM, in Room 129 of the Capitol Annex. Representative Terry Mills, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members: Senator Danny Carroll, Co-Chair; Representative Terry Mills, Co-Chair; Senators Julie Raque Adams, Tom Buford, Dan "Malano" Seum, Reginald Thomas, Stephen West, and Whitney Westerfield; Representatives Ruth Ann Palumbo, Rick Rand, Arnold Simpson, Chuck Tackett, and Jeff Taylor.


Guests:  David T. Thompson, Executive Director, Kentucky Press Association; Marc A. Wilson, Partner, Top Shelf Lobby; Ken Meng, Executive Director of Office of Tax Policy & Regulation; Tom Crawford, Director of Office of Property Valuation, Department of Revenue; James D. Chaney, Deputy Executive Director, Kentucky League of Cities; and Shellie Hampton, Director of Governmental Relations, Kentucky Association of Counties.


LRC Staff:  Greg Hager, Committee Staff Administrator; Chris Hall; Colleen Kennedy; Van Knowles; Jean Ann Myatt; Chris Riley; William Spears; Shane Stevens; Joel Thomas; and Kate Talley, Committee Assistant.


Minutes for August 12, 2016

Upon motion by Representative Taylor and second by Senator Carroll, the minutes of the September 8, 2016, meeting were approved by voice vote, without objection.


Study Topics for 2017

Senator Carroll explained that study topics for 2017 will be chosen at the next meeting.  Each caucus will choose one topic.


Staff Report: Cost and Policy Considerations for State-Mandated Local Public Notices

Van Knowles said that public notice is any effort by government to inform the public about an action, event, or circumstance that members of the public might want or need to know about. The report covers notices that the state requires local jurisdictions to publish. More than 200 statutes mandate public notice for local jurisdictions. He cited examples from KRS Chapter 424, which describes when and how often different types of notices should be published and how the newspaper is selected. It details what some notices must contain and who must publish them. KRS 424.380 allows citizens to challenge governmental acts in court if notice was not provided according to the requirements of the chapter.


Local jurisdictions do not track spending on state-mandated notices separately from spending for other types of notices and advertising, so most numbers shown in the report are estimates. Only about a third of counties and cities responded with usable information to the questionnaires sent by Program Review staff. Information about school districts’ newspaper advertising was taken from their accounting system, but those numbers do not separate spending for state-mandated notices.


The report shows the estimated public notice spending of individual counties, cities, and school districts as a percentage of each’s total general government spending. For example, Sadieville, with a population of 313, spent $1,500 on public notices in 2014 out of $297,000 in general government spending—about half of 1 percent. Louisville/Jefferson County spent $193,000 on public notices out of nearly $1 billion in general government spending—2 hundredths of 1 percent. The smaller city spent 25 times more, relatively speaking.


School districts have been spending less than other local jurisdictions, but many will have significant increases in the cost of state-mandated notices as of FY 2017. Budget language that had exempted them from publishing full financial statements and school report cards in the newspaper for the past 13 years was vetoed in the 2016 budget bill.


Local jurisdictions are required to advertise public notices in a specific newspaper called the qualified newspaper. Most counties have a local newspaper that is the qualified newspaper, and most cities, school districts, and other districts publish in the same newspaper as the county. Newspapers must publish notices at the lowest rate offered to other customers.


Small cities tend to spend proportionately more as a share of revenue than larger cities. This is an issue especially in Jefferson and Kenton Counties because newspapers there have the highest advertising rates. Cities have the option of using direct mail, and a few small cities have found it to be less expensive than newspaper advertising.


Delinquent tax advertisements are among the most expensive types of notices, but some of the cost is recovered through a fee added to the tax claims. The Department of Revenue developed a cost recovery formula, but on average it recovers approximately 34 percent of the cost by the end of the tax sale season. Recommendation 3.1 of the report is that the department should consider modifying the delinquent tax advertising cost recovery formula and procedures in order to make the formula more effective for all counties.


The cost of posting notices on the Internet can be negligible. Local governments that already have websites could include notices at little or no additional cost. A website hosting public notices should meet standards for security, timeliness, and accessibility. Kentucky Interactive, the company that runs, offers free web pages to local governments and could host a simple statewide public notice website at no cost. Using the state’s official website would address issues of security and accessibility.


Utah operates a statewide public notice website with custom-built search features for $7,000 per month. Shared among all local jurisdictions in Kentucky, a similar amount would be less than $10 per month.


Newspaper readership patterns have changed in the past 20 years, but they continue to reach more people than the Internet in some groups, especially older citizens. Internet use is increasing and it is more likely to reach younger citizens. Internet availability is expanding, but it is still not available in homes everywhere in the state. Libraries provide access to newspapers and the Internet. Mobile phones provide additional ways to access the Internet.


When government actively wants to reach as many people as possible, it uses larger ads and may require more than one advertisement. The intent is to put the information in front of “browsers,” people who are not looking for it. Reaching newspaper browsers can be expensive. Most state-mandated public notices are small, use fine print, and are concentrated in the classified sections of newspapers. This is a more passive approach than using larger ads. If notices are placed on the Internet, there is no provision to reach casual browsers.


“Seekers” are people who are looking for public notices. Seekers can find online notices easily using online search engines. Search tools do not always help find a specific notice, but they will find public notice webpages and websites.


Kentucky and several other states already provide some combined newspaper and Internet options for public notices. One of the most significant is the delinquent tax notice option, in which the newspaper ad includes the Internet address of the online notice. Other statutes say that the newspaper ad must refer the reader to a location or place where information or documents can be found, but it is unclear whether the information or documents may be online.


Statute is unclear about the control that a governmental entity must have over a website containing a public notice document. Another policy question is whether to place notices on local websites or a statewide website. Website accessibility requirements could be established—how easy should it be to find, and how reliable should access to it be.


Recommendation 6.1 is that to ensure compliance with legislative intent in current and future statutes, the General Assembly may wish to consider clarifying the following questions:

•           When may the Internet be a place or location that may be advertised as the location of public notice details?

•           What government control of a public notice website is needed?

•           Should a public notice website be local or statewide?

•           How easy should it be to find online notices?


Nine states have adopted a proposal from newspaper associations to operate statewide public notice websites. Individual newspapers usually are required to participate in order to continue to publish public notices. Public notices must still appear in newspaper advertisements, which remain the official notice. The website is not required to be complete, accurate, or timely. In most of the states, other website requirements were not mentioned. Local governments continue to pay for newspaper advertising under these plans. If considered in Kentucky, the state might mandate certain features, such as required newspaper participation, guarantee of online posting, free posting and access, a built-in search tool, prominent links to the site from newspaper websites and local government websites, exclusion of non-notice content, security, and reliability.


No states allow all public notices to be posted online. Kentucky and some states have a few specific online-only options. In Kentucky, localities may adopt the Model Procurement Code, which allows them to use the Internet for requests for bids and proposals. School districts post detailed financial reports on the Internet.


If public notices were no longer in newspapers, it would be important to ensure they are available and accessible at the times and for the periods required. Local officials would have to be held responsible for posting online notices in the same way they are responsible for publishing notices in newspapers. It would be good to have a method of removing and archiving older notices.


Recommendation 6.2 is that if it decides to allow Internet-only public notices, the General Assembly may wish to consider how to prove that notices were posted and available unaltered for the specified period of time, when to remove older notices, and how to archive them.


Because government and citizens have different interests depending on the type of public notice, it might be helpful to decide how to best inform affected citizens separately for each type or category of notice. It might be better for some types of notice to be printed in newspapers, for others to be posted online, and for others to be in both media. The choices for a particular type of public notice would balance the needs of local governments and citizens, the capabilities of the media, and the cost.


In response to questions from Senator Westerfield, Mr. Knowles said Kentucky Interactive does not have information about cities or counties that have their own websites, though is a free option. Some web hosts are not universally accessible due to security issues. There is not an existing mechanism of accountability for the process, but Recommendation 6.2 addresses this issue. The Department of Libraries and Archives requires a paper copy and digital photo for archiving purposes.


Representative Mills commented that only a third of cities and counties responded to the questionnaires.


In response to a question from Representative Palumbo, Mr. Knowles explained that some states that have online websites operated by the newspaper association hold the newspaper accountable.


In response to a question from Senator Carroll, Mr. Knowles said Kentucky Interactive provides at no cost, provided that it can package and resell the information. Cities and counties are responsible for posting information and the content. Accountability is similar to that for newspapers. If the posting involves an act of government and is not posted correctly, it could be voided.


Mr. Thompson said there are nine states with mandated state websites. If a newspaper does not post on these websites, it loses the right to publish public notices. is a statewide website available for newspapers to publish online. Of 145 qualified newspapers, 131 have posted notices at any given time. Many companies bidding on public projects use the website.


In response to questions from Senator Carroll, Mr. Wilson said that the report showed that less than 1 percent of local spending is used on public notices. Mr. Thompson said weekly publications would feel the impact most if notices were moved online, likely losing one to two employees. There is no standard rate across the state for public notices. KRS 424 only requires it be the lowest advertising rate.


In response to a question from Senator Seum, Mr. Thompson said utilities are only required to publish public notices when a rate change is made. A stop work order does not require a public notice.


In response to questions from Senator Westerfield, Mr. Wilson said newspaper readership is up due to a growing online presence. Mr. Thompson said that, when he started working at the Kentucky Press Association in 1983, there were 174 newspapers in the state;  there are now 171. Circulation has declined but readership has increased.


Representative Mills commented that broadband access in his area is a problem. More people read the newspaper there than view it online.


In response to questions from Senator Carroll, Mr. Thompson said there will be a time when more newspapers will be online than in print. Newspapers have not discovered how to make money online. All but three of 171 newspapers have online versions. Mr. Wilson said if transparency and accountability are important, the government should look to the private sector.


Representative Taylor commented that there is a state of critical mass that will be reached at any given time on a case-by-case basis. Local jurisdictions will need to make these decisions.


In response to a question from Representative Mills, Mr. Crawford said the delinquent tax advertisement recovery formula was included in legislation enacted in 2009. A survey of county clerks is done each year to determine how many bills remain unpaid. Over the past 2 or 3 years, 50 percent of the bills remain unpaid. This percentage was added to the bill the following year to recoup some of the revenue loss. The Kenton County clerk paid $16,568 for advertising delinquent tax bills for 2015; $16,065 was recovered. In 2016, the Kenton County clerk paid $14,229 and has recovered $14,826 so far this year. The Boyle County clerk spent $968 this year on advertising and has recovered $1,126. The formula is working.


In response to a question from Senator Carroll, Mr. Crawford said that the current method of publishing names in newspapers is effective in collecting delinquent taxes. It also allows those who purchase tax bills to see what is available.


In response to a question from Senator Buford, Mr. Crawford agreed that it would be appropriate for local governments to decide to post public notices in newspapers, online or both, though online only is not a current option.


Representative Simpson commented that the intention of the current process of publishing public notices is notification. The primary concern is not the cost for government.


Mr. Chaney said that a 2014 bill was an attempt to address this issue. SB 101 provided for a transition to a newspaper notice, but with full documentation being posted online. This would have allowed for a choice; it was not mandated. A small percentage of a local government revenue is not trivial; city officials look for any cost savings available. Cities want to be accountable and ensure transparency to their citizens. The citizens need access to the information to be able to make informed decisions and be in compliance. SB 101 addressed requirements for online notices. This report creates a framework for discussion among members of the Kentucky League of Cities and the Kentucky Press Association.


In response to a question from Senator Buford, Mr. Chaney explained that most cities collect their own taxes. They have a choice between publishing the delinquent tax list and then publishing it three times or advertising in the newspaper and posting on the Internet. Most city clerks find the 3 week advertisement is most effective.


Ms. Hampton agreed with Senator Buford that it would be great to have more ability at the local level. Depending on the area, some people receive their news from a physical paper; others access it online. Counties have an interest in keeping their residents informed. County clerks are supportive of their local papers.


Representative Mills commented that this is a complicated topic. Legislation should not have unintended consequences. There must be a balance between citizen participation and being cost conscious.


Upon motion by Representative Simpson and second by Senator Buford, the Cost And Policy Considerations For State-Mandated Local Public Notices report was adopted by a roll call vote.


            The meeting was adjourned at 11:21 AM.