By Mark Collette
Originally published Oct. 3, 2014
The Texas Supreme Court on Friday refused to hear a lawsuit by Greater Houston Partnership that could have limited the public’s right to know about government money sent to private groups.
The case applies to all businesses and nonprofits in Texas that receive public funds. It allows the state attorney general to decide on a case-by-case basis which organizations must open their books under open records law, and under what circumstances.
GHP’s case attacked one of the earliest and most expansive constructions of Texas open records law, known as the Kneeland test. Used since the 1980s, it determines whether corporations with government contracts should be subject to the Texas Public Information Act.
Without Kneeland, government functions outsourced to private nonprofit corporations could be exempt from public scrutiny. GHP officials couldn’t immediately be reached for comment.
Seven years ago, Montgomery County resident Jim Jenkins, curious about money The Woodlands sent to GHP for economic development, wanted to see how the taxpayer funds were spent. He requested GHP’s check register. GHP fought him all the way to the high court.
In Texas, a governmental body that wants to withhold information must seek an opinion from the attorney general. In this case, Greg Abbott’s office used Kneeland to find that even though GHP is a nonprofit chamber of commerce, it is an agent of the city because it receives public money and carries out Houston’s economic development agenda. It therefore was subject to open records law and had to release the register. By refusing to hear the case, the high court effectively upheld Abbott’s ruling.
The Kneeland test operates on the rationale that there is a critical difference between a vendor – like the office supplier who sells paper to City Hall, or the contractor who builds a stretch of public road – and an organization that acts like an agent of the government, getting public money for a general purpose.
GHP earns most of its yearly revenue, an estimated $22 million for 2013, from member companies. It also routinely gets contracts with cities and counties worth about $1 million a year. Houston paid GHP about $376,000 under contract this fiscal year, city Finance Director Kelly Dowe said.
GHP argued that the Kneeland test violates the Public Information Act because lawmakers didn’t intend for the law to apply to private corporations.
But the attorney general’s office said the Legislature wanted the act to apply to public records – especially those detailing how government funds are spent – no matter where they are located.
“Outsourcing the advocacy of city interests should invoke the highest level of public scrutiny,” attorney Kimberly Fuchs wrote in a brief on behalf of Abbott.
Numerous broad tasks
Even with Kneeland intact, GHP’s court filings say its contract with Houston is specific enough to make it a vendor, preventing it from having to disclose records.
But the attorney general points to numerous tasks in the contract it says are so broad they constitute general government support: identifying business opportunities, marketing for the city, promoting the airports internationally, and government lobbying. The contract has provisions for GHP to continuously implement business retention and expansion programs; coordinate recruiting trips for city officials; and prepare and execute mayoral itineraries on international business trips, like Mayor Annise Parker’s this week to South Korea and Japan.
City officials are invited to GHP committee meetings, and the city gets appointments on key GHP policy committees.
Jenkins, a longtime Montgomery County conservative and government watchdog, is leery of the politics involved in subsidies.
GHP has been a top donor to TexasOne, Gov. Rick Perry’s nonprofit that uses donations from corporate members to fund Perry’s business recruiting trips.
And politics are integral to GHP. It aggressively advocates for business, with a public policy division of 10 staff members, working with 40 committees with 961 members, according to GHP’s website.
After Perry tapped GHP President Jeff Moseley as transportation commissioner in 2012, Moseley got a $293,000 severance package from GHP on top of his $167,000 base salary, according to IRS records. Before his job at GHP, Moseley served as executive director of TexasOne.
Jenkins calls GHP “a quasi-governmental agency. If it’s going to operate that way, we need to know what they’re doing.”
The city is authorized by its contract to audit GHP, but no one in the controller’s office was aware of it ever doing so, spokesman Roger Widmeyer said.
One of the state’s leading economic development advocates said too much transparency at private corporations will dampen the business climate.
“There will be other states that will go the opposite direction to win the battle for jobs and investment,” said Carlton Schwab, president of the Texas Economic Development Council, which represents about 400 active groups.
When governments give money to private economic development groups, they do it with the understanding that business gets done over meals, he said.
“To really put the clamps on the act at the state level so the Jim Jenkinses of the world can be assured that no public funds are ever used to buy a guy a steak … then we’ve become bureaucratic and musclebound to the point of idiocy,” he said. “You’ve got to have some flexibility. It’s just the way the world works.”
Paul Watler, a Dallas attorney who worked on the 1980s open records case that resulted in the Kneeland test, said there’s a simpler way for economic development organizations and other private groups to avoid public scrutiny.
“Don’t accept government funds,” he said.