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Bill applying Arkansas' open-records law to universities' private arms goes to panel

by Eric Besson | February 26, 2019 at 4:30 a.m.

Legislation to expand Arkansas' open-records law to specifically include private agencies that support government -- such as universities' nonprofit fundraising arms -- will be presented Thursday to a Senate committee, the bill's sponsor said Monday.

Senate Bill 231 by Sen. Kim Hammer, R-Benton, would allow Arkansans oversight into myriad business dealings that private agencies undertake on behalf of their public partners, including loan agreements and contracts.

The bill would apply to any entity "with the primary purpose of providing direct support" to a governmental body, either with money or labor, according to a draft amendment Hammer presented Friday to a legislative task force on the open-records law.

John Tull, an attorney who specializes in open-records issues and is a member of the task force, said such documents are already subject to the state's Freedom of Information Act in many cases.

But nonprofit directors and their attorneys routinely assert that the law does not apply to them. This impasse has meant Arkansas residents must risk a costly court challenge to get the records.

The Arkansas Democrat-Gazette has sought such documents from university athletic foundations in Jonesboro and Fayetteville and been rebuffed.

"This is a gray area of the law and has been for some time," Tull said. "... As I understand Sen. Hammer's bill -- that makes it clear that the law applies to the [private] entity."

Hammer said he will present the bill Thursday to the Senate Committee on State Agencies and Governmental Affairs.

"I think once all the facts get out there, hopefully it will be a little bit easier for members and the general public to understand the intent," Hammer said. "We'll make the best argument we can and see where the votes fall."

Tull called the draft amendment a "good balance of the public's right to know and the work of private foundations."

RAZORBACK FOUNDATION

Robert Steinbuch, a University of Arkansas at Little Rock law professor, helped draft SB231. He has said the Democrat-Gazette's detailed reporting in 2018 on athletics foundations at the University of Arkansas, Fayetteville and Arkansas State University helped inspire the legislation.

"That's the motivation," Steinbuch said of an April 2018 story about ASU's athletics foundation, as well as other stories by the Democrat-Gazette and the Arkansas Times.

"It's not only that one story, but that story happens over and over and over again."

Spokesmen at the UA, the UA System and the Razorback Foundation, which supports the athletics department, said Monday that they oppose SB231.

The documents the Democrat-Gazette unsuccessfully sought include a contract the Razorback Foundation signed with a firm in 2017 to assist in UA's search for a new head football coach, the highest-paid public position in the state.

After the foundation denied the request, the newspaper obtained and reported on nearly 22,000 emails between the UA and foundation staff as part of an investigation into whether the agencies were practically the same, which open-records experts said was one test used to decide whether the law should apply.

Reporters found that foundation officials sat in on job interviews for candidates in the UA athletic department, attended high-level strategy sessions and had free use of university trademarks others had to pay to use.

UA officials also have waived millions in cash commitments that the foundation made toward capital projects, helped promote a foundation membership program and advised the foundation on how to respond to at least one media inquiry.

UA System spokesman Nate Hinkel said Monday that the system opposes the bill "as it is written."

"While some foundation records are publicly available through tax forms and other disclosures through the university, we believe defining foundation records as 'public' would negatively impact private fundraising for university projects," Hinkel said.

Mark Rushing, a spokesman for the Fayetteville campus, issued a similar statement, though neither explained how the legislation would affect fundraising.

Kassidie Blackstock, the Razorback Foundation's director of strategic communications, said in a statement that the bill would have an "adverse impact on philanthropic support," but she did not specify how.

Blackstock also wrote that the foundation's financial support to the athletics division has helped the program avoid drawing from taxpayer funding or student fees.

Emails obtained by this newspaper last year showed the Razorback Foundation often shared donor information with the university, which is subject to the open-records law.

The university has nevertheless withheld that information by citing an exemption to the open-records law that allows agencies to keep secret information that would give competitors an advantage.

Hammer's draft amendment says that "only records related to the performance of a public or governmental function" would be considered public records. It specifically says "the identity of donors to a private entity are not public records."

RED WOLVES FOUNDATION

Separately, Arkansas State University and its athletics nonprofit, the Red Wolves Foundation, have denied access to loan documents related to its two stadium expansion projects -- one to expand the north end zone, completed last year, and one to renovate and expand the stadium's west side in 2016.

ASU signed lease agreements with the Red Wolves Foundation allowing the nonprofit to build the expansion projects and collect money from the new seating.

Public property records show the foundation then used those agreements as collateral to borrow a combined $42 million from Centennial Bank to pay for the projects. The foundation will pay down the loans with money it raises, but how much interest it will pay and over how many years remains hidden.

Centennial Bank contributed $5 million toward the end zone expansion project. Johnny Allison, chairman of the bank's Conway-based holding company, and his family contributed $5 million to each project, bringing the total to $15 million to seed the two projects. Allison is an ASU graduate.

ASU System spokesman Jeff Hankins has said the university did not guarantee the loan and is not a party to the real estate records.

If the foundation could not meet its loan obligation, the funds for premium seating would go directly to the bank, Hankins said.

"The bank would operate the premium area through the term of the lease until the loan was paid."

In denying the newspaper's April 2018 request for access to loan-related records, Hankins said the documents are not public records. He also cited the public-records law exemption that allows agencies to withhold records for competitive reasons.

An attorney representing the foundation said at the time said that the nonprofit is not subject to the transparency law because it "does not receive direct transfers of public funds."

The Freedom of Information Act applies to any "agency or improvement district that is wholly or partially supported by public funds or expending public funds."

The Democrat-Gazette reported last April that Red Wolves Foundation staff members draw paychecks from the university and that the foundation does not pay rent for office space it uses in the university's basketball arena.

The athletic department also draws heavily from campus aid -- fees, tuition and profits from campus stores or parking -- to make ends meet.

The ASU System does not plan to testify about SB231 and declined to comment on the bill, Hankins said Monday.

An initial version of SB231 would have applied to all private agencies that devote one-fifth of their resources to supporting government agencies, but that version ran into opposition from the open-records task force -- a mix of attorneys, media representatives and spokesmen at public agencies.

The task force on Friday endorsed Hammer's amendment to the bill by a 4-1 vote. Hankins cast the lone no vote. The endorsement is non-binding.

Information for this article was contributed by John Moritz of the Arkansas Democrat-Gazette.

Metro on 02/26/2019

Print Headline: Bill applying Arkansas' open-records law to universities' private arms goes to panel

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