For most private organizations, there is little concern regarding the Public Information Act (PIA), since it seems inapplicable to that business model. The PIA grants civilians the right to access government records based on the idea of governmental transparency and an informed citizenry.
But a private organization is not a governmental body. Or is it?
One would think that the standards by which a governmental body is determined would be straightforward. Upon request, public entities must produce requested information (absent an exception), while private entities are exempt from such examinations.
Unless.
If a private organization's relationship with a government entity causes it to fall within the definition of a "governmental body," the organization may be subject to the PIA and required to release its records to the public.
The Request that Rocked the GHP
In May 2008, the Greater Houston Partnership (GHP) received a public records request for a copy of its check register, asking "for all checks issued for the year 2007."
The GHP initially refused because it considered itself a nonprofit corporation akin to a chamber of commerce, and, therefore, exempt from complying with the request. After all, its $11.7M operating budget came primarily from its 2,100 member companies. Furthermore, it only included a small percentage (less than 8% of its annual operating budget) from the City of Houston "to provide research, advertising, and economic development services."1
The GHP's refusal was challenged on the grounds that governmental funding altered its private status, and, therefore, subjected the organization to the PIA. In Greater Houston Partnership v. Abbott, the court set out to determine the GHP's precise status and whether or not it was subject to the PIA.
The Transformation from Private to Government
Generally, the term "governmental body" encompasses all Texas public entities at state and local levels. Simply receiving public funds does not make a private entity a "governmental body,"2 but private entities may be considered governmental bodies if they are supported in whole or in part by public funds or if they expend public funds.3
Because the definition of governmental body in the PIA is, according to Texas courts, ambiguous,4 courts have historically utilized Kneeland v. National Collegiate Athletic Association5 to determine whether a private entity receiving or supported by public funds qualified as a "governmental body":
The Kneeland test outlines three specific situations:
- The agreement between the not-for-profit entity and the governmental entity does not have a specific and definite obligation to provide a measurable amount of service in exchange for an identifiable amount of money (i.e. the type of contract that would be expected in an arms-length contract for services between a vendor and purchaser); OR
- The entity has a relationship with the government that indicates a common purpose or objective or creates an agency-type relationship between the two; OR
- The private entity's relationship with the government requires the private entity to provide services traditionally provided by governmental bodies.6
Using the Kneeland test, the Austin Court of Appeals' held that a not-for-profit, separately-formed corporation was nevertheless a governmental body subject to the PIA.7
The Far-Reaching Arm of "Governmental Body"
The court noted that the first prong of the Kneeland test – the specific and definite obligation to provide a measurable amount of service – was the primary consideration in determining whether this private entity was, in fact, a governmental body.
The court explained that the contract between the City and the GHP did not provide measurable tasks but consisted of general aspirational obligations (e.g. "coordinate on matters of mutual interest"). Because the contract did not impose specific and definite obligations characteristic of an arms-length contract for services, the court concluded that the GHP was supported by public funds.
With respect to the second and third prongs, the court explained that, not only did the GHP and the City share a common purpose or objective that created an agency-type relationship, but the City also required the GHP to perform tasks traditionally provided by governmental bodies – e.g. take over of the City's responsibility as the Secretariat of the World Energy Cities Partnership, serve on the task for, and execute the Mayor's ten-year strategic plan, etc. Thus, the company that undoubtedly viewed itself as a private entity was forced to open its books to the public.
While the GHP met all three components of the Kneeland test, the sole presence of any one can subject a private entity to the PIA. Keeping Your Business Private
To continue as a private entity, be sure to have your counsel review the parameters under which your organization receives government funding.
The Greater Houston Partnership illustrates that the agreement between the private and government sectors must impose a specific obligation to which compensation can be connected. There should be no general agency agreement where the non-public entity is compensated regardless of the work performed.
A contract between a governmental body and a not-for-profit entity should steer clear of the unrestricted grant of funds, and include language that defines the specific tasks to be performed and the cost for each.
Remember: The amount of money paid by the governmental body to a third-party is wholly inconsequential. Instead, it is the structure of the business relationship and the services provided that can determine whether you remain private or are subject to the scrutiny of the PIA.
Footnotes
1 Under the terms of its contracts and in exchange for $196,250 per quarter, GHP agreed "to improve the economic prosperity of Houston and the Houston Airport System" (HAS) by performing the following broadly stated scope of services:
- Identifying new business opportunities, securing economic incentives, and increasing outreach and recruitment activities to the region's targeted key industries to strengthen the City of Houston as a competitive place to do business.
- Conducting qualitative and quantitative research to assist HAS and the City of Houston's convention and visitor's bureau with their marketing efforts.
- Supporting and coordinating HAS on a comprehensive marketing program to develop new air routes and international business.
- Promoting HAS stories in international markets and highlighting HAS efforts to provide airports allowance for expansion and ease of transportation.
- Coordinating on matters of mutual interest before the United States Congress, federal agencies, the Texas State Legislature, and Texas agencies.
- Providing the City of Houston with full membership and exclusive benefits as a general partner of GHP.
- Providing the City of Houston with tables/tickets to various events.
Greater Houston P'ship, 2013 Tex. App. LEXIS at *18-19.
2 See Kneeland v. National Collegiate Athletic Ass'n, 850 F.2d 224, 228 (5th Cir. 1988) ("The Texas Attorney General has concluded that the Act does not apply to 'private persons or businesses simply because they provide specific goods or services under a contract with a government body.'") (quoting Tex. Att'y Gen. No. ORD-1 (1973)).
3 See TEX. GOV'T CODE § 552.003(1)(A)(xii).
4 See id. at *13; Tex. Ass'n of Appraisal Dists., Inc. v. Hart, 382 S.W.3d 587, 592 (Tex. App.—Austin 2012, no pet.).
5 850 F.2d 224 (5th Cir. 1988).
6 Greater Houston P'ship, 2013 Tex. App. LEXIS at *16 (citing Kneeland, 850 F.2d at 228) (emphasis in original).
7 See Greater Houston P'ship v. Abbott, 2013 Tex. App. LEXIS 1030, *28, n. 1 (Tex. App.—Austin Jan. 31, 2013, no pet. h).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.