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Texas High Court Carves "Monstrous Loophole" for Government Secrets

McAllen taxpayers cannot find out how much their city paid Enrique Iglesias to sing at a holiday concert, and that's just one example of the fallout from a Texas Supreme Court decision that is shielding many business secrets from the public.

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Thanks to the Texas Supreme Court, McAllen taxpayers cannot find out how much their city paid Enrique Iglesias to belt out his Latin pop lyrics at a holiday parade.

And Houston cannot release, among other information, how many driver permits it has issued to ride-hailing giant Uber.

A Kaufman County school district’s food service deal? Much of that is now secret, as are details of a Texas Department of Insurance contract for interpretation services.

Those are a few instances among many over the past year in which Texas Attorney General Ken Paxton’s office told local governments not to release information to the public because it is now shielded by a state Supreme Court ruling protecting the secrets of private companies doing business with government agencies. 

Such records were considered public before the court's ruling last year, and open government experts call the decision a broadly written accommodation of business interests that is ripe for abuse.  

Now, Texas lawmakers are considering ways to patch up what one calls a “monstrous loophole” in public records law.

“Every single private organization can essentially shut down any information they gave a government entity in perpetuity,” said state Rep. Giovanni Capriglione, R-Southlake, who is working with open records advocates on a legislative fix. 

In the June 2015 ruling, the justices ordered Paxton to block the release of certain information in a lease between Boeing and the Port Authority of San Antonio because the aerospace manufacturer said making the details public could tip off its competitors.

The ruling expanded the secrecy of government contracts in two key ways, experts say: by broadening an exemption in public records law used to protect the government’s competitive interests and by affirming that businesses could invoke it, too.

In recent years, the state would withhold otherwise-public records only if their release significantly hindered government’s ability to get a good deal in the marketplace.

Even that application was wider than what the Legislature intended when it created the exemption decades ago, said Joe Larsen, an open government attorney who also serves on the Freedom of Information Foundation of Texas. Originally, lawmakers sought to prevent a bidder for government work from nabbing a competitor’s bids on a contract. And once that contract was finalized, it was considered public, Larsen said.

Not anymore, particularly after the Boeing v. Paxton decision. It lowered the threshold for what can be secret, while affirming that private entities — when government informs them about someone's request for their information — could invoke the protection when doing government business in Texas.  

The test for disclosure “is whether knowing another bidder’s overhead costs would be an advantage, not whether it would be a decisive advantage,” Justice John Devine wrote in his majority opinion. 

Trend toward secrecy

Private and public entities have since seized on ruling, using it to persuade Paxton’s office to rule in their favor in a host of records disputes. That’s leaving taxpayers in dark about some government spending — like how much McAllen paid Iglesias for an hourlong concert that featured hit such as "Bailando” and “El Perdon,” according to local news reports.

The city has withheld the records since local news media requested them, arguing that the government has “specific marketplace interests” in the information and releasing it would “place the city at a competitive disadvantage” when negotiating future contracts, according to a March 7 ruling from Paxton’s office. The letter sided with the city and referenced the Boeing decision.

City officials told the Tribune that they had no additional comment.

Paxton’s ruling in the McAllen case echoed many others he has issued over the past year. Some specifically mention that the requested information was considered public before the Boeing decision.  

This trend worries advocates of government transparency.

“If there’s a place where corruption can fester, it’s here,” Larsen said. “It’s the interface between those who are seeking to work for the government and the government. That’s where the money is.”

Now, some Texas lawmakers say they're ready to address the issue next legislative session. 

Capriglione said his bill, still in draft form, would essentially return Texas to life before the Boeing ruling, which he said undermined efforts last session to increase transparency in state contracting. 

“We want to go back to where the governmental entity essentially gets the power of that exemption.”

He may get bipartisan help. State Rep. Terry Canales, D-Edinburg, is also drafting legislation — spurred by the tussle over the Iglesias contract — that would address the Boeing ruling and specifically list entertainment contracts with the government as public documents.

Steering the bill though the Legislature could prove tricky because the issue is so far-reaching, said Curtis Smith, his chief of staff.

“Often we want to limit the effect of our bills,” he said. “But this touches everything. Everyone will have an opinion on it.”

Some exceptions to the trend

Paxton hasn’t sided with everyone who has invoked Boeing to evade transparency. 

Last April, Assistant Attorney General Nicholas Ybarra wrote that Chesapeake Energy failed to show it would face “substantial harm to its competitive position” if the Fort Worth Independent School District released details of its $1 million settlement with the natural gas driller — a resolution of a royalty payment dispute.

More recently, Paxton sided with The Texas Tribune when chemical manufacturer BASF sought to keep secret information related to a $2.4 million Texas Enterprise Fund grant announced in 2015.

Last month, the company sued, asking a Travis County district court to prevent Gov. Greg Abbott's office from releasing what it called “sensitive, proprietary, information regarding BASF’s means, methods, and costs.”

Larsen said he was surprised that Paxton had sided with the Tribune, considering the persuasiveness of the Boeing argument.

Bill Cobb, a former deputy in the attorney general’s office, said BASF may have failed on a technicality, since it did not submit a sworn statement detailing how the release would damage the company (Such statements aren't required, but Cobb said his former employer likes to have them). 

Or, perhaps, the decision was just one inconsistency from an office that has already churned out more than 1,700 letter rulings this year. It was unlikely that BASF, which cited Boeing, lost on the merits alone, Cobb said.

Disclosure: Boeing and Uber have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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Courts Criminal justice Economy State government Greg Abbott Ken Paxton Texas Legislature