Sunday, January 23, 2022

Should the new community foundation — managing $1.25 billion of the public’s money — be subject to public records laws?

N.C. Open Meetings law requires public bodies to disclose actions to the public and permit attendance in open meetings. The new community foundation board is being designed to avoid being subject to these rules.  (Port City Daily photo/File)
N.C. Open Meetings law requires public bodies to disclose actions to the public and permit attendance in open meetings. The new community foundation board is being designed to avoid being subject to these rules. (Port City Daily photo/File)

NEW HANOVER COUNTY — The approaching sale of the county-owned New Hanover Regional Medical Center to Novant Health will generate over $1.25 billion in proceeds, which New Hanover County plans to convey to a new entity described as a ‘community foundation.’

Should that entity be subject to the state’s Open Meetings law?

Related: New Hanover County considers options, limits for investing $1.25 billion community fund

“It could be argued either way,” County Manager Chris Coudriet told Commissioners at their meeting Monday. Coudriet described the question as a “silent” matter of policy, that is, an issue not explicitly addressed either way by the sale documents for NHRMC, which also contains the structure of the community foundation.

At least one commissioner welcomes public access to future meetings of the new board; others argue the act of public oversight could lead to political grandstanding, unduly influencing the activities of a fiduciary entity.

N.C. Open Meetings law grants the public access to meetings, requires, the minutes (records) of those meetings, notice ahead of meetings, and prohibits general policy discussions from being concealed via closed sessions (private meetings) with attorneys.

These rules apply to “public bodies,” which as outlined by §143-318.9, is a “very broad” definition, according to the U.N.C. School of Government.

The new community foundation, tasked with divvying up and disbursing the investment income of the $1.25 billion fund to the tune of roughly $40 million annually, is being designed to not fall under the Open Meetings law. Except through an annual report provided to the county, the community foundation will not be required to provide any information about its actions to the public, nor will there be a public record of meetings, discussions, or votes.

Its meetings may take place in private, as 11 members decide which projects, businesses, and groups receive millions in the public’s funds. Is that a good thing, and does that privacy encourage or prevent the board from political influence?

501(c)(3)

The community foundation will operate as an “independent tax-exempt, non-member, non-stock, nonprofit corporation,” according to a county memo. Six members, a majority, will be appointed by the new hospital board formed following the sale of NHRMC to Novant, with Novant maintaining final oversight of those appointees, according to the foundation’s draft bylaws (view the bylaws, which begin on pg. 61).

The remaining five members will be appointed by New Hanover County Commissioners. Each member will serve up to three consecutive three-year terms; Commissioners voted to extend the limit by one term in a 4-1 Monday, with Commissioner Rob Zapple dissenting.

The reasoning for the county maintaining a minority rather than a majority stake in the new board is twofold: 1) It limits the board’s politicization 2) It allows the board to avoid rules that apply to public bodies, like Open Meetings law or the investment of idle funds, which could limit investment returns, should it be rendered public.

The county is currently awaiting input from the Local Government Commission, which oversees the financial activities of public bodies, to determine whether or not the new community foundation would fall under the statute that governs the investment of idle funds. Governed under separate statutes, the philosophical question for both the public records and investment inquiry relies on the new entities’ attachment to or independence from its creating body, which in this case, is New Hanover County.

Because NHRMC’s current Board of Trustees is made up exclusively of county appointees, Zapple voiced concerns that ultimately, a majority of the new foundation could be entangled with the county. The argument, essentially, is that Novant affiliates are likely to appoint at least some current NHRMC board members to its new board and those board members will either have a hand in picking Novant’s portion of the community foundation appointees or could themselves end up on the board. Thus, the county’s imprint on the foundation board would be more than just its five direct appointees.

However, Novant Health spokesperson Kristen Barnhardt said the hospital does not plan to appoint members to the community foundation board. Novant anticipates the community foundation board to be named prior to the close of the sale, Barnhardt said, which would mean the hospital would have no say in how the community foundation board is comprised.

The LGC informed the county it should expect an answer to the complex issue on the investment of funds inquiry by the end of the week. The LGC’s response could potentially also shed some light on the issue of whether public records law would apply.

Private or public?

Even if the new entity doesn’t meet the technical definition of a public body, thus triggering public review, Zapple said he did not see the harm in opening up the community foundation board meetings to the public.

Don Munford, the county’s Raleigh-based outside counsel with the firm Smith Anderson, strongly disagreed.

“When you apply the Open Meetings law, the body becomes political,” Munford told the board. Tasked with creating the board’s formation documents at a cost not to exceed $25,000 according to his contract with the county, Munford said he intentionally designed it to be a fiduciary body — not a political one. He argued that the very act of applying Open Meetings law rendered the board political, thereby subjecting it to political influence.

“I think injecting politics into the foundation would be much more destructive than anything else you could do to it,” he said.

Still, Munford acknowledged the public records rules expose political bodies and their decisions to the public and said he didn’t want to see county or Novant appointees pushing for pet projects.

Zapple didn’t follow Munford’s reasoning, arguing that public openness can discourage the very activities Munford shared concerns about. “I see you’ve clearly had some bad experience with Open Meetings law,” he said.

“No, I just don’t think it works,” Munford replied. He went on to explain that even with sunshine laws, legislators decide what to do in private before voting on the House or Senate floor, arguing that the rules don’t stop corruption. The new “private” foundation, Munford argued, is not a place for these rules.

“I think that’s where we split ways here on this — that it’s a private foundation. But it’s a private foundation with one-and-a-quarter-billion dollars of public money that’s in it. So to me, there’s nothing private about it,” Zapple said.

In an email, Commissioner Woody White said he supported Munford’s recommendation. “No foundation that I know of is subject to open meeting laws. The idea of making a foundation subject to public meetings is just another red herring that is being pushed out there in order to scare and mislead people,” he wrote.

The whole point of the process, White said, is to get politics out of the local hospital. “Allowing politicians to grandstand to a community foundation by way of the public meetings laws would undo one of the primary reasons why this was initiated,” White said.

At the close of the meeting Monday, Chair Julia Olson‑Boseman was terse in her response to Zapple’s closing statements. “Any suggestion that any of us are doing anything behind closed doors or not in front is just not true. So I don’t appreciate the continued suggestions and innuendos,” she said.

Reached by email later that day, Olson-Boseman said she believes openness and transparency are important in all public business, saying “[n]onprofit 501(c)3 corporations operate differently than public bodies though, so I think we need to find a balance of letting this important community endowment do its job and operate on its own – outside of any political control – but also be open and transparent for the community it will serve.

“It’s important for the public to know and understand the grants being made, but it’s also important for this nonprofit and its board to be independent and operate as any private foundation or endowment would from a fiduciary business perspective,” she said.

Commissioners Pat Kusek and Jonathan Barfield did not immediately respond to a request to weigh in on the topic; during the meeting, Barfield said he’d “never make the assumption that people are inherently bad.”

Commissioners still have time to review and amend the community foundation’s draft bylaws before the entity is formally created. A decision on the sale of the hospital is expected next month.


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