Confidentiality of Town Board Closed Session was compromised

Information allegedly obtained during the Closed Session of the December Town Board meeting, which was later released and misrepresented to an “outside” interested party, was the subject of the January Town Board Closed Session meeting.

According to state statute, a Closed Session of the board is a privileged, confidential opportunity to discuss sensitive matters of a statutorily defined nature. The information produced in a Closed Session may not be obtained in a public record request unless, in a contested court case, and a judge so orders it.

Under N.C.G.S. 143-318.11 (a) there are three permitted purposes for going into to a closed session, relevant to the NCBG letter:

(3) to consult with an attorney

(4) to discussion location of industry or business in the Town

(5) to instruct staff about the terms of negotiation for the acquisition or property or the terms of employment

According to Town Attorney Jay Coward, it follows that a board member who is privy to this information is not at liberty to divulge it to the public.

The Back Story

At the end of the January 17 Town Board meeting, commissioners went into Closed Session to discuss a letter from NC Broadband Group (NCBG), one of the three companies that had submitted a Request for Proposal (RF

  1. P) to bid on running the town’s broadband highway. 

It should be noted that at the November Town Board meeting, it was disclosed that NCBG had withdrawn its bid prior to the November meeting leaving only Balsam West and Hotwire as contenders.

After hearing a report from the Town Manager Josh Ward concerning the references of the two companies, once back in open session the board voted 4 to 1 to enter into contract negotiations with Hotwire Communications. Commissioner Marc Hehn voted “nay.”

Subsequently, town staff developed a contract for the leasing of the town’s aerial dark fiber.  

Hotwire is offering $10,200,000 over 25 years – far more than the $4.6 million loan with interest the town took out to build the aerial portion of the highway – which Mayor Pat Taylor said will be paid off in about 13 years. The town will receive a slight profit after four years, with the profit increasing each year thereafter; therefore income from the lease thereafter will be the town’s.

As part of the contract outlined by the town and in the RFPs given to all three companies, Hotwire agreed to build-out and own the underground portion of the highway which amounts to 17% to 18% of the system. As such, the underground portion is not part of the 25-year lease agreement. 

The underground portion of the highway is the area of contention for NCBG.

As per the undated letter from Chad S. Wachter, VP, General Counsel for NCBG, postmarked Dec. 31, 2020, referenced as “Protest Letter and Request for Meeting Town of Highlands Broadband Initiative,” NCBG requested that “the town suspend or terminate negotiations and/or performance pursuant to the Town of Highlands Broadband Initiative during this submitted protest.”

“A key evaluation criterion used by the Town of Highlands is a commitment by the bidders to complete the ‘remaining 17%’ of the network, at their own expense, by constructing the underground and aerial build-out areas inside the city limits of the Town of Highlands serviced by other electric utilities (Haywood Electric Membership Corporation and Duke Energy specifically),” reads the letter.

“The Town of Highlands made clear the importance of the selection criteria, prior to the due date for the bids being submitted, when it clarified and reinforced the requirements of its Request for Proposal (RFP) at the time the town issued to the public the requirements of its RFP.

“Subsequently, it appears, per public records and comments made by public officials, that the Town of Highlands is modifying or eliminating the criteria of the winning bidder bearing the expense described above, after the Town of Highlands has announced the winning bidder. 

“In changing the terms and/or conditions of the accepted bid, the Town of Highlands is abusing its discretion to act in the best interest of the citizens of Highlands and is using its authority in a manner that is unfair to the bids that were not accepted. 

“In light of the above, by effectively amending its selection criteria after receiving the bids, the Town of Highland’s bid award should and must be reversed, and the request for bids be reissued pursuant to the revised and new criteria put forth by the Town of Highlands,” continued the letter.

After coming out of the January Town Board meeting Closed Session, Mayor Taylor reported that Commissioner Amy Patterson made the motion to direct the Town Attorney to respond to the letter sent by the attorney for NCBG concerning the procedures for developing a contract with Hotwire Communications. The vote was unanimous.

Furthermore, Commissioner Patterson made the motion to direct staff to proceed with the development of the contract with Hotwire Communications following the requirements of the RFP/bid process.

The vote was 3 to 1, Commissioners Patterson, John Dotson and Brian Stiehler voted yes. Commissioner Hehn voted no. Commissioner Donnie Calloway was absent from the January Town Board meeting.

As of Jan. 21, Town Attorney Jay Coward had not responded to NCBG’s letter but did present a letter to the board dated the same. It reads in part: 

“In the public record the winning bidder, Hotwire, suggested in its bid that the town take over the underground infrastructure once it was completed so the network would not be ‘broken.’ This was outside the RFP. 

“The subsequent conversation, reported to the board in a Closed Session on the 17th of December 2020, was that this would amount to a sale to the town, supported by profits earned later and paid later to Hotwire. 

“Commissioner Hehn asked if this was not a substantial change to the RFP. 

“The board asked the attorneys to discuss this question and report back to the board tonight [January 17]. 

“So, there are no public records that indicate the Town of Highlands is modifying or eliminating the criteria of the winning bidder. That allegation is false,” reads Coward’s letter.

In fact, according to the minutes of the Dec. 17th Town Board meeting, the board went into Closed Session to discuss matters relating to the location or expansion of industries or other in the area served to discuss the fiber lease contract negotiations, but once back in open session, it was reported that the board took no action.

In Attorney Coward’s letter to the board, he reported that “after the conversation between the lawyers (Jim Baller, Gabriel Dusablon, Sean Stokes, and myself) and Josh Ward and Matt Shuler on the [January] 14th, we concluded that 1) the Hotwire suggestion was a substantial change, and 2) we would recommend to the board that it take no action on the suggestion and stick with the bid as presented.”

Coward said the NCBG letter is troubling, not only for its content but because Atty. Wachter states that his letter is based on “public records and comments made by public officials.” 

“There are no public records that indicate the Town of Highlands is modifying or eliminating the criteria of the winning bidder, said Coward. “How that information was obtained is what troubles me. That leaves comments made by public officials.”

Coward outlines in his letter two possibilities to consider since the only people at the Closed Session meetings are typically the Mayor, Commissioners Patterson, Dotson, Stiehler, Calloway and Hehn, Town Manager Josh Ward and Town Clerk Gibby Shaheen. 

“First, Mr. Wachter could have obtained information based on a meeting between staff and contractors. I have attended several meetings of this nature and I cannot recall a meeting where a board member was present. Staff would also qualify as public officials. I will leave the straightening out of this possibility – which I seriously doubt – to the Town Manager and the Mayor.

“The second possibility is that Mr. Wachter would be in a position to make his allegations if he obtained information from someone who was present in the Closed Session of the board. Since I am the board attorney, I address this possibility directly to you,” Coward wrote to the board.

Coward said as per the definition of a Closed Session and the purpose thereof, a board member who is privy to Closed Session information is not at liberty to divulge it to the public.

“The NCBG letter reveals to the board that some member has failed in his/her duty to follow the law. This failure is not a crime. There are no reported cases which address it. The School of Government has no meaningful guidance about what to do when it occurs. It is so fundamental a principle that it goes without saying. BUT in my opinion, it is a violation of the Oath of Office in the North Carolina Constitution Art. VI SS 7 which states that the person elected to office shall “support and maintain…the laws of North Carolina…and that I will faithfully discharge the duties of my office,” reads his letter.

Coward ended is letter by saying:

“Mr. Wachter is not licensed to practice law in North Carolina. Therefore, his letter constitutes the unauthorized practice of law in North Carolina, unless he is an owner or officer of NCBG. 

“Furthermore, neither of the cases he cites to support his allegations stand for the legal theory he proposes that in awarding a contract, an agency must also follow its own rules, including the criteria contained in its own RFP and follow the appropriate statutes of North Carolina. The failure to do so is a reversible error – Humble Oil & Refining co v. Bd. Of Alderman, 284 N.C. 458, 467, 202 S.E.2d 129, 135 (1974) and Act—Up Triangle v. Commission for Health Servs. 345 N.C. 699, 707, 483 S.E.2d 388, 393 (1997). Coward said the first case Wachter cites is a zoning case and the second one involves an HIV testing program.

Meanwhile, Town Manager Josh Ward said the Town of Highlands will continue contract negotiations with Hotwire Communications.

Per the initial contract, “Hotwire is taking over all aspects of the of network management, service provision, infrastructure maintenance, support and all associated functions of the town’s current network and infrastructure. Hotwire will be responsible for providing its full suite of residential, commercial and enterprise services over the network – including voice, video, Internet, and home security/automation. 

“All risk associated with the operation of the network – including, but not limited to headend builds and upgrades, infrastructure maintenance, labor employment and cost, broadband cost, customer premises equipment, and content costs will be borne by Hotwire. 

“As consideration for its network lease, Hotwire proposes to pay the Town of Highlands $425,000 per year to be paid on a quarterly basis beginning in 2022 through 2045,” reads the contract.

Mayor Taylor said he is disappointed and frustrated if a board member would discuss what was said during a Closed Session with the town’s legal counsel to a third party, especially since the board took no action and was waiting for the attorneys to give the board their legal advice.

By Kim Lewicki, Highlands Newspaper

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