July 12, 2006
Civil Division-Kent County (739-7641)
06-IB14
Mr. Jeff Bruette
116 Sleepy Hollow Drive, Suite C
Middletown, DE 19709

Re:   Freedom of Information Act Complaint
          Against Town of Middletown

Dear Mr. Bruette:
Our Office received your complaint dated May 31, 2006 under the Freedom of Information
Act, 29 Del. C. Ch.100 (“FOIA”), alleging that the Town of Middletown (“the Town”) violated the
public records requirements of FOIA.
On May 15, 2006, you made two FOIA requests to the Town. The first request was for: ” 1.
A copy of any loan agreements between the Town of Middletown and Trinity Church between
January 2004 and present. 2. Records of payments on the above loan(s) and the current status of
any loan(s).” Your second FOIA request was for: “1. Copies of all agreements for loans extended
by the Town between January 2004 through today to any individuals (employees or otherwise),
businesses, groups, or organizations. 2. Current status of any of the loans identified above.”
By letter dated May 25, 2006, the Town responded to your FOIA requests. As for the first
request, the Town “advised that no loan agreements exist between the Town and Trinity Church.”
The Town denied your second request: “While there are loans to certain employees, we have been
advised by our attorney that under 29 Del. C. 10002(g)(1) and (2), such documentation is not a
public record.”
By letter dated June 12, 2006, we asked the Town to respond to your complaint by June 23,
2006. We received the Town’s response on June 23, 2006.
According to the Town, the loan program dates back to August 2003 when “a Town
employee approached Mayor Branner in confidence and explained that he was in dire financial straits
. . .” On advice of legal counsel, the Mayor declined the employee’s request for a salary advance.
Instead, the Town “created a loan agreement whereby the Town would loan the employee a certain
sum of money so long as the money was repaid out of the employee’s paycheck.” The Town
“considers these loans as part of its overall employee benefits package.”
The Town provided us with a blank form agreement it uses for these employee loans. The
form agreement provides:

I, authorize the Town of Middletown to deduct $.00 per week
from my paycheck until such time as the loan I received from
the Town in the amount of $.00 is paid in full.

In addition, I agree that should my employment with the Town
of Middletown be terminated for any reason, the Town may
apply any compensation owed to me to the balance due on
the loan.

If said compensation is not enough to pay off the balance of the
loan I further agree to make monthly payments to the Town of
Middletown in the amount of $.00 per month with the first payment
being due 15 days after employment is terminated.

The form has signature/date lines for the borrower, a witness, and the approving authority.
According to the Town, it has made loans to 29 (out of 103) employees totaling $265,700,
of which $216, 841 is outstanding. The Town represents that the “only documentation (other than
payroll deductions) is the executed loan agreement” and that it has “no objection to providing
executed copies of the loan agreements providing the employee’s name is redacted.”
RELEVANT STATUTES
FOIA provides that “[a]ll public records shall be open to inspection and copying by any
citizen of the State during regular business hours by the custodian of the records for the appropriate
public body.” 29 Del. C. §10003(a).
FOIA exempts from the definition of a “public record” any “personnel, medical or pupil file,
the disclosure of which would constitute an invasion of personal privacy, under this legislation or
under any State or federal law as it relates to personal privacy.” Id. §10002(g)(1).
FOIA exempts from the definition of a “public record” any “trade secrets and commercial or
financial information obtained from a person which is of a privileged or confidential nature.” Id.
§10002(g)(2).
LEGAL AUTHORITY
A. Trinity Church Loan
According to the Town, “[t]here was, in fact, a request by Trinity Church for a loan. Mayor
Ken Branner mentioned this in the Executive Session on June 7, 2004 and that a proposed loan
document would be prepared. However, the Town never took any action on this matter.
Consequently, . . . there is not, nor has there ever [sic], a loan agreement executed between the Town
and Trinity Church.”
It has been our historical practice to accept such representations from an attorney for ‘the
custodian of public records to determine that such documents do not exist for purposes of FOIA.’”
Att’y Gen. Op. 05-IB19 (Aug. 19, 2005) (quoting Att’y Gen. Op. 97-IB01 (Jan. 14, 1997)). We
determine that the Town did not violate the public records requirements of FOIA by denying you
access to a record (the Trinity loan agreement) which does not exist.
B. Employee Loans
The Town contends that the names of the employees are exempt from disclosure under FOIA,
either as part of the employee’s personnel file or as confidential financial information.

1. Personnel File

In Att’y Gen. Op. 02-IB24 (Oct. 1, 2002), our Office adopted the Department of Labor’s
definition of a “personnel file” in 19 Del. C. §731(3), which includes “wage or salary information.”
FOIA, however, only exempts information in a public employee’s personnel file “the disclosure of
which would constitute an invasion of personal privacy.” 29 Del. C. §10002(g)(1). Disclosure of
a public employee’s salary would not constitute an invasion of personal privacy.
In Gannett Co. v. Colonial School District, Civ.A. No. 82M-DE-26, 1983 WL 473048 (Del.
Super., Aug. 19, 1983) (Balick, J.), the Superior Court held that the salaries of public employees
were public information under FOIA. “Although some might feel that the amount of their salary is
personal, it is generally recognized that the public has a legitimate interest in knowing the salaries
of persons who are paid with public funds and public employees have no right of privacy in this
information.” Id. Accord Att’y Gen. Op. 3W-023 (Mar. 10, 1978); Att’y Gen. Op. 3W-077 (Aug.
4, 1977).
In Att’y Gen. Op. 06-ID11 (May 31, 2006), our Office extended that reasoning to include
time sheets and attendance records of public employees. “Just as the public has a right to know the
salary paid to public employees, the public also has a right to know when their public employees are
and are not performing their duties for which they are paid.” Id. Your complaint requires us to take
a further step to determine whether FOIA requires a public body to disclose an employee’s nonsalary
compensation.
In University System of Maryland v. Baltimore Sun Co., 847 A.2d 427 (Md. App. 2004), a
newspaper requested information regarding incentives, bonuses, broadcast agreements, and athletic
footwear contracts to ascertain the total compensation of the university’s head football and basketball
coaches. The university denied the request claiming the information was exempt under the Maryland
Public Information Act (“MPIA”) as a “personnel record.” Md.Code §10-616(a)(i) (“a custodian
shall deny inspection of a personnel record of an individual, including an application, performance
rating, or scholastic achievement information”).
The MPIA requires disclosure of the “salary of an employee or a unit or instrumentality of
State Government.” Id. §10-611(g)(2). The Maryland Court of Appeals held that a public
employee’s “salary” should be construed broadly to include “any document evidencing the
employment arrangement and how the state-funded salary is earned . . . especially in light of the
various alternatives for compensation potentially available to the coaches in the form of car
allowances, country club memberships, complimentary ticket sales, use of state-owned resources for
clinics and camps, etc.” Baltimore Sun, 847 A.2d at 441.
The interest-free loans made by the Town to its employees are a form of compensation. “For
income tax purposes, an employer making an interest free loan to an employee is deemed to have
paid, as compensation to the employee, an amount equal to the annual interest the employee would
have been required to pay had she borrowed the money from a commercial lender. This amount is
known as ‘imputed income.’” Diamond v. T. Rowe Price Associates, Inc., 852 F. Supp. 372, 414 (D.
Md. 1994). The Town acknowledges that it “considers these loans as part of its overall employee
benefits package.” *1
We believe that the courts in Delaware would hold that disclosure of non-salary total
compensation in whatever form to public employees would not constitute an invasion of privacy and
therefore is not protected by FOIA’s personnel file exemption. The public has a right to know how
their public servants are compensated with taxpayer monies whatever the form the compensation
might take. Public bodies should not be able to avoid revealing how their employees are paid by
shifting the form of pay from fixed salary to bonuses, lump-sum payments, or other forms of
compensation such as interest-free loans. *2
The Town contends that “disclosure of the identity of the employee to whom the loan is
granted would be highly offensive and is truly not of legitimate concern to the public.” We are
sensitive that disclosure of the names of the employees might create an embarrassing perception of financial distress. In balance, however,

[t]he public has a very strong interest in knowing to
whom such public funds are being loaned and in
what manner the loans are being repaid. Public
disclosure and oversight will provide protection
against malfeasance, misfeasance and the waste
of public funds. Borrowers of public funds must
expect public oversight, as contrasted with borrowers
from private sources, and the benefits of such
oversight outweigh their privacy interests.

Parsons v. Urban Redevelopment Authority of Pittsburgh, 893 A.2d 164, 169 (Pa. Cmwlth. 2006).
Id. at 167. Individuals do not “have a right to privacy or reputation in their loan histories sufficient
to overcome the public’s right to know.” Id. at 169.
Public oversight of loans made by the Town using taxpayer monies requires disclosure of the
names of the borrowers just as FOIA requires disclosure of the names of public employees together
with their salaries. See Colonial School District, 1983 473048, at p.1 (school district must disclose
“specific administrators’ salaries” ) (emphasis added). “[T]here is no way to verify the accuracy of
the information or to conduct any meaningful public oversight of governmental operations without
the employees’ names, because it is otherwise impossible to detect patterns, overpayment,
underpayment, irregularities, abuse, fraud, discrimination, favoritism or inefficient management of
public employees.” City of Bakersfield v. The Bakersfield Californian, 2002 WL 32122040, at p.4
(Cal. App., Dec. 4, 2002).
When employees avail themselves of an interest-free loan from the Town, they must expect
that there will be public oversight of the amount and repayment of the loan requiring disclosure of
the name of the borrower. *3 The public has a legitimate interest in knowing the essential facts about
a financial transaction between an individual and a public body including the name of the borrower,
the amount of the loan, the terms of re-payment, and the loan status. Loan status means more than
just a statement as to whether the loan is current or delinquent. Loan status also includes the date
last paid, next date due, the length of any delinquency, the number of payments made and the number
of late payments. *4
We determine that the Town violated FOIA by not providing you with access to employee
loan information. That information is not exempt under FOIA as a personnel file because disclosure
would not constitute an invasion of personal privacy.
2. Confidential Financial Information
In Att’y Gen. Op. 87-IO31 (Nov. 4, 1987), our Office determined that personal financial
statements filed by licensees with the Alcoholic Beverage Control Commission were confidential
information. “The release of information regarding one’s assets, profits and losses, stock holdings
and collateral” are exempted from disclosure under FOIA. Id. See also Att’y Gen. Op. 96-IB30
(Sept. 25, 1996) (tax returns of parents of children applying for scholarships were not public records
under FOIA).
The federal FOIA, like Delaware’s, exempts “trade secrets and confidential or financial
information obtained from a person and privileged or confidential.” *5 U.S.C. §552(b)(4)
(“Exemption 4”). The legislative history of Exemption 4 shows that Congress intended it to include
“technical or financial data submitted by an applicant to a Government lending or loan guarantee
agency.” H.R.Rep. 1497, 89th Cong. 2d Sess 10, reprinted in [1966] U.S.Code Cong. & Admin.
News 2418. *5
In Rural Housing Alliance v. United States Department of Agriculture, 498 F.2d 73 (D.C.
Cir. 1973), a public interest group made a FOIA request for an investigative report about housing
discrimination. The federal appeals court noted that “[t]he Senate Report on the bill which became
FOIA suggests that loan applications would be within the scope of exemption 4.” 498 F.2d at 79
n.30 (citing S.Rep. 813, 89th Cong., 1st Sess 9 (1965)). “As much of the information collected here
related to loan applications, certainly some data is financial information which might warrant
confidential treatment.” 498 F.2d at 79 (footnote omitted).
In Miami Herald Publishing Co. v. Small Business Administration, 670 F.2d 610 (5th Cir.
1982), a reporter made a FOIA request for a list of small business borrowers, the date and amount
of their loans, the remaining balance, and records reflecting if a loan had been written off, liquidated,
or declared delinquent. “Significantly, the information sought does not include information supplied
in the process of applying for loans . . . Thus disclosure of such matters as the general financial
condition or the personal background of the applicant is not at issue.” 670 F.2d at 615. *6
Like Delaware’s FOIA, the federal FOIA only exempts confidential financial information
“obtained from a person.” In Buffalo Evening News, Inc. v. Small Business Administration, 666 F.
Supp. 467 (N.D.N.Y. 1987), a newspaper made a FOIA request for information about loans for
disaster relief: (1) the names of the borrowers; and (2) the amount of each loan and the dollar amount
repaid to date. The federal district court held that the information “has been generated by the SBA
regarding the individual loan amounts, including the outstanding balances and payment, collection,
or discharge status” and was not “obtained from a person” for purposes of Exemption 4. 666 F.
Supp. at 468 (citing Board of Trade of the City of Chicago v. Commodity Futures Trading
Commission, 627 F.2d 392, 404 (D.C. Cir. 1980) (“the requirement that information be ‘obtained
from a person’ [is] to restrict the exemption’s application to data which have not been generated
within the Government”)). “In no way do these records implicate any financial information provided
to the government by the borrower.’” Buffalo Evening News 666 F. Supp. at 468.
The Town’s loan agreements with employees and the status of those loans is not confidential
financial information provided by the borrower. The form loan agreement only identifies the
borrower, the date and amount of the loan, and the terms of re-payment, and repayment is reflected
in payroll deductions. All of this information “has been generated by the [Town] in the course of
its involvement with its borrowers” and is not exempt under FOIA. Buffalo Evening News, 666 F.
Supp. at 469.
The Town contends that if it “is forced to disclose employees’ identities under FOIA, this
will have a chilling effect on the loan program . . . The employees who availed themselves of this
employment benefit have a reasonable expectation of privacy and might have made other choices
if they understood that their identity would be subject to disclosure by virtue of a FOIA request.”
We do not believe that public employees have a reasonable expectation of privacy that any
part of their compensation package including an interest-free loan is confidential. Nor do we
believe that there is any particular stigma attached to the need to apply for a loan considering that
29 (out of 103) Town employees have received loans. Whether any particular employee would have
turned down an interest-free loan is speculative because many State and local government employees
do not understand that their compensation in whatever form is public information.
CONCLUSION
For the foregoing reasons, we determine that the Town violated the public records
requirements of FOIA by denying you access to copies of loan agreements between the Town and
Town employees and information regarding the status of those loans. As remediation, we direct the
Town to make available to you within ten days of the date of this letter any loan agreements or other
records reflecting: (1) the names of the borrowers; (2) the amount of the loan; (3) the terms of
repayment; and (4) the loan status. To the extent that there is any confidential financial information
(such as a personal financial statement or tax return) or personal information the disclosure of which
would invade personal privacy (e.g., home address and telephone number, social security number,
bank account numbers), the Town should redact that information from the records before making
them available to you.
We direct the Town Solicitor to notify us in writing within ten days after the Town has
completed remediation.
Very truly yours,
W. Michael Tupman
Deputy Attorney General
APPROVED
________________________
Lawrence W. Lewis, Esquire
State Solicitor
cc:
The Honorable Carl C. Danberg
Attorney General
Malcolm S. Cobin, Esquire
Chief Deputy Attorney General
Keith R. Brady, Esquire
Assistant State Solicitor
Scott E. Chambers, Esquire
Town Solicitor
Phillip G. Johnson
Opinion Coordinator
FOOTNOTES
*1 It is not clear from the record whether the Town reported the loans for tax
purposes. See Diamond, 852 F. Supp. at 414 (“T.Rowe Price reported the imputed income on the
Form 1099s that the firm provided to the Internal Revenue Service and to Diamond every year
from 1989 to 1992. . . . Diamond attached the 1099 Forms to her income tax returns for the years
1989 to 1992 and reported the imputed income as ‘nonemployee compensation.’”).
*2 We note that Article VIII, Section 8 of the Delaware Constitution provides: “No
county, city, town or other municipality shall lend its credit or appropriate money to, or assume
the debt of, or become a shareholder or joint owner in or with any private corporation or any
person or company whatsoever.” The question of whether the interest-free loans to Town
employees is unconstitutional or a valid expenditure for an employee benefit is not within the
scope of FOIA.
*3 Of course, there may be information provided by borrowers to the government
which should not be disclosed, “particularly [in] the loan applications, [which] necessarily
contain a great deal of information that is personal and confidential as to individuals.” Parsons,
893 A.2d at 169 (redacting home addresses and telephone numbers, Social Security numbers, and
bank account numbers). You did not request copies of any loan applications, and, according to
the Town, there is no written application, only the executed loan agreement. We do not need to
address this issue in more detail here, except to note that we do not believe FOIA would require
the Town to disclose the nature of the financial hardship for the loan application.
*4 According to the Town, “all money that has been loaned has either been repaid in
full or the employee is current in his/her repayment obligations” but the only documentation of
the loan status is the loan agreement and payroll deductions. If so, then the Town will have to
make publicly available the payroll deduction information in addition to the loan agreements so
that a citizen can do an accounting.
*5 Exemption 4 does not go so far as to incorporate a blanket “lender-borrower”
privilege. See Sharyland Water Supply Corp. v. Block, 755 F.2d 397, 400 (5th Cir.), cert. denied,
471 U.S. 1137 (1985) (the “term ‘privileges’ refers only to privileges created by the Constitution,
statute, or the common law. None of these sources recognizes a lender-borrower privilege.”)
(footnotes omitted)).
*6 In Miami Publishing, the SBA provided the names of the borrowers and the date
and amount of their loans, but refused to provide loan status information claiming it was
confidential financial information. The court rejected the SBA’s argument that disclosure of
loans classified as delinquent, in liquidation, or charged off would violate the personal privacy of
the borrowers. There was no reasonable expectation of privacy because the “borrower’s only
realistic expectation is that the lender, whether the SBA on a direct loan or a financial institution
on a guaranteed loan, will proceed against him with the full force of the law. So proceeding, the
lender will publicly disclose precisely that data which the SBA here seeks to withhold.” 670
F.2d at 615-16.

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