Middletown officials must disclose the names of 29 employees who received interest-free loans from town tax money, the state Attorney General's Office has ruled.

Businessman Jeff Bruette appealed the issue to the attorney general after town leaders denied his public records request for the information. Town officials said it was a personnel matter and not public under the state's Freedom of Information Act.

In a 14-page opinion, Deputy Attorney General W. Michael Tupman wrote: 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.

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 repayment, and the loan status, he said.

Tupman gave the town until July 22 to provide the information.

In June, Mayor Ken Branner suspended the practice, under which employees with personal hardships had received up to $14,000, after it came under scrutiny from residents and state officials, including state Auditor R. Thomas Wagner. It was left up to Branner to determine what was a hardship. No employee who sought help ever was denied an interest-free loan.

The mayor has said neither he nor any council member nor any of their relatives received loans.

Since the program began in early 2004, Branner issued loans totaling $265,700 to 29 of the town's 103 employees. Some already have been repaid, with $216,841 outstanding, according to figures released by the mayor last month. The program was never voted on in a public meeting or included in a written policy. Council members were informed of the loans but not involved in approval.

I am pleased that the attorney general has agreed that the details of public funds should be public knowledge, Bruette said. I'm anxious to see the details of those loans. However, my intention has never been and is not to embarrass or shame or cause focus on the individual borrowers.

The issue is not the borrowers themselves. The issue is the town's handling of money, he said.

Branner could not be reached for comment Friday. Councilwoman Catherine Kelly said the town may appeal the decision, declining to comment further.

Council members Monday unanimously approved Branner's recommendation to do away with the program and turn over the outstanding debt to a bank. The bank will immediately repay the town, and the employees will begin paying the money  with interest  to the bank, taking Middletown out of the equation. Details, including which bank and how much interest employees will pay, have not been disclosed or are still being worked out.

Wagner has completed his investigation but is waiting for the attorney general to finish a legal review of the lending practice before releasing his report. Article VIII, Section 8 of the state constitution says no municipality may lend its credit or appropriate money to any person.

Town officials resisted releasing recipients' names, saying the loans were given for hardship and thus disclosure could embarrass the employees, who did not realize when they accepted a loan that it could become public.

Tupman said public employees do not have a reasonable expectation of privacy that any part of their compensation package is confidential: Nor do we believe that there is any particular stigma attached to the need for a loan considering that 29 [out of 103] Town employees have received loans, he said in his opinion dated Wednesday.

This is the third time Bruette has won a public records battle with the town. The point is that the town cannot go giving away the public's money and then say, it's our little secret who got it and why, he said.