Call to Order and Roll Call
The Program Review and Investigations Committee met on Monday, September 21, 2015, at 1:00 PM, in Room 131 of the Capitol Annex. Representative Martha Jane King, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Martha Jane King, Co-Chair; Senators Tom Buford, Perry B. Clark, Dorsey Ridley, Dan "Malano" Seum, and Stephen West; Representatives Leslie Combs, Tim Couch, David Meade, Terry Mills, Ruth Ann Palumbo, and Rick Rand.
Legislative Guests: Representatives Kenny Imes and Susan Westrom.
Guests: Wendell Lawrence, Executive Director, Lincoln Trail Area Development District; Steve Tribble, Judge Executive, Christian County; John Wilson, Judge Executive, Garrard County; Jason Vincent, Executive Director, Pennyrile Area Development District; and David Duttlinger, Executive Director, Bluegrass Area Development District.
LRC Staff: Greg Hager, Committee Staff Administrator; Chris Hall; Chris Riley; Colleen Kennedy; Van Knowles; Jean Ann Myatt; William Spears; Shane Stevens; Joel Thomas; Ashleigh Hayes, Graduate Fellow; and Kate Talley, Committee Assistant.
Minutes for August 13, 2015
Upon motion by Representative Combs and second by Representative Mills, the minutes for the August 13, 2015, meeting were approved by voice vote, without objection.
Representative King summarized the Program Review and Investigations Committee statute and mission. There have been concerns about area development districts (ADDs), but the committee is not performing a study at this point.
Area Development Districts
Mr. Vincent said that ADDs were created pursuant to the federal Public Works and Economic Development Act of 1965 and a governor’s executive order in 1969. Several ADD directors have resigned in recent years, so the ADDs set up a cooperative review of each other, a manual of ADD training materials, a code of ethics, bylaws, staff and organizational charts, and other ADD materials. Board members attend a formal orientation and are encouraged to attend the National Association of Development Organizations annual training conference. Pennyrile ADD meetings are open to the public and announced through newspapers, email, and online. Meeting packets are available online for those not able to attend. The three most recent annual audit reports and budgets are also available on the website.
Judge Tribble said that the Pennyrile ADD has a 39-member board of directors. It has a $4 million budget and serves 9 counties and 33 cities. There are over 300 advisory committee members who advise on subjects such as transportation, military, aging, and water management. Funding comes from federal, state, and local governments. Local governments contribute 30 cents per capita for a total of $66,000 annually. The Pennyrile ADD bylaws provide for an executive committee, which meets quarterly, to oversee the budget and financial affairs of the district. It is made up of board members from each county along with the four officers of the board. Management staff administer grants from different sources with many different requirements. After Auditor Edelen’s Special Examination of the Bluegrass ADD in 2014, the Pennyrile executive committee presented further recommendations to the board of directors.
Mr. Lawrence said the Kentucky Council of Area Development Districts (KCADD) is the statewide governing organization of ADDs. The council is made up of 30 representatives of all ADD boards in the state. It provides policy guidance and represents public and private sector interests. Local ADD boards are required by law to have a majority of local elected officials. ADDs welcome any review of operations. ADDs offered to undergo additional reviews by the Auditor of Public Accounts (APA) when the Bluegrass ADD was being examined.
Judge Wilson said the Bluegrass ADD has been very beneficial to the region. In the APA report, there were allegations of inappropriate activity related to the use of property that was purchased for an approved prison re-entry program. There was concern regarding the previous director. The Bluegrass ADD board itself contacted APA with its concerns. Immediate action was taken by the board including forcing the resignation of the previous director, eliminating the prison re-entry program, and emphasizing the board’s role as the owners, conveners, and beneficiaries of the ADD.
The APA report released in March 2014 included findings related to government practices, activities beyond statutory authority/conflicts of interest, reporting of criminal violations, violations of procurement policies, prevention of excessive and unnecessary travel expenditures, non-compliance with federal grants, bonuses paid to ADD employees, and use of an outdated accounting system. All findings were corrected to the APA’s satisfaction within 3 months of the report being issued. If legislation for further reform is needed, the Bluegrass ADD is ready to be part of that process.
In response to a question from Representative Meade, Mr. Lawrence said there is a regular ongoing relationship between ADDs and the Education and Workforce Development Cabinet (EWDC). He was unaware of any formal review of workforce development funds.
Judge Wilson said that there has been an independent review of workforce development in the Bluegrass region, but there is no report available. Another auditor sent a letter about questionable costs, which is being reviewed currently.
In response to questions from Representative Westrom, Judge Wilson said that an assessment of funds, including workforce development funds, would be paid by the ADD. However, board members are protected from individual liability. The Bluegrass ADD welcomes any review.
Representative Westrom said that ADDs are vital to every county and invaluable to the small counties that have limited resources.
Judge Wilson invited Westrom to attend the next Bluegrass ADD board meeting.
In response to questions from Senator Seum, Mr. Lawrence said that the Kentuckiana Regional Planning & Development Agency (KIPDA) is an urban planning agency that includes nine Kentucky counties and two Indiana counties; otherwise, it is the same as the other ADDs. KIPDA is federally funded according to a specific formula and direct grants. Judge Wilson said the Community Development Block Grant (CDBG) is a direct grant that Garrard County requests.
Mr. Lawrence said state funds match federal funds. Regulations determine what is allowed to be funded for each ADD program. Board membership is determined by law and regulation. Previously, ADD bylaws specified board members, but now law and regulation includes county judge-executives, mayors, and citizen members. Federal programs have caps on administrative costs. Overhead is spread over all programs. The ratio of administrative to program costs is low. The board of directors and funding agencies monitor all programs.
In response to questions from Representative Couch, Mr. Duttlinger said that Bluegrass ADD funding is 60 to 65 percent federal (largely for aging programs), 30 percent state match (much of that from the Transportation Cabinet), and 10 percent from local government. The Bluegrass ADD’s current asset value is $2.6 million for the office building and $1.1 million in retained earnings.
Mr. Lawrence said the Lincoln Trail ADD’s current asset value is $800,000.
Representative Couch said the ADDs should consider moving their offices to different counties on a rotation every four to five years to discourage favoritism if feasible.
In response to a question from Representative Westrom, Judge Wilson said there is a cosmetic dentist that rents some space in the Bluegrass ADD office building.
In response to questions from Representative Mills, Mr. Lawrence said that the Lincoln Trail ADD personnel committee sets salaries. There is a new pay scale. Senior staff and the executive director recommend increases, taking into consideration salaries for similar jobs in the community. The executive director is under contract, and the committee negotiates compensation with the executive director. Salaries are open to the public. Board members are not paid. The ADD does the best it can through the personnel process to keep up with increases in cost of living. The budget committee must approve all personnel committee decisions.
Mr. Vincent said that in the Pennyrile ADD, the executive committee reviews all salaries and makes recommendations to the full board of directors.
Judge Wilson said the Bluegrass ADD executive committee is not paid.
In response to a question from Representative King, Mr. Vincent described the Career Path Institute project in Todd County that is scheduled for completion in December. Hopkinsville Community College, Todd County schools, two counties, and cities developed the facility that Todd County schools will use in the day and the college will use at night. $2.5 million of CDBG funds were used along with $500,000 contributed by Todd County.
In response to a question from Representative King, Mr. Vincent said the Pennyrile ADD and Purchase ADD are working together to serve the 17 westernmost counties. The Todd County career path project is an example of combined workforce development and community development.
Judge Tribble said Christian, Todd, and Trigg Counties are working together through their ADD. Christian County gave half of its CDBG funds to Todd County for the career path project.
Senator Ridley welcomed Magistrate Elbert Bennett from the Caldwell Fiscal Court and chair of the Kentucky Magistrates Association as a guest.
The meeting adjourned at 2:10 pm.