Bill requiring more details from area development districts passes House State Government Committee

03/10/2016 10:37 PM

FRANKFORT — Legislation that would provide more oversight to the state’s area development districts cleared a House committee on Thursday, but its sponsors say it’s just half of the bill they’d hoped to see pass.

House Bill 438 would enact a slew of changes to laws governing the 15 districts, which provide regional economic development support, and passed the House State Government Committee on a unanimous vote.

The legislation would require development districts to give the Legislative Research Commission a detailed accounting for every state and federal dollar spent by the agencies, advertise executive director openings and cease future one-time pay bonuses to its staff.

HB 438 comes in response to a scathing 2014 audit of the Bluegrass Area Development District, which found the district had failed to report an employee who charged fees for participation in a federally funded felon re-entry program, lavished year-end bonuses on workers and leased office space from one of its subsidiaries, among other items.

Rep. Susan Westrom, HB 438’s sponsor who also requested the Bluegrass ADD audit, said the legislation shouldn’t be seen as an indictment against all Kentucky’s area development districts, but rather a means to foster transparency within the economic development agencies.

“I am sorry, but there was one bad apple that kind of shed the light on everybody, and the questions were asked,” said Westrom, D-Lexington, in reference to Bluegrass ADD, whose executive director resigned after the 2014 audit’s release.

“I could never have prevented that. We all sitting in this room know what it is to have one person make us all look bad and we all have to pay the price for that, but I think as a result with quality leadership of our area development districts, we’re going to see a shining example like the Kentucky League of Cities was able to rebuild itself.”

A second portion of HB 438 would have laid out parameters for regular audits of the development districts conducted by the state auditor, including preliminary examinations of all 15 districts by June 30, 2021.

That piece was ultimately carved out through a committee substitute, but Westrom says HB 438 represents a good start to make the districts more accountable.

“Every dollar that is sent to the area development districts for agency services is absolutely critical, but we’ve never been able to ask the question are they all being used and how are they being used and how much is being spent for administration, how much is actually being spent to provide direct services and who actually provides the services,” Westrom said. “Does the ADD provide the service, or do they contract that out? All of those pieces of information are vitally important for us to understand how dollars are being spent.”

Westrom declined to say who requested that section’s omission during her committee testimony, but she told Pure Politics afterward that House State Government Chairman Brent Yonts asked for that section to be cut from the original bill.

She said he and others have said local governments would be on the hook for costs associated with a state audit.

Yonts told Westrom that if she could identify a permanent funding source for the audits, that provision could be returned to HB 438.

“When I started having legislators come up to me and say, ‘I can’t vote for that bill because my judge-executive said they’re going to have to go back to the county to get the money,’ and the counties don’t have the money to do this,” she said. “Well that wasn’t what the legislation said, so the chair of the committee said, ‘Until you can find a 100 percent funding stream to pay for that, get it out of the bill,’ which we did.”

Westrom was joined by co-sponsors House Speaker Pro Tem Jody Richards and House Minority Whip Jim DeCesare in her testimony. Questions have been raised about one-time bonuses paid to employees of the Barren River Area Development District.

Darrell Link, executive director of the Kentucky Council of Area Development Districts, said his group concurred with the committee substitute that passed out of committee, and Westrom says she expects her bill will ultimately pass both the House and Senate.

“There are people in the Senate that are waiting for this bill,” she said.


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