Some of the disclosure requirements imposed by a new state law are bringing concerns for local boards of directors and the agencies and organizations they oversee.
Several Glasgow Municipal Airport board members were among those who attended an information session on Nov. 6 that was requested by Glasgow Mayor Rhonda Riherd Trautman; the presentation was by a Kentucky League of Cities representative who outlined the requirements of what was House Bill 1 during the 2013 General Assembly. The legislation became Kentucky Revised Statute 65A when signed into law.
HB 1 was based on recommendations by Adam Edelin, state auditor, who had determined there were many groups getting taxpayer money with too little or sometimes no oversight. The bill calls for the establishment of a website the public can access that would provide information about these organizations and agencies – called special purpose government entities – ranging from what they do and who their board members are to financial information.
The law also imposes new requirements for audits. The information is to be submitted to the website by the local groups statewide. The web portal for the entry of information is running, the website isn’t ready for the public to view the information yet.
While a set of criteria is listed that determines which SPGEs have to comply with the new rules and which are exempt, certain types of groups – including airport boards – are listed as specifically having to comply.
The airport board went straight to a state legislator, with one of its members inviting state Rep. Johnny Bell, D-Glasgow, to its Monday meeting.
Fred Miller, board vice chairman, started the discussion.
“We currently do everything that’s called for,” he said.
He noted that none of the board members are paid or even get reimbursed for expenses typically, and complying with the law would put an extra burden on them.
“We really don’t see a reason why we should have to participate,” Miller said.
Bell explained the primary intent of the bill was transparency, which he agrees is important, but he did have some hesitation about voting for it because of issues like the ones Miller mentioned. He said the information legislators were hearing was that there were thousands of boards across the commonwealth retaining large amounts of money.
“When you start talking about transparency, it becomes something almost impossible to go against,” Bell said.
He acknowledged that with almost any new law, there can be unintended effects and legislators often have to revisit and tweak certain aspects of it, and from what he’d heard, he expected some changes to be necessary.
J.D. Chaney, chief government affairs officer for KLC, had also told the people representing miscellaneous local groups at his presentation that KLC would be working with the General Assembly toward getting some of those adjustments made.
Bell suggested the board members put in writing any specific issues with the law having a negative impact on them and get those to him.
Miller suggested a list of criteria that SPGEs could check off to see whether they must comply, regardless of whether they are on the list of specific types, like airport boards.
“If we already do this, this, this and this without oversight from the state, we should be exempt,” he said.
Bell said airport boards were specifically listed because some of the larger airports handle “tremendous amounts of money,” so he wondered aloud whether an exemption for smaller airports or those for certain classes of cities would be appropriate.
Miller said the Glasgow airport produces very little revenue on its own, basically through hangar rentals and fuel sales, but it appears it has much more because it is a conduit for the federal funds it receives that make up about 90 percent of its budget.
The amount of revenue determines which category an SPGE is in, and the law’s requirements are different depending on the category. The frequency and degree of financial reviews is one example of that, and SPGEs must pay an annual fee to help offset the costs of the program, the amount of which – $25, $250 or $500 – is based on revenue level.
(Chaney had said the fee was a controversial part of the bill, but the amount would be offset some by the fact that fewer informational items will have to be published in newspapers because they are online.)
Also, the way the law is now, any time they would want to raise any fees, the board would have to go through city council for approval, Miller said.
Board Chairman Roger Clinton said KRS 183 sets airport boards as separate entities from local governments.
“So which one do we go by?” he asked. “The city has very limited control over what we do out here.”
Bell said the intent was not for other government entities to be able to have further scrutiny and control than they previously had, but to “open up a window” so everyone could see how taxpayer money is being spent.
According to Chaney’s summary, new or increased fees or taxes do have to be reported in writing to the local governing body at least 30 days before the change becomes effective, but it is for informational purposes only. Then testimony has to be provided at an open, regularly scheduled meeting of that governing body at least 10 days prior to the effective date. The local government has to include notification of the presentation of the testimony in its meeting notices.
Clinton said the airport board is already scrutinized more than most types of SPGEs because of all the federal regulations it must follow, and he said an outside auditor has come in to look at the books.
Bell said he couldn’t make any guarantees about what changes would be made, but believed it would be possible to revise the law to resolve some of the concerns and still leave the essence of the bill “fundamentally sound.”
Mayor Rhonda Riherd Trautman later in the week said the entire airport budget – not just the part contributed by the city – is reviewed as a separate document but in the same audit as the city’s budget, and she could understand at least part of their objection.
“They’re already jumping through all these hoops,” she said. “They got under this net [the legislators] threw out there.”
Lexington’s Blue Grass Airport came under fire in 2009 as the result of then-Auditor Crit Luallen’s review of its spending, which was found to be excessive and often inappropriate, and issues like that added fuel to Edelin’s fire in his 2012 report on special taxing districts.
The airport board isn’t the only group expressing dissatisfaction. The Joint City-County Planning Commission of Barren County’s attorney, Charley Goodman, presented a synopsis of the law’s requirements, which include the first deadline of Dec. 31 for all of the SPGEs to register with the website.
“We are under the purview of this statute as far as being a special purpose government entity,” he said. “All of these reporting requirements are going to be an extra burden for us, but it’s something we’ll have to do.”
He noted the penalties for noncompliance, which range up to the Department for Local Government’s ability to administratively dissolve an organization.
Kevin Myatt, planning director for the commission, also noted the part about any changes in fees having to go through local governments. For this group, he believed that would mean all four separate governments – Barren County, Glasgow, Cave City and Park City.
According to Chaney’s summary of the law, though, the process only has to be done with “the governing body of the city or county in which the largest number of citizens reside that are served by the SPGE.”
He took issue with the idea that any citizen can bring action in court and recover attorney fees to force compliance, whether or not they have a solid basis for the complaint.
According to Myatt’s preliminary inquiries, the cost of the audit required every four years (at the commission’s revenue level) would likely be a few thousand dollars, and that would be in addition to the annual fee.
“We’re giving more tax dollars to watch our tax dollars,” Myatt said.
He doesn’t mind anyone looking at the commission’s finances, he added.
“It’s the fact that we’re going to have to spend the money to do this,” Myatt said, adding it was “kind of ludicrous. … It’s not that we don’t want to provide [the information] or have anything to hide. It’s just a lot of extra work for nothing.”
Maybe some people were spending money on expensive items that they shouldn’t, he said, referring to some of the cases that prompted the state auditor’s desire for the law, but that’s not us.
“It’s basically the 1 to 2 percent that are doing bad [who] are costing everybody.”
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