League of Cities' Lovely to step down

lblackford@herald-leader.com,Herald-leader staff,By Linda B. BlackfordAugust 26, 2009 

Audit Released

State Auditor Crit Luallen

DAVID PERRY

Sylvia Lovely, the executive director of the Kentucky League of Cities since 1990, bowed to growing pressure from the public and League members Tuesday, announcing she will step down Jan. 1.

"I wish more than anything to accept responsibility for the loss of credibility that KLC has suffered," she said in a statement. "We missed the cues — especially that the world has changed — and we were slow to change with it. Transparency and accountability are perhaps the most important currency of our day and age," she said, pointing out that the organization is continuing to consider its future "in order to better provide accountability."

Lovely, 58, a charismatic public speaker who is given credit for turning the League from a small lobbying group into a non-profit that provides multimillion-dollar insurance and financing deals to cities, could not survive the impact of several months of controversy over spending and salaries at the League.

Lovely's 2008 compensation package of $315,000 included the use of a BMW SUV. Her salary for 2009 is $331,000. Lovely was one of three League executives who spent more than $300,000 in three years on travel, meals and other items such as sports tickets, the Herald-Leader found.

Lovely did not specify what other opportunities she would pursue except to say she would continue with "the development of community — in some way."

"I'm passionate about this work," she said.

Lovely met with reporters at her offices and read a lengthy and personal statement, calling her 22 years at the League "the best job on earth." She praised her staff, mayors and members of the General Assembly, and spoke emotionally about her family and their roots in Kentucky.

She declined to answer questions.

Lovely will receive her full salary until the end of the year, when she will leave the League. The details of her agreement with the group will not be available until Wednesday, officials said.

The executive board of the organization accepted her resignation, saying the decision followed a closed personnel meeting between Lovely and the executive board Aug. 19.

"The executive board believes that Sylvia's departure comes at the right time — for the organization, as well as for Sylvia and her future endeavors," said a statement released by the board.

Lovely's resignation comes just a day before League officials are to appear before the General Assembly's Interim Committee on Local Government to explain their policies and procedures. Officials of the Kentucky Association of Counties also will appear.

"The situation at the League has been pretty bad and frankly ... they have a lot of explaining to do," said State Sen. Damon Thayer, R-Georgetown, who co-chairs the committee that will meet Wednesday. "If they think the top leader resigning gets them off the hook, they've got another think coming. It doesn't explain why the board allowed it to happen."

The League is being audited by State Auditor Crit Luallen.

"Today's announcement gives the Kentucky League of Cities Board an opportunity to focus on the future," Luallen said in a statement. "Our audit work will continue with the goal of providing recommendations to the board that will strengthen accountability going forward."

"I think this action will allow KLC to move forward in a more positive manner," Mayfield Mayor Arthur Byrn said Tuesday.

A lobbying force

Under Lovely, the League has been a formidable force in Frankfort, often using its close ties with lawmakers to ensure legislation favorable to cities. Officials from smaller cities also praised the League for providing help that many tiny municipalities cannot afford, ranging from legal advice to safety training. The League's market dominance in insurance also meant it can offer special services that other insurance companies couldn't.

The group's success allowed Lovely to create an offshoot, The NewCities Institute, which focused on her particular interest of civic engagement in Kentucky communities. It was funded largely through the League and further expanded Lovely's profile throughout the state.

State Sen. Kathy Stein, D-Lexington, said Lovely showed that women could succeed in the world of politics and business.

"Sylvia is a talented woman," Stein said. "I was always very impressed with her command of the information. ... It's unfortunate what's happened, but I'm sure the board is doing what it thinks is necessary."

Lexington Mayor Jim Newberry, who serves on the League's executive board and has been an outspoken critic, also praised Lovely's work.

"Although Sylvia Lovely's departure creates an opportunity for the League to chart a new course, recent events do not erase the many good things she has done for this state, its citizens and its cities," he said in a statement.

Public or private?

The League often stated the money from cities for insurance premiums, finance charges and membership dues did not actually count as public money. It also contended it was not obliged to provide records or open its meetings to the public — though it often did.

The League stopped providing records to the Herald-Leader after the newspaper requested bills involving the law firm where Lovely's husband, Bernard Lovely, is a partner. But when Luallen stepped in to audit the League, saying the refusal to open the records raised questions about transparency, the board relented.

"One of the problems is that when it's been to their advantage for the League to be public, they've been public, but when it's advantageous for them to be private, they've been private," said Jim Waters, director of the Bluegrass Institute, a free-market think tank. "We need someone who doesn't see taxpayers as an ATM machine."

The group has also faced questions over apparent conflicts of interest. When asked about the League spending almost $21,000 over three years at Azur, a Lexington restaurant partly owned by her husband, Bernard, Sylvia Lovely previously responded she was "flabbergasted" that anyone would think there was a problem.

Bob Arnold, executive director of the Kentucky Association of Counties, said Lovely was a forceful ally when lobbying the legislature.

"I hate to see her leave, particularly under those circumstances," Arnold said. "However, I think she's been a great asset to cities and the Kentucky League of Cities."

KACo also came under scrutiny after the Herald-Leader reported Arnold and four top staff members spent $600,000 in travel, meals, entertainment and other expenses over two years.

At last week's League board meeting, the board adopted several new spending and ethics policies, which include stricter oversight of credit cards, a limit to spousal travel and greater transparency over potential conflicts of interest.

Several cities, including Lexington, have stopped their dues until the board takes action. Henderson City Commissioner Jim White spearheaded the move in his city.

"I think it's something that needed to happen," he said of Lovely's resignation. "I think there's still a lot of work to be done to make sure we don't get back in this situation again. We need the director to serve the board, not the board to serve the director."

June 7, 2009: The Herald-Leader finds that the top three executives of the Kentucky League of Cities spent more than $300,000 in three years on travel, expenses and other items. All executive salaries top $200,000; Executive Director Sylvia Lovely's compensation package of $315,000 includes the use of a BMW SUV. In addition, the League has spent more than $20,000 at Azur, a Lexington restaurant partly owned by Lovely's husband, Bernard Lovely, and has spent $19,000 for travel expenses for the spouses of top executives.

June 19: At a board meeting, Lovely suspends three executive perks: League-paid travel for executive spouses, League functions at Azur and her use of a League-provided BMW SUV. Board members also vote to create a task force to look at policies and procedures.

June 25: The League decides to stop providing the Herald-Leader with documents under the state's Open Records Act after the paper requested billing documents from Bernard Lovely's law firm.

July 1: State Auditor Crit Luallen says her office will audit the League and the Kentucky Association of Counties because of what she called "excessive spending and inadequate oversight."

July 2: The League says it will give the Herald-Leader the documents it requested.

July 7: Owensboro Mayor Ron Payne considers canceling his city's membership with the League but stays in, waiting for the board to change its spending and compensation policies.

July 14: The League explains that when four employees went to the Diamond Cabaret in Las Vegas, charging $80 to a League credit card, they didn't initially realize they were in a strip club.

July 17: League officials suspend all executive credit card use, including Sylvia Lovely's. Shortly after the Henderson City Commission votes to suspend its membership, League officials also tell city officials to withhold their dues if they're concerned about spending.

July 30: League documents show that, in the past 10 years, the League paid $2.3. million to two law firms where Bernard Lovely was a partner.

Aug. 3: Lexington Mayor Jim Newberry, a member of the League's executive board, decides to withhold the city's $26,000 in dues to the League. The executive board discusses kicking Newberry off the executive board.

Aug. 13: League board members end use of Bernard Lovely's law firm, Bowles Rice McDavid Graff & Love, and tell insurance director William Hamilton to stop renting space to one of the League's vendors. Erlanger Mayor Tom Rouse says he will not attend the League's annual convention in nearby Covington.

Aug. 19: The executive board approves a new spending and ethics policy. It also holds a three-hour executive session on a personnel matter which Sylvia Lovely leaves in tears.

Aug. 25: Lovely resigns as executive director of the League but will collect her full salary and retain her duties in the national organization until December.

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