FRANKFORT — Pike County officials are challenging in court the state legislature's creation this year of a special process for the county to obtain coal severance tax proceeds, including a provision that requires state officials to consult with the county's legislative delegation.
Pike County Judge-Executive Wayne T. Rutherford and members of the Pike County Fiscal Court said the new process was included in the two-year state budget bill approved by Kentucky's 2014 General Assembly.
The lawsuit they filed Oct. 1 said the budget bill "does not set forth any rationale whatsoever for the legislative decision" for the change, which will "severely hamper" Pike County.
Defendants are state Local Government Commissioner Tony Wilder; Legislative Research Commission acting director Marcia Seiler and the clerks of the Kentucky House and Senate.
The Pike County officials claim the change is unconstitutional because it is special legislation that affects only one county. The lawsuit notes that the state Department for Local Government is responsible for implementing parts of the budget bill governing grant applications filed by Pike County to access money in the Local Government Economic Development Fund.
The fund contains proceeds from the coal severance tax. Two-thirds of the fund is allocated to coal-producing counties based on several factors. The money, according to state law, is supposed to be used for industrial development projects involving manufacturing, processing and assembling.
The lawsuit says that for many years the legislature has suspended restrictions on the money to give counties greater flexibility to use the funds to meet "economic and other needs of their communities."
The lawsuit said the budget bill authorized money from the fund for specific projects in 34 coal-producing counties, but not Pike County.
For example, the suit said, the Ashland Independent Board of Education got $15,000 from the fund for ground and other improvements and the Paramount Arts Center in Ashland got $28,000.
By contrast, the legislature required Pike County to apply to the Department for Local Government for the grants from a pool of funds, rather than providing line-item funding. It also requires the money to be used only for "bona fide economic and industrial development projects."
The legislature also required the Department for Local Government to "consult with the Pike County legislative delegation prior to the approval of any grant agreement."
Pike County officials said they were notified of the new process in an Aug. 26, 2014, letter from Wilder, and were given an Oct. 1 deadline to file applications for $579,454 in available funds. A call to Wilder for comment was referred to his department's general counsel, Bobby Russell, who did not return the call. The LRC's Seiler said she could not discuss pending litigation.
On Sept. 26, Pike County applied to the state for five projects "without admitting the legality or validity of the application process," the lawsuit said.
Assistant Pike County Attorney John Doug Hays, a co-counsel in the suit with Louisville attorney David Kaplan, said the five projects Pike County applied for last month are "well above the $579,000 available."
Pike County officials had heard at the time the budget was passed in this year's legislative session that there might be stricter criteria for using coal severance funds but "everyone assumed the same way of operating would remain," Hays said
Asked if he knew which legislator or legislators sought the new process, Hays laughed and said, "I don't know but we've heard rumors." He would not elaborate.
State Rep. Leslie Combs, D-Pikeville, said she could not comment on a pending lawsuit but thinks the Pike County legislative delegation provided "a very responsible appropriation for the betterment of Pike County."
Two other House members representing Pike County in the 2014 General Assembly — Democrats Keith Hall of Phelps and Hubert Collins of Wittensville — could not be reached for comment. State Sen. Ray Jones, D-Pikeville, said one reason for the change was "we were given $11 million in requests for coal severance from Pike Fiscal Court and only had about $4 million to spend."
"We wanted to make sure the money was spent for only viable projects and not squandered as the state mines less and less coal," Jones said.
Jones said he didn't know why the same process was not done for other counties but said no other county in his district requested more money than what was available. His district also includes Martin and Johnson counties.
Jones said the new process does not give state legislators representing Pike County any veto power over the Department for Local Government's project selections. "We trust the Franklin Circuit Court to deal properly with this issue," he said.