The NewCities Institute, an off-shoot of the Kentucky League of Cities, is likely to undergo changes following an auditor's report that showed it has cost the League $7.2 million over eight years.
Several members of the League's board said they weren't sure what the institute actually does and whether it's worth that investment.
"I can't imagine the amount of money we were putting into that," said Richmond Mayor Connie Lawson, who was KLC's 2009 president and served on New Cities' board last year. "Right now, I can't see that we can afford it."
Sylvia Lovely, who announced in August that she will resign as the League's executive director in January, founded NewCities in 2002 as a non-profit think tank to foster "civic engagement" and consult on strategic planning for communities.
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State auditor Crit Luallen released a report Thursday showing that most of the $7.2 million that the League spent to subsidize NewCities was in-kind contributions that covered overhead, such as its rent and the salaries of three NewCities employees.
The report said auditors struggled to measure NewCities' effectiveness because the organization was "pretty vague" in documenting just what services it provided for communities.
"It's time for the League of Cities to go back and determine if that's the best use of that money, given what we believe is a lack of quantifiable results," Luallen said. Her audit criticized League executives for giving themselves perks and for numerous conflicts of interest.
"I made a huge assumption that the KLC board members knew what NewCities is about and approved it," said Martha C. Johnson, a NewCities board member.
"I would hope once they understand what NewCities can do for their communities, that they will agree it's important," she said.
Officials from some of the handful of communities that have sought out NewCities' consulting help praised the staff's work.
"I would say they were very valuable to us," said Jim Ising, a councilman in Windy Hills, a suburb east of Louisville. Windy Hills paid New Cities $2,000 to send questionnaires to its 2,500 residents and to moderate town forums about the city's branding and what services people want.
Johnson said the organization already has changed. For instance, because the economy has hammered cities' coffers, NewCities scaled back its work to focus on smaller consulting jobs like that at Windy Hills, or helping moderate forums for Lexington's leaders.
She said she has been surprised to learn how many Kentucky officials don't understand the group's role.
Lexington has spent $24,486 with NewCities since Mayor Jim Newberry took office in 2007. Most of that was paid for consulting help on finance and human resource software and for moderating three retreats for city leaders. Newberry is a member of the League's executive board.
Johnson said she expects more changes, but that the "NewCities board certainly believes the work should continue."
"The decision, ultimately, will be made by the KLC and New Cities boards talking and working together," she said. "The case that the NewCities board will make is that ... it's never been more relevant, I think, than it is today in this economic environment" because it specializes in helping communities make choices about how to thrive in the future.
Johnson, a former Ashland Inc. executive, has been involved with NewCities since June 2008, when it merged with the education advocacy group she worked with, the Partnership for Successful Schools. Johnson had been involved with the partnership since it was formed in 1991 out of the statewide school reforms.
The largest contract NewCities had was with Madisonville, where the city, Hopkins County and Trover HealthCare split the $75,000 cost for NewCities to create a strategic plan for the three entities to work together.
Starting in September 2007, the organization coordinated "listening sessions" with residents, civic engagement exercises and other long-range planning, said Madisonville Mayor Will Cox.
"We're in the process of working through the findings of that report, and we have a road map for the future," Cox said. Some suggestions, such as city walkways and signs, already have been implemented, he added.
Cox said that process required the help of a neutral party.
"We have eight or nine incorporated cities with a history of not getting along," he said. "Because they were outsiders, they were able to get over old suspicions."
Lovely, the NewCities founder, said that's one of the reasons she created NewCities and why she believes it should continue.
"I think it's a great long-term investment for the League," Lovely said. "It's all about managing change for the coming world. We have to have our cities prepared."
Lovely, who declined to talk about other findings in the audit, said she hoped NewCities would continue to attract contracts from Kentucky cities and those across the nation to help it stand on its own in the future.
But state auditors said in their report that it's unclear whether an increase in such contracts and more grants "would be sufficient to provide the amount of support required for NewCities to become a self-sustaining operation."
Currently, the League subsidizes the salary of its three employees: Tom Prather, the acting president; Tad Long, the director of business development; and Bobbie Bryant, director of public affairs. It also covers time other League employees spend doing NewCities-related work.
Lovely didn't receive compensation through NewCities, Luallen said. And Lovely said she gave about $20,000 worth of speaking fees she received to NewCities over the years.
Midway Mayor Tom Bozarth, one of four local officials who sent letters to Luallen to relay concern about the issues raised in the audit, said he expects the League board to debate NewCities' future soon.
"I think that's one we have to look at, and we have to sit down and find out what the NewCities Institute actually brings to the Kentucky League of Cities," he said. "If it were any other business, you can only fund something for so long if it doesn't pay for itself."