Lawmakers grill leaders of KACo, League of Cities about spending

FRANKFORT — Lawmakers grilled leaders of the Kentucky League of Cities and the Kentucky Association of Counties on Wednesday about what they're doing to prevent another spending scandal and urged that staff members face "consequences" for their actions.

The Interim Joint Committee on Local Government's meeting came a day after League executive director Sylvia Lovely announced that she would step down.

After Wednesday's hearing, one lawmaker said KACo executive director Bob Arnold needs to follow suit.

"A change probably ought to be made," Rep. Adam Koenig, R-Erlanger, said in an interview. "In some ways, at least, the problems at KACo were more egregious" in the amount spent and the type of charges, the former Kenton County commissioner said.

Arnold said in an interview Tuesday that he hasn't felt pressure to resign, nor does he have plans to leave "any time soon."

Wednesday's meeting, lasting more than two hours, was the first chance for legislators to publicly ask questions about management and spending practices at the two organizations, which had been outlined in a series of Herald-Leader articles.

The three leaders of the League charged more than $300,000 in expenses over three years, and KACo's five top staff members spent nearly $600,000 in two years on travel, meals and other items, the Herald-Leader reported. Among charges on KACo credit cards were two dinners costing more than $7,000, hotel rooms with nightly rates of $450 and two charges to a Lexington escort service.

"Without a doubt, the series of articles ... that appeared in the newspaper this summer have been troubling to this committee and our mutual constituents," said state Sen. Damon Thayer, R-Georgetown, co-chairman of the committee.

Lawmakers underscored their concerns about spending by pointing out that both organizations, which provide legal advice and lobbying and sell insurance and project financing to local governments, receive public dollars.

"We answer to the taxpayers, and that's what money you're spending, whether you make it through insurance or through your dues," said Rep. Richard Henderson, D-Jeffersonville.

Both groups have implemented a series of changes to bolster financial oversight and restrict spending.

But legislators, who praised the groups for the services they provide, suggested that the groups consider limiting the number of board members, allowing people who aren't elected officials to serve on those boards, and providing the Georgetown-built Toyota Camry for the organizations' executive directors instead of the BMW SUVs that both were given.

The committee had requested that the organizations appear, and they directed their questions to the presidents — Richmond Mayor Connie Lawson, current president of KLC, and incoming president Mike Miller, mayor of Jackson; and J. Michael Foster, the Christian County attorney and KACo's leader. Thayer said legislators didn't want to hear from the paid staff, but they wanted to question the elected officials who are in charge.

Rep. Arnold Simpson, D-Covington, also said KACo might want to reduce its board from 34 members. The League has 53 board members, including 18 on its executive committee.

Rep. Steven Riggs, D-Louis ville and co-chairman of the joint committee, said the sagas of both quasi-governmental organizations show that board members must be much more engaged in operations. Even though public officials are busy running their cities and counties, they need to make oversight of these groups a priority, he said.

"If you don't want to do the job, which has some responsibilities to it, don't apply," Riggs said.

At one point, Lawson conceded that she was "not really sure if I knew exactly what a board was supposed to do in its entirety" when she joined the board.

Thayer asked League officials about $263,000 in loans the organization made to four employees to buy extra time, and thus higher benefits, in Kentucky's County Employees Retirement System. The Herald-Leader reported that the employees were lent the money but that 20 percent of it was forgiven for each year that they stayed at the League.

Miller told the committee that "technically, the loan wasn't forgiven" because payments came out of the employees' salaries. The League's general counsel, Temple Juett, later pledged to provide documents showing how the loans were handled.

Other lines of questioning focused on rebukes for top staff members who allowed the spending or made questionable charges.

"We have to have consequences; otherwise, it's all window dressing and a charade," said Sen. John Schickel, R-Union.

The League board is discussing requiring employees to repay the group for any expenses deemed improper, Miller said.

Koenig, the Erlanger lawmaker, told the committee he saw a "stark contrast" in the way the League had responded, as opposed to KACo.

"At the KLC, we have someone who either A, stood up and took responsibility, or B, was made to take responsibility," he said, referring to Lovely, who stepped down Tuesday. She will continue to draw her salary of $331,000 through December.

"I just want to make sure that is going to happen at KACo," Koenig said.

Foster responded that he is awaiting results of a management review that was just begun by former Transportation Cabinet inspector general Robert "Bobby" Russell, as well as other internal investigations and audits that are under way, before making any decisions about personnel.

"We'll do whatever's necessary to right the ship," he said.

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