Under pressure from auditor, Bluegrass Area Development District to purchase building

Under pressure from State Auditor Adam Edelen, the Bluegrass Area Development District will spend $300,000 to buy the building it has leased from a related entity for $250,000 a year for the past two decades.

The executive board of Bluegrass ADD, which manages economic development money for Central Kentucky, unanimously approved the deal at a special meeting Tuesday.

The office building at 699 Perimeter Drive is owned by the Bluegrass Industrial Foundation, which is headed by Jas Sekhon, former executive director of Bluegrass ADD.

Edelen conducted a special examination of Bluegrass ADD in March, questioning the relationship between the two groups and declaring that taxpayers were being fleeced by the lease agreement.

"It's difficult to adequately describe a home run, but that's what the taxpayers got today," Edelen said after the vote. "It's a pretty clear demonstration that this agency is serious about righting its ship."

The Bluegrass ADD will pay the $300,000 out of $750,000 it just received for the sale of its property on Trent Boulevard to Episcopal Retirement Homes in Cincinnati, which brings the story back to where it started.

More than two years ago, neighbors in the River Park Neighborhood Association called Edelen's office after they became concerned with a nebulous plan by Bluegrass ADD to turn the Trent property into a felon re-entry program. That controversy ended with the forced resignation of former Bluegrass ADD executive director Lenny Stoltz, who had taken over the job from Sekhon.

In his examination, Edelen found numerous instances of conflicts of interest, excessive spending and lack of oversight in nearly all aspects of Bluegrass ADD's operations, including its relationships with the Bluegrass Industrial Foundation.

"This represents a significant victory," said Charles Payne, president of the River Park Neighborhood Association.

Although Edelen and others initially thought that the foundation should gift the building to Bluegrass ADD, attorney Jon Gay said he advised the board to accept the sale because litigation would be lengthy, costly and uncertain. The sale comes without liens or other entanglements on the property.

Luke Morgan, an attorney for the foundation, said selling the $4 million building at less than 10 percent of its price was, in fact, a gift.

"That speaks for itself in terms of BIF's intent, that BIF wants the Bluegrass ADD to be successful and has all along." Morgan said.

It's not clear whether the foundation will continue what it calls its economic development work to bring jobs to the region.

In his examination, Edelen found that $1.1 million of the $1.6 million purchase price for the building was financed through sources available to or approved by Bluegrass ADD. But the lease agreement did not vest any eventual ownership to Bluegrass ADD. Edelen said the rent money would have paid for the property by now.

A Herald-Leader analysis found that Bluegrass Industrial Foundation spent tens of thousands of dollars on travel for Sekhon and his board members, several of whom also served on Bluegrass ADD's board.

The foundation also paid a salary to Sekhon and annual payments to its board members.

Garrard County Judge-Executive John Wilson said the executive board voted to buy the Perimeter Road property early last year, but Stoltz never took action.

"The audit vindicated the feelings of the board," Wilson said.

Area development districts were created to assist local governments in regional planning for economic growth. The Bluegrass ADD, in Lexington, serves 17 counties in Central Kentucky. It has an annual budget of more than $24.4 million, 90 percent of which comes from federal and state grants.

State Rep. Susan Westrom, D-Lexington, who has worked with the River Park Neighborhood Association in its fight with Bluegrass ADD, said she is certain that the General Assembly will consider legislation next year to create more oversight of the state's 15 ADDs.

"This is a refreshing start," Westrom said.

This story was originally published July 1, 2014 at 12:45 PM with the headline "Under pressure from auditor, Bluegrass Area Development District to purchase building."