Frustrated by years of financial mismanagement and limited accountability, an Eastern Kentucky activist group this week asked Attorney General Andy Beshear to investigate.
In a letter signed by the Martin County Concerned Citizens activist group, the Appalachian Citizens' Law Center and the national Food & Water Watch group, the groups asked Beshear to probe the financial history of Martin County Water District.
For years, the district has been mired in controversy, untrusted by many of its reluctant customers.
"We’ve got to let people know that we’re going to hold them accountable," said Nina McCoy, chairwoman of Martin County Concerned Citizens. "Our people have been asking these questions for years."
Terry Sebastian, a spokesman for the Attorney General's office, said officials will meet Friday to discuss the letter and determine how the office will respond.
The letter details the district's rocky past — including a lengthy water shutoff in January, when thousands of residents went without running water for days, and a subsequent 28 percent rate hike for customers — and lists three cases of suspected misuse of public money.
The first involves a $3 million grant provided to the district "at some point between 1999 and 2003," according to the letter.
"No one seems to know where the money went, and there is quite a bit of speculation in the community about who pocketed the money and how," the letter says.
Martin County Judge-Executive Kelly Callaham applied for the grant during his first term in office, from 1994 to 1998, to pay for the expansion and renovation of the district's water treatment plant, but the work was never done.
At a 2017 hearing of the Public Service Commission, the state agency that regulates most utilities in Kentucky, a PSC staff attorney said he believed the money was instead spent on a new raw water intake system.
"We ask your office to answer this simple question: Where did the $3 million in state funding go?" the letter says.
The second suspected misuse of money refers to the district's expense accounts, specifically seeking details about how employees use water district funds at ZipZone, a gas station chain owned by coal executive and University of Kentucky Board of Trustees member Jim Booth.
PSC commissioners and Appalachian Citizens' Law Center attorney Mary Cromer have questioned and criticized the district for its poor supervision of employee purchases.
According to the district's financial records, it owed more than $200,000 to ZipZone at the end of March. The district's total debt exceeded $900,000 at that time.
At a PSC hearing Thursday, the district's interim general manager, Greg Scott, said there were "no controls at all" regarding fuel purchases when the district hired him in March.
Employees are now required to log mileage and fuel purchases, and then submit those records to the district's accountant, Scott said.
Martin County Water Board treasurer Jimmy Kerr said Thursday that the district is making significant strides in getting its finances in order.
By limiting overtime hours of employees, collecting past-due bills and creating more stringent employee purchase requirements, Kerr said the district has decreased its expenses by about 17 percent since February.
"It's definitely pointed in the right direction," Kerr said.
The third suspected misuse regards suspicions that some public officials and private entities get their water for free.
"Residents have long suspected that certain individuals and entities may be receiving free water service at the expense of everyone else," the letter says.
McCoy, of the Concerned Citizens group, said she hopes involvement from the attorney general will help build trust between customers and the district, and ensure that officials spend future grant money responsibly.
The district won approval for nearly $5 million in grant money this year to help repair its failing infrastructure — $3.4 million from the Federal Abandoned Mine Lands program, and $1.2 million from the Appalachian Regional Commission.
The letter concludes by asking Beshear "to shine a spotlight on this crisis and help move Martin County forward toward safe and affordable water."