Beshear answers citizens' plea. He will investigate troubled Kentucky water district.

One of the valves on one of the treatment tanks at the Martin County Water District water treatment plant on Turkey Creek Road in Inez, Ky., Wednesday, January 25, 2001.
One of the valves on one of the treatment tanks at the Martin County Water District water treatment plant on Turkey Creek Road in Inez, Ky., Wednesday, January 25, 2001.

Answering the plea of a citizens activist group, Attorney General Andy Beshear announced Monday his office will investigate the current and past management and operations of the troubled Martin County Water District.

Beshear's decision comes days after a citizens activist group from Martin County, along with the national Food & Water Watch group and an attorney from the Appalachian Citizens' Law Center, wrote Beshear a letter asking him to peel back the curtain on the district's questionable financial history.

"We’re finally able to see our justice system working for the people," said Nina McCoy, chairwoman of the Martin County Concerned Citizens activist group, who co-signed the letter. "I think it’s good that they’re letting everybody know what happens with our tax dollars."

The Attorney General's Department of Criminal Investigations and the Office of Rate Intervention will manage the inquiry. Their work will be independent of two ongoing cases about the district within the Public Service Commission, the state agency that regulates most utilities in Kentucky.

In the months since a January water crisis, when thousands in Martin County went without running water for days, the district has been consumed in an effort to right its rocky finances. In January, officials said the district was just weeks away from financial collapse, and then received approval for a 28 percent rate hike.

Martin County Water Board Treasurer Jimmy Kerr said the district will cooperate with the Attorney General's office during the investigation.

"We’ll cooperate and do the best we can to get them the information they need," Kerr said. "I do see the benefit of looking back and seeing what went wrong."

The Concerned Citizens' letter to Beshear highlighted three instances where people suspect the district misused public money.

The first involved a $3 million grant awarded to the district more than a decade ago. The state authorized the grant to help the district pay for an update and expansion of its water treatment plant. That work was never done, and some residents believe the upgrades could have staved off the water shortage in January.

"There is quite a bit of speculation in the community about who pocketed the money and how," the letter reads.

The second suspected misuse involves the district's lax oversight of employee purchases, specifically how employees spend district money at ZipZone, a gas station chain owned by coal executive and University of Kentucky Board of Trustees member Jim Booth.

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, though officials have since installed more stringent controls.

The third alleged misuse involves suspicions that some public officials and private entities may 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 reads.

Kerr said the water board members, who are unpaid public officials, are focused on moving the district forward rather than rehashing the possible mismanagement of previous administrations.

"We’re in such bad financial condition that we can't afford to even think about the past," he said. "For me and for this board, we have no choice but to go forward."

During last week's PSC hearing, Kerr said the district has made positive strides recently by limiting overtime hours for employees, improving bill collections and restricting employee purchases.

The district has decreased its expenses by about 17 percent since February, Kerr said.

Kerr warned that attention from the attorney general's investigation could make it more difficult for the district to receive approval for grant money, which would help pay for much-needed infrastructure repairs.

"It concerns me," he said. "We’re trying to fix this thing, and I’m not sure how grant-writers and people who do that kind of thing will view this."

However, Kerr said the district will keep moving forward even if the investigation creates road blocks.

"If the Attorney General's Office thinks there’s enough there to look, then by all means," he said.

Will Wright is a corps member with Report for America, an initiative of The GroundTruth Project. Reach him at 859-270-9760, @​HLWright

Murky water flows from the faucet in a bathtub in eastern Martin County in late September 2016.