City, EDP at odds over funding agreement

Danville officials remain at odds with the leadership of the Danville-Boyle County Economic Development Partnership over how the city should provide funds for the group less than a month before the next budget cycle begins.

The most recent draft of the city's budget, which should get a second reading Monday, includes the full $120,000 requested by the EDP. However, both City Manager Ron Scott and Mayor Bernie Hunstad said Tuesday the quarterly funds won’t be dispersed when the next fiscal year starts July 1 unless the group signs off on a new public agency funding agreement being used for the first time.

In addition to the dispute about the funding agreement, EDP leaders have taken exception with the city controlling how the funds should be spent and have yet to sign the agreement.

Earlier this year, the City Commission approved a private entity funding agreement for groups receiving city funds. The groups must submit a detailed account of the public purpose for which the money will be used; allow the city to audit their books and records at any time; require written statements be filed with the city within 60 days of the end of the fiscal year; and reimburse the city if a court decides the money was not spent legally for approved public purposes.

The primary conflict, though, is between a condition in the agreement, which was drafted by then-City Attorney Vince Pennington, allowing the city to revoke any portion of their funding “at any time for any reason,” and the EDP’s memorandum of agreement, which says the city agrees to disperse funds approved in the budget for the whole year.

Hunstad said he was troubled by the possibility of having to meet large financial obligations to agencies given uncertain economic conditions.

“In essence, it could become an entitlement that would supercede health and safety,” said Hunstad.

EDP President and Chief Executive Officer Jody Lassiter said Thursday he was not comfortable with the broad license the agreement would give the city for withholding funds. While he acknowledged a hardship could always arise preventing the city from paying the EDP or any other publicly-funded organization, Lassiter said he would like to see a less subjective agreement which specifically states money in the budget will be paid out unless there is a catastrophic circumstance.

In an interview Tuesday, Scott, who was joined by Hunstad, referred to a section of the Kentucky League of Cities handbook for city officials to follow when appropriating local government funds to private entities.

The handbook cites case law on donations to private entities that obligate a city to consider whether the city receives benefit from the appropriation; control the organization or how the organization spends city funds; and determine whether the expenditure primarily benefits the public at-large and not the private group. If those criteria are met, Scott said the question of whether the activity the group undertakes is something the city wants to be involved with.

“This is not an attack on any group,” Scott said. “It is our duty as public servants to make sure money is spent appropriately.”

Both Lassiter and Scott were in agreement the differences can likely be worked out, but the clock is ticking.

Lassiter said the EDP considers the city’s official approval of the funding to be when the final budget is approved, which should happen Monday.

The other major sticking point is how much say the city, which is itself a member of the EDP, has in how the money should be spent.

Commissioner Gail Louis first raised questions during the budget process about the amount of funding that goes directly to marketing and business recruitment. According to a May 30 email sent by Lassiter to city officials and obtained by The Advocate-Messenger, the issue came up again during a May 23 meeting, during which Scott and Hunstad asked Lassiter what amount earmarked specifically for business development and marketing would be acceptable.

Although the amount of money in the EDP’s budget line item for business development has been increased to about $40,000, Hunstad said the relatively large amount of the public funding that goes to salaries and other expenses makes it difficult to gauge the public benefit.

“We don’t want to try and tell them how to spend every nickel they have, but in a time when the community needs jobs, you would hope they would be tailoring their budget and activities to maximize [job recruitment],” said Hunstad, who added he approved of Lassiter’s job performance during his time in Danville.

Funds from the city, the county ($110,000) and private donors (about $100,000) make up the largest part of what is expected to be about a $411,000 EDP budget for next year. Lassiter said all of the funding partners would like to have their allocations go directly to business development, but using only the city’s money, or a large portion of it, for that line item would throw the rest of the budget off kilter and be unfair to the other groups.

“Frankly, the entire EDP budget is dedicated to business development, as the city’s $120,000 in funding will not be much use to the EDP if there are no staff and resources to carry out our economic development mission,” Lassiter wrote in his email to city officials. “I wish to reiterate that ‘business development’ versus ‘salaries’ is a false choice.”

Lassiter also wonders whether the EDP and its partner organizations are being singled out, or if the same level of scrutiny is being applied to the other non-governmental agencies.