Interim Joint Committee on Local Government


Minutes of the<MeetNo1> 2nd Meeting

of the 2005 Interim


<MeetMDY1> July 27, 2005


The<MeetNo2> second meeting of the Interim Joint Committee on Local Government was held on<Day> Wednesday,<MeetMDY2> July 27, 2005, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Representative Steve Riggs, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Damon Thayer, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Julian M Carroll, Carroll Gibson, Ernie Harris, Dan Kelly, Alice Kerr, Elizabeth Tori, and Johnny Ray Turner; Representatives Adrian K Arnold, Scott W Brinkman, Ron Crimm, Mike Denham, Ted "Teddy" Edmonds, David Floyd, Derrick Graham, Jimmy Higdon, Dennis Keene, Stan Lee, Thomas M McKee, Reginald K Meeks, Brad Montell, David Osborne, Arnold Simpson, Ancel Smith, Ken Upchurch, and Jim Wayne.


Guests:  Commissioner Ellen Williams, Myralee Smith-Cowley, Rich Ornstein, Stephanie Stumbo, Peggy Satterly, Jay Hall, and Jeff Hanna, Governor's Office for Local Development; Mike Kalinyak, Ed Ross, and Angela Robinson, Finance and Administration Cabinet; David Reichert, George Mann, and Nelson Henderson, Department of Housing, Buildings and Construction; Mayor Tom Watson, City of Owensboro; Rick McQuady, Kentucky Housing Corporation; Sylvia Lovely, Bert May, Phil Huddleston, Jerry Deaton, and Craig Maffett, Kentucky League of Cities; Judy Levy, Homeless and Housing Coalition of Kentucky; Shellie Hampton, Kentucky County Judge/Executives Association; and Richard Tanner, Kentucky Magistrates and Commissioners Association.


LRC Staff:  Jamie Franklin, Donna Gaines, Mark Mitchell, Joe Pinczewski-Lee, Tom Willis, Ann Cheek, Geri Grigsby, and Cheryl Walters.


Upon the motion of Representative Keene, seconded by Representative Crimm, the minutes of the June 8, 2005 meeting were approved.


The first order of business was review of the 2005 Kentucky Small Cities Community Development Block Grant (CDBG) Program. Representative Riggs introduced Commissioner Ellen Williams of the Governor's Office for Local Development (GOLD). Commissioner Williams told the Committee that she looked forward to working with them. She then introduced Ms. Myralee Smith-Cowley, Executive Director of the Office of Grants, GOLD, to explain the 2005 CDBG application.


Ms. Smith-Cowley told the Committee that the CDBG program was established by the Housing and Community Development Act of 1974. She noted that the program is administered by the U.S. Department of Housing and Urban Development (HUD). Ms. Smith-Cowley explained that the program is divided into two major categories:  (1) Entitlement, those cities who have populations of 50,000 or more; and (2) Non-Entitlement, more commonly referred to as the "Small Cities" program. She added that GOLD administers the "Non-Entitlement" or "Small Cities" portion of the CDBG program. All cities and counties in Kentucky are eligible for participation in the Small City Program with the exception of the following "Entitlement" jurisdictions:  Ashland, Bowling Green, Covington, Elizabethtown, Henderson, Hopkinsville, Owensboro, Lexington/Fayette County, and Louisville/Jefferson County Metro Government.


Ms. Smith-Cowley first gave an overview of the 2004 CDBG program. She stated that the intent of the CDBG Program is to help communities meet their greatest community needs, with particular emphasis on assisting low and moderate income persons. Ms. Smith-Cowley noted that GOLD accepts applications in five distinct areas:  (1) Public Facilities--projects include installation of water/sewer lines and construction/upgrade/expansion of water/sewer plants; (2) Housing--projects include acquisition of dilapidated structures and relocation of households; (3) Economic Development--projects include property/building acquisition and equipment purchase or lease; (4) Community Projects--projects vary and may include construction of senior citizens or community centers as well as health department buildings; and (5) Community Emergency Relief Fund--projects are designed to be a source of emergency funding if an emergency situation such as a natural disaster arises in a community.


Ms. Smith-Cowley told the Committee that in 2004, Kentucky received $30.7 million in CDBG funds for FY 2004. In 2005, that amount fell to $29.2 million. 2005 CDBG area allocations are $8,216,323 for Economic Development, which is 28%; $8,216,323 for Public Facilities, which is 28%; $4,393,755 for Public Services (Recovery Kentucky), which is 15%; $3,734,692 for Housing, which is 13%; $3,734,692 for Community Projects, which is 13%; and $1,002,594 for Community Emergency Relief Fund, which is 3%.


Ms. Smith-Cowley stated that the changes for the 2005 CDBG program include:  $50,000 for joint applicants on micro-enterprise projects; clearinghouse requirements for public facilities projects; and Recovery Kentucky, which has partnership members including the Kentucky Housing Corporation, GOLD, and the Department of Corrections. This program has ten facilities, two in each Congressional District, and CDBG provides public service funds for a three-year commitment.


Representative Arnold asked how much CDBG money did Kentucky receive in previous years. Ms. Smith-Cowley replied that the amount fluctuates, that it has been more and less in previous years. Representative Arnold also asked how the money is allocated. Ms. Smith-Cowley stated that HUD uses two different formulas.


Representative Riggs asked if the federal government based its decision on population or poverty rate regarding CDBG funding for Kentucky. Ms. Smith-Cowley replied that HUD uses population and poverty rate, in addition to the age of housing. Representative Riggs told Ms. Smith-Cowley that GOLD should encourage Kentucky's congressional delegation to draw more CDBG funds to the Commonwealth.


Representative Wayne asked how GOLD statistically confirms that 51% of low to moderate income persons have been served. Ms. Smith-Cowley said by surveying.


Regarding Recovery Kentucky, Representative Wayne asked why community mental health is not included and why no mental health professionals are involved. Mr. Rick McQuady, Kentucky Housing Corporation, replied that Recovery Kentucky is not a licensed treatment program. He noted that the individuals assisting the program will be licensed.


Representative McKee asked Ms. Smith-Cowley to explain the breakdown of the CDBG allocations. He asked if there are federal guidelines as to how the CDBG funds are allocated. Ms. Smith-Cowley replied that there are no federal requirements on how the money is allocated. She noted that it is up to each state to make those decisions.


Senator Tori asked if grants can go to faith-based entities. Ms. Smith-Cowley replied yes, but they still must go through a city or county and that HUD will track each state to see how it works. Senator Tori also asked if any awards had been given this year. Ms. Smith-Cowley said maybe one.


Representative Edmonds thanked the GOLD staff for their help to his counties. He said because of their help, his counties have been getting the water they need.


Senator Carroll asked if GOLD had sufficient resources to get projects completed quickly. Commissioner Williams stated that at the present time, they have sufficient resources.


Representative Meeks commented that there is a growing amount of undrawn funds not being spent. Ms. Smith-Cowley answered that there is a two-year window for completion of projects. She said in the past, some counties did not spend money at an appropriate rate. She also noted that sometimes the other money being leveraged takes longer to get funded thus tying up projects. The rate of spend down has not affected the amount of money the state receives.


Representative Higdon commented that he would also like to thank GOLD and to keep up the good work.


Senator Kerr asked how the entitlement cities get their funding and how is it allocated. Ms. Smith-Cowley said the entitlement cities get their allocation directly from HUD. She said she would get that information for the Committee.


Representative Brinkman asked how successful is Kentucky in recapturing funds. Ms. Smith-Cowley stated that there is a mechanism already established for money which my come back to the state.


Representative Riggs asked if there were any comments from the audience. Ms. Judy Levy, Executive Director of the Homeless and Housing Coalition of Kentucky, told the Committee that housing resources are shrinking. She said housing is economic development and it needs more funding.


Representative Wayne commented that money should not be taken away from other projects for Recovery Kentucky. He added that funding for Recovery Kentucky should not come from CDBG funds but should be funded through the state budget process. He said he feels this program has not been well thought through.


Commissioner Williams suggested that the Recovery Kentucky staff appear before the Committee to brief them about the program.


Senator Kerr moved, seconded by Senator Thayer, to accept the CDBG report as presented and to pass it on to LRC.  The motion carried by voice vote.


The next order of business was review of Executive Order 2005-494, relating to the reorganization of GOLD. Representative Riggs again recognized Commissioner Williams of GOLD. Commissioner Williams introduced Mr. Rich Ornstein, General Counsel, and Ms. Stephanie Stumbo, Executive Director, Kentucky Community Development Office (KCDO), GOLD, to explain Executive Reorganization Order 2005-494.


Mr. Ornstein told the Committee that Executive Reorganization Order 2005-494 authorizes the creation of the Community Development Office and the transfer of the single county coal fund from the Economic Development Cabinet to GOLD. He then referred to Ms. Stumbo to discuss the KCDO office and the Community Economic Growth Grant (CEGG) program administered by GOLD's Kentucky Community Development Office.


Ms. Stumbo told the Committee that 04 HB 267 established the CEGG program, funded from the sale of bonds. She explained that the CEGG program will provide grants to assist eligible recipients with funding for projects that will enhance economic development in their respective community. Ms. Stumbo noted that pursuant to HB 267, grants shall be made from this program to support nonrecurring investments in capital projects that contribute to community or industrial development in the Commonwealth. She added that the goal of the CEGG program is to provide flexible funding to support and encourage the economic growth and viability of communities within the Commonwealth.


Representative Denham asked what the scope of projects was which could be funded by the CEGG program. Ms. Stumbo replied that grants are available through the CEGG to any county, city, special district or school district throughout the Commonwealth.


Senator Harris asked if GOLD will offer one-stop shopping for all grants. Commissioner Williams replied yes.


Senator Harris moved, seconded by Senator Kerr that Executive Reorganization Order 2005-494 has been reviewed and will be reported to LRC, and that the Committee supports the reorganization of GOLD as presented. The motion carried by voice vote.


The next order of business was review of Kentucky Administrative Regulations. The first regulations reviewed were 109 KAR 12:011 and 200 KAR 38:050. Representative Riggs introduced Mr. Mike Kalinyak, Office of General Counsel, and Mr. Ed Ross, State Controller, Finance and Administration Cabinet, to explain the regulations. Representative Crimm moved, seconded by Representative Simpson, to accept 109 KAR 12:011. The motion carried by voice vote. Representative Crimm moved, seconded by Senator Kerr, to accept 200 KAR 38:050. The motion carried by voice vote.


The next regulations reviewed were 815 KAR 15:080, 8:045 & E, 8:020 & E, 8:010 & E, and 7:120. Representative Riggs introduced Mr. David Reichert, General Counsel for the Department of Housing, Buildings, and Construction, to explain the regulations. Senator Kerr moved, seconded by Senator Harris, to accept 815 KAR 15:080. The motion carried by voice vote. Representative Crimm moved, seconded by Representative Upchurch, to accept 815 KAR 8:045 & E. The motion carried by voice vote. Senator Tori moved, seconded by Representative Upchurch, to accept 815 KAR 8:020 & E. The motion carried by voice vote. Representative Upchurch moved, seconded by Senator Kerr, to accept 815 KAR 8:010 & E. The motion carried by voice vote. Senator Kerr moved, seconded by Representative Upchurch, to accept 815 KAR 7:120. The motion carried by voice vote.


The last order of business was discussion of the formation of a Coalition of Cities of the Second Class. Representative Riggs recognized Ms. Sylvia Lovely, Executive Director of the Kentucky League of Cities. Ms. Lovely commented that all cities in Kentucky are important. She added, however, that there are groups of cities that have different needs. Ms. Lovely then introduced Mayor Tom Watson, City of Owensboro, to address the Committee.


Mayor Watson told the Committee that there is a very distinct and special category of Kentucky communities that play a vital role in the progress of the Commonwealth and which have a strong commonality. He said this category is Kentucky's cities of the second class. Mayor Watson stated that these cities are not only important to Kentuckians who call them home, but also to the remainder of the state which depends upon them for economic well-being and for the civic, social, and cultural contribution they make to the quality of life to all the citizens of Kentucky.


Mayor Watson noted that twelve cities spread across Kentucky have the "class two designation":  Ashland, Bowling Green, Covington, Frankfort, Henderson, Hopkinsville, Jeffersontown, Newport, Owensboro, Paducah, Radcliff, and Richmond. He said these cities have become hubs of growth for very good and very real reasons. Mayor Watson explained that these cities are economic drivers, not only to the immediate geographic areas in which they are located, but also as a major driving force for the economy of their respective regions and of the entire Commonwealth. He added that the vital nature of these cities is clear, not only to the citizens who live there and to the business and industry that flourishes there, but also to the progress and growth of our state.  For that reason, Mayor Watson stated that these twelve cities have come together to form a coalition to share ideas, to address concerns, and to strive to move forward, individually and collectively.


In closing, Mayor Watson told the Committee that the "Coalition of Cities of the Second Class" want to join hands with the Kentucky General Assembly in meeting the needs of Kentucky families. He added that they want to work with the Committee in gaining an even more direct focus on the issues important to citizens who look to cities of the second class for the quality of life they enjoy and for the livelihood upon which they depend.


There being no further business, the meeting was adjourned at 12:10 p.m.