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The cities of Shelbyville and Simpsonville were benefiting from memberships in the Kentucky League of Cities long before Tom Hardesty and Steve Eden took over as their mayors.
And Hardesty and Eden both speak resolutely in support of the League, which is undergoing a state audit and internal evaluations after its spending practices were brought into question in an investigation by The Herald-Leader of Lexington.
Published in June, a series of stories by The Herald-Leader disclosed lavish and questionable spending, unusually high salaries and questionable decision-making by officials of the League, an 80-year-old non-profit association serving 382 member cities in the commonwealth.
So concerned have been some member cities that one has voted to withdraw as a member and another is refusing to pay its dues until the League reevaluates its policies and fixes its questionable spending.
Among the findings by The Herald-Leader were:
§ Executive Director Sylvia Lovely was paid a salary of about $315,000 in 2008, and her Deputy Director/Chief Operating Officer, former Shelbyville Mayor Neil Hackworth, was paid around $245,000, both of which outrank the around $112,000 paid to Gov. Steve Beshear.
§ During the past three years the League’s top three officials charged $304,000 to credit cards, including $175,000 for airline tickets and hotels, $77,000 for meals, $8,100 for a trip to Dublin Ireland for the Lovely and her husband, Bernie.
§ KLC spent $4,500 on a six-seat box for a season at Churchill Downs in 2007.
§ There were meals and entertainment expenses of more than $20,000 at Lexington-based AZUR Restaurant, of which Bernie Lovely owns 20 percent.
§ William Hamilton, director of insurance services with the League, made charges on his company credit card when he, Hackworth and a small group of KLC staff went to Diamond Cabaret strip club in Las Vegas.
Because of these and other questions raised in the investigation, it was decided State Auditor Crit Luallen would audit the League.
Such spending outraged officials of Henderson, who voted unanimously to withdraw from the city, and Lexington Mayor Jim Newberry vowed to withhold his city's $26,000 membership payment to the League until it re-evaluates its financial policies.
He encourages other cities to do the same, but in Shelby County such a drastic response is not being taken.
Hardesty said Shelbyville’s relationship with the League will remain the same, and he is confident the organization will make improvements and move on.
"There’s a lot of good, hardworking people working at the League,” he said. "I’m not going to take a knee-jerk reaction. I’m anxious to see what the task force finds.
“I’m concerned just like every mayor or city official should be, but I am glad that they’re responding in a positive manner toward this.”
What the League does
The League generates its operating funds through dues of member cities, insurance premiums and interest on loan payments. Cities pay dues from a population-based portion of city taxpayers' dollars, with larger cities paying larger dues.
Shelbyville, which joined the League in May 1972, pays an annual fee of $2,680 for membership. Simpsonville joined in May 1989 and pays just $400.
For those contributions the cities receive a variety of services, including help with insurance, workman’s comp, developing ordinances, job descriptions and training, legal issues, legislative lobbying support, safety grants and risk management.
Hardesty said for years the city’s membership has yielded tremendous benefits. "We get a lot of bang for our buck for the services offered. We get a lot of good professional help and advice,” he said.
The League has emerged as a primary insurance provider for cities, and both Shelbyville and Simpsonville are using its services.
"They’ve helped us save money on health insurance program for employees and workman’s comp,” Eden said of Simpsonville. "There are a lot of programs that we benefit from.”
Shelbyville gets its workman’s comp, property and liability insurance through the League. Health, dental and other insurance are done through other companies.
"They help with a lot of human resource issues – job describing, policies and procedures. And they offer public officials training,” Hardesty said.
Shelbyville officials have participated in many of the training sessions and often calls on the League for information, and Simpsonville recently won a $3,000 grant for safety.
"They’re really safety oriented,” Hardesty said. "They have public works training seminars to help people get certified in what they need. They have training for police officers using a firearms training simulator. It’s excellent training – virtual-type training.”
And risk management specialists have inspected local buildings and procedures, like the Shelbyville skate park and public works facility to be sure they’re following necessary standards.
"They even helped finance the new [Simpsonville] city hall expansion we did three years ago,” Eden said.
Hackworth, who, as a former mayor, says he sees the value from both sides, said both cities have benefited.
"It’s been a real benefit in terms of being able to quickly, and with reasonable costs, help finance a number of projects that we did in Shelbyville and Simpsonville,” he said.
Hackworth was mayor of Shelbyville for 13 years when he resigned to join the League. He was owner of The Armstrong Agency, which he sold several years ago, and he and his wife, Sharon, still live here.
His name emerged frequently in The Herald-Leader’s examination, most notably with the questionable night in Las Vegas, an event, he said, that never should have happened.
"It’s inappropriate to be in those situations with those folks, and I should not have done that,” he said. “I hope people understand we all make mistakes, and I apologize for any part that I had in it.”
That aside, Hackworth said he has been instrumental in the league’s growth
When he first arrived at the league in 1995 he said there were only 15 to 20 people on staff. Now there are around 80 employees, and it’s a multimillion-dollar company. His expertise in insurance was a key element of that growth.
"I was instrumental in putting the insurance agency together,” he said. “Our insurance agency writes about twenty million dollars worth of insurance direct for health insurance, and a whole lot of other products.”
Now facing another challenge, he said he is confident that the League will come out better than it was and continue to offer support and assistance to the leaders of Shelbyville and Simpsonville, as well as all over the commonwealth.
"This is my life’s work. It’s very important to me. I just want the people of Shelbyville to know I feel I’ve given my time to the city to try and make it a better place, and I’ve done that with the League of Cities,” he said.
As part of the League’s internal review, Hackworth is overseeing two task forces: a Procedures task force and a Finance task force created to examine KLC policies.
He said the executive board is made up of volunteers who give their time freely, so he would like to be able to offer them a meal and lodging as they work to help cities. But he acknowledges that some changes need to be made.
"Hopefully we can resolve some of the questions and concerns. But we are moving quickly to get some new policies in place and get new policies written – policies that clearly understand and clarify all the issues that have been raised with these articles. We have to live to a higher standard. We’re taking it seriously,” he said.
Hardesty and Eden said they hope the League can continue providing the services it has been, but they acknowledged that there are some real policy problems to work through in regards to spending.
"We were concerned,” Eden said. "It hadn’t effected the services to our citizens, but we were concerned, and, hopefully, with the reorganization, they’ll be able to improve upon and put polices in place to keep this from happening again.”
Hardesty mirrored that view and said he thinks that only good can come from reorganizing.
"Every organization needs to step back occasionally and see how they can do things better and see if they’re managing resources wisely,” he said.