Journal-Times (Grayson, KY)

March 26, 2014

Mayor authorizes fund transfer without Council OK

By Joe Lewis - Staff Writer
Journal-Times

March 26, 2014 — Olive Hill Mayor Kenny Fankell has ordered the transfer of all utility profits to the city’s general fund.

The transfer is discussed in a March 18 e-mail exchange between City Clerk Angela Owens and Council member Glenn Meade that was obtained by the Journal-Times.

“The mayor asked that I inform you that the utility check in the amount of $102,807 has been cut and signed to transfer funds over to the general fund based upon legal counsel’s advice,” Owens said in the e-mail.

When asked for comment, Fankell referred all questions regarding utility profit transfers to the city’s legal counsel, Derrick Willis.

“I’ve not seen any e-mail about funds being transferred but I did prepare a written legal opinion about this issue at the request of the Council and the mayor,” said Willis.

In that opinion, Willis references KRS 96.200, the statute regarding use of utility profits.

That statute gives City Council the power to enact specific ordinances regulating the use of utility profits but Olive Hill currently does not have such an ordinance on its books.

The statute, however, also contains language regulating the dispensing of utility profits in the absence of an ordinance.

“Until such an ordinance is enacted, any surplus earnings shall be paid into the city treasury, to be expended for the general purposes of government in the city,” reads the statute.

Willis asserts in his opinion that this language implies a mandatory transfer of utility profits to the general fund since the city doesn’t have an ordinance otherwise regulating the funds.

“It is my opinion that the City shall transfer these sums to the general treasury and the Council should then discuss an ordinance setting forth how those funds will be disbursed,” he said.

In a separate opinion, Willis also advised the mayor and Council as to whether or not Council would need to approve the transfer itself.

“The statutory language does not specify whether the funds must be transferred by ordinance or may be transferred by executive municipal order,” said Willis in the opinion. “I contacted the staff attorney at the Kentucky League of Cities and he advised that any time the budget is amended it must be done by Council approval.”

The opinion continued:

“He stated that, in the past, cities have transferred funds by executive order to the

general treasury but the preferred method is transferring those funds directly from said utility by ordinance since disbursement requires approval by Council.”

“I see no clear prohibition on transferring the funds directly to general treasury,” he concluded.

“All ordinances must come from the Council and the city's purse strings are controlled by Council, not the mayor,” said Meade.

“Council must approve all financial transfers. If any action is taken by the mayor to transfer any funds, we respectfully request immediate notification and the appropriate legal action will follow.”

Fankell originally sought Council approval for the transfer in the form of a budget amendment at last month’s meeting. He called for a $60,000 transfer from the utility fund to the general fund.

Fankell explained that the transfer was intended to cover a shortfall in the street department and to replace funds previously cut from the budget.

Meade, along with council members Randy Tackett and Enoch Hicks, opposed the transfer because they felt the mayor had abused his spending authority by failing to follow the budget that Council had previously approved.

A Council meeting scheduled for last night was not held due to the lack of a quorum.

In his e-mail exchange with Owens, however, Meade expressed a differing opinion on the issue.

Joe Lewis can be reached at jlewis@journal-times.com or by telephone at 286-4201.