EXTRA CONTENT: Debt on Corbin expo center soars to $11 million

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Escalating debt on a 5,000-seat exposition center in south Corbin piled up $3 million higher Monday as the city’s Board of Commissioners agreed to borrow the additional amount to help pay some unexpected costs connected to the project.

The move, unanimously approved by the five-member board during its regular monthly meeting, brings the total city indebtedness on the project up to $11 million. Corbin City Manager Bill Ed Cannon said the Southeast Kentucky Agriculture and Exposition Center would end up costing around $28 million when all bills are paid.

The money, which is being borrowed from the Kentucky League of Cities, comes at a low interest rate, said Corbin Mayor Willard McBurney. The city will pay around $57,000 a month on the debt, equaling around $684,000 annually in debt service.
McBurney said while the amount the city had to borrow to finish the project is well over the $5 million city leaders first projected, he doesn’t think it will put too large a strain on the budget. That’s because the city has been stockpiling cash from a three percent restaurant tax imposed in 2005, 75 percent of which it gets to keep to help pay for expo center costs. The other 25 percent goes to the town’s Tourism and Convention Commission.

Also, the city has a $1 million reserve fund that can be tapped if needed.

The three separate loans, taken in two $3 million increments and a $5 million increment, have a term of up to 15 years.

McBurney said he hopes the city pays it off much sooner.

"Everyone is assuming that we are going to have a $300,000 operating deficit at the arena but I don’t think it will be that much," McBurney said, referring to a feasibility study performed before construction of the expo center estimated its potential for profit and losses in the first years of operation. "It won’t be that much. I think things are going better up there than first anticipated."

McBurney said SMG World, the company that manages the expo center, is due to give the city a quarterly report on the financial status of the facility in the near future.

"Right now, the numbers are still vague."

City Commissioner Bruce Farris, a local certified public accountant, said having to borrow an additional $3 million to finish the project was unfortunate and that he was disappointed the state of Kentucky did not complete funding of the expo center but that he understood the economic downturn was to blame.

"I am sure state elected officials are at a disadvantage where funding is concerned" Farris said, "and are probably unable to fund many projects that they would otherwise like to".

Farris said the city had to either take over the primary funding of the arena or let the project fall to the wayside. City leaders chose the first option rather than the second.

"The Mayor and Commissioners wanted to make certain that the Arena would be a first class addition to the area and financing with the Kentucky League of Cities was the best option available," Farris said.

When first planned, the expo center was a more modest project. It was expected to cost $12 to $15 million, nearly all of which would be state funds, and was originally designed to seat only around 2,500 people. Initial bids on the project came in around $18 million, and then were reduced to around $15 million when a construction management firm was hired. Additional excavating work, an increase in the scope of the building, some changes lobbied for by the management firm and other unforeseen costs caused the price tag to skyrocket.

Compounding the problems was the revelation Monday that the city missed an opportunity to win a $1.5 million grant from the federal Economic Development Authority to help pay for installation of a one million gallon water holding tank above the expo center. The subject was a sore point among commissioners Monday, and one laid blame squarely at the feet of an Randy Corlew, Director of Site/Municipal Design for the firm of Wilbur Smith and Associates in Knoxville, Tenn. Wilbur Smith was subcontracted by Bullock Smith and Associates, another Tenn. design firm, to do site and utility design for the site and the roadway leading up to the facility. Bullock Smith actually designed the expo center itself.

Commissioner Phil Gregory said Corlew was tasked with filling out an application for grant funds from the EDA, but failed to do so in a timely manner. Once the city began bidding to build the facility, it was disqualified from receiving EDA funds.

"Why did it take so long to put that application in?" Gregory asked Corlew during Monday’s meeting. "We got knocked out of a $1.5 million grant because someone didn’t do their job two years ago."

Corlew said he first began to make application for the grant in April of 2006 before the company was ever even hired to do the design work. He said problems arose when he was unable to nail down exactly how much installation of the tank and water lines was going to cost.

"I had to know where the funding sources were and how much was going to need to be borrowed and how much wasn’t going to be," he said. "I couldn’t do that because it was an ever evolving thing. That was probably the reason a lot of people wanted to wait."

He also claimed, during the meeting and during a separate interview with the News Journal on Tuesday, that some city officials had told him to halt the application process in order to await the outcome of the most recent gubernatorial election.

Pressed by Farris to name the city officials who gave that order, Corlew was silent. He said Tuesday he would not divulge who instructed him to delay the application.

"I’ve been in this business for 30 years and there’s sometimes I will take the heat," Corlew said. "I know in my mind what I’ve done and I know what our firm has done … We have been really pleased to be involved in that project and I think we served the city of Corbin well."

Gregory said he had never heard of anyone at city hall telling Corlew to stop. He said city officials learned by happenstance that no application had been made for the grant and started to begin making inquiries, only to be met with confusing answers.
"All the time we were talking to our city manager who was supposed to be contacting John or somebody and he was supposed to be contacting you and, Lord have mercy!" Gregory said, exasperated. "I better not get into that."

Corlew was paid $15,000 for his work on the grant application. He said after the city was rejected he tried to move the process forward anyway and nearly convinced the EDA regional office in Atlanta to consider funding for the project, but to no avail. He submitted a letter to the Commission during the meeting for an additional $6,000 payment for around 30 hours of work he did trying to salvage the grant funds. Commissioners took no action on the request.

The city is splitting cost of the water tank with the City Utilities Commission. Cannon said it was about a $2 million project.
Commissioners got another surprise Monday when Corlew submitted an $80,464.69 change order for the project regarding extra drilling that had to be done to install water lines connected to the tank. Corlew said the company hired to put in the lines, G W Wyatt Contracting, was unsure of the location of fiber optic lines owned by AT&T that ran under Cumberland Falls Hwy. and so was forced to use ground penetrating radar to find the lines. He said AT&T would not cooperate with requests to mark them.

After the lines were located, the company had to drill 20 feet deeper than expected in order to avoid hitting the lines.
Commissioner Dennis Lynch was furious over the change order given to the board months after the actual work was completed.

He also questioned extra costs incurred for the installation of "check valves" apparently requested by the City Utilities Commission.

"I’m not knowing why people wanted to change this," Lynch said. "I just don’t’ think any part of it is right. If the City Utilities was going to add some boxes they should at least come to a meeting. They know when our meetings are. I don’t like them saying ‘do this and send the bill to the city of Corbin.’ We should at least have had some idea."

Farris noted that while the tardy change order was aggravating, the commission would have likely approved it anyway months ago because it was essential to the expo center being open and operational.

G W Wyatt won the low bid for the work for $965,914, which increased to $1,046,379 with the change order.

Commissioners split on whether to pay the bill with Gregory and Lynch opposing it, Farris and Joe Shelton in favor. McBurney cast the tiebreaking vote to approve payment.

In other business, the Commission:

• Approved a bid from Elza Construction for $443,997 to repair a mudslide behind the Corbin Center for Technology and Community Activities.

• Approved bids for fuel service, cell phone service and stone. Bids for landfill service for the upcoming year were taken under advisement.

• Heard a presentation from Tim Thompson, representative of the Vision Committee. The committee was formed following a community assessment by the Kentucky Association for Economic Development. The committee, Thompson said, has just completed a plan to improve Corbin.

• Approved the renewal of a franchise agreement with NewWave Communications for 10 years.

• Approved the promotion of Major Bruce Rains to the position of Colonel.

• Authorized the city manager to advertise for decorative lighting for Main Street.

• Appointed Gregory and Farris to the budget committee.

• Approved an agreement with Whitaker Bank for high-speed Internet service.

• Approved health, dental and life insurance plans for city employees for the upcoming fiscal year.
City officials said employees had a lot of claims this past year, prompting a 21.92 percent rate increase from current health insurance carrier Bluegrass Family Health. Minor changes to some co pays, drug benefits and maximum out-of-pocket expenses brought it down to a 6.5 percent rate increase – a $24,500 increase in premiums over this current fiscal year as opposed to a $60,000 increase. The city will pay $474, 295 to Bluegrass Family Health for insurance costs.
Dental and life insurance plans stayed the same.

• Approved a resolution for a Homeland Security grant. Cannon said the money, about $17,000, would be used to upgrade equipment in the police department’s 911 emergency center.

• Accepted the resignation of Henderson Reeves from the Public Works Department.