Fiscal Court vows to recover former Sheriff’s tax deficits

The Whitley County Fiscal Court took the first steps Tuesday evening during its monthly meeting to recover over $200,000 worth of deficits that state auditors say occurred during the administration of former Sheriff Lawrence Hodge.

Whitley County Judge-Executive Pat White Jr. said that the first step is to authorize Whitley County Attorney Paul Winchester to pursue the legal obligations of Hodge.

Winchester said his first step is to make claims with Hodge’s bonding company to cover the money.

“The purpose of the bond is to cover situations like this,” Winchester said. “We have a claim on the bond. If they want to try and recover what they have to pay out, then they will do that.”

State auditors have noted numerous deficits in Hodge’s accounts in recent years. In November, a special called Whitley County Grand Jury indicted Hodge on a 21-count felony indictment.

18 of those counts are for abuse of the public trust. 15 of those counts deal with money either collected or expended by Hodge’s office.

“I think nearly everyone knows our former sheriff has some legal issues,” White said. “The audits for the past four or five years show deficits that are owed to the fiscal court.

“These are actions by the fiscal court to delegate to the county attorney the right to pursue and recover monies that are the legal obligations of the former sheriff to Whitley County.”

White noted that the sheriff and other office holders that deal with money are bonded.

The bonds, which are similar to insurance, are designed to protect taxpayers against losses due to theft or gross negligence on the part of office holders or their employees.

White said that Hodge was covered under one policy up to $150,000 per year, and on another policy up to $50,000 annually.

Provided none of the missing funds exceed those amounts in any given fiscal year, the entire amount of the missing funds should be covered by the bonding company.

Winchester said that the county is working with state auditors to get specific amounts for each year.

Magistrate David Myers inquired about whether this would impact the county’s ability to get bonds for future office holders, or the amount paid for those bonds.

White said that claims against bonds have been paid out before in Whitley County and other counties, and didn’t affect the ability of future officials to get bonded.

In 2001, former Sheriff H.D. Moses bonding company reimbursed the fiscal court $99,101 for deficits in Moses tax account.
Rates for future bond holders could be affected in the future by the claims against Hodge, White conceded.

Where the money would be refunded to is a matter that the county is getting advice from state auditors about.
Some of the deficit relates to property tax bills and payments.

Only about 10.2 percent of every property tax bill goes to the fiscal court, White said.

The rest is distributed to various other taxing districts, such as school systems, the health department and the library board.
Other missing or unaccounted for funds revolve around money from various funds in the sheriff’s department. If the money for those funds is repaid directly to the sheriff’s department, then the fiscal court could see a greater share of the funding.
State law calls for excess funds each year in the sheriff’s and county clerk’s offices to be turned back over to the fiscal court.
Tuesday evening, the fiscal court accepted a partial settlement of excess funds from Hodge’s former administration in the amount of $35,070. Total excess funds due to the fiscal court for 2010 total about $63,000 from Hodge’s administration.

The fiscal court presented new Sheriff Colan Harrell with a $35,070 check Tuesday after collecting the excess funds from the sheriff’s department.

White said that the fiscal court has agreed to give Harrell’s administration the sheriff’s excess funds from last year for use in the office. ”We thank the court for this action. It will be spent wisely,” Harrell told the fiscal court.

White noted that the additional money from the excess funds would make Harrell’s budget this year “substantially the biggest sheriff’s budget in the history of Whitley County.”

Harrell’s office started the year flat broke though, and has been forced to purchase several needed items of equipment, and has accepted donations from the community in the form of used police cruisers, firearms, labor to get vehicles running, etc.

In other business, the fiscal court:

• Opted not to take action on a state recommended measure to raise the judge-executive and jailer’s pay rate by about 1.5 percent for 2011.

The recommended pay rate for each office holder was set by the state at $88,277.38, White said. It is set according to a state formula based on a number of factors, including year’s of experience and county population.

This current fiscal year, the judge-executive’s salary was set at $82,027, and the jailer’s salary was set at $84,673, according to the 2010-2011 county budget.

Not setting the two salaries in compliance with the state’s recommendations is something White said he knows will result in the county getting written up for when auditors look at the books.

He said that eventually, the fiscal court will be forced to give both office holders the raises retroactively, but that he is hoping the county will be in a little better financial shape at that point to afford the pay raises.

• Discussed efforts to address electric rates for several Whitley County residents supplied by Jellico Electric.
Third-District Magistrate Jamie Fuson said  that about 54 percent of the customers in that electric district live in Whitley County. It serves about 6,000 customers.

Brown said the problem is that Whitley County residents have no representation on the Jellico Electric board of directors and no input on the rates that are significantly higher than those for Kentucky Utilities or Cumberland Valley RECC.

White noted that when he first researched the matter about 18 months ago, Kentucky Utilities base rate per kilowatt hour was about 5 cents. The Cumberland Valley RECC base rate was about 7.5 cents per kilowatt hour while the Jellico Electric base rate was roughly 10.5 to 11 cents per kilowatt hour.

Brown noted that if the the two schools in Jellico electric’s district were on Kentucky Utilities, then the school district would save over $350,000 annually that could be put back into instruction.

Brown said that he has spoken with the Kentucky Attorney General’s Office about addressing the rates, and that several third-district residents plan to attend the Jellico City Council meeting scheduled for 6:30 p.m. at Jellico City Hall Thursday.

“The city council can’t really do anything with the electric company unless they abolish the power board, and then they would have control,” Fuson said.

Fuson said that he has been assured by Jellico Mayor Les Stiers that if the Jellico Electric board is abolished and the City of Jellico takes it over, then Stiers would try his best to lower the electric rates for all customers if this proves possible.