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Coal, gas cuts cost county $1.2 million in severance taxes



In addition to the severe effect it is already having on jobs and the economy in Letcher County, steep cuts in the production of coal and natural gas will leave the county’s governing body with $1.2 million less in severance tax receipts this year than it earned the year before, Letcher County Judge/Executive Jim Ward said this week.

“It has taken a toll,” Ward said Monday night during the December meeting of the Letcher Fiscal Court. “It is getting very tough.”

During the fiscal year 2009-2010, the last 12-month period before production declines began hitting first the natural gas industry and then coal in eastern Kentucky, the Letcher Fiscal Court and cities of Whitesburg, Fleming-Neon and Jenkins received coal severance funds alone totaling $2.056 million that could be used to help meet the cost of operating expenses, the bulk of that going to the county.

In July, state budget director Mary Lassiter reported that Kentucky received $28.4 million less than expected in coal severance tax receipts for fiscal year 2011-12, down to a total of $298.3 million from the expected $326.7 million.

Ward said the fiscal court will have to watch its expenses, but said the county government has already tightened its belt about as far as it can.

Ward’s comments came after Letcher County Treasurer Phillip Hampton cautioned the court that current amounts in a number of the county’s bank accounts will have to last until June 2013, the end of the 2012-2013 fiscal year.

Also at Monday night’s meeting, the fiscal court accepted 2013 budgets from the offices of Letcher County Court Clerk Winston Meade and the Letcher County Sheriff Danny Webb.

After presenting the court with a check for $4,424 that brought the total excess fee payments made by his office to $34,424 for 2012, Meade presented a budget on a total fee collection of $6.360 million with excess fees projected at $7,094. Webb presented a budget of $882,500, with $772,500 projected for operating expenses including salaries and an additional $110,000 to repay an annual advancement financed by the fiscal court to allow the sheriff ’s office to operate until tax revenues arrive in January.

The Letcher County Water and Sewer District also sent its annual operating budget to the court, although no representative from the district’s board of directors attended the meeting. The budget called for total income of $1,120,781 against total expenses of $1,120,781.

In other business, officials say there is no merit to charges from a Deane woman that led to a terse confrontation during the meeting.

The exchange came after Elaine Tanner accused a person or persons she could not identify of misappropriating public funds. Tanner presented what she referred to as evidence of $2 million being shifted in 2005 from what she said was a water line extension project set for an area in Deane to the community of Sandlick, although County Attorney Jamie Hatton told her the installation of the water lines at Sandlick had to be completed before lines at Deane would be usable or even eligible for funding.

Tanner also accused Judge Ward of covering up the alleged switch, although Ward had not yet been elected judge at the time funds were appropriated though House Bill 269. Ward was elected in 2006 and took office in January 2007. She also said Ward has charge of the water and sewer district, although the district’s charter specifies that it is a standalone body that is not subject to the court. Although Ward and other court officials attend meetings at times and the court has appropriated funds to service debts for the district, court members do not have a vote in district matters. The court does appoint and confirm board members, but court members are not allowed to interfere in board business.

“The $2 million was intended for Sandlick,” Hatton explained to Tanner. “Nobody moved the money to Sandlick. It was intended for Sandlick. It didn’t come out of Deane.”

Tanner was referring to a water line extension that was funded well before water lines were extended far enough to make it possible to obtain funding for the Deane Water Project, which was funded early in 2012 and is now partially complete. The Deane project was funded by Abandoned Mine Lands, except for the Shelby Fork Community including Mill Creek, which has been funded by a line item in the state budget.

Bids for Phase II of the Deane Project and the Shelby Fork Project were opened last week by Bell Engineering and members of the water and sewer district’s board of directors. The bid should be awarded at Thursday’s meeting of the water and sewer district board and construction will begin within 45 days.

At the October and November meetings of the fiscal court, Bell Engineering’s Steve Caudill, who works with water and sewer district on water projects, made it clear that funding agencies will not fund the extension of water lines without a source of water that can be hooked onto. Caudill referred to a situation that occurred when work on extending lines in the county stalled several years ago because current sources had reached their capacity to supply water customers in the county. That happened before the Knott County Interconnect was completed last year to connect Letcher County lines with lines running from the Knott County water plant. When the new Knott County water plant at Carr Creek Lake came online, it allowed the Knott County Water District to serve as a source for Letcher County as well as allowing lines to be extended throughout Knott County.

The plant was funded by multicounty severance tax funds and Caudill recently told the Letcher district that it is nearing capacity and will seek further multi-county funding to serve the expanding base. The lines that will be laid at Shelby Fork, the area with which Tanner is concerned, will temporarily be served by the Knott County Water District, which will sell the water to Letcher County. That was also made possible by the new Knott County water plant. When all Letcher County water lines are inter-connected, Shelby Fork will be served by the Letcher County Water and Sewer System.

According to a report issued by Caudill at the February 2011 meeting of the water and sewer district board of directors, the Kentucky 931/Sandlick/Kentucky Route 7/ Mainline/Camp Branch Water Line Extensions were funded by a combination of funding from the Kentucky General Assembly, which was administered through the Kentucky Infrastructure Authority (KIA), loans and grants from the U.S. Department of Agriculture’s Rural Development Agency, and Abandoned Mine Lands.

Although Hatton explained the situation, Tanner persisted in her accusations before Phillip “Pee Wee” Back, former water district board chairman, spoke up and said he took exception to hearing the board accused of wrongdoing.

“You need to back off,” said Back. “There was no money misused. There was no money for Deane until they could get lines to Deane.”

“There was no way they could get water to Deane because they had no source,” added Hatton.

At that point, Tanner became loud and disruptive until Ward used his gavel to regain control of the meeting, telling Tanner he would have her escorted out of the meeting if she didn’t control herself. District Four Magistrate Keith Adams said he did not like being accused of wrongdoing when he was not even on the court when the Sandlick waterline extensions took place.

In other business, Ward asked Hatton if there had been any progress in getting two landowners to finally settle a dispute over land the county wants to purchase for an animal shelter. Hatton said there had not, and Ward said to give them one more chance before court starts looking at other acceptable sites for the shelter.

The court also accepted and awarded bids for material and services for the coming year. Among the items that were bid and accepted were: crushed limestone, Mountain Aggregate (Jenkins) and Bluegrass Material (Gordon)). Mountain Aggregate had a slightly lower bid and the court will purchase most of its crushed limestone from it, unless it is working close enough to Gordon to make hauling costs lower at which point it will purchase from Bluegrass Material. Asphalt: Mountain Enterprises, the sole bidder. Welding Services: Greg Hale LLC at Whitco. Electrical work and plumbing, Breeding Plumbing and Electric, Isom. HVAC: Banks Refrigeration of Whitesburg, except for the courthouse and county recreation center which have systems that require other service. Carpentry: Greg Hale LLC. For all other services on which the fiscal court did not receive bids, the court will purchase them at state contract price.

Letcher County Tourism Commission Chairman Dr. David Narramore told the court that 15 county presenters have given their attendance figures and 2013 budget requests to the commission and 10 organizations haven’t presented a budget at this time. Narramore said the commission would like to award $500 to each for a total of $12,500, but it currently only has $9,000 in the county’s budget for tourism. Judge Ward told Narramore to go ahead and plan to distribute the full amount because receipts from the county motel tax, which goes to tourism, and coal severance taxes set aside for tourism will make up the difference.

In other business, the court:

• voted to allow Judge Ward and County Attorney Hatton to negotiate a lease agreement for a building at the old Kingcome Come School. Magistrate Keith Adams said the building sits apart from the community center and is not in use and will be used for a consignment shop. The profits will go to support the center.

• voted unanimously to set the speed limit at Shelby Fork for 10 miles per hour.

• voted unanimously to accept the Watts Drive bridge at Ulvah from the state and assume responsibility for the bridge’s maintenance.

• voted unanimously to dedicate Sergent Road (Highway 2545) in honor of Sergeant Andrew B. Sexton, U.S. Army, killed in action; one mile of Yonts Fork Road going toward Potter Town in honor of Corporal Howard Collins, U.S. Army; Boot Hill Road for brothers Corporal Everett Banks and Sergeant Williams Banks, U.S. Army, and the Ulvah Bridge for Wagoner Cooley Campbell, U.S. Army, World War I.

Bank Balances for county agencies as of December 12:

• General Fund $547,167.25

• Road and Bridge Fund $889,430.45

• Jail Fund $281,428.61

• LGEA Fund $1,651,674.68

• Senior Citizens Fund $165,036.16

• Forestry Fund $10,480.88

• Letcher County Public Courthouse Corp. Funded Depreciation



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