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A great deal of work is carried out in the county by various civic boards and authorities manned by largely uncompensated members who occasionally take some heat for the decisions they make. When P&Z or the Nuisance Board makes a decision someone is usually unhappy, but there is an authority in Lincoln County that typically flies under the radar because its decisions don’t usually affect taxpayers or property owners directly, until recently.

The Stanford-Lincoln County Industrial Development Authority was established in 1979 by a joint ordinance passed by the Stanford City Council and the Lincoln County Fiscal Court to acquire, retain and develop land for industrial and commercial purposes; aid in the development and promotion of industrial sites, parks and subdivisions to meet industrial and commercial needs of the community. The Industrial Development Authority operates two industrial parks, one on Ky. 78 east of Stanford, and one on U.S. 150 east of Cedar Creek Lake.

The Industrial Development Authority became news recently as result of an annual audit of Stanford’s city budget when the auditor warned that the city’s financial reserves, the money left over at the end of the fiscal year, had been dwindling for years and that it had reached a point where an unforeseen liability could put the city in danger of default. The city council is going to do a line-by-line review of its earning and spending in preparation for this year’s budget cycle, but one item leaps out from the page: the quarter of a million dollar loan that Stanford made to the Industrial Development Authority in 2001 that costs the city $968.74 a month in interest payments and has cost the taxpayers almost $100,000 in interest since the loan was initiated.

In 2001, the city council and fiscal court provided a half-million dollars in matching funds to secure a $1 million grant from the U.S. Economic Development Administration, a division of the U.S. Commerce Department, whose mission it is to lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy. The Stanford-Lincoln County Industrial Development Authority kicked in $54,500 and the Stanford Water Commission ponied up the same for a local contribution of $609,000; roughly 40 percent of the total cost of developing a new industrial park.

The agreement funding the development of the new industrial park between the city, county and the Stanford-Lincoln County Industrial Development Authority says, “All net sales receipts from property sold by the authority in said industrial park site or sites and any other income from the industrial park development shall first be applied to any outstanding principal loans obtained by the authority (then) applied to the reimbursement to the City of Stanford and Lincoln County Fiscal Court on an equal basis.”

So why, after eight years and accumulating more than a quarter of a million dollars in the bank has the Industrial Development Authority not paid any of the principal back to the city or county?

There are two answers. The first and easiest, according to the authority, is “They never asked.” While Stanford Mayor Bill Miracle says he raised the subject at a meeting over the summer, the minutes of meetings held by the Industrial Development Authority, obtained through an open records request, do not reflect any requests for repayment.

The second answer is as simple as the first, but far less promising for the Industrial Development Authority creditors: They can’t repay it. David Todd, legal counsel at the Atlanta office of the U.S. Economic Development Administration (EDA) that is responsible for projects in Kentucky, said all profits flowing from projects sponsored by the EDA have to be reinvested for future development. So despite taking in more than $15,000 a month in payments from businesses in the industrial parks and a $500 a month payment from a judgment against Beth Hill that has netted over $31,000 to date, none of it can be used to repay money to the city and the county.

Currently, the only way money can be returned to the creditors is through the sale of land. Federal regulations provide that net proceeds from land sales can be used to pay back shareholders in projects on a ratio proportional to their participation in the grant, in this case 60/40.

Short of dissolving the partnership and selling the land to capture any net profits, it looks like the civic partners in Industrial Development Authority projects might be out of luck. The EDA’s Todd said that even if that were to happen, any infrastructure installed, road, sewers, etc. remains under the terms of the original grant agreement in perpetuity.

So until there are further developments, it appears the city and the county might be out $250,000 each, and the city will have to go on making a monthly interest payment. The situation for the county is a little better. While Stanford got a bank loan for its share of the matching funds, Lincoln County had the cash on hand. While the county is not making monthly interest payments like the city, it is fair to say it has lost roughly the same amount as the city in opportunity cost.

Federal regulations pertaining to grants from the EDA say, “When authorized, program income may be used to meet the cost sharing or matching requirement of the grant agreement.” So, the only ray of hope could be that the original agreement, which was reviewed by the Bluegrass Area Development District and the Kentucky Office of the Attorney General, might be fundamentally flawed, that is the city and county entered into an agreement that is contravention to federal laws and regulation, and therefore grounds for an appeal for some relief from the EDA.

Next how the Industrial Development Authority works.

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