A dramatic turn in this troubled little town came today when four City Council members filed notice of a Special Council meeting for October 25, 2016, to conduct a public hearing to remove Mayor Rick Richards from office. In general, Mayor Richards has been charged with neglect of duty and other misconduct. Richards will be given a list of specific charges so that he may prepare to defend himself at the public hearing.
The four Council members, Toby Clark, Clara Crawford, Loy Crawford and Joseph Mattingly, have long been dissatisfied with Richards’ management, hiring and firing practices, unauthorized employee pay, secrecy and over budget spending. The two other City Council members, Elizabeth Bierbaum and Janie Mosely, have been strong supporters of Mayor Richards in the past.
A City Council can remove a sitting Mayor only with a unanimous vote.
The regular monthly West Buechel City Council is tomorrow night, Tuesday, October 11at 6 PM.
Before July, 2012, the residents and businesses of West Buechel, Kentucky paid 5% of all insurance premiums as a tax to the City. Five percent is the same rate that Louisville Metro residents pay as an insurance premium tax.
In 2011, West Buechel’s General Fund bank balance had increased from $1.5 million on January 1, 2011 to $1.8 million on December 1, 2011.
With that excess of cash on hand notwithstanding, in late 2011 former West Buechel Mayor Sharon Fowler proposed doubling the insurance tax from 5% to 10%. According to the City’s audited Financial Statements for FY 2011-2012, West Buechel’s spending for the year was only slightly more than $1 Million. The City had nearly two whole years of operating expenses already in the bank when Mayor Fowler proposed her tax increase.
At its December, 2011 regular meeting, the West Buechel City Council rejected Fowler’s proposed tax increase.
In January, 2012, Fowler unilaterally implemented her insurance tax increase anyway . . . by highly questionable means.
Background – Kentucky Local Government Insurance Premium tax
Local governments in Kentucky can impose a tax on insurance premiums. This tax is administered, in part, by Kentucky’s Insurance Commissioner. The Commissioner’s office communicates the different tax rates from the many different local governments to the several hundred insurance companies that write policies in Kentucky. The Commissioner also provides geo-location support to identify which policy holders are in what jurisdiction. The insurance companies are responsible for reporting and paying the taxes collected directly to the local governments on a quarterly basis. Kentucky law allows the insurance company to collect a small fee from their respective policy holders to cover the expense of collection.
The legislative body of each local government sets the tax rate for different types of insurance. In a city with the Mayor-Council form of government, the Insurance Premium Tax rate is set by a duly enacted ordinance. The tax rate can be changed by ordinance, and if timed properly, the new tax rate goes into effect on July 1, at the beginning of a new fiscal year.
If the City Council enacts an ordinance establishing this tax or changes the percentage rate of taxation, the City Clerk sends the Ordinance to the Kentucky Insurance Commissioner who then is responsible for communicating the new tax rate to each of the insurance companies.
From a local government’s point of view, it is easy money. With a mere stroke of the pen the checks start to arrive in the mail. Most tax payers don’t read or understand the fine print on their insurance policy declarations. People have become accustomed to regular increases in insurance premiums and a 5% increase in their monthly insurance payment would likely be blamed on the insurance company.
Most would not notice that the increase resulted because of their local city leaders raising taxes.
How did a tax increase rejected by West Buechel’s City Council go into effect anyway?
On January 16, 2012 a former West Buechel Clerk-Treasurer sent a fax to the Kentucky Insurance Commissioner’s office. That fax included a copy of a document she claimed was City Ordinance 162 dating from 1997. (see below)
The story was that Ordinance 167 increased the insurance tax to 10%, it was actually enacted in 1997, but the City had never put it into effect. Fifteen years later, in 2012 and one month after the City Council defeated the tax increase, the Fowler administration suddenly “found” this long lost Ordinance from the 20th Century.
What great good luck! Who would believe such a remarkable coincidence?
Apparently, nobody in a position of authority seriously questioned it. West Buechel’s City Council did not question it and Kentucky’s Insurance Commissioner did not question it. At a later City Council meeting, one West Buechel resident did ask about the tax increase and was given the story about the previously enacted but not implemented Ordinance from 1997.
But, the copy of the Ordinance faxed to the Insurance Commissioner has all the outward appearances of a blatant forgery.
Page one and two of “Ordinance 162” were clearly produced on a laser printer typically used in West Buechel City Hall in 2012. Page three of the hoax document, with the 1997 dates and signatures was printed on a DOT MATRIX PRINTER. One document supposedly produced by two totally different types of printers.
It is amazing that such an implausible story would go unquestioned. It is doubly amazing that such an obviously faked document could go so long undetected.
When the State Auditor looked at selected West Buechel practices during a special audit conducted in 2015, attention was drawn to the 2012 tax increase. The Special Audit Report dated December 10, 2015, included this Finding and Recommendation:
Finding 14: In 2012, the former Mayor submitted a 1997 City ordinance to the Department of Insurance to increase the City’s insurance premium tax from 5 percent to 10 percent after the City Council voted down this proposed increase in 2011.
To facilitate an increase in the City’s insurance premium tax from five percent to 10 percent, the City’s former Mayor provided a 15-year old ordinance to the Department of Insurance (DOI) in January 2012. The December 6, 2011 City Council meeting minutes document the former Mayor’s motion to increase the insurance premium tax to 10 percent failed to be passed by the City Council. The meeting minutes do not document that the City Council was informed of a 1997 ordinance that raised the rate to 10 percent but was apparently never implemented. At a subsequent City Council meeting on February 7, 2012, it is documented in the City Council meeting minutes that a resident asked the former Mayor about the insurance premium tax increase. The minutes further document that the “[m]ayor stated we already had the ordinance in place so we proceeded with the ordinance.”
Recommendations: We recommend that the City work with DOI to further investigate this issue to ensure the legality of this tax increase and take whatever action, if any, is necessary to appropriately address. We further recommend the City Council review this issue to determine the desired City insurance premium tax rate to be established moving forward. This issue was referred to DOI to consider whether further investigation is warranted.
The Richards administration has not followed through with the Auditor’s recommendation.
KRS 62.010(2) requires every individual who is elected to public office to take the necessary oath of office before undertaking the duties of that office. Those who are appointed to public office must take the oath within 30 days after receiving notice of appointment, as required in KRS 62.010(3)
Mayor Rick Richards appointed Kimberly Richards to the office of City Clerk-Treasurer for West Buechel in January, 2015, and she began to perform the duties of that office immediately. However, Kim Richards did not take her oath of office until June 9, 2015, more than 30 days later. (See City Council meeting minutes for June 9, 2015 Council meeting below)
By waiting until June to take her oath of office, Ms. Richards violated the time requirements of KRS 62.01(3)
KRS 62.990(2)(b) provides that when the oath of office provisions of KRS 62.01(3) are violated, “his office shall be considered vacant, and he shall not be eligible for the same office for two (2) years.”
All that is now required to get Kim Richards out of West Buechel City Hall is the say-so of a Jefferson Circuit Court Judge.
Kentucky law requires the compensation of City employees and non-elected officials to be set by Ordinance.
“The legislative body of each city shall fix the compensation of city employees and nonelected city officers in accordance with a personnel and pay classification plan which shall be adopted by ordinance.”
West Buechel’s Code of Ordinances § 31.36(D) specifically addresses the compensation and conditions of employment for the City Clerk-Treasurer:
Compensation authorized to be paid the City Clerk-Treasurer for conditions of employment and services shall be fixed by the City Council by ordinance.”
The “personnel and pay classification plan” required by KRS 83A.070(2), in general, including the compensation for the City Clerk-Treasurer, is contained in the City’s Personnel Policy and Procedures Handbook which has been adopted by Ordinance, by reference.
West Buechel Code § 37.01 ADOPTION BY REFERENCE.
(A) The policies and procedures, compensation plan and classification plan of the city is hereby adopted by reference as if fully set out herein.
(B) All employees now employed, and those employed in the future, shall be furnished a copy of the policies and shall attest in writing to the Mayor and Council that they have received the policies examined it and understand the contents herein. Employees shall also certify that they have had an opportunity to ask questions concerning same.
(C) A full and complete copy of the policies is on file in the Office of City Clerk-Treasurer.
West Buechel’s Personnel Policy and Procedures Handbook, as it existed and was readily available in print on January 1, 2015, when Rick Richards took office as Mayor, set the maximum hourly pay for City Clerk-Treasurer at $24.34.
In January, 2015, Kim Richards undertook the duties of City Clerk-Treasurer at $26.00 per hour. For calendar year 2015, Kim Richards was paid in excess of $60,000.
In 2016, Mayor Rick Richards unilaterally increased Kim Richards’ hourly pay to $28.00. Through July 9, 2016, Kim Richards had already received pay from the City in excess of $55,000.
The amount of pay received by Kim Richards in excess of $24.34 per hour has never been authorized by West Buechel’s City Council.
Through an Open Records request of City Council member Toby Clark, we have obtained several West Buechel bank account statements showing the balances on June 30, 2015, at the start of the 2015-16 Fiscal Year, and also for June 30, 2016 at the end of the year.
These bank account statements show cash on hand declined by $843,986.00 during that twelve month period.
Mayor Richards’ Budget Report for the 2015-2016 Fiscal Year shows a deficit of only $642,553.00.
The $201,433.00 discrepancy between the bank records and Mayor Richards’ Budget Report has yet to be explained. When the issue was raised at a recent City Council meeting, Rick Richards’ ex-wife and City Clark-Treasurer was overheard to say, “Oh, it’s only a bookkeeping error.”
In a bold and unprecedented move, West Buechel’s beleaguered Mayor, Rick Richards, clearly signals the world that he can spend public funds any way he sees fit, without answering to anyone. With the assistance of his long time associate and business partner, City Clerk-Treasurer Kim Richards, a check for $10,350 was issued and cashed this August.
Rick and Kim Richards refuse to disclose to whom the money was paid and for what public purpose it was expended.
Our Open Records request for a copy of the check, along with all documentation supporting the spending, resulted in the receipt of a redacted check image, with the name of the payee and the purpose of the payment blacked out. We also received a written statement from Ms. Richards that “the City is not in possession of any supporting documentation.”
We plan to submit this issue to the Kentucky Attorney General’s Office for an Open Records decision, based upon our opinion that all expenditures of public funds are open to public inspection under Kentucky law.
WEST BUECHEL, KY – Copies of bank statements obtained by way of an Open Record request establish the amount of cash the City of West Buechel had in the bank on January 1, 2015, when Mayor Rick Richards took office. When compared to bank records from July 7, 2016, the city appears to have spent about $992,000 more than it took in during that 18 month period.
Rick Richards’ financial reporting for that same period shows spending of about $664,000 in excess of receipts.
Marti Sitz was Clerk/Treasurer for the City of West Buechel from 2013 to November, 2014, when she was terminated by former Mayor Sharon Fowler for undisclosed reasons. When Rick Richards became Mayor in 2015, he re-hired Ms. Sitz as Assistant City Clerk under Clerk/Treasurer Kim Richards.
Marty Sitz was arrested Wednesday, June 29, 2016, at West Buechel City Hall. West Buechel Police officers made the arrest and transported Ms. Sitz to Louisville Metro Corrections where she was booked in with two charges of Theft by Deception for more than $10,000.
The exact nature of the alleged crime is unknown at this time.
WEST BUECHEL – MAY 10, 2016. At its regular meeting on Tuesday night, the West Buechel City Council voted upon a Resolution proposed by Council member Toby Clark. The Resolution set out fourteen specific areas of alleged misconduct by Mayor Richards and his staff to be referred to law enforcement officials for investigation and possible criminal prosecution. The six Council members split, with 3 in favor of the Resolution and 3 opposed.
Mayor Richards broke the tie by voting “no.”
City of West Buechel
City Council Resolution
Series 2016, number ___
WHEREAS: Kentucky’s Auditor of Public Accounts has recently called into question whether the citizens of West Buechel are capable of self-government or operating a City according to the Rule of Law.
WHEREAS: The current administration has repeatedly ignored and disrespected well established rules for budgeting, spending, financial reporting, personnel management, record keeping, office management, availability, responsiveness and transparency. These failures have exposed the City to expensive litigation, inconvenienced the general public and fostered an environment of mistrust, hostility and disrespect for the law.
WHEREAS: Kentucky’s Penal Code has criminalized extreme levels of Official Misconduct (KRS 522.020 & KRS 522.030) and Abuse of Public Trust (KRS 522.050) along with other offenses. The Kentucky Revised Statutes impose fines and penalties for lesser violations of certain laws regulating the duties of City official.
NOW THEREFOR BE IT RESOLVED, the following general categories of misconduct and non-compliance, without being limited thereto, shall be referred to appropriate law enforcement agencies and officers for investigation and possible criminal prosecution of the responsible parties.
Payroll payments in excess of amounts authorized by law.
Spending in significant excess of budgeted amounts.
Illegal termination of employees.
Settlement of legal claims against the City without budget authority, without proper documentation, and without Council knowledge or approval.
Willful failure to comply with statutory procurement procedures and intentional concealment of unauthorized purchases from City Council.
Negligent late payments that result in substantial penalties to the City and intentional misrepresentations to the Council.
Falsifying official records to conceal job performance failures.
Failure to comply with established City personnel policies.
Illegal electronic eavesdropping at City Hall public areas, without notice.
Use of City vehicles for personal purposes without complying with City policies and procedures.
Failure to comply with City credit card use, record keeping and reporting requirements.
Failure to comply with financial reporting requirements.
Failure to comply with annual audit requirements.
Failure to comply with bond and oath of office requirements.