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.
In Rick Richards’ second week in office as the newly elected Mayor, in January, 2015, the employment of a probationary West Buechel Police Officer was terminated by him, for reasons unknown. It’s not really necessary to have cause to terminate a probationary Police Officer. The Police Officer’s Bill of Rights does not apply to probationers during the first six months of employment.
Nonetheless, this particular Police Officer felt aggrieved and claimed the firing was retaliatory against her efforts to expose criminal wrongdoing by another Police Officer. In addition, she claimed sexual harassment and she threatened to sue the City.
(1) She was given a check for the difference between the unemployment compensation she actually received and the net pay she would have received had she remained on the payroll from January to the middle of April, 2015.
(2) She was put back on the payroll at full pay, as if she were a genuine City employee, through the end of 2015. She never actually reported for work during that time.
(3) She received full health insurance coverage paid for by the City for all of 2015, as if she were an actual employee.
(4) She received full CERS retirement contribution from the City (17% – 18% of gross pay). as if she were an actual employee.
Combining all that with Social Security and Medicare employer tax contributions, this settlement agreement cost the City about $50,000.
This is how the settlement was managed by Mayor Rick Richards.
(1) The settlement was never properly documented or formalized. The terminated employee accepted the benefits of the settlement, but she never signed a written settlement agreement.
(2) The City Council was never consulted or informed of the settlement, and there was no budget authorization for it. It was a secret deal.
(3) The expense of the settlement was buried in the payroll budget, the CERS retirement contribution budget and the employee health insurance budget.
So, it was a secret deal deceptively disguised, which involved the falsification of every City financial report issued by Mayor Rick Richards for 2015.
Kentucky law requires municipalities to follow certain procedures for purchases of goods or services over $20,000. They may:
Piggy back on state purchase contracts;
Adopt the Local Model Procurement Code (KRS 45A.343), or;
Advertise for bids under KRS 424.260
In the Fall of 2015, West Buechel’s Mayor, Rick Richards purchased a new $25,000 vehicle for the West Buechel Police Department from and out of state dealership. The City of West Buechel has not adopted the Local Model Procurement Code and there was no advertisement for bids. To complicate matters, the City’s budget made no provision for the purchase of vehicles.
The direct legal penalties for violating KRS 424.260 appear to be nearly non-existent, even if significant off-budget spending might expose the Mayor to personal liability for making such a purchase without legal authorization. However, despite the number of times is has been repeated over the years, it never seems to sink in. “It’s not the crime. It’s the cover-up.”
(1) Mayor Rick Richards issued two consecutive checks, on the same date, for the purchase of this one vehicle. One check was for $19,500 and the second was for $9,500, for a total of $25,000.
(2) The check reports distributed to the West Buechel City Council omitted these two checks.
(3) The Annual Budget Report for FY 2015-2016 buried the vehicle purchase in the category “Maintenance & Repairs.”
Mayor Richards did not consult with the City Council regarding this expenditure, he did not ask for budget authorization and to this day the City Council has not been informed by the Mayor of the vehicle purchase. However, it appears that Mayor Richards and Clark-Treasurer Richards took pains to hide the purchase from the Council.
In addition to the purchase price of $25,000, there was also $4,230 expended to equip the vehicle for use as an unmarked police car. This combined $29,230 expense was off-budget and unauthorized by the City Council.
The documents we obtained through a January, 2016 Open Records request are included below.
There was a second vehicle purchased during this same time period. The circumstances seem to be the same but the specific details are still unknown.
The Commonwealth of Kentucky has suspended making monthly Road Aid payment to the City of West Buechel due to the City’s failure to submit a Uniform Financial Information Report (UFIR) for FY 2014-2015. The last Road Aid payment was made in May, 2016.
The City cannot submit a UFIR for FY 2014-2015 until that year’s Financial Statements have been audited by an independent CPA as required by law. Our repeated requests to inspect the City’s Financial Statements for FY 2014-2015 have gone unanswered. The Financial Statement required by KRS 424.220 should have been finalized and published a year ago. An independent audit of the City’s Financial Statements cannot begin if the Financial Statements do not yet exist.
The State Road Aid allocated to West Buechel will continue to accumulate. Those funds, which are about $2,000 per month, will not be paid to West Buechel until the City gets its financial reporting in proper order and a UFIR is submitted.
We previously reported $5,000 in late fees imposed upon the City of West Buechel by Kentucky Retirement Systems because of Kimberly R. Richards’ multiple failures to report or pay retirement contributions on time. See: Gross Negligence. Ms. Richards has been City Clerk-Treasurer for West Buechel since Richard W. Richards took office as Mayor in January, 2015. She continues in that position with an annual salary in excess of $60,000.
By a recent Open Records request to Kentucky Retirement Systems, we have been advised that an additional $1,000 late penalty has been imposed.