EDP Presentation: Danville City Commission Workshop 4-23-13
WHO ARE WE?The textbook definition of your EDP . . .Ec • o • no • mic De • vel • op • ment Part • ner •ship(ěkə-nŏmĭk dĭ-věləp-mənt pärtnər-shĭp) n.1. An innovative, collaborative, public-private allianceunifying and coordinating the interrelated andinterdependent community and economicdevelopment missions, resources, and initiatives ofits Partners. MOA Sec. 2, p. 1; Sec. 3(A), p. 2.
Danville-Boyle CountyEconomic DevelopmentPartnershipBusinessDevelopmentBoyle CountyIndustrialFoundationBCIFBoard of DirectorsEDP-BCIFPresident/CEOBusinessServicesDanville-BoyleCounty Chamber ofCommerceChamberBoard of DirectorsExecutive Director/EDP Vice PresidentDowntownDevelopmentHeart of DanvilleHODBoard of DirectorsExecutive Director/EDP Vice PresidentMain StreetPerryvilleMSPBoard of DirectorsExecutive Director/EDP Vice PresidentTourismDevelopmentDanville-BoyleCounty Convention& Visitors BureauCVBBoard of DirectorsExecutive Director/EDP Vice PresidentEDPBoard of DirectorsEDPPresident/CEOECONOMIC DEVELOPMENT PARTNERSHIPStructural Overlay with Partner OrganizationsPrivate, nonprofit corporations—receive no public funding.Private, nonprofit corporations or public agencies—receive public funding by appropriation or tax.Boyle County Fiscal CourtDanville City CommissionJunction City CouncilPerryville City Council
WHO ARE WE?The textbook definition of your EDP . . .Ec • o • no • mic De • vel • op • ment Part • ner •ship(ěkə-nŏmĭk dĭ-věləp-mənt pärtnər-shĭp) n.2. A nonprofit, corporate entity governed by an active boardof fifteen (15) Directors representing both the privateand public sectors and designed to ensure that thePartners work in concert to provide an exemplary array ofeconomic development services in a coordinated andcost-effective manner.
WHO ARE WE? The 2013 EDP Board of Directors . . . (see board listing) John C. Albright Chairman Richard Trollinger Vice Chairman Lisa A. Bottom Secretary/Treasurer Jamey Leahey Chamber of Commerce Jerry Boyd Convention & Visitors Bureau Bill Pollom Heart of Danville Alan R. Turbyfill Industrial Foundation Robby Mayes Main Street Perryville Sherry Davis, Director at Large Hobart Corporation Terri Gilbert, Director at Large Agriculture Judge/Executive Harold W. McKinney Boyle County Fiscal Court Mayor Bernie R. Hunstad City of Danville Rita G. Douglas, Alternate City of Junction City Mayor Anne Sleet City of Perryville Jody A. Lassiter President/CEO
HOW DID THIS HAPPEN? The Danville-Boyle County Economic Development Partnership,Inc., was formed in 2006 on the foundation of the former Boyle CountyCommunity Development Council, Inc. There was no formal coordination or working agreement amongthose organizations that would become the EDP Partners. The Boyle County Industrial Foundation (BCIF) was served by a part-time executive in a more competitive business developmentenvironment. Mayor John W. D. Bowling and Judge-Executive Tony Wilder pledged$100,000.00 each to support the EDP and attract a full-timeeconomic development professional. Then-BCIF board member John Albright participated in the EDP’screation.
WHAT DO WE DO? The “Big 4”: The EDP’s primary missions areshared across all Partners . . .Business DevelopmentBusiness ServicesDowntown DevelopmentTourism DevelopmentMOA Sec. 2, p. 1
HOW DOES THIS WORK? A few of the basics . . . The 9 EDP Partners are either: Economic Development Organizations (EDOs),i.e. Chamber of Commerce, or Local Governments, i.e. Boyle County FiscalCourt.MOA Sec. 1, p. 1.
HOW DOES THIS WORK? A few of the basics . . . The EDP functions through a Memorandum ofAgreement among all the Partners thatspecifies the mutual responsibilities andrelationships among them, their staff, the EDPBoard of Directors, and its central staff. TheMOA is a 3-year contract reviewed annually.
HOW DOES THIS WORK? A few of the basics . . . EDO Partners retain their own boards ofdirectors and maintain separate budgets, butwe share staff and services as the EDP continuesto centralize administration and realign staffsupport roles to maximize our efficiency andeffectiveness. Diagram of Board & Executive RelationshipsMOA Sec. 4(B), p. 3; Sec. 4(D), pp. 3-4; Sec. 5(B), p. 5; Sec. 6(B)(2), pp. 8-9. See Diagram.
EDP BoardEDPPresident/CEOEDO PartnerBoardExecutiveDirectorChair serves as EDPBoard, Executive Committeemember.Board authority, CEO accountabilityfor EDP mission, personnel.Board authority, Executive Directoraccountability for Partner mission, personnel.EDP CEO servesas ex officioPartner Boardmember.EDO Partner Executive Directorserves as EDP Vice President forPartner mission, member of EDPExecutive Team led by EDP CEOfor EDP operations and initiatives.ECONOMIC DEVELOPMENT PARTNERSHIPEDP-Partner Board & Executive Relationships
HOW DOES THIS WORK? A few of the basics . . . EDP FY 2012-13 Budget: $458,368.00 The EDP receives both public and privatefunding to support its operations: Public: (same level since 2009) City of Danville: $120,000 ($130,000 requested, FY 13-14) Boyle County: $110,000 ($120,000 requested, FY 13-14)) Private: Chairman’s Circle: $95,000 (increased to $105,000) Industrial Foundation: $78,000 (shared CEO)
HOW DOES THIS WORK? A few of the basics . . . 70% of EDP’s public funds, 45% of total budgetsupports the EDO Partners: Heart of Danville: $110,000 (staff/operations) Main Street Perryville: $30,000 (staff/operations) Chamber of Commerce: $20,000 (business developmentsupport/fiscal administration services fee) CVB: $1,048 (shared staff benefit cost) Shared Services: ≤ $32,000 (communications, website) Chamber/HOD/MSP: $16,000 (private funds – membershipdues reimbursements/investment credits)MOA Sec. 5(C), p. 5; Sec. 5(E), p. 6; Sec. 6(A), pp. 7-8.
HOW DOES THIS WORK? A few of the basics . . . Private sources: Industrial Foundation’s $78,000 contribution directlysubsidizes the compensation of the EDP President/CEO,who also functions as Industrial Foundation’s President.MOA Sec. 5(E)(1), p. 6; Sec. 6(A)(1), p. 7. $95,000 in budgeted Community Partner investmentssupports: ALL of the EDP’s business marketing & recruitment activities; Business data research & website development/maintenance; $16,000 in membership dues reimbursement & investmentcredits to Chamber, HOD, and MSP. MOA Sec. 5(C), p. 5.
Commissioner’s Question “Give in priority the top five things the city commission cando to assist you in the mission of bringing business andnew jobs to Danville.” Funding: Continue the City’s funding support of the EDP at the requestedlevel of $130,000 in FY ‘13-’14, the first increase requested since 2009. Fully Engaged: Active participation in all voting and/or ex officiopositions on EDP and Partner boards (BCIF, CVB, HOD) to be fullyinformed about our plans, activities, and initiatives. Attitude: Present a cooperative, can-do, customer-friendly attitude toexisting businesses and new projects by the Commission and City staff. Focus on the Positive: Accentuate the positive aspects of local economicdevelopment now and in the future, rather than negatives of yesterday. Ask First: If you have any concern about the EDP or its Partners, address itfirst to the EDP or Partner for a response before publicly communicatingthrough the media.
Heart of Danville What is the financial relationship between EDP and HOD? The EDP annually appropriates $110,000.00 from its generalfund (derived from local government appropriations) to HODto subsidize its operations. MOA Sec. 5(E)(2), p. 6; Sec. 6(A)(2), p. 7. Is HOD subject to the Kentucky Open Meetings or OpenRecords Acts? Open Meetings: NO. HOD is not within the definition of a“public agency” to which this Act applies under KRS 61.805(2). Open Records: YES. HOD falls within the definition of a “publicagency” under KRS 61.870(1)(h) due to deriving more than 25% ofits funds expended annually from public sources.
Chamber of Commerce What is the structure of the Chamber of Commerce? The Chamber of Commerce is a private, nonprofitcorporation that is tax-exempt under IRC §501(c)(6). It is amembership organization that is supported predominantly bythe dues paid by its members. Is the Chamber subject to the Kentucky Open Meetings orOpen Records Acts? NO. As a private, non-profit corporation, the Chamber is notwithin the definition of a “public agency” to which these Actsapply under KRS 61.805(2) or KRS 61.870(1).
Chamber of Commerce What is the annual fee paid by EDP to the Chamber ofCommerce? The fee is a fee-for-service in the amount of $20,000.00 per year that is paidin quarterly installments by the EDP to the Chamber (COC). This serviceand fee was initiated July 1, 2010, by amendment to the EDP MOA. Services: EDP Executive Vice President: The Chamber Executive Directoracts as the Executive VP in support of the President/CEO. Business Development: The Chamber’s Executive Director supportsand assists the EDP President/CEO with new businessrecruitment, existing industry retention /expansion, and otherinitiatives and management as needed. Finance and Administration: The Chamber provides centralizedfinancial accounting and office management to the EDP/Partners.MOA Sec. 5(E)(4), p. 6; Sec. 6(A)(4), pp. 7-8. See EDP-Chamber Description of Services.
Convention & Visitors Bureau What is the CVB? The CVB is a joint City-County tourist and convention commissioncreated by local ordinances by authority of KRS 91A.350 - .394. Appointments to the CVB commission are made by the CityCommission and County Fiscal Court according to state statutorymandates. The CVB is a taxing district which is solely funded by the County’s3% transient room tax. The CVB receives NO additional appropriations from City or Countyvia the EDP. However, the EDP provides a small percentage cost-share for theCVB Visitors Center Coordinator, because this position providesstaff support to the EDP Partners and will function as the centralreceptionist upon EDP’s relocation to Constitution Square.
Convention & Visitors Bureau What role will CVB play when the EDP Partners relocate toConstitution Square? Managing Partner: Similar to other EDP shared services, CVB willbe the Partner coordinating the EDP’s fulfillment of services to theFiscal Court under the County-EDP lease agreement. This will beadded to the EDP MOA by amendment effective July 1, 2013. Services: The services to be provided for CS by the EDP under theCounty’s lease agreement are largely within the tourism expertise ofthe CVB, such as park interpretation, tour/event coordination,marketing/promotion, and educational programming. County-EDP LeaseAgreement, Sec. 5, pp. 3-4.
Convention & Visitors Bureau Why is CVB’s share of rent at Constitution Square beingabated by the EDP? Abatement: The amount of CVB’s abated rent will be $350.00 permonth or $4,200.00 per year. Reasons: The abated rent will be retained by CVB to: Fund compensation for part-time, seasonal weekend staffing of theVisitors Center at Constitution Square. This cost, over $3,000.00, hadbeen eliminated by CVB in FY ‘13-’14 as a budget reduction. Defray other added staff expenses as the EDP’s managing Partner atConstitution Square in fulfillment of services to the County. The abatement allows CVB to retain $4,200.00 of its own limitedtransient room tax revenues to apply to these needs.
Convention & Visitors Bureau Is EDP and/or CVB going to “manage” ConstitutionSquare? NO. EDP’s services are limited to those specified to Section 5 of thelease agreement with the Fiscal Court. Landlord: The County remains responsible for management andmaintenance of the common areas, log buildings, andexterior/infrastructure of the historic buildings to be occupied bythe EDP Partners. Tenant: EDP is responsible only for its business-related expenses,such as telecommunications, equipment, cleaning services,furnishings, and renter’s liability insurance. Result: This is LESS than the EDP’s responsibilities and financialobligations at the McClure-Barbee House location.County-EDP Lease Agreement, Sec. 4, p. 2-3.
Industrial Foundation The Boyle County Industrial Foundation (BCIF), Inc., is the lead Partnerwithin the EDP for the primary mission of business development: Manages and improves existing real estate assets for sale or lease forindustrial and/or commercial development; Monitors, assesses, and responds to opportunities for acquisition ofadditional land and/or buildings to maintain a competitive stock of realestate assets for industrial and/or commercial prospects; Markets for sale or lease any available land or buildings owned by thirdparties for potential industrial and commercial development; Provides “concierge” services both to new business prospects and existingindustries through an extensive network of public and private resources;and Facilitates and supports the activities of the Danville-Boyle CountyIndustrial Council, an association of local industry managers.MOA Sec. 3 (B), p. 2.
Industrial Foundation What is the corporate structure of BCIF? Founded in 1961, BCIF is a private, non-profit corporation. Article V, Articles of Incorporation (December 11, 1961):“The corporation is not organized for a profit and nopart of the net earnings shall enure to the benefit ofany private shareholder, individual, officer or directorand no dividends shall be paid on the capital stock.” Internal Revenue Service (July 12, 1977): By letter, BCIF wasdesignated as tax-exempt under Internal Revenue Code§501(c)(6). IRS Form 990s have been annually filed by BCIF sincethis date.
Industrial Foundation What about the Kentucky Secretary of State’s website thatrefers to BCIF as “P - Profit”? BCIF was organized as a corporation under KRS Chapter 271 (or itspredecessor act) long before Kentucky adopted a non-profit, non-stock corporation act (KRS 273); therefore, the SOS technicallyrefers to BCIF as a “profit” corporation because it retains shares. Similar situation: Danville Country Club, Inc., which was formedmuch earlier than BCIF in 1924, is also referred to as a “P – Profit”corporation by the Kentucky SOS. Key consideration: Substance trumps form.
Industrial Foundation Who serves on BCIF’s Board of Directors? (see board listing) John C. Albright, Chairman (Caldwell Stone Company) Greg W. Caudill, Vice Chairman (Farmers National Bank) Walter L. Goggin, Secretary (Robinson, Hughes & Christopher, CPAs) Alan R. Turbyfill, Treasurer (Kentucky Trust Company) Jody A. Lassiter, President/CEO (EDP) Dr. Carmen Coleman (Danville Independent Schools) James “Jim” L. Jacobus (Inter-County Energy) Carl Metz (Ephraim McDowell Health) Dr. John A. Roush (Centre College) Bob Rowland (Retired Educator/Small Businessman) Harold W. McKinney, Boyle County Judge-Executive (voting, ex officio) Paige D. Stevens, Danville Mayor Pro Tem (voting, ex officio)
Industrial Foundation City Representation: The Mayor of Danville has been a voting, ex officio member of the BCIFBoard of Directors since the tenure of former Mayor John W. D. Bowling. As of January 1, 2015, the Judge-Executive and Danville City Manager will benon-voting, ex officio members after bylaws amendments in 2013. Access: As a member of the BCIF Board of Directors, the Mayor (or the City’sofficial representative) has direct and full access to BCIF’s corporatedocuments, financial information, and business development project files. Attendance: Since January 1, 2011, the BCIF Board of Directors had 15meetings (including 1 special meeting in April 2011). The City of Danville wasrepresented at only 7. 2011: 7 meetings; the City was represented at 2 (March and May). 2012: 6 meetings; the City was represented at 5 (did not attend January). 2013: 2 meetings; the City was represented at 0.
Industrial Foundation Why was BCIF structured as a private entity? Long-term stability: No political influence and interference. No dependence upon public funding. Confidentiality with business/industrial prospects. Is BCIF subject to the Kentucky Open Meetings or OpenRecords Acts? NO. As a private, non-profit corporation, BCIF is not within thedefinition of a “public agency” to which these Acts apply underKRS 61.805(2) or KRS 61.870(1).
Industrial Foundation Why does BCIF retain shares and shareholders? BCIF’s Board of Directors investigated conversion to anonprofit, nonstock corporation as early as 2008. Problem: 905 shares outstanding in 2008, growing inability tosecure a quorum for Annual Meeting via presence or proxy due todeath, no contact information, extinct corporations, or loss of stockcertificate. For example: The Louisville Store (out of operation, no corporate existence) Chevron USA (local owner purchased shares, no corporate record) Roy Johnson Estate (no heirs or contact with heirs) Annual meetings of shareholders historically functioned by BCIFChairman or President/CEO holding proxies of majority ofshareholders to conduct business. No more than 2-3 shareholdersattended in person.
Industrial Foundation BCIF’s legal counsel and accountant advised the board that conversionmay produce tax liabilities that would reduce BCIF’s financialresources. BCIF’s legal counsel advised the creation of a Trust to which sharescould be gifted or waived to assure a majority for shareholder action.The Trustees are BCIF’s officers. Shares in Trust: 678.5 Inactive shares with no shareholder representative: 67.0 Active shares with shareholders: 159.5 Substance over form: BCIF functions essentially the same as any KRS273 non-profit, non-stock corporation where the Board of Directorsdirectly governs its affairs according to its bylaws. Yes, BCIF may still issue shares of stock by retaining this status.
Industrial Foundation Does BCIF receive public funding via the EDP? BCIF receives NO public funding directly or via the EDP budget.All private revenues have been generated from real estatesales/leases and financial investments for 50 years. BCIF has paid City, County, and State real and personalproperty taxes since 1961 to support community’s growth ratherthan using its non-profit exemption. BCIF subsidizes industrial recruitment and retention activitiesfrom its income and reserves. BCIF shares a President/CEO with EDP, which is subsidized by$78,000 in funding support to EDP. MOA Sec. 5 (E)(1), p. 6; Sec. 6(A)(1), p. 7 Rather than receiving benefit of EDP’s public funding, BCIFprovides direct benefit to EDP and, by extension, the taxpayer.
Industrial Foundation How did BCIF contract with Farmers National Bank WealthManagement to manage its equity investments? This is the apparent target of Mayor Hunstad’s statement in his secondletter/op-ed: “A significant contract was awarded to a board members[sic] business entity when it did not appear to be the mostcompetitive bid.” BCIF Treasurer Alan Turbyfill issued a detailed Request for Proposal(RFP) to local financial investment advisors, excluding Kentucky TrustCompany. Due to ethical considerations, board members affiliated with a respondingfirm were shielded from the review and deliberation process. Inparticular, Vice Chairman Greg Caudill consistently recused himself fromany board or executive committee participation in this process.
Industrial Foundation Eight (8) local firms responded to the RFP, and were reviewedon these criteria: Adequacy of firm’s response to RFP questions; Nature of firm’s account management; and Amount of firm’s fee for services. Per the criteria, Treasurer Turbyfill and President/CEO Jody Lassiterrecommended two (2) firms with local ties for the board’sconsideration and selection: Community Trust Investment Services; and FNB Private Wealth Management. Presentations were then made by representatives of both firms tothe BCIF Board of Directors with the opportunity for questions.
Industrial Foundation BCIF’s board equally split as to the best service givendifferent variables offered by each firm. Ultimately, FNB was selected after two votes because: The firm’s services would be provided locally in Danville vs. Lexington; Its investment philosophy was more conservative; and Its service fee was considerably less. At no time did any Board member question the process orpropriety of the Board’s action. Per the Board’s direction, FNB’s management is monitoredand reviewed on a periodic basis to assess investmentperformance.
Industrial Foundation Has Boyle County’s per capita personal income declined? NO. In fact, Boyle County’s per capita personal income (PCPI) increasedfrom $25,288 in 2001 to $30,686 in 2011, per the U.S. Bureau of EconomicAnalysis. Annual growth was 2.0% in Boyle versus 3% in Kentucky and2.9% for the U.S. See Boyle County BEARFACTS, 2011. Has BCIF refused to benchmark economic performance? NO. The BCIF Board heard but declined criticism of “per capita netearnings” data presented to the Board because (1) per capita personalincome, not per capita net earnings, is a traditional benchmark for BCIF’seconomic development performance; and (2) a University of Louisvillereport (published April 2012) which utilized data later corrected by the U.S.Bureau of Economic Analysis. The report was reviewed in detail, and a fullbriefing on the report and its incorrect data was supplied to the entireBoard.
Industrial Foundation Benchmarking: The EDP Board of Directors took up theissue of benchmarking performance of ALL EDP Partners,including BCIF, in 2012. A “Performance Dashboard” wascreated through the leadership of then-board member BenNelson with key economic indicators approved by all Partnerboards. For example, BCIF’s indicators will includeunemployment rate, number employed, per capita personalincome, payroll tax revenues, and BCIF’s quarterlyemployment census. This EDP Performance Dashboard willbe a dedicated page of the new EDP website to be launchedlater this Spring.
Industrial Foundation What has BCIF done for us lately? Total: (projects/reports from January 1, 2008, until today)Jobs: 1,033 | Capital Investment: $201,144,741.00 Expansions:Jobs: 523 | Capital Investment: $79,972,741.00 New:Jobs: 510 | Capital Investment: $121,172,000.00 Completed:Jobs: 509 | Capital Investment: $84,254,812.00 In process:Jobs: 454 | Capital Investment: $109,015,000.00 Withdrawn:Jobs: 70 | Capital Investment: $5,974,929.00See spreadsheet for detailed project/report listing, 2008 – 2013 YTD.
ADDENDA BCIF Question: Why is Mr. Hunstad in his private capacity as acitizen pursuing appeal of BCIF’s rejection of his Open Recordsrequest to the Kentucky Attorney General? April 2: Date of Mr. Hunstad’s ORR letter to BCIF, sent via certifiedmail. BCIF President/CEO Lassiter was on family vacation duringthe week of April 1 – 5. April 8: Morning: Lassiter received and responded via e-mail due to timeconsiderations to both of Mr. Hunstad’s known e-mail addresses that BCIF isnot within the definition of a “public agency” to which the Open RecordsAct applies under KRS 61.870(1). Evening: Discussion/approval of the City Commission’s workshop withEDP was on the Commission’s meeting agenda, which had been issued byFriday, April 5.
ADDENDA April 14: A receipt was returned to BCIF that its e-mail response wasdisplayed at Mr. Hunstad’s personal e-mail address. April 15: Lassiter received an e-mail from Mr. Hunstad’s personal addressthat he would be on vacation during the week of April 15 – 19. Quote: “I will get some general questions to you in time but wont likely providea comprehensive list of questions. . . . I appreciate your interest in getting anyquestions I have answered. As you are aware, I had some questions on the MOAfor the Constitution Square, public funding of the BCIF, and to a lessor extent itsstatus as a non-profit. I will also have some questions on industrial recruiting andnegotiation of incentives.” ORR: There was no reference in Mr. Hunstad’s e-mail to his ORR to BCIF or hisintent to appeal BCIF’s denial of his request. April 22: BCIF received notice from the Attorney General’s Office thatBCIF’s denial of Mr. Hunstad’s ORR had been appealed to that agency.BCIF has referred the appeal to its legal counsel, W. Banks Hudson.