County selling assets to avoid default

Ralph B. Davis rdavis@civitasmedia.com

December 17, 2013

PRESTONSBURG — Friday the 13th was perhaps a most appropriate day for the Floyd County Fiscal Court’s most recent meeting, which included revelations that the county would run out of money in three months and open hostilities between officials.

Judge-Executive R.D. “Doc” Marshall called Friday’s meeting to give magistrates the county’s latest financial projections, or as he put it, “to bring the court up to date on exactly where we stand and talk about where we go from here.”

County Treasurer David Layne explained to the court that, based on the amount the county currently has on hand and estimates for revenues and expenditures over the next three months, the county would run out of money in February or March. He noted that the situation places the county in real danger of defaulting on its $700,000 bond payment, due in February, unless magistrates could find $450,000.

And adding insult to injury, all of those revelations did not take into account roughly $1 million in invoices reportedly owed to a single contractor.

As a result of Friday’s meeting, magistrates unofficially decided to take steps both large and small, from furloughing employees, holding a fire sale to get rid of surplus vehicles and property, to giving up their cell phones.

Dire straits

Layne explained to magistrates that the county is on track to carry $250,000 into the new year. Between January and March, the county expects to receive $3.3 million in revenue, but anticipates spending $4 million in fixed expenses over the same period.

“What I’m telling you is that, at the end of February, we will not have enough to pay our bond payment,” Layne said.

Defaulting on the bond could prove costly for the county, which would see its credit rating lowered, Layne said. In addition, the Department for Local Government would likely step in to manage the county, making all of spending decisions.

Marshall said that when Layne presented him with the numbers last week, he contacted the Department for Local Government to inform them of how bad the situation was getting.

Layne said that was probably the best move the county could make at this point.

“It’s like a university,” Layne said. “You got caught. The question now is whether you wait for the NCAA to sue us and take us over, or you start trying to do something now.”

But beyond that, Layne had few answers for the court. When District 1 Magistrate John Goble asked him what he suggested to get the county out of its mess, Layne was blunt: “I don’t. I think you’ve got a hole so big you can’t get out of it.”

Outstanding bills

However, sitting front row, center, Harpo Castle sat observing the proceedings, getting ready to drop a bombshell that would quickly see the meeting spiral into shouting matches and accusations.

Castle was there representing C&C Construction, owned by Maria Castle, which had recently submitted $165,000 in invoices for work performed on 13 projects. When he was later asked if that represented all that was owed to C&C, Castle told the court it wasn’t and that he would soon be submitting invoices for roughly $850,000 more.

Castle said the bills were projects completed about four years ago. He said he submitted bills in the past, but was told they were lost. He said he waited some time before resubmitting, “to give them time to see if they’d turn up.”

“I think I’ve been real nice about this,” Castle said.

Castle further said that he performed the work at the request of Marshall and county road foreman Mike Jarrell, but he said Marshall told him that the county did not have money to pay him immediately.

That news came as a surprise to County Attorney Keith Bartley.

“The real problem is, were we having him do work, knowing we couldn’t pay him?” Bartley asked. “If that’s so, that’s a big problem.”

Bartley later said that if Marshall ordered Castle to perform work, knowing the county would be unable to pay him, he was in violation of his job duties.

Marshall, who had been mostly quiet until that point, confronted Bartley.

“You’re casting it this way?” the judge asked Bartley.

“I’m casting as hard as I can cast it, if what he says is true,” Bartley responded. “It if isn’t, then no, you don’t deserve it.”

A few minutes later, Marshall responded to Bartley with sarcasm, saying, “I guess we shouldn’t have done the work and let the people suffer.”

“You just delayed the pain,” Bartley responded. “The people are going to suffer anyway, when you lay the whole county off and pass a tax on the people.”

From the audience, Pam Blackburn, wife of Sheriff John K Blackburn, chimed in with criticism of Marshall. Saying the sheriff’s office would do whatever it could to help the county through its troubles, she then asked, “But why should we be punished, if [Marshall] is out there destroying the county?”

Bartley further accused Marshall of intentionally misleading the fiscal court and Floyd County taxpayers, saying the county had paid all of its bills, when he knew that he was having C&C continue to do work that hadn’t been paid.

“How many times have you sat there and said we didn’t own any contractor bills, knowing you were having that man [Castle] work every day?” Bartley asked the judge, before answering himself. “He lied, and he lied, and he lied.”

Marshall’s wife and administrative assistance, Lois Marshall, came to her husband’s defense.

“I know what he said,” Lois Marshall said. “He said we didn’t have any invoices back there, but he knew he’d done some jobs.”

“Bullshit!” Bartley responded. “That’s bullshit! I call ‘bullshit’ on that!

Bartley then returned to Judge Marshall.

“The bottom line is, you broke the county,” Bartley said. “You did a magnificent job breaking it.”

Next steps

Once tempers settled, magistrates returned to the job of finding additional money to meet the county’s immediate financial needs. Layne told them that they would need to come up with $450,000, just to avert disaster. However, he cautioned them that, even if they did find the money, the problem would not be solved.

“That’ll get you through March,” Layne said. “They you’re right back in the same situation again. We’re spending more than we’re taking in.”

After some discussion, magistrates appeared to reach a consensus on a plan to erase the $450,000 shortfall, which included laying off six seasonal employees, giving up their county-provided cell phones, turning off street lights in county parks during winter months, auctioning off surplus vehicles, and selling two pieces of property owned by the county, the old tourism building where the Attorney General’s Office currently has offices and the Martin Community Center.

The fiscal court will meet at 10 a.m., Wednesday, for its regular monthly meeting, during which magistrates are expected to finalize their plans to plug the shortfall.