Commonwealth Journal

December 19, 2013

‘Unified’ Pulaski would kill USDA loans

by Bill Mardis
Commonwealth Journal

Somerset — With release of a study concerning feasibility of unified governments in Pulaski County about a month away, there is growing concern that creation of a city of more than 63,000 residents would negate the community’s rural status and make the entire county ineligible for USDA (United States Department of Agriculture) loans and grants.

“It would be devastating to our community to lose the tens of millions of dollars that come to us each year from USDA ,” said Somerset Mayor Eddie Girdler. “Once our population exceeds 50,000 we are no longer eligible for USDA funds –– funds for water and sewer plants, natural gas pipelines, single and multiple housing units, guaranteed business and industrial loans,” the mayor said.

“Without USDA, we wouldn’t have the new sewage treatment plant, the new water treatment plant that serves 125,000 people, or the (planned) Energy Center,” Girdler said. “Once we go over 50,000 population, practically nothing is eligible (for a USDA loan and grant), he indicated. “It would do tremendous damage ... it would cripple this community.”

Ineligibility for USDA loans and grants also would affect water districts and associations. People served by these districts and associations would pay three or four times as much in water fees, the mayor predicted.

“There are no alternate sources of funds,” Girdler added. “A population above 50,000 would put Somerset in competition for funds with cities like Louisville, Lexington, Bowling Green and Owensboro and we (Somerset) would be ‘lowest of the low,’” the mayor remarked.

Unified governments in the county would dissolve city boundaries and create one government for the entire county.

“No program currently exists to offset the tens of millions of dollars a year from USDA that flow into this community,” the mayor continued. “It would be a piddling amount if we got anything.”

Girdler chided people who propose ideas and projects and “ ... fail to mention the consequences. It is a very serious problem,” he cautioned.

There are some sources of federal funds for cities above 50,000 population, but, as Mayor Girdler says, it apparently is a piddling amount compared to USDA funds coming into Somerset and Pulaski County.

“We are an entitlement community,” said Brent Childers, director of Neighborhood and Community Services for the city of Bowling Green, population 60,600. Entitlement funds come through HUD (US Department of Housing and Urban Development). “We’ve averaged getting $500,000 a year (from HUD) over the past 10 years,” said Childers.

As an urbanized area, Bowling Green’s other major source of federal funds comes through the Federal Transit Administration. “That money pays for our bus service,” Childers said.

“That’s about it,” said Childers. “We may get a little police department money, but I’m not sure how much.”

Thomas Fern, state director for USDA Rural Development for Kentucky, confirmed the Somerset mayor’s fears. He said there are different population limits for various programs, including a 10,000 population limit for water and waste disposal grants and direct and guaranteed loans, Somerset with a population just under 12,000 is eligible because it is not in a Metro Statistical Area (MSA), meaning it is not surrounded by a heavily populated metropolitan area.

Barry Turner, London, area USDA director for a 22-county area, including Pulaski, agrees a population over 50,000 would change Somerset’s status from rural to urban and definitely would affect such loan and grant programs as single family home loans, water and sewage treatment loans, grants and business loans. Somerset’s planned Energy Center, for which an $8.5 million USDA loans has been approved, would not be affected by a population increase, Fern said. “Any projects already approved would not change,” he added.

There is some concern that making this community ineligible for USDA loans would wipe out the single family housing market. Direct loans for single family home mortgages are available only to those whose incomes are below 80 percent of the county’s median income.

USDA’s definition of a rural area is any area “ ... OTHER THAN (1) a city or town that has a population greater than 50,000 inhabitants, and (2) any urbanized area contiguous and adjacent to a city or town (with a population greater than 50,000).”

For water and waste disposal grants and direct and guaranteed loans, the USDA definition says: “ ... the terms ‘rural’ and ‘rural area’ mean a city, town or incorporated area with a population of no more than 10,000 inhabitants. Again, Somerset’s population – 11,196 – according to the 2010 census, is not a disqualification because it is not surrounded by a Metro Statistical Area. For community facility loans and grants, rural and rural areas mean any area other than a city, town or unincorporated area with a population greater than 20,000.

The law recognizes there may be limited instances in which pockets of rurality still exist within a municipality that otherwise would be excluded because of being adjacent or contiguous to a city or town with a population greater than 50,000. But, those cases are limited to two fact patterns: One for larger urbanized areas that could encompass multiple municipalities, but is not proximate to any city larger than 150,000 total population; the other for places with an urbanized area that is in one-quarter mile of an eligible rural area.

Unified municipal governments in Pulaski County are not a done deal. From the onset of the study, Girdler and Somerset City Council have strongly opposed the idea of merged governments and directed the city’s legal department to get whatever help is necessary to protect the integrity of its boundaries. Ferguson also has opted out of the study, and Eubank, because the northernmost city straddles the Pulaski-Lincoln county line, would not be eligible to join a unified government.

The unification study is authorized by Somerset-Pulaski County United, a group of an estimated 150 local movers and shakers headed by developer Brook Ping. Luke B. Schmidt, consultant for the $35,000 study, concedes without Somerset’s participation it will be more difficult to form a unification plan.

Asked about the impact of losing eligibility for USDA loans and grants, Schmidt said he is familiar with the concerns and said he realizes that, if down the road, the community decides to unify, there will be some impacts considered positive and some negative.

“The report (on unified government) is being written as we speak,” Schmidt said Wednesday. “It will be released in full in January; date for the release will be announced after the holidays.”

Schmidt said rather than comment on specific issues such as USDA loans, he prefers to release the report in its entirety. Some parts of the report will relieve anxieties and others, he concedes, will be controversial.

The completed study, if favorable toward a unified city-county government, would be presented to local governmental bodies.

Then, Pulaski Fiscal Court, Somerset City Council and governing bodies of Burnside, Ferguson and Science Hill by ordinance would create an official Unified Government Commission made up of between 20 and 40 members to plan a structure for a unified city-county government. Since Somerset and Ferguson have opted out, it’s not clear how this will work.

Pulaski Fiscal Court would appoint half the members of a Unified Government Commission and the remaining members would be appointed by participating cities prorated on population. Any type of merged governments must be approved by voters of Pulaski County.

Tiffany Bourne, community development director for Pulaski County government, deferred questions about problems with USDA grants to Pulaski County Judge-executive Barty Bullock. He was not available for comment when this story was written.