STATE OF THE MERGED GOVERNMENT ADDRESS

My fellow Lexingtonians:

Section 5.04.B. of the Urban County Government Charter states that the Mayor “shall prepare and submit an annual report on the state of the Merged Government to be presented at a public meeting of the Council orally and in writing on or before the thirtieth of January of each year.” Tonight, I am honored to discharge that mayoral duty.

The obligation to prepare and submit this address is an obligation which the drafters of our charter were wise to include among the mayor’s duties. Just as is the case with the State of the Union address for the president or the State of the Commonwealth address for our governor, the State of the Merged Government address requires the mayor to consider exactly what should be said about our merged government – to determine what is really significant for all of us to know.

In some respects, I consider tonight as my opportunity to talk with my bosses, the citizens of Lexington. To those of you who pay the taxes which are used to operate your local government, tonight is a chance to get a report on your investment in your community. In the business world, investors are entitled to hear periodically from the officers and directors of the business enterprise. Tonight creates a similar opportunity for our taxpayers to hear from those of us who are entrusted with the job of taking care of our city’s business.

This evening, I want to tell you a little about what has transpired in the last month, and I want to share with you some good news and bad news about what I have learned in the last few weeks. Finally, I want to outline for you a series of items which both the Urban County Council and my administration believe need to be addressed during 2007. Based upon that information, I will then share with you my assessment of the state of our merged government. Let me begin with a short review of the last 30 days.

Since taking office on January 1, I have visited with both Governor Fletcher and our Fayette County legislative delegation about issues which are important to Lexington – our need to protect and expand our water supply, the need to move the Newtown Pike Extension forward and the need to address other transportation projects for our community. I am extremely pleased to report that both the Governor and the legislative delegation are highly motivated to help Lexington address its critical problems, and I am eager to work with them to move our city forward.

During our meeting on January 4, Governor Fletcher advised that state funds have been committed to a repair of Dam 9 on the Kentucky River – the dam that holds Lexington’s drinking water supply, and on January 22, Kentucky American and the Bluegrass Water Supply Commission reached an agreement to develop a water treatment facility on the Kentucky River. Both of those events are significant developments for this community since they further secure our water supply, and I am pleased that they have both happened in the last month.

On January 4, Joe Kelly, LFUCG’s Director of Economic Development, and I met with representatives of our horse, health care and high tech industries so that we can begin the process of building a vibrant economy for the 21st Century. We have much work to do, but the process has begun.

On January 11, I was asked to serve on the Executive Committee of the World Games 2010 Foundation so that Urban County Government’s efforts to support the Games will be coordinated with the efforts being made by the organizing committee and the Horse Park.

On January 11 and 12, LFUCG’s division directors met to begin the process that will produce our budget for fiscal year 2008, and for the first time in recent years, members of the Urban County Council were invited to participate in the budget process on the front end in an effort to avoid surprises when the budget is presented in April.

On January 16, we reported to the Urban County Council about significant problems with our financial software system which have been going on for months. As we reported, Urban County Government had been unable to generate reliable financial statements since June 30, 2006 – a situation which was both incredible and totally unacceptable to me. I am pleased tonight to report that thanks to the efforts of Acting Chief Administrative Officer Charlie Boland, Finance Commissioner Kyna Koch and a team of exceptionally hard working LFUCG employees and contractors, those problems have been largely resolved. Although work continues, I am pleased to report that today Urban County Government has received the first set of reliable financial statements since last summer!

On January 17, I met with the leadership of the Fayette County Neighborhood Council to discuss concerns of our neighborhoods.

On January 25, I hosted a meeting in the Mayor’s Office with Congressman Ben Chandler, UK President Lee Todd, Fayette County Schools Superintendent Stu Silberman, Vice Mayor Jim Gray, Commerce Lexington’s Chair Guy Huguelet and President Bob Quick to discuss a variety of Lexington’s needs which can be addressed with help from the federal government – especially improvements in downtown. We have much more work to do, but the process of getting federal help has begun.

On January 26, Council members and senior leadership team members from my administration met to identify common goals for Lexington during 2007. It was a highly productive day, and I’ll share more about that later.

And perhaps most significantly, I am pleased that we have completed the land use element of the comprehensive plan update process in such a way that we can now focus more attention on downtown and on our infill and redevelopment efforts. The Planning Commission’s January 22 decision was a momentous one for Lexington, and now that it is made, we must make that decision work well for our community.

As you can see, January has been both a busy and a good month. By starting to build significant relationships with the Council, state and federal government officials, education officials, neighborhood association leaders, the World Equestrian Games leadership and the business community, our administration has begun putting in place the foundations for a progressive community, but I am well aware that one very good month does not make for a successful term in office. In fact, the really hard work still lies ahead.

In light of what has transpired since January 1st, the question now becomes where do we go from here? As I have had the chance to consider my response to that question, I have come to feel somewhat like Johnny Carson – I have good news, and I have bad news. No one likes to be the bearer of bad news, and no one enjoys hearing about problems. However, my consistent experience has been that the first step in addressing problems is acknowledging that they exist. Only then can solutions be identified and implemented. So, in the interest of beginning the process of identifying solutions to the problems which confront our community, I want us to take off our rose-colored glasses and to deal with the bad news first.

Preliminarily, I want to make it clear that the sky is not falling. While we have some significant problems, we can address each of the problems I am about to describe. Unfortunately, the process of addressing these problems will be slow and expensive. However, the sooner we start dealing with our problems, the quicker we will put them behind us. So, let us begin.

First, let’s talk about our environment. When I kicked off my campaign for mayor in November 2005, I spoke about our need to care for our environment, and I said, “Our responsibility is to leave [our environment] in better condition than we found it.” For the duration of this administration, our environment will be our primary concern and our top priority.

Environmental stewardship takes many forms. It involves using our land wisely, keeping our city clean, and improving the water quality in our streams. Since we are taking off our rose-colored glasses, we must admit that Urban County Government has been one of the area’s biggest polluters of our streams because we have been operating sanitary and storm sewers that have failed to comply with the Clean Water Act.

Cities across the country have been cited by the U.S. Environmental Protection Agency for violations of the Clean Water Act related to sewers and other issues concerning water quality, and the resulting fines and remedial obligations have totaled hundreds of millions of dollars. As many of you know, Lexington has not escaped this EPA enforcement effort, but unlike the experience of many other cities, the EPA has taken aim at both our sanitary and our storm sewers.

We don’t really know the size of the fine the EPA will level against Lexington nor do we know what remedial steps we will be required to undertake, but we do know that those obligations are coming soon. Negotiations in the case are ongoing, and there is a confidentiality agreement that prohibits us from sharing a lot of information. But the fact that we have significant problems with our sewers should come as little surprise. For years, our neighborhood associations and homeowners have complained repeatedly about an assortment of problems with both our sanitary and storm sewer systems, but we have failed to effectively address those issues. Yes, it’s true that in recent years, Urban County Government has taken some steps to improve our sewers, but any honest observer would have to tell you that those efforts have been too little, too late. While we probably will never fix all of our sewer problems, now we are beyond the point at which we can debate the need to act. We are at the point at which we must act. And we will.

In the coming months, there will be an opportunity for the public to review and comment on any consent decree which may be negotiated. However, it is abundantly clear from the results of enforcement actions in other cities that the costs will be significant, and in most of those cities, significant increases in sewer user fees have been necessary to fund the remedial measures. Lexington should expect no less. Acting Chief Administrative Officer Charlie Boland, Public Works Commissioner Don Kelly and Law Commissioner Logan Askew are all actively involved in dealing with this matter, and together with outside counsel, I am confident that this matter is in capable hands.

A second item of bad news is our pending litigation. It is always a problem to discuss lawsuits while they are still in court, so I will refrain from discussing any particular case in the context of tonight’s address. But you should know that the quantity of our litigation is requiring us to spend too much staff time and energy dealing with the litigation process, and we are certainly spending a significant sum to pay lawyers to represent Urban County Government’s interests. Further, there are significant claims pending, which if successfully pursued by the plaintiffs, could have an adverse financial effect on our local government. Consequently, we will retain first rate lawyers to assist us in defending those claims, and we will aggressively defend those claims which we believe are unjust. Law Commissioner Logan Askew has been asked to review all of our litigation and to recommend appropriate actions to lessen our litigation load.

Third, I must tell you that our home – our city – is in a state of disrepair. That disrepair is reflected in many ways – the poor condition of our roads, the litter along our streets, the lack of appropriate maintenance in our local government buildings, and the poor state of our sewer system as I mentioned earlier. Deferred maintenance – the failure to properly maintain assets as they need repair – is a strong indicator of an organization in financial distress. Think about it at your home. When things get a little tight, we’ve all put off paint jobs, or we’ve postponed replacing that bad window until we have a little more money on hand. Unfortunately, LFUCG has put off far too much needed maintenance.

Good stewardship of the city’s buildings is not an exciting subject, but it is important for those of us in government to maintain the assets which have been entrusted to us. For instance, the Government Center is a historic and beautiful building that has been a landmark since its construction in the 1920s. While it has many beautiful features, maintenance is expensive. The latest estimates for work needed on the exterior of the building total $1.6 million. These repairs would, among other things, eliminate the leaks around the windows and in the roof that are presently causing internal water damage. Those types of problems cannot continue, and the Government Center is just one example of the repairs we need to make in our buildings. General Services Commissioner Kimra Cole has been working to address the issues surrounding the Government Center and our other buildings, and progress will soon be made.

Perhaps more important to those of you who use our roads each day, we have significant issues on many of our streets and roads which we must begin to address. New Circle Road needs to be overhauled – completely. That is a project that will take years to complete. It will necessitate our cooperating closely with our state and federal highway officials to obtain the requisite funding, but we need to start that process immediately.

The Newtown Pike Extension is another key project for this community. We were recently discussing this project in the office, and one of the members of my staff told me that she had written about the Newtown Pike Extension when she was a student at UK. She is now 53 years old. The time has long since passed for us to get this project done, and even though it involves a number of local, state and federal agencies, it is time for the logjam to be broken. I have asked Public Works Commissioner Don Kelly to bring together a work group consisting of local, state and federal transportation officials to make sure that the Newtown Pike Extension project is fully accelerated.

If I continued to talk about the streets and roads which need repairs, I would have no time left to discuss other matters, but I do understand the necessity of our getting about the business of repairing our infrastructure so that our city will function better in the future than it has in the past.

Fourth, we have a precarious revenue stream for local government. Our total budget is just shy of $400 million. Of that amount, just slightly more than $140 million is allocated to a variety of special funds, so the General Services Fund – the checking account for local government – consists of slightly less than $260 million. The primary source of that $260 million is the payroll tax. In fact, 83% of that $260 million comes from licenses and permits – the largest portion of which is the payroll tax. So, if our local economy has a downturn such that fewer people are employed in Lexington, our revenue stream will go down and services will have to be reduced. On the other hand, if our economy expands and more people are employed, we will have more revenue to address the city’s needs. To have 83% of our revenue coming from licenses and permits is a risky situation because of our economy’s volatility, and as our investors in local government, our citizens need to be aware of that risk. In light of this situation, it is vital that our community emphasize our job creation efforts, and I am pleased that Urban County Government is working with Commerce Lexington and the University of Kentucky to maximize our economic development resources.

We have other problems, but the ones I have mentioned are some of our more significant ones, and those problems will continue to be priorities for our administration until such time as we have successfully addressed them. I am confident that together, with the Council, the able people in my administration and the support from the community, we will successfully resolve the difficult issues which confront our Urban County Government.

As you recall, I also promised to talk about some good news, and I am pleased to report that there are four important and good items to share.

First, let me talk about our new Urban County Council. I continue to be impressed with the caliber of the council members who are serving this community and with their commitment to Lexington. We often lose sight of the fact that these folks are only supposed to be part-time employees, yet they spend countless hours attending to our city’s business, and we should be grateful for their efforts. Please understand, I certainly do not expect them to agree with me all the time, nor do I expect that they will agree with each other all the time. But on the vast majority of the matters which come before the Council, we will be able to find common ground, and together we will address the issues which confront this city. I am thankful for the citizens providing our community with Council members of this quality.

In addition to being impressed with the quality of the Council, I am extremely pleased to report that the relationship between the Council and the Mayor’s Office is vastly improved. I will keep working to see that trend continue, and I sense that the Council will do the same.

Second, I am extremely grateful that a number of outstanding individuals have agreed to serve in critical roles in leading the major departments of Urban County Government and to serve in key positions in the Mayor’s Office. Without exception, these individuals are serving for one reason – to serve the citizens of Lexington. Many of you will have occasion to work with these fine folks in the coming months, and I am confident that you will be pleased with their efforts on your behalf. In addition, I have had a chance to work at some length with most all of the division directors – the most senior members of the civil service staff – and I am exceptionally pleased with their skills, their commitment to their work and their interest in serving this city. There is room for all of us to improve, and just as I hope to become a better mayor in the coming years, I hope that all of my Urban County Government colleagues will improve their professional skills in the future. However, our citizens should know that we have a strong group of dedicated professionals who are working to make this city a better place, and I consider that to be very good news!

The quality of the Council and of the administrative personnel at Urban County Government are two bits of good news from your merged government, but there are two items of significant good news outside the walls of the Government Center which we need to acknowledge.

One piece of that good news is the community’s spirit. Since November, I have had countless folks in our community tell me how positive they feel about Lexington’s future. Those expressions have been gratifying beyond words, and I so much appreciate those of you who have stopped me on the street or have sent cards, email messages and letters. All of us appreciated the fact that approximately 1,400 people attended the Inaugural Ceremony on December 31 – an amazing turnout that reflects a newfound excitement and willingness for Lexingtonians to be involved in the life of our community. That spirit is enormously important for our city. As you have heard, we have some significant issues to address, and those issues will be far more easily overcome if we are able to maintain a spirited, community-wide effort to move ahead.

As a fourth item of good news, we must not overlook the fact that in 2010, Lexington has an unparalleled opportunity to enhance our reputation as the horse capital of the world. The Alltech FEI World Equestrian Games will be here more quickly than we can imagine, and we have much work to do to prepare for our guests’ arrival. Last August, the mayor of Aachen, Germany told me that he viewed the 2006 World Equestrian Games as equal parts of sport and culture. The Kentucky Horse Park will provide the venue for the sporting events, but it will be up to Lexington to provide the cultural component of the 2010 Games. That means we have much work to do to enhance our cultural offerings, and the Games provide us with a wonderful motivation to make those cultural enhancements happen.

So, there is the bad news and good news. The question now becomes, what does all of that news mean for the average Lexingtonian? It means we have some serious, long-term, often boring, and almost always expensive work which we must do without delay or hesitation, but it also means that we have a great opportunity to move forward because we have a great team in place and a strong spirit in our community.

I recognize full well that the mayor does not have the unilateral ability to solve our community’s problems. I will need the help of the Council, and both the Council and I will need your help and the help of the entire community. But, unless I am misreading the mood of this community, Lexington is ready to provide the support necessary for us to restore the pride we all want to have in our city.

Then let me be clear. We will deal with our problems. We will ignore them no longer.

So what are we going to do? At Urban County Government, we are going to roll up our sleeves and start working together to move this community forward.

How can I say that? As I mentioned a few moments ago, members of the Council and the administration’s senior leadership team met all day last Friday. Together, in remarkably short order, we found that we have a lot of common interests. In fact, we identified a half dozen items that we want to address during the course of this year. I want to briefly address each of those items.

We found that we share a keen sense of responsibility for our environment. The pending EPA enforcement action provides us with an opportunity to begin the process of improving our water quality, but we should not stop there. As we discussed on Friday, I will soon propose to the Council that Urban County Government create a new Department of Environmental Quality to oversee our solid waste functions, our sanitary and storm water sewer systems and our air quality. The Department of Environmental Quality will help to ensure that our rights of way stay clean and that our gateways look attractive to both Lexingtonians and to those who come to visit. Most of all, the creation of such a department will emphasize our need to improve our environment for our children and for generations yet to come.

During our meeting with the Council, we also agreed that Lexington needs a vision for its future. As I said in the Inaugural Address, we must dream a dream that will endure – we must develop a shared vision for the future of our community. That vision will consist of many elements. We will need to develop a visual image of the way Lexington will look in the future so that we can address our physical needs, but we will also need to address our economic, cultural and human needs if we really want our community to prosper. In the very near future, we will present a process by which the shared vision of the Council and our administration can be enhanced with broad-based involvement by our citizens.

The Council and the administration agreed that we need to put greater focus on our economic development efforts to be sure that Lexington has the sort of economy that can sustain itself in the 21st Century. Our world economy has changed dramatically over the course of the last 15 years, and so too must Lexington’s economy change. Our workforce must develop the skills necessary in our new economy, so we will support worker training programs for those individuals who need to enhance their skills. We agreed that our horse, health care and high tech industries hold great promise for our future, and we recognized that we must make science, technology, engineering and math areas of increased emphasis at every educational level. This year, I will propose a scholarship program to the Council that will encourage Lexington high school students to pursue science, technology, engineering and math education in our local post-secondary institutions. Based upon our conversation with the Council last week, I am excited about the prospects for our economic future.

Last Friday, we agreed that Lexington needs more innovative planning – planning that incorporates the best thinking in urban planning and planning that enables us to more effectively address our infrastructure needs on an ongoing basis rather than to be confronted with massive infrastructure needs all at one time. We want to take a comprehensive look at the process by which we develop our community in an effort to ensure that our planning efforts and our implementation efforts are more closely linked. And we want to create an atmosphere that permits greater creativity by our builders so that we can more effectively utilize our unique land resources.

The Council and the administration agreed that we need more effective communication, both internally and externally. Internally, I have already provided you with several of the initiatives we have undertaken to improve communication with the Council, and I intend for these initiatives to be the rule, not the exception. Externally, I will work with the Council to improve communications with the community by making the best use of the many options technology offers, including email, electronic newsletters, and the use of our website. We also want to improve the communications we offer through Cable Channel 3 by adding several new programs, and I will encourage Council participation in that effort. We also hope to hold Council meetings outside the confines of city hall so that it will be easier for members of the community to attend.

Finally, we agreed that we should take a number of steps to make Urban County Government more efficient and more cost effective in the future. Those steps include the expansion of the internal audit office so that more management and financial audits can be performed. We plan to identify and analyze critical measurements to evaluate our performance, and we hope to increase the use of LexCall so our citizens will be able to more easily access needed local government services. We also believe that we need to emphasize our information technology by creating the post of a chief information officer to oversee the significant investment we have made in our computer systems.

Among all of the good news items I have to present, the fact that the Council and this administration have a common agenda and are working collaboratively to address our city’s critical problems is the best news which I could report to our bosses! Throughout my term as mayor, my administration and I are committed to seeing that this era of cooperation with the Council continues, and I have every reason to believe that this Council will do the same.

Having said all that, what can we conclude about the state of our merged government? The current state of our merged government is best described as “promising”. I cannot in good conscience tell you that the state of our merged government is strong as of January 30, 2007, but I can tell you with great confidence that the state of our merged government will be strong by 2010 because I see this city coming together in a way that is without precedent.

During my Inaugural Address, I spoke of how Lexington was once known as the Athens of the West. Between 1780 and 1830, the early settlers of this community took Lexington from being merely a blockhouse and four cabins to being one of America’s preeminent cities. Lexington’s educational institutions, its arts and culture, its fertile land and its industrious people created an atmosphere that enabled Lexington to grow and prosper. It was a remarkable place in the early 19th Century as a result of our forefathers’ hard work, and they earned a special place in our city’s history. Today we, too, have an opportunity to claim a special place in Lexington’s history if, like our forefathers, we will work hard and seize the potential which exists in our city.

With the help of the Urban County Council, with the benefit of the incredible resources in the community and with the benefit of the remarkable spirit which now exists in this community, I stand before you this evening confident that Lexington is uniting and will move forward to become one of America’s preeminent cities just as it was in 1830. If we do that, our own special place in Lexington’s history will be secure.

As we move forward together, may God bless our efforts! Thank you and good night!