South Pittsburg officials "illegally" transferred almost $750,000 in funds, audit claims

South Pittsburg officials "illegally" transferred almost $750,000 in funds, audit claims

September 13th, 2011 by Andy Sher in News

Former South Pittsburg Mayor Mike Killian

Former South Pittsburg Mayor Mike Killian

Photo by Ben Benton /Times Free Press.

NASHVILLE - State Comptroller Justin Wilson's office says South Pittsburg officials "illegally" transferred almost $750,000 from its utilities department to the city's general fund and other city uses after the mayor "misinterpreted" a 21-year-old city ordinance.

In a news release and a letter sent Monday to Mayor Mike Killian and commissioners, Division of Municipal Audit director Dennis Dycus advised officials that under state law they must outline steps for the city to repay the money within five years or be subject to possible ouster from office.

Killian in an interview Monday night disputed that he did anything wrong.

"I did nothing on my own," he said. "That is a department of our city. That is not an independent utility district at all, and we still say they owe us money."

He said he plans to contest whatever action Wilson's office takes. The mayor also accused Wilson and his office of "hitting below the belt" by issuing the news release and letter before he received the document.

Killian also questioned whether Wilson, a Republican appointee, was making an issue of the transfer because he is a Democrat and his brother, Bill Killian, was named by Democratic President Barack Obama as U.S. attorney for the Eastern District of Tennessee.

"I did nothing by myself," the mayor said. "I transferred the money because the board voted unanimously to do that. I don't know why they [comptroller's office] are attacking me personally except that I'm a Democrat. I'm just guessing."

Killian added later, "Don't you think it just smells a little bit of politics? You know Justin Wilson, the comptroller. My brother just happens to be a presidential appointee. It just smells a little edgy. Put out a press release that at the very least is not the whole truth."

An attempt to contact Wilson's spokesman, Blake Fontenay, by email Monday night was not successful.

According to the comptroller's news release, the 1990 ordinance was intended to assure that the city's utilities, Marion Natural Gas System and the Board of Water Works and Sewers, would pay for any roadwork expenses related to utility line installation, repair or maintenance.

To make sure all costs were covered, the ordinance gave the utilities the option of depositing $20,000 annually for all projects that might occur in a given year. The utilities paid a $20,000 deposit in 1990, the release states.

However, in a letter dated Dec. 31, 2009, according to the comptroller's office, Killian asserted the utilities should have been paying $20,000 deposits every year, even though they had paid for their roadwork expenses and the original $20,000 deposit remained intact.

Killian maintained in the interview that "the ordinance in question said they were supposed to be paying $20,000 a year in lieu of damages to roads. Well, for 19 years they were not paying those."

The mayor noted that commissioners approved the proposal, which he acknowledged recommending, on a 5-0 vote. The utilities, Killian argued, had caused "a couple of million dollars damage to our roads" over the years and would only patch areas in which they cut trenches or holes with a "hot mix" of asphalt.

"They act [comptroller's office] like I took the money," Killian said. "It went into the city's capital account, and we've been using it for flood control, which is utility business. They've gone out on a tangent here probably because I haven't done anything wrong.

"Our names are on their [utilities'] reserves," he said. "Apparently they [comptroller's officials] act like they're a third party. They're ... 100 percent under the board and the commissioners."

Killian estimated some $400,000 went into the city's capital fund.

According to Dycus' letter, the city applied $379,000 of the payment to a capital outlay note owed to the utilities and transferred the remaining $441,170 from the utilities to the city's general fund.

It noted the city charged the utilities 6.5 percent interest. Killian said the charge was "reasonable" and under state law he could have charged 10 percent.

Contact staff writer Andy Sher at or 615-255-0550.