LOUISVILLE, Ky. (WDRB) – A new economic development group backed by Mayor Craig Greenberg’s administration plans to officially form next week, a move that comes as an ethics complaint targets the initiative.
The Louisville Economic Development Alliance received $1.5 million in start-up funds in the recently approved city budget and has raised another $2 million in private funds, Greenberg said at a downtown press conference Friday morning.
“Our economic development strategy of the past decade or so in Louisville has not yielded the results we've looked for,” Greenberg said. “When you look at other cities that they've grown over that decade, compared to our growth the results in Louisville have been unacceptable. We need to do something new. We need to do something bold.”
But the effort is at the center of a complaint filed this month by a former Metro government employee, who claims Greenberg and top officials are violating city ethics and personnel rules in creating the entity known as LEDA.
“This structure will overwhelmingly privatize the city’s economic development pipeline while enabling multiple streams of public subsidies for the organization and the projects it prioritizes,” Terri Hathaway, a past administrator of Metro’s small business and commercial property loan program, wrote in the complaint to the Louisville Metro Ethics Commission.
“The structure gives particular influence and access to developers who will both sit on the board and be the most likely to financially benefit from project contracts resulting from projects prioritized and publicly subsidized.”
The complaint, obtained Thursday by WDRB News, accuses Greenberg, Deputy Mayor Pat Mulloy and Jeff O’Brien, executive director of the city’s economic development cabinet, of using their positions to get “unwarranted privileges and advantages for those private interest entities and individuals personally invited to join the board of the Louisville Economic Development Alliance.”
Greenberg briefly addressed the accusations Friday morning. “With respect to the ethics commission complaint that was filed -- that has no merit,” he said. “Our attorneys are going to handle that. As you can tell from today, we are focused on moving forward.”
LEDA would be the lead contact for site selection firms and businesses looking to locate or expand here, and have broad authority over business marketing and branding, among other things.
Mayor Craig Greenberg addresses business and civic leaders who will help craft a new Louisville economic development plan. The first meeting was on August 8, 2023 at L&N Federal Credit Union Stadium. (WDRB photo)
Touted as a “public-private partnership” that grew out of the mayor’s push for a new economic development plan last year, Greenberg said LEDA will incorporate next week as a 501(c)(6) organization – an IRS designation that typically applies to chambers of commerce and business leagues.
After that, he said, the board’s members will be made public ahead of an initial meeting in July. Those 30-plus members will serve at the request of the mayor’s administration.
Four members have been publicly identified – Jim Allen, vice chairman of Baird; Condrad Daniels, president of HJI Supply Chain Solutions; Kim Halbauer, regional president of Fifth Third Bank Kentucky; and Bill Moore, president of UPS Airlines.
Pat Mulloy, who leads the economic development cabinet, said University of Louisville President Kim Schatzel and University of Kentucky President Eli Capilouto also plan to serve on the board. Greenberg said he’ll have a seat, as will representatives of the Metro Council and several other members of his administration.
Plans also call for members of the city’s economic development cabinet to work as contract employees for the new corporation, although it’s not yet know how many, according to the Greenberg administration.
WDRB requested, under Kentucky’s open records law, the bylaws and articles of incorporation of the alliance, as well as the prospective board invitation list and the organizational chart of Metro employees who would work there.
Metro government declined that request this week because those documents aren’t yet final.
City officials also couldn’t immediately say if the board members will be considered “Metro officers,” which can include people appointed by the mayor to public agencies and who have the power to expend public funds. Those officers have a duty under the city’s ethics code to file financial disclosure statements.
Mulloy said LEDA will have conflict of interest policies.
He told reporters that LEDA’s main goal is to take a big-picture approach to economic development in Louisville.
“If you ask the fundamental purpose, it's about continuity,” Mulloy said. “It's about taking the long view of how we grow our economy in this town, taking a fresh view at how we do it.”
Ethics complaint
Greenberg and Mulloy have said LEDA grew out of the mayor’s Growing Louisville Together plan, which concluded last December. But Hathaway’s complaint claims the effort dates back to at least the spring of 2023.
She cites a “confidential memo” from April 2023 from the Jefferson County Attorney’s Office to Greenberg Chief of Staff David Kaplan in response to questions about supplementing city economic development staff compensation with private funds.
That request occurred, she says, “four months before the stakeholder process was launched for the economic development strategic planning process.”
Hathaway also alleges that Mulloy and O’Brien last fall floated a plan to use the Metropolitan Business Development Corp., or METCO – where she worked – to retain legal counsel for the proposed LEDA entity.
Former METCO administrator Terri Hathaway, who filed an ethics complaint against Mayor Craig Greenberg and economic development officials (WDRB photo)
She claims LEDA will have “disproportionate influence and power to design development incentives, and determine which specific projects and types of businesses and projects are prioritized for public subsidies and financing.”
For those reasons, she alleges in her complaint, Greenberg, Mulloy and O’Brien have run afoul of ethics code provisions on “unwarranted advantages.” In particular, she claims LEDA will benefit Greenberg and Mulloy’s “private interests,” and those close to them.
Besides the LEDA claims, Hathaway’s complaint has three main accusations:
It claims city officials secured advantages for a modular home company through “customized funding opportunities” after it chose not to pursue a city small business loan. Those opportunities weren’t available to others, the complaint says.
The company received a $500,000 grant and possibly more than $1 million, according to the complaint, which redacted the name of the firm.
The details, however, line up with publicly available information about MMY Group, a UK-based company that plans to open a manufacturing location in an industrial building in the Parkland neighborhood. Metro Government gave MMY a $500,000 grant for the project, according to a February press release from Gov. Andy Beshear’s office.
Second, the complaint accuses the city of acting counter to the public interest by failing to track and collect $422,187 it’s owed for a land sale approved by the Metro Council in 2006. The owner and location of the property is redacted, but the council ordinance cited in the complaint involves the sale of a lot at E. Main and Preston streets to Fleur De Lis Development LLC for office and condominium use.
Hathaway claims she researched the debt status along with O’Brien during the second half of 2023 and into early 2024, and during that time Greenberg, Mulloy and O’Brien were asked by an unnamed person or entity to forgive the payment due.
Third, the complaint says Hathaway was “compelled” to close a $250,000 METCO loan last month at a lower interest rate than it qualified for after a borrower contacted O’Brien. “This interference will result in a projected loss of $17,000 in interest income to METCO over the life of the loan,” the complaint alleges.
Hathaway also claims that in May Mulloy interfered in METCO’s effort to collect payment from an unnamed entity for equipment used as collateral in a loan.
The complaint says those alleged actions amounted to “securing unwarranted privileges and advantages” for the entities whose names are redacted.
The next step in the ethics commission process is for Greenberg, Mulloy and O’Brien to formally respond to the complaint.
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