United States: Staying Out Of Hot Water

Lack of Attention to Commissioner Salary Issues Can Result in Major Headaches

Approximately 99 of the 112 water districts in Kentucky pay their commissioners a salary as compensation for their services. While these salaries are generally small relative to the responsibilities of the office, they can present major headaches. Water district commissioners should pay close attention to issues related to their salaries to avoid public embarrassment, personal financial hardship, and possible legal actions.

KRS 74.020 governs water district commissioner salaries. It establishes a maximum annual salary of $3,600 for a commissioner. Commissioners who attend six hours of certified water management training may be eligible for a maximum annual salary of $6,000. Commissioners who serve as their water district's treasurer are also entitled to receive an additional amount not to exceed $200 per year. With the exception of the extra compensation that a treasurer receives, a water district's commissioners must be paid the same salary.

While KRS 74.020 establishes the maximum salary for water district commissioners, the fiscal court of the county in which the water district is located determines the amount of any salary. The payment of a salary to commissioners is not required, but is within the fiscal court's discretion.

A water district should maintain a copy of the fiscal court resolution establishing its commissioners' salary level or the minutes of the fiscal court meeting reflecting the adoption of such resolution. Without such documents, a water district lacks evidence of authorization to pay a salary to its commissioners. In rate proceedings, the Kentucky Public Service Commission ("KPSC") will request such evidence and, if not produced, will disallow the water district's recovery of those salaries through rates. Equally important, commissioners receiving a salary in the absence of such evidence generally will be required to refund any previously paid salaries. Should they fail to make such refunds, they may be subject to potential lawsuits for recovery of the unauthorized salaries as well as potential criminal proceedings for authorizing and accepting unlawful payments. Moreover, the commissioners are likely to face adverse publicity for their actions.

If the fiscal court authorizes an annual salary in excess of $3,600, the water district commissioner must attend at least six hours of certified water management training during the calendar year to receive the higher salary. The KPSC is responsible for certifying water management training programs.

A water district commissioner required to attend certified water management training should plan his or her attendance early in the year. Given the limited number of available certified programs, it may prove difficult to meet the attendance requirement near the close of the calendar year. A water district commissioner who fails to attend the required training must refund that portion of his or her salary that is based solely on his or her attendance at such program.

Prior to attending a management training program, a water district commissioner should confirm that the KPSC has certified the program, or that an application for certification is pending before the KPSC, and the number of hours for which the program has been certified. The KPSC no longer accepts applications for certification after a program has been conducted. Upon attending the program, the commissioner should obtain a certificate of attendance from the program provider that indicates the number of hours of training attended.

If it is providing each of its commissioners with an annual salary greater than $3,600, a water district should adopt procedures to remind its commissioners of the training requirement and to advise them of available training programs. It should also adopt and implement procedures to track its commissioners' attendance at certified training programs and their continued eligibility to receive the higher salary. It should request and retain for its records a copy of training attendance certificates and the KPSC order certifying the program as evidence of the commissioner's entitlement to a higher salary. Commissioners should retain a copy of these documents for their personal files as well.

A commissioner's salary is an annual salary and is not conditioned upon the commissioner's attendance at board meetings. A commissioner does not forfeit his or her salary for the month that he or she fails to attend a meeting. A commissioner's repeated failure to attend board meetings, however, is likely to serve as grounds for his or her removal from office.

Commissioners should exercise caution with fringe benefits to avoid exceeding established salary ceilings. While the value of fringe benefits, such as paid health insurance or dental insurance, is generally not considered as salary, it will be if the fringe benefit is part of a scheme to increase the commissioner's salary through the subterfuge of paying benefits not uniformly available to all water district employees. For example, if a water district provides paid family health insurance coverage to its commissioners but only paid single health insurance coverage to its employees, the arrangement is likely to be viewed as an effort to circumvent established salary limits and the cost of the additional insurance coverage will be deemed as additional salary.

In summary, a water district should review its records to ensure that the salaries paid to its commissioners have been properly authorized and do not exceed the established maximum. Water district commissioners receiving annual salaries in excess of $3,600 should ensure they obtain the required amount of certified water management training each year. A water district and its commissioners should maintain documentary evidence of the commissioners' completion of such training. Finally, a water district should have its legal counsel review its records annually as an additional compliance measure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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