Berryville received a $25,000 state grant in 2014 after Mayor Tim McKinney dropped his opposition to awarding a $200,000 grant from the same fund to a private college in Springdale, the mayor said.
The mayor said the grant to the city was offered by then-state Sen. Jon Woods after he visited McKinney in Berryville and convinced him to drop his opposition to the college grant. McKinney sits on the board of the Northwest Arkansas Economic Development District, which approves the grants from the state's General Improvement Fund.
Guilty plea
Former state Rep. Micah Neal, R-Springdale, pleaded guilty in federal court Jan. 4 to one count of conspiracy to commit honest services mail and wire fraud in violation of U.S. Code 1349. The charge applies to elected officials who deprive constituents of their honest service and is punishable by up to 20 years in prison. No sentencing date has been announced.
Source: Staff report
McKinney said Woods was the chief legislative proponent of the college grant. McKinney's assistant, Jay Lee, said records kept by the city identify the college involved as Ecclesia College of Springdale. Records reviewed Thursday at the development district headquarters in Harrison show a $25,000 grant for the Berryville Parks Department building was approved Dec. 17, 2014 at Woods' direction.
A $200,000 grant to Ecclesia College for a land purchase was approved in two installments. That grant consisted of $150,000 released by Woods and another $50,000 at the request of state Rep. Micah Neal, R-Springdale. Woods' portion of the college's grant was approved on the same day as the Berryville grant. Neal's segment for the college was approved the next day.
Neal pleaded guilty Jan. 4 to accepting $38,000 in kickbacks in exchange for directing some of his share of grant money.
Calls and texts to Woods for comment haven't been returned since Jan. 4.
Legislators have wide discretion when it comes to where to spend their portions of the General Improvement Fund. The fund totaled $20 million in the 2015-16 budgeting cycle, down from $70 million over the previous two years. The 2015-16 amount represents about $100,000 for each of the 100 House member and $285,000 for each of the state's 35 senators.
Neal's guilty plea has renewed scrutiny of the spending, with Gov. Asa Hutchinson allocating no money for such grants in his proposed budget for the next two fiscal years.
The system by which grants are given has little accountability, opponents say. Required audits aren't done so there is no follow-up to make sure the money is spent according to the grant application, said longtime opponent Mike Wilson of Jacksonville. Wilson is pursuing an appeal of the fund's legality in state Supreme Court.
The state Department of Finance and Administration doesn't receive a summary of what the money is spent on once it goes to the development districts, the department confirmed after Neal pleaded guilty.
"When that much money is spread out among a lot of hands, some of it's going to stick," Wilson said. "You're playing with fire when you give people unfettered access to public money."
Visiting Berryville
Berryville is a Carroll County town almost an hour's drive from Springdale. Woods' district is contained in Washington County.
"He came to Berryville to talk to me about the grant to the college and after a while I told him, well, it's your money and I'll let you spend it as you want," McKinney said Wednesday. He said he couldn't specify when the meeting took place.
"After I said that, he asked if there was anything I needed. I said that, yes, we needed another $25,000 to start work on a new maintenance building for our parks department. He said he had some money left in his share, put in an application and he'd support it."
The development district also released copies of subpoenas it received from federal investigators for records involving Ecclesia. District Director Joe Willis said the district gave original records to the U.S. Attorney for the Western District of Arkansas, the same office that accepted Neal's guilty plea to taking kickbacks.
The Oct. 23, 2015, subpoena demanded "all documentation related to any General Improvement Fund disbursements" related to: Ecclesia College, "Owen Paris III", Woods and Randell Shelton. The subpoena didn't mention Neal or give any contact information for Shelton.
Mckinney spoke to federal investigators about the college and the Berryville grants "three or four months ago," McKinney said. "They asked me to come to Fayetteville, and I voluntarily did."
According to the grant application, signed by Ecclesia College President Oren Paris III, the December 2014 grant was to pay part of the cost of acquiring 25.5 acres adjoining the college campus. The plot included a "large home," a 2,400-square-foot shop, a barn and other storage buildings. Part of McKinney's objections, he said, was it was the second such grant the college had received in about a year's time.
Paris didn't return a phone message Friday seeking comment on the purchases. He hasn't responded directly to calls seeking comment. A statement from Paris on the college's Facebook page after Neal's guilty plea said the school didn't pay any kickbacks.
Neal's plea
Neal agreed to request a $50,000 grant be given to a private college in Springdale and a senator unnamed in the court document would request the remaining $150,000, according to the plea. Development district records show the only grant Neal requested for $50,000 that went to a private college was for Ecclesia, awarded Dec. 18, 2014. This was the day after Woods' $150,000 grant to Ecclesia was issued, according to the district records. This was in addition to a $200,000 grant issued at Woods' request to Ecclesia on Sept. 18, 2013, records show.
On Jan. 5, 2015, a check from Ecclesia paid $65,000 to an unnamed consulting company, according to court documents. The company deposited the check. Neal was paid $18,000 in cash by the president of that consulting company by Jan. 30, court documents say.
Neal also pleaded guilty to helping the unnamed senator direct $400,000 in grants to a workforce training program. Neal directed $125,000 of the money to the program and the senator directed $275,000, court documents show.
The development district issued only one grant for $125,000 in that time frame requested by Neal, its records show. That grant was to "Decision Point d/b/a Ameri-Works," according to records.
Decision Point has offices in Springdale and provides behavioral and substance abuse treatment. Decision Point was considering a collaboration with AmeriWorks of Bentonville on a jobs training program, according to a statement issued by Decision Point's parent company. Decision Point ended the plans, returned the state grant in full and didn't pay any kickback, the company said. Development district records confirm the money was returned in full in August 2014. Neal received a $20,000 kickback for his role in that grant, court records said.
The court documents in Neal's case say a confirmation letter was sent to the person who paid the kickback to notify him the grant had gone through, and the letter was dated Sept. 27, 2013. Development district records of the grant approved by Neal and Woods to Decision Point contain a Sept. 27, 2013, letter sent to Milton "Rusty" Cranford, president of "Decision Point, Inc. d/b/a AmeriWorks." Attempts to contact Cranford since last week received no response.
Development District records show Woods distributed all of his available allotment of General Improvement Funds until Decision Point refunded its portion in August 2014. Woods approved the Ecclesia grant in December.
Shiloh grant
The Northwest Arkansas Economic Development District is one of eight such districts in Arkansas distributing grants from the state's General Improvement Fund. Recipients of those grants are largely directed by the legislators who make appropriations to the district, Willis said.
District records show Woods also directed a $10,000 grant to Shiloh Christian School in Springdale whose application said it planned to use the money to send coaches and two players to a leadership conference in Nashville, Tenn.
Josh Floyd signed the grant application dated Dec. 12, 2013. He was Shiloh's head football coach and athletic director until resigning in May 2014 to take another coaching job. The district awarded the grant Dec. 3, 2014.
Jeff Conaway, who took over as Shiloh's head football coach and athletic director in June 2014, said Friday he doesn't have any information on the issue and has had no dealings with the Northwest Arkansas Economic Development District during his tenure at Shiloh.
Greg Jones, Shiloh superintendent, didn't return a phone message left Friday.
The Freedom from Religion Foundation has criticized the grants to Ecclesia and Shiloh. The group sent the development district a letter dated Feb. 22, 2016, calling the grants to Ecclesia unconstitutional, according to the development district. The foundation is a nonprofit organization based in Madison, Wis., advocating for the separation between church and state.
"People should not be taxed to promote a religion," said Annie Laurie Gaylor, Freedom from Religion co-president.
"They are using taxpayer money to proselytize children. Why are they looking for a public handout?" she said Friday of the Shiloh grant.
The 2016 letter asked the development district to refrain from awarding public money "to Ecclesia College or other religious ministries in the future."
Willis responded a few days later stating it wasn't the district's intention to violate either the Arkansas or U.S. Constitution, and future grant requests "will be scrutinized to make certain that the funds sought will not be used to advance a religious purpose or cause."
The development district in June amended its General Improvement Fund policy to specify entities not eligible for money. The four-page policy lists private businesses, individuals, private education institutions, policy party organizations and religious organizations as ineligible.
Doing good
The grants do a lot of good in communities throughout Arkansas and allow the local legislator who best know the needs in his area to direct the spending, supporters say. For example, the same fund at the same time equipped a kitchen at a Springdale senior center, bought equipment for firefighters and police in departments in the region and helped the Shiloh Museum and the Kiwanis Club.
Allyn Lord, Shiloh Museum director, said the museum received a General Improvement Fund grant worth $1,030 in 2012 to help pay for a historical marker commemorating the centennial of the Civil War. A $20,000 grant in 2013 helped pay for a remodeling of the museum store and front desk area and a lighting upgrade, she said. Both grants were through Woods.
"Jon called us and asked what needs we had. He said he was looking at his GIF donation and wanted to see if there was anything he could help us with," she said. "He is a member and frequent visitor."
The lighting project switched all the museum's lights to LED. Lord said they were able to get $6,115 in rebates for the $14,231 lighting project.
"We've already saved in our electrical costs what we put into it," she said of the project.
Changes to the store helped boost sales from $8,500 in 2013 to $21,000 last year, Lord said.
The Northwest Arkansas Area Agency on Aging is still trying to collect enough money to build an exercise center next to the senior center in Springdale, and a $100,000 grant from the General Improvement Fund is a big step in the $500,000 expected expense of the project, said Jerry Mitchell, executive director of the Harrison-based group.
"We've had a lot of bequests and donations, but it's not enough," Mitchell said. "Even with the grant, we're still trying to raise the money."
Small groups -- and even small towns -- lack the staff and expertise needed to pursue other kinds of grants from governments or even charities, Willis said.
Sometimes, more than one legislator is involved with the same grant, district records show. A $20,000 grant in 2014 to retire debt on a veteran's memorial in Searcy County, for instance, had five lawmakers dedicating a share toward the project, including some from well outside Searcy County like Neal and Woods.
Middle men
The improvement fund comes from unspent budget balances at the end of each state fiscal year and from interest earned on state deposits. The fund has been a subject of controversy since 1997, when the Legislature took control of half from the governor's office and began using its share largely for local projects.
Rather than given directly to nonprofit and government entities, the money is passed to the economic development districts. Groups wanting a share submit an application, but the money is essentially controlled by the lawmakers who direct the development districts where to send it, Willis said.
Lawmakers used to grant the money directly. That was declared unconstitutional in a 2005 ruling in a lawsuit brought by Wilson. The Legislature then changed the law to pass the grant money through economic development districts.
Wilson said the new system is worse than the old because it ended a central record of where the money went.
"Now it's just laundered through the districts, which do what the Legislature's members tell them," he said.
There's no consistent rule for all eight districts on how the grants are awarded, Willis said, but lawmaker support is always vital.
"Before I got here, you didn't even need a vote of the full board," he said. "All you needed was a vote by an executive committee. Fortunately, they changed that."
The board in the Northwest Arkansas District has the county judge or his someone he designates from each county in the district, the mayor of the largest town in each county and one private member from each county, Willis said. Other districts have different board compositions and at least one has a board with more than 50 members.
"Prior to my coming here, we didn't even have a functional website," Willis said. "The only way to file an application for a grant was through a legislator. Now you can download the form and send it in, but in reality it's the Legislature's money. A grant will normally have to have at least minimal support from some legislator."
Gov. Asa Hutchinson has no General Improvement Fund money for local projects in his proposed budget before the Legislature. He addressed the Arkansas Municipal League on Thursday, which represents Arkansas city governments -- major recipients of fund grants.
According to news accounts, he told the league's convention he was aware the fund had been used for many good projects but he couldn't support the grants as they are currently distributed, in light of Neal's guilty plea.
NW News on 01/15/2017