Athens officials to seek roughly $932,000 to finish new fire station after theft; cybersecurity steps outlined

Director Stone told the Athens City Council committee Tuesday that the city needs about $932,000 in additional authorization to make a final payment to Pepper Construction to complete Project 346, the new fire-station headquarters.

The additional request stems from a multi-part funding shortfall: a theft of city funds during the project, growing project costs for items added during construction and the normal close-out payments, and the exhaustion of bond proceeds, Director Stone said. "We owe Pepper Construction the final payment for that project. And that payment is roughly $931,000," he said.

Why it matters: The payment covers the contractor’s final invoice and lets the city close the construction contract and move warranty items into normal operations. Officials said the theft and subsequent cash-flow gap require the city to reallocate appropriated funds rather than issue new debt.

What administrators presented

Director Stone told the committee most warranty punch-list work is complete and Pepper is finished for purposes of withholding retainage. To cover the shortage, the administration proposes drawing roughly $350,000 from Fund 206 (public safety capital fund) — made up of about $150,000 in interest earned on bond proceeds and a $200,000 insurance check the city received — and approximately $582,000 from other existing appropriations. Of that $582,000, about $530,000 would come from capital fund 580 (including $30,000 in a new appropriation), $27,000 from the fire operation line 1011208 TC 200, and $25,000 from admin operating line 01/00/1120 TC 200. Director Stone said the administration plans to "tighten the belt" on other activities funded by those appropriations this year.

Director Stone also explained litigation and recovery efforts tied to the theft. He said roughly $350,000 has been frozen in a Kentucky bank account that the city believes contains illicit proceeds, and that courts must sort competing victim claims. "If we get any of that money recovered … my initial recommendation would be to put that into the $4.30 fund, which is the debt fund," he said, adding that recovered funds might later be placed back into the capital fund 580 to replace the money being used now.

Council questions and context

Council members asked whether reallocating the capital fund will harm other projects. Member Clotfelter thanked staff for avoiding new debt and asked whether the reduction in the capital fund would hurt planned projects. The administration said the $500,000 already appropriated this year in fund 580 was "unspoken for" and that officials had expected to move some of it to other projects if needed; the administration said it would update members on specific balances and timing.

Members also pressed whether additional project elements were approved by council. Director Stone said many added elements — a larger parking area serving an adjacent athletic field, the city’s share of a fitness court, public art funded under a 1% for art ordinance, and land purchase considerations — were considered part of the overall Project 346 scope during development and referenced an ordinance supporting the 1% for art provision.

Cybersecurity and payment controls

Committee members asked about the theft’s cause and whether the city strengthened controls. The auditor and the treasurer said they engaged third-party cybersecurity reviewers and worked with the insurance company and the FBI to develop training. The auditor described new, layered procedures for large payments that include additional verification steps and in-person bank confirmations. An IT representative said the city has enabled two-factor authentication, will enforce periodic password resets for high-risk accounts, has turned on Office 365 settings to flag infrequent external senders, and will require annual forced cybersecurity training for users. "Two-factor authentication, we've already turned on," the IT representative said.

Next steps and actions

No formal council vote was taken at the committee meeting. President Pro Tem Tim Reisner and Committee Chair Pro Tem Reisner offered that legislation will be introduced Monday to authorize the additional funding and to reappropriate the funds described by staff; Reisner indicated the City and Safety Services committee will carry the ordinance forward. Director Stone and staff will present an updated ordinance and a line-by-line spreadsheet at the regular council session.

Ending

Council members requested follow-up detail on fund balances and any future impacts on scheduled capital projects. Staff said they will provide updated fund reports and the draft ordinance when the item is formally introduced Monday.