Conflict of interest shuffle over Gorge resort project shows need for transparency

Two board members of a nonprofit that’s guiding development of an upscale resort near the Red River Gorge have stepped down to avoid the perception of conflict of interest.

Charles Beach III, CEO of People’s Exchange Bank in Winchester and Elmer Whitaker, CEO of Whitaker Bank are founding members of Red River Economic Development, a nonprofit that started and created a plan to turn 891 acres near Slade into a $135 million resort featuring a big lodge, trails and a distillery. Last week, we found out that both of them — along with organizer Dave Adkisson, former president of the Kentucky Chamber of Commerce — had become investors in the project, putting up part of $2.25 million to buy the property from businessman Ian Teal as part of the Red River Gorge Holding Company.

That raised plenty of questions about self-dealing, and did not help some public perceptions of the project, which was first conceived by the Chamber of Commerce several years before it was made public in 2019. Now the holding company owns the land and the RRED will market it to developers.

Three other members of the RRED board — entrepreneur Jim Host, Central Bank CEO Luther Deaton and Community Trust Bank CEO Jean Hale stated they had not invested in the project.

Hale will replace Beach as acting chair of RRED. Two new Eastern Kentucky businessmen or women will replace the two members who resigned. Adkisson will continue to act as an adviser to the project.

“RRED is very appreciative of individuals who were so devoted that they were willing to invest in the land so we could hold onto it,” Hale said this week after a board meeting. “I can say we discussed the issue and based upon the conversations, we wanted to avoid any appearance of a conflict of interest.”

It’s the right move because, frankly, a lot of public opinion on this project is wary about who will make money out of it, based on Eastern Kentucky history and the fact that it’s being driven by moneymen and women. Although the land was privately held and the project will be privately developed, a big master plan that got it started was funded with $1 million in state and federal grants.

Last week, after RRED revealed the existence of the holding company, I spoke to environmental lawyer Hank Graddy about the situation.

“It clearly bears more scrutiny,” he said. “This matter needs transparency, an assurance that people investing are not going to profit at the people’s expense.”

‘All the power’

That’s a key point to this project. While on paper it is a private commercial development, it will border one of Kentucky’s most beloved natural areas — the canyons, forests, ridges and arches of the Red River Gorge. The Gorge is already crowded and many fear that the resort and its visitors could further erode the natural beauty, and price out many who come visit.

The organizers have always seen it as a way to propel an Eastern Kentucky economy that can no longer depend on coal.

“We believe it will have an positive impact on job creation and tourism in Eastern Kentucky and the rest of the state,” Hale said.

Something you hear a lot of from these organizers is that they care deeply about Eastern Kentucky and its prosperity. They are no doubt sincere, but the history of the region is full of people who professed their devotion and then did it harm. Caring does not take the place of total transparency that lets the public know that a public trust is being upheld.

In some ways, the process has been positive, propelling the four-county region of Powell, Lee, Menifee and Wolfe into consideration of questions like: Why does Powell County have absolutely no zoning? Or how can we spread tourism around the region to better preserve the ever-more crowded trails and natural lands inside the official Gorge boundaries?

The master plan put together by Stantec also laid some important parameters for the proposed development, including protections for the nearly 20 natural arches on the property.

“It is our intention to encourage developers to use the study that was done because we all believe that the responsible plan that was created there,” Whitaker said last week. “I’m a nature photographer, I just love shooting the area ... we’re all of the same opinion that the nature is the drawing card.”

But because the project will be built by a commercial developer, the only assurance that the developer will meet those requirements will be in the hands of the Powell County Judge Executive James Anderson. When, for example, the developer wants access to Slade infrastructure like sewer and water, he will have to ensure they are meeting everything laid out in the environmental plan first.

“For us, it’s all up to the county judges to pressure them (developers) to hold the environmental standards,” said Elijiah Hicks, who works at his family’s cabin rental company in the Gorge. “All the power is in their hands.”

Hicks is a member of Red River Gorge United, which has raised questions about the project, and he echoes many residents and weekend hikers who want to make sure the Gorge’s low-key alternative atmosphere is preserved. “I’m not opposed to all development,” he said. “I think what we’re really concerned about is making sure people still want to come here and it doesn’t become a Gatlinburg.”

Nancy Hamann, a local businesswoman who is also in RRGU, said she was pleased by the environmental protections put into the development RFP as a sign of good faith, but her group will keep the pressure on local officials.

“Some of our thinking is if you have to dance with the devil, you dance with one you know,” she said.

Another danger zone is mention of putting the new development in a tax increment financing district, Kentucky’s favorite form of corporate welfare. If regional officials want to make sure the region really benefits from the project, they need to make sure not to give away all future property or occupational taxes as part of the project.

And if all the promised jobs are created, this resort will be the political Bigfoot, able to call the shots in a county that depends on tourism.

“The footprint seemed very large and possibly incompatible with the area,” said Gerry Seavo James, who founded the Explore Kentucky Initiative. “It could negatively impact existing businesses. This is what pushes people out ... the Gorge is possible because it’s accessible for everyone.”

There are plenty of pitfalls ahead. James and Sara Day Evans of Accelerating Appalachia say they will be looking into state and federal environmental laws to make sure they are being followed in protecting the delicate ecosystem, even on private land.

It’s encouraging that RRED has listened to and been concerned enough about perceived conflicts of interest to make changes mid-stride. Transparency is always the best balm for doubt, especially when it comes to a project as important as this one.