Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Appropriations and Revenue was held on Monday, September 19, 2016, at 1:00 PM, in Room 154 of the Capitol Annex. Representative Rick Rand, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Christian McDaniel, Co-Chair; Representative Rick Rand, Co-Chair; Senators Chris Girdler, David P. Givens, Denise Harper Angel, Stan Humphries, Dennis Parrett, Wil Schroder, Brandon Smith, Robin L. Webb, Stephen West, and Max Wise; Representatives Linda Belcher, John Carney, Larry Clark, Jeffery Donohue, Myron Dossett, Kelly Flood, Martha Jane King, David Meade, Terry Mills, Brad Montell, Marie Rader, Bart Rowland, Steven Rudy, Sal Santoro, Dean Schamore, Arnold Simpson, Rita Smart, Wilson Stone, Tommy Turner, Addia Wuchner, and Jill York.
Guests: Hood Harris, President, Hollie Spade, AT&T Kentucky; Garry Watkins, President, Wabuck Development Company, Leitchfield KY; Mike Hynes, President, Housing Partnership, Inc., Louisville KY; Lewis Diaz, President, The Kentucky Affordable Housing Coalition and Partner at Dinsmore & Shohl, LLP, Covington KY.
LRC Staff: Jennifer Hays, Charlotte Quarles, Eric Kennedy, and Jennifer Beeler.
Approval of the Minutes
Senator Parrett made a motion, seconded by Representative Donohue, to approve the minutes of the August 25, 2016, meeting. The motion carried by voice vote.
Testimony regarding actions taken by AT&T since the 2015 deregulation bill was enacted by the General Assembly
Hood Harris, President, AT&T Kentucky, testified on AT&T Kentucky’s investments in the state’s telecommunication network since the passage of 2015 Regular Session House Bill 152.
Mr. Harris explained that HB 152 was a first step in updating Kentucky’s outdated telephone lines. The bill increased the investment in high speed internet infrastructure and created of jobs. By the end of 2016, AT&T will have expanded the fiber optic network to bring more Kentuckians access to the latest in wireless services through the construction of 32 new cell sites.
Mr. Harris stated that AT&T has worked closely with other communication providers, the Kentucky Department of Education, and every school district to stretch fiber based high speed internet to all 173 school districts. This upgrade in connectivity has allowed Kentucky to be the first state to hit a national benchmark set in 2012.
In response to a question from Representative King, Mr. Harris explained that the Connect America program is adding 84,000 locations to underserved areas of the state for internet. The FCC informs AT&T the areas that internet service needs to be provided, and AT&T in turn is paid a subsidy to help pay for the upgrades.
In response to a question from Representative Flood, Mr. Harris stated that AT&T will continue to provide high levels of service to all 173 school districts within the state.
Discussion on the affordable housing tax credit bill introduced during the 2016 Regular Session
Garry Watkins, President, Wabuck Development Company, Mike Hynes, President, Housing Partnership Inc., and Lewis Diaz, President, The Kentucky Affordable Housing Coalition and Partner at Dinsmore & Shohl, LLP, testified about the benefits of affordable housing credits and gave an overview of 2016 House Bill 542, which was introduced in the 2016 Regular Session but did not pass.
Mr. Diaz stated that the affordable housing tax credit bill mirrors the federal tax credit program that was enacted in 1986 and that provides a per capita allocation. In 2017, the U.S. Treasury will allocate $10.3 million of federal low income housing tax credits to Kentucky. Because the low income housing tax credit is a 10 year credit, the program will yield approximately $97,850,000 of private equity investments. Between 2009 and 2014, the tax credit assisted an average of 1,045 individuals and families annually through the new construction or rehabilitation of multifamily residential units.
Mr. Hynes explained that Lexington and Louisville are seeking to establish local funding for housing finance. The Lexington Affordable Housing Trust Fund has received pledges of $7 million total investment during the previous 3 years. Louisville CARES has a $12 million total investment by Louisville Metro in workforce housing. These establishments address housing issues for low household incomes, aging household stock, and lack of local resources.
Mr. Diaz said that the goals of the proposed legislation were to increase the number of annual housing construction starts, preserve Kentucky’s stock of existing affordable housing, increase the amount of private equity invested in the Kentucky market, facilitate and enable investment in Kentucky’s poorest counties, and allow for additional investment in special programs such as Recovery Kentucky.
Mr. Diaz said that a recent study calculates that a state low income housing tax credit is expected to incentivize roughly 450 total additional units. Assuming that each unit costs an average of $80,000 to construct, the total annual construction spending is expected to be $36 million. The projected $36 million of annual capital investment is estimated annually to generate 394 jobs, 187 direct construction jobs and 208 indirect and induced jobs. With this credit there will be no taxpayer cost in the biennium, no state credits can be awarded until construction is complete. There is no possibility of a fiscal impact until at least 2019. Architects, development firms, and construction workers will be creating jobs and buying materials which would create a short term increase in state and local revenues. The actual cost of implementation is minimal because the credit works in tandem with the federal credit.
In response to a question from Representative Schamore, Mr. Diaz explained that with the low income housing tax credit there is a ceiling that rent cannot exceed and for this credit, unlike other government programs, there is no subsidy for rent.
In response to a question from Representative Clark, Mr. Hynes stated that in the case of West Louisville, where there are homes abandoned that would cost more to renovate than what they are worth, a tax credit program is beneficial to get the homes functional again.
In response to a question from Representative Stone, Mr. Diaz stated that how the credit is allocated, whether certain percentages go to build homes for the elderly, section 8 housing, or other government programs, can be determined by legislative language. Currently, the market drives what is being renovated and constructed.
With no further business before the committee, the meeting was adjourned.