The 1st meeting of the Budget Review Subcommittee on Economic Development & Tourism, Natural Resources & Environmental Protection of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, August 28, 2003, at 9:30 AM, at the Simpson County Schools Central Office, Representative Rob Wilkey, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Senator Richie Sanders, Senator Vernie McGaha, Representative Rob Wilkey, Representative Charlie Hoffman, Representative Robert Buckingham and Representative Tommy Thompson.
Guests: Honorable Jim Brown, Mayor, Franklin, Kentucky, Honorable Jim Henderson, Simpson County Judge-Executive, John Raines, Chairman, Franklin-Simpson Industrial Authority and Board of Directors, Franklin-Simpson Chamber of Commerce.
LRC Staff: Kim Phelps, Legislative Fiscal Analyst and Kristin Burton, Committee Assistant.
Representative Wilkey called the meeting to order by thanking his fellow legislators for attending the meeting in Franklin, Kentucky. He asked the members of the committee to introduce themselves and explain what committees they serve on with the General Assembly.
Representative Wilkey stated that one of the things that the legislators try to do is to hold meetings throughout the state in various communities so that the Represenatives and Senators can see what is happening in other parts of the state.
Representative Wilkey introduced the Mayor of Franklin, Kentucky, Jim Brown. Mayor Brown welcomed the committee and thanked the committee for holding their meeting in their community. He stated that they were a small community with aggressive leadership that has the intention of promoting their natural resources and making an environment that is business friendly. He thanked the committee for their support in bringing new industry to their area.
Representative Wilkey introduced Jim Henderson, Simpson County Judge Executive to the committee as an integral part of the local leadership team of Franklin-Simpson, Kentucky. Mr. Henderson welcomed the Subcommittee to their community. Mr. Henderson stated that their community had a united commitment in the area of Economic Development. He stated that their community had seen a significant increase in manufacturing jobs since 1980. The community has worked hard to develop an industrial base that is solid. He thanked the Subcommittee for their assistance in making these improvements happen for their community.
The final presenter to be introduced from the Franklin-Simpson, Kentucky area was John Raines, Franklin-Simpson Industrial Authority and Chamber of Commerce Board of Director. He thanked the Subcommittee for choosing their area to hold their meeting. He thanked this Subcommittee and other members of the legislature for providing the tools needed to bring industrial jobs and economic prosperity to their area. He described that five years ago with a state grant a major track of land was purchased in Franklin, Kentucky along highway 31W that is now known as Wilkey Industrial Park. The low interest loan program has allowed them to attract businesses such as US Tobacco. In addition a second parcel of land was developed that is known as Sanders Interstate Industrial Park. Over the past years, 18 new industries have began operations in the Franklin-Simpson area. These businesses employ over 3,400 citizens in this area.
This is a 20% growth in manufacturing growth in Simpson County over a 22 year period.
Mr. Raines took the opportunity to encourage the Subcommittee to consider funding the Franklin Technical College during the next legislative session. The design for this facility has been completed and the 20 acre site has been purchased at the Sanders Industrial Park. This will provide work force training and allow its citizens to upgrade their technical skills in order to compete in the ever demanding job arena.
Representative Wilkey thanked the members of the Franklin-Simpson community and credited its growth to the leadership of its industrial authority and from their county judge and mayor. He stated that he was very excited about the proposed community and technical college to serve the educational and technical needs of his community.
Representative Wilkey stated that a great deal of accomplishments in this community have been the direct result of the work of the Economic Development Cabinet. He introduced Secretary Gene Strong, and spoke of Kentucky’s competitiveness in the areas of economic industrial development. He credited Kentucky’s ratings to the successes of Secretary Strong and his cabinet.
Secretary Strong stated that the Franklin-Simpson area was ready for economic development. He said that potential clients were always impressed with the area and its recent developments. Secretary Strong credited their preparedness to their local leadership.
Secretary Strong’s power-point presentation demonstrated how Kentucky was doing in economic growth as compared to some of its competitive states. Several slides pointed out how Simpson County in particular was doing along with the Western Kentucky region.
Secretary Strong did point out some statistics regarding Kentucky’s Economic growth. Kentucky ranked sixth (6th) among the states in the inaugural Site Selection Competitiveness Award for 2002. Eight Kentucky communities ranked in Site Selection 2002’s Top 75 Small Towns for corporate expansion, according to their March 2003 issue. According to Expansion Management Magazine Kentucky had the 9th Top Job-Creating Project for 2002 with the 1,003 person location of Pella Corporation. Site Selection magazine ranked Kentucky 10th in their 2002 Top 25 State Business Climate Rankings. Kentucky ranks 4th in the country in total light vehicle production for 2002 with 10.2% of all cars/trucks produced in the United States were made in Kentucky.
Kentucky’s unemployment rate has been below the national average for 15 consecutive months through June 2003. In 2002, Kentucky exported over $10.6B worth of goods, ranking Kentucky 10th of all states in exports per capita. Kentucky had the 3rd largest increase of all 50 states in exports from 2001-2002. In 2002 KY Innovation and Commercialization Centers (ICC’s) were created.
New expansions for 2002 included North American Stainless in Carroll County, which provided 250 direct jobs with an investment of $100,000,000. Webasto Roof Systems Corporation in Fayette county expanded with 100 jobs and an investment of $17,700,000. Harman/Becker Automotive in Simpson County expanded with 100 new jobs and an investment of $11,000,000. Huish Detergents, Inc. in Warren County expanded 130 jobs with a $36,000,000 investment.
New locations for 2002 were the J.M. Smucker Company, LLC in Allen County which added 200 jobs and a $51,000,000 investment; Pella Corporation in Calloway County which added 1,003 jobs and contributes a $45,000,000 investment; Kobe Steel, LTD in Warren County which provided 78 jobs with a $35,645,000 investment; and T Marzetti Company in Hart County which provided 171-300 new jobs and was a $38,000,000 investment to that community.
After the presentation by Secretary Strong, members of the Subcommittee were asked if they had any questions. Senator Katie Stine was recognized by Chairman Wilkey. She asked that the Cabinet provide an analysis of how many companies Kentucky has lost in the last three (3) years and why. She asked if exit interviews had been conducted with companies that had left Kentucky. She asked what services are included in the gross state product real percentage growth rate from 1993 to 2001 (slide #9). Secretary Strong responded that he would bring a detailed breakdown of services to the next meeting.
Referring to slide #12 she asked why South Carolina had incurred a 292% growth in motor vehicle gross state product. Secretary Strong indicated that this was probably due to a recent expansion to the BMW plant.
On slide #17 she asked what is the overall rank compared to the overall rate of increase for wage and salary. She asked the Secretary to list Kentucky’s top ten export products and if these include agricultural products. Secretary Strong said that he could provide this information to the Subcommittee before the next meeting.
Referring to slide #22 she asked about the relationship between KCTS and Bluegrass State Skills and if there was any coordination between the two. Secretary Strong commented that Bluegrass Skills does not relate to KCTCS but there was $7M in Kentucky Workforce Investment Networking Systems (WINS).
On slide #25 she asked the Secretary to address the education attainment income rate as it is related to the technical education income rate. On slide #27 she asked the Cabinet to provide a new chart that includes the New Economy and Tourism Development Act Projects in Per Capita Financial Incentives by Kentucky’s nine (9) Economic Regions. Secretary Strong answered that the Tourism Act Projects are administered by the Tourism Cabinet and that he could provide the Subcommittee with this summary.
Senator Vernie McGaha asked, in relation to slide #9, what advantages do Tennessee and Illinois have in growth over Kentucky. Secretary Strong answered that the education attainment levels were different and that Kentucky was population disadvantaged in relation to these states.
On slide #10 he asked why Kentucky has not experienced any growth in the electronic equipment industry. Secretary Strong pointed out that again this was in relation to the education attainment levels of Kentuckians.
Referring to slides #13 and #15 he asked if there was a way to show per capita personal income and the cost of living index together. Secretary Strong said that he didn’t know of any statistical data that would show this information. He pointed out that the wage issue was a better number to go by since several factors include state and federal benefits, dividends and retirement can increase per capita figures without affecting personal income levels.
Senator McGaha asked what Kentucky’s top four or five exports were (slide #21). Secretary Strong said that he didn’t have the complete list with him, however, he knew that automobiles and machinery and equipment were among the top exports from Kentucky and that he would provide a list of the top exports to the Subcommittee.
Senator McGaha asked in reference to job training what is KCTCS doing and Blue Grass Skills doing and if there was any centralization between the two. Secretary Strong pointed out that the key to these two programs was remembering who the customer was and being flexible to their training needs.
Representative Tommy Thompson asked the Secretary that in reference to slide #1 what Kentucky needs to do to improve its image to make it more business friendly. He asked the Secretary to provide the Subcommittee the top two most salient ingredients that need improvement. Secretary Strong answered that Education and Transportation were the two most important factors that companies looked for in selecting new areas. He pointed out that between 1993-2003, 74% of new announced locations were within miles of an interstate or parkway. He also pointed out that in relation to attracting new business that you had to be careful about worker’s compensation rates and how inventory taxes affect the communities. Secretary Strong said that he was a proponent of tax reform to more equitably distribute taxes to make Kentucky more attractive to companies interested in opening new locations.
Representative Thompson asked that in reference to Kentucky’s incentives, has the emphasis been on jobs created or the kind of jobs created and what the priority should be. Secretary Strong answered that the priorities are weighted as to the kinds of jobs created due to the emphasis on higher wages.
Representative Robert Buckingham asked in relation to slide #1 why Kentucky is perceived as being unfriendly to business. Secretary Strong answered that Kentucky is perceived as unfriendly and that unfortunately perception is reality. Secretary Strong pointed out that Kentucky is eliminated from many new business ventures right off the bat due to the fact that they are not a “right to work” state. Many consulting firms have told him that they would have liked to have considered Kentucky, however, the client absolutely insisted that they locate in a state that gave the employees the option of joining a union rather than requiring it. Secretary Strong said that if they can actually get the client here, then Kentucky has a good chance of attracting new business. Many companies that use the national consulting firms will not even consider Kentucky as a possibility due to their status. Representative Wilkey suggested that the Subcommittee should continue to evaluate Kentucky’s policy on its right to work status. Secretary Strong stated that he would like in the future to bring in several national consultants to speak before the Subcommittee. He thought that they could shed some insight into what businesses look for in communities before committing to a new site. He said that they can give specifics on what companies are requiring before they make any investment.
Representative Buckingham asked that the Secretary provide an analysis of Kentucky’s perception as being unfriendly to business to the Subcommittee at the next meeting.
Senator Stine referring to slide #9 regarding the gross state product of Tennessee and Illinois if Secretary Strong could explain this with a thought toward the taxation burden. She also asked if on slide #10 if the top five percentage growth industries in Kentucky included the new economy. Secretary Strong said he would provide this information to the Subcommittee.
Representative Wilkey asked the Cabinet to provide to the Subcommittee an update on how their incentive programs are doing. He asked that at a future meeting, he would like a report on the New Economy and the return on the state’s investment to this point. Representative Wilkey
At the conclusion of the questions, Secretary Strong made an announcement that the Cabinet had just approved an expansion for a local company. Pig Improvement Company (PIC) which had been a solid corporate citizen in the Franklin-Simpson area had just received a $580,000 incentive package that would bring new jobs to the area. Cheryl Slack of PIC (SiGen) was introduced and announced that this expansion would bring 20-25 science positions to the area.
There being no further business, the meeting was adjourned at 11:45.