The 2nd meeting of the Interim Joint Committee on Agriculture and Natural Resources was held on Wednesday, October 9, 2002, at 1:00 PM, in Room 149 of the Capitol Annex. Senator Ernie Harris, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ernie Harris, Co-Chair; Representatives James Gooch, Co-Chair, and Roger Thomas, Co-Chair; Senators Paul Herron Jr, Robert Leeper, Vernie McGaha, Virgil Moore, Joey Pendleton, Ernesto Scorsone, and Elizabeth Tori; Representatives Royce Adams, Adrian Arnold, Scott Brinkman, James Bruce, Mike Cherry, Phillip Childers, Hubert Collins, James Comer, Keith Hall, Charlie Hoffman, Thomas McKee, Fred Nesler, Don Pasley, Tanya Pullin, Marie Rader, William Scott, Dottie Sims, Jim Stewart, Gary Tapp, Mark Treesh, Johnnie Turner, Tommy Turner, Ken Upchurch, Robin L. Webb, and Brent Yonts.
Legislative Guests: Representative Susan Westrom.
Guests: Carl Campbell, Department of Surface Mining Reclamation and Enforcement; Eric Gregory, East Ky. Power Co-op; Jim Brannen, Office of the Petroleum Storage Tank Environmental Assurance Fund; Drs. Shannon Neigbergs, Richard Thalheimer, and Robert Lawrence, University of Louisville; Deborah Eversole and Angela Curry, Public Service Commission; David Switzer and Alex Rankin, Kentucky Thoroughbred Owners and Breeders Inc.; Frank Penn; Robert Clay, Three Chimneys Farm; Mark Farrow and Randy Wise, Dept. of Agriculture; Glenn Gibian, Kentucky Utilities; Gay Dwyer, Kentucky Retail Federation; Karen Jones, Kentucky Agency for Substance Abuse Policy; Andy Gregery, Churchill Downs; Mike Ridenour, Lexington Chamber of Commerce; Joe Ewalt, Phil Huddleston, and Nick Sparks, Ky. League of Cities.
LRC Staff: Dan Risch, Biff Baker, Hank Marks, D. Todd Littlefield, Tanya Monsanto, and Kelly Blevins.
Senator Ernie Harris, Co-Chair, opened the meeting by asking the members to review a resolution urging amendment of the U.S. Warehouse Act of 2000. He said he would ask the committee to consider a motion on the resolution later in the meeting.
Chairperson Harris then asked for and received a motion to approve the minutes of the August 22 meeting. The motion passed.
Next, Representative Roger Thomas, Co-Chair, gave a report for the Subcommittee to Study Establishment of a Farm Museum. He said the subcommittee took testimony from several public and private entities on the idea of establishing a state farming museum. He also said LRC staff explained the work that had already been done on the study. A motion was made and seconded to accept the report. The motion passed.
Next, Representative Jim Gooch reported for the Subcommittee to Study the Competitiveness of Kentucky Coal. He said the subcommittee looked at the factors affecting the competitiveness of Kentucky coal, including the factors controllable by the state and the factors beyond influence. He also summarized the economic significance of coal to Kentucky’s economy. He pointed out that little is known about 84% of the state’s coal reserves. He said the subcommittee will look at ways to build markets for Kentucky coal. A motion was made and seconded to accept the subcommittee report. The motion passed.
Senator Harris next invited Mr. Rick Brueggemann, of Bavarian Waste Services, to address the committee. Mr. Brueggemann said his company provides waste collection services to 32,000 customers in northern Kentucky and in Hamilton County, Ohio. He said his industry is highly competitive and is dominated by a few very large companies. Mr. Brueggemann raised several questions about the changes to the solid waste management laws passed in 2002. First, he said he could not determine from the law if the newly created $1.75 tipping fee is to be assessed on the amount of waste collected or on receipts taken in by his company. Second, he asked for legislative clarification of whether construction/demolition/debris waste is to be subject to the fee. Third, he asked if records would need to be kept on the $1.75 fee collected on each load of waste which is less than one ton. Last, he asked how Kentucky can force a non-Kentucky generator to pay the fee.
Chairperson Harris asked Mr. Mark Mangeot of the Natural Resources and Environmental Protection Cabinet, if he could explain when cabinet administrative regulations may be promulgated to address Mr. Brueggemann’s questions. Mr. Mangeot said he expects proposed regulations to be filed with LRC by October 15.
The next presenters provided an overview of horse farming. Mr. David Switzer, representing the Kentucky Thoroughbred Owners and Breeders Inc. (KTOB), began by pointing out that the thoroughbred industry contributes to the state’s agricultural heritage, by its economic impact, its contribution to the rural way of life, and its intrinsic protection of natural resources. He said that Kentucky’s horse industry is, in many instances, at a competitive disadvantage with other states because of the assistance those states provide their horse breeders. He cited 1996 American Horse Council data that indicates that Kentucky’s horse farms provide a $3.4 billion economic impact in the state and supports 16,600 full time employees and 36,600 indirect jobs. He said Kentucky produces 30 percent of the nation’s thoroughbred foal crop.
Mr. Frank Penn, a horse farm owner in Fayette County, spoke next. He said he had been a tobacco grower but diversified into boarding and breeding thoroughbreds. He said he raises hay but depends on local agribusiness to supply feed and equipment. However, he said, unlike other farmers, he pays sales tax on supplies. He said he attracts clients from Kansas, British Columbia, and New York. He pointed out that not only do horse farmers face weather and insect problems that all farmers face, they also must compete against breeders in states where significant state assistance is given to those breeders.
Next, Mr. Alex Rankin spoke. Mr. Rankin farms in Oldham County and is the president of KTOB. Using his farm as an example, he said that many horse farms are located outside the bluegrass region counties. He also said that a 2001 survey of 460 thoroughbred horse farms revealed that the median horse farm is 200 acres, generates a gross income of about $400,000, and yields a net annual income of $50,000.
Mr. Rankin described his farm as 400 acres that had been in his family for 65 years. He said he has, over the last 20 years, converted from a grain, cattle, and hog operation to a horse farm. He said he works off-farm and his wife works as the farm’s bookkeeper. He employs 12 people and provides them housing, health insurance, and retirement plans. He said his broodmare business is directly affected by the purse levels and racing atmosphere at Churchill Downs.
He said over 50% of his farm’s gross income is derived from the sale of yearlings. The market for Kentucky yearlings is created by their quality and the incentives provided by the Kentucky Thoroughbred Development Fund. He said the fund supplements purses for Kentucky bred horses. However, the impact of the fund has been diminishing because other states are pushing their purses higher as they benefit from other gambling. For example, he said the lowest level claiming race at Churchill Downs is $12,000 while at West Virginia’s Mountaineer Park, a new and relatively unknown racetrack, the amount is $17,500.
The next speaker was Mr. Robert Clay. Mr. Clay owns Three Chimneys Farm, a thoroughbred breeding operation in Woodford County. He said Three Chimneys contains 1700 acres, employs 100 people, and has contributed 250 acres for conservation easements to the county. The farm welcomes over 10,000 visitors a year. He described four lines of business at the farm: 1. Boarding over 600 horses for non-Kentucky clients. This business pumps over $6 million into the state’s economy. 2. Selling over $35 million worth of livestock. 3. Raising horses. 4. Providing stallion services. He said the farm presently has eleven stallions.
Mr. Clay explained the importance to Kentucky’s economy of retaining top stallions in the state. He said the thoroughbred industry does not allow artificial insemination. Therefore, mares must be within driving distance of the stallions. If the state loses the top stallions, mares, veterinarians, and suppliers would follow. He said other states understand the economic importance of stallions within the industry and are pushing incentives to lure the best stallions away from Kentucky. Like Mr. Penn, Mr. Clay identified the state sales tax as placing Kentucky’s horse farmers at a competitive disadvantage.
Representative Royce Adams said he had sponsored a bill in the past to exempt horse feed from the sales tax and said he would be willing to sponsor it again.
In response to a question from Representative Susan Westrom, Mr. Switzer said that a sales tax exemption alone will not stabilize Kentucky’s competitive position. He pointed out that now Kentucky ranks sixth in the amount of the parimutual handle at racetracks. He said Kentucky can expect to drop to tenth as more states utilize alternative gaming’s receipts.
Representative Charlie Hoffman asked if the Lexington-Fayette County program to preserve farmland was helping preserve horse farms. Mr. Penn said he knew of five or six horse farms in the program. He added that 8000 acres have been placed in the program in two years.
Senator Paul Herron asked if gambling at race tracks would help the horse industry and make Kentucky more competitive in the industry. Mr. Switzer said it could.
Representative Robin Webb observed that stallion specific incentives would be the most effective. Mr. Switzer replied that Kentucky does not have a stallion specific program.
The next presenters were from the University of Louisville, Equine Industry Program. Dr. Bob Lawrence, the department chair, introduced Drs. Shannon Neibergs and Richard Thalheimer, who were the researchers responsible for the report; Thoroughbred Breeder/Owner Incentive Policies – An Economic Analysis Using Selected States. A copy of the report is on file with the committee meeting materials in the LRC library.
Dr. Neibergs summarized the findings of the report. He pointed out the need for more research, particularly the need to evaluate purse supplements. Nevertheless, the major conclusion he drew from the research is that increasing open race non-restricted purses are the most effective state assistance programs. However, he noted that this type of program would be the most difficult to fund when state budgets are tight. Finally, he observed that anecdotally Kentucky’s assistance program, the Kentucky Thoroughbred Development Fund, is an effective program and that any new program would need ten to 15 years of implementation to show results.
Next, Senator Harris asked if anyone would move for adoption of the resolution urging Congress to amend the U.S. Warehouse Act of 2000 to state that it does not preempt state regulatory authority over grain merchandising and grain buyer activities of federally licensed warehouses. A copy of the resolution is on file with the committee meeting materials in the LRC library.
After a motion and a second, the committee adopted the resolution with one no vote by Senator Virgil Moore. Senator Moore stated his belief that more needed to be known about the issue.
Next, Senator Harris asked the committee to review administrative regulations which had been referred to the committee. First, Deborah Eversole and Angela Curry provided a brief overview of administrative regulations from the Public Service Commission. After receiving both a motion and second, the following administrative regulations were accepted: 807 KAR 5:063, 807 KAR 5:100&E, and 807 KAR 5:110&E. The motion carried.
Next, Commissioner Tom Bennett briefly described administrative regulations pertaining to the Department of Fish and Wildlife Resources. A motion and a second was made to accept the following: 301 KAR 1:075, 301 KAR 1:085, 301 KAR 1:122, 301 KAR 1:130, 301 KAR 1:150, 301 KAR 3:015, 301 KAR 3:027, 301 KAR 3:030, and 301 KAR 5:020. The motion carried.
Mark Farrow and Randy Wise, of the Department of Agriculture, presented information on the Department’s administrative regulations. There was a motion and second to accept the following regulations: 302 KAR 25:006, 302 KAR 31:006E, 302 KAR 40:010, 302 KAR 75:011, 302 KAR 75:130, 302 KAR 76:011, 302 KAR 76:100, 302 KAR 77:010, 302 KAR 79:010, 302 KAR 80:010, and 302 KAR 81:010. The motion carried.
Next, Commissioner Carl Campbell of the Department for Surface Mining Reclamation and Enforcement presented administrative regulations pertaining to their department. The following administrative regulations received a motion and second to be accepted: 405 KAR 16:090 and 405 KAR 18:090. The motion carried.
Finally, Jim Brannen explained an administrative regulation of the Office of the Petroleum Storage Tank Environmental Assurance Fund. There was a motion and second to accept the following administrative regulation: 415 KAR 1:40. The motion carried.
The committee adjourned at approximately 3:00 p.m.