The 1st meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, August 15, 2002, at 1:00 PM, in Room 149 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Co-Chair; Representative Thomas Kerr, Co-Chair; Senators Ernie Harris, Alice Kerr, Vernie McGaha, Joey Pendleton, and Richard Roeding; Representatives Royce Adams, Eddie Ballard, Carolyn Belcher, Scott Brinkman, Phillip Childers, Perry Clark, Howard Cornett, Brian Crall, Jesse Crenshaw, Tim Feeley, Charles Geveden, Gippy Graham, J. R. Gray, Jodie Haydon, Dennis Horlander, Thomas McKee, Russ Mobley, Ruth Ann Palumbo, Tanya Pullin, Tom Riner, Brandon Smith, Ken Upchurch, Charles Walton, Mike Weaver, and Robin L. Webb.
Guests: David Lovelace, Deputy Secretary of the Tourism Development Cabinet;
Ann Coffee, Deputy Commissioner of Travel; Bob Bender, Deputy Commissioner of Parks; Gene Strong, Secretary and Gene Fuqua, Executive Administrator, of the Cabinet for Economic Development; Bobby Clark, Board Chair for the Kentucky Commission on Small Business Advocacy; Betsy Nowland-Curry, CEO for the Kentucky Commission on Small Business Advocacy; and Dr. Mike Clark, LRC Staff Economist.
LRC Staff: Mary Yaeger, Committee Staff Administrator, John Buckner, Committee Analyst, Jessica Graves and Cecilia Perry, Committee Assistants.
Representative Kerr welcomed all of the members then recognized Representative Ruth Ann Palumbo for some announcements involving staff changes.
Representative Palumbo introduced Cecilia Perry to the members and explained that she will be replacing Jessica Graves who currently serves as the Committee Assistant. Also, as of September 1, the new Committee Staff Administrator (CSA) will be John Buckner. Dr. Buckner will be replacing Mary Yaeger who will be retiring after 30 years of service to state government. Representative Palumbo then turned the floor over to Senator Stine.
Senator Stine introduced David Lovelace, Deputy Secretary of the Tourism Development Cabinet. Mr. Lovelace recognized Tom Bennett, Department of Fish and Wildlife, John Nicholson, Kentucky Horse Park, and Bob Stewart, Department of Travel. He then discussed current tourism development challenges currently facing the Commonwealth. Mr. Lovelace said that tourism is a major part of Kentucky’s economy. A decline in the economic impact of tourism was recognized after 2001. Struggles with the national economy and the events of September 11 were the major factors in the decline. Mr. Lovelace said that the economy is strengthening and revenues are at least steady at this point. He stated that, generally speaking, industries in Kentucky are holding up well. He then introduced Ann Coffee, Deputy Commissioner of Travel, for an update on recent marketing initiatives.
Ms. Coffee discussed various marketing strategies designed to enhance public awareness about tourism in Kentucky. They have initiated some traditional marketing efforts that focus upon print advertising and radio. The department has also developed some in-state programs that involve family members or friends visiting Kentucky. Their goal is to educate Kentuckians who will be serving as hosts to those visitors. Host programs are designed to prepare people for visitors by supplying them with a tourist information. Ms. Coffee believes the in-state program will prove to be beneficial to tourism in Kentucky.
David Lovelace discussed promoting the development of the private sector. In 1996, resulting from the passage of the Kentucky Tourism Development Act, seven tourism projects have been approved and four are already in operation. Mr. Lovelace introduced a new loan program that was developed with funds granted to them by the 2000 General Assembly. The loan program was designed to help the success level of smaller tourism projects. Three loans have been approved thus far to the following: The Equine Center in Owensboro, a rock climbing experience located next to Natural Bridge, and a bed and breakfast/winery in Danville.
Senator Pendleton asked when the hotel will be completed at the Fairgrounds. David Lovelace responded that the hotel would be completed during the summer of 2003.
Senator Pendleton commented on the State Fair being one of the largest tourism events held in Kentucky and thought it would be beneficial for the committee to attend and examine the facility. He felt that the members of the committee should research ways to expand this event in an effort to prevent companies and businesses from holding their meetings out-of-state.
Representative Mobley asked if Mr. Lovelace promoted the summer theatre programs. David Lovelace commented that there were funds designated to promote the summer theatre programs throughout the state.
Representative Weaver asked if there were any initiatives to promote the Patton Museum located in Fort Knox. Ann Coffee stated that the museum was listed in their Getaway Guide, which is their primary response publication, and on their web site.
Representative Weaver commented on the photos used in one of the publications. He asked where the photos where taken and why they were chosen. Ms. Coffee indicated that the pictures were selected from all parts of Kentucky and that they change depending on what publication is used and the message they are trying to convey.
Representative Weaver asked if the Patton Museum was currently being promoted as far as being used in a publication of any kind. Ms. Coffee said that the Patton Museum is not a primary focus on any of their publications at this time. The goal of the ads and photos presently used are to pique interest which will encourage people to call our 800 number or visit the web site.
Representative Weaver stated that due to the acts of September 11, many individuals are interested in patriotism and want to be exposed to areas relating to the military. Touring the Patton Museum would be very educational but the difficulty of passing through security needs to be addressed. He advised the department to communicate with representatives of Fort Knox and design a plan enabling visitors to tour the museum without having to undergo extensive security procedures. Ms. Coffee agreed to look into an easier access plan for tourists visiting the Patton Museum.
Senator Roeding commented on some new tourist attractions in the Northern Kentucky area such as the Newport Aquarium and Newport on the Levy. He went further to say that due to a narrow reading in the Tourism Development Act, Kentucky was going to miss out on a great tourism opportunity. His concerns focused on the Hofbrauhaus, which is a tourist attraction with only two other locations in the world: in Munich, Germany and Tokyo, Japan. The Hofbrauhaus has recently focused on the Northern Kentucky area to open a third location. Due to the opinion of the cabinet, the Hofbrauhaus was considered to be a restaurant and not a themed destination attraction and therefore did not qualify under the Tourism Development Act. Senator Roeding asked that this matter be reconsidered. The Hofbrauhaus would have a significant and positive effect on Kentucky. Senator Roeding distributed a newspaper clipping from the Cincinnati Inquirer and a projection sheet covering sales and income tax projections relating to the facility.
David Lovelace explained that the Tourism Development Act was very strict in its early stages. Since 1996, the Act has undergone several revisions so that more tourism projects could be considered.
Senator Roeding asked again that the committee research this issue to prevent Kentucky from passing up a great opportunity.
Mr. Lovelace offered to meet with other state agencies as well as members of the committee to address issues concerning the Hofbrauhaus.
Representative Haydon commented that the horse tracks had considered using electronic gaming/entertainment machines at their facilities. He then asked what effect those machines would have on tourism in Kentucky. David Lovelace stated that there has been no extensive studies on the issue. Representative Haydon asked if Mr. Lovelace saw a need for such a study and questioned if it would have a significant impact on tourism. Mr. Lovelace stated that the department, with the help of other state agencies, would be glad to research the issue and thought that it would definitely have an impact on tourism.
Representative Walton commented on the Hofbrauhaus and advised the department heads involved to base all of their decisions on factual information and not assumptions. He also added that if the Tourism Development Act is vague in some areas, the committee needs to work on revising the law in an effort to make it more clear.
Mr. Lovelace said that he would be willing to provide committee members with factual information concerning the Hofbrauhaus and would do so in writing at their request. Senator Stine asked Mr. Lovelace to prepare such a document for the members of the committee.
Representative Cornett commented on the many camp sites in Kentucky and how he was particularly impressed with the Kentucky Horse Park. He addressed the need for sewage disposals at Kentucky’s camp sites and asked that the department heads research the possibility of completing such a task. John Nicholson, Kentucky Horse Park, agreed with Representative Cornett and said that sewage disposal has been a popular request. In an effort to prepare for camp site upgrades, two dump stations have been under consideration and rate increases have been activated.
Representative Cornett asked if this project would entail a treatment facility or would it be possible to partner with Fayette County. Mr. Nicholson said that most likely we could work with Fayette County because we are under capacity at this point. We would need to review matters with Fayette County officials first before further discussion.
Representative Cornett stated that camping is one of the fastest growing industries in tourism. He commended Mr. Nicholson for the Kentucky Horse Park being such a beautiful facility.
Representative Feeley expressed an interest in researching how the gambling industry is affecting tourism. He stated that Kentucky is missing tourism opportunities and such information needs to be documented at the cabinet level.
Senator McGaha made reference to the Highway 127 yard sales and asked if there was any information regarding the economic impact of the event and if it is promoted in their publications. David Lovelace said that his department is involved in the promotion of the Highway 127 yard sale along with the Transportation Cabinet and the Kentucky State Police. He is not aware of any study that would analyze the economic impact pertaining to this event.
Representative Pullin asked if the bankruptcy of US Air has had an effect on tourism in Kentucky. Mr. Lovelace did not think tourism would be affected in the immediate future because of the amount of leisure travel we experience in Kentucky. He continued his presentation by briefly discussing legislation concerning tourism bills that successfully passed during the previous legislative session and referenced HB 372, HB 556, HB 654, SB 229, HB 737, SB 13 and also HCR 125. He asked Bob Bender, Deputy Commissioner of Parks, to come forward and discuss two of the bills previously mentioned.
Mr. Bender addressed HB 556 which deals with Pine Mountain Trail State Park. The necessary criteria for this project was developed by the Department of Parks and the Finance Cabinet and have been submitted to a consulting firm. Various state agencies have been assigned responsibilities relating to this project and funding sources have been identified. Much progress has been made with this project in a short period of time.
SB 13 impacts the Department of Parks because it encourages the usage of Kentucky grown agriculture products by state agencies. The legislation calls for a steering committee which has been formed and has met twice. Mr. Bender said the legislation also calls for the Department of Parks to administer some private projects, of which there are two in place at this time. In 2003, Kentucky parks will host farmers markets to enable farmers to sell fresh produce to park patrons and local citizens.
Last year’s Kentucky General Assembly granted funding for seven golf course projects across the state. One of those projects has been completed and the others are presently under renovation.
Representative McKee commented on the Kincaid Lake golf course project and thanked Mr. Bender for the efforts of the department during its renovation. He also gave special recognition to the late Kenny Rapier who worked so hard on this project while serving as Commissioner.
Representative Smith was concerned about HB 556 that deals with the Pine Mountain Trail project because he had received calls from constituents complaining that surveyors were walking their property. He asked what stage the project is in and if there have been any public meetings held relating to its renovation. Mr. Bender confirmed that there had been no public meetings at this time because the department thought it would be premature. The consulting firm attempted to walk a portion of the trail soon after they were hired. The Department of Parks received one complaint from an individual pertaining to the surveyors. That complaint was immediately forwarded to the Division of Real Properties in the Finance Cabinet and the property owner was contacted and the situation was resolved. Mr. Bender asked the committee to forward any calls they receive to his office and he would make sure the appropriate agency is contacted.
Representative Brinkman asked if the golf course projects needed $17.5 million to complete the six remaining golf courses in addition to funds granted during the previous legislative session. Bob Bender said $17.5 million is needed to completely finalize the project. During the last legislative session the department was asked to come up with a figure where the courses would be playable but not totally completed.
Representative Brinkman asked if those programs are not currently appropriated by Governor Patton under his spending plan. Mr. Bender confirmed that the programs were not appropriated by the Governor’s spending plan.
Representative Brinkman inquired about the golf course open for play in Bardstown. He asked if the daily greens fees at the course are comparable to those of a private course. Mr. Bender said that every attempt has been made to prevent undercutting the private sector, with the goal of having competitive rates but also in line with the private sector. Representative Brinkman questioned if Mr. Bender was receiving complaints from private operators in that area. Mr. Bender stated that he had not received one complaint thus far.
Senator Pendleton asked about the status of annual pass fees sold at state parks, what is the average cost for a pass, and what revenue is being made from those pass sales. Mr. Bob Bender stated that the annual pass fee for a family is around $400. He does not have total sales data on hand but said it is a substantial, significant figure and the pass has been well received by the public.
Senator Pendleton questioned the cost of an average green fee/cart fee at the state parks. Mr. Bender said the cost is $28 for cart and green fees.
David Lovelace gave a brief overview of budgetary considerations affecting the operation of current and/or new initiatives. Overall, after communicating with different agencies, budget programs are doing very well.
Senator Stine introduced Gene Strong, Secretary, and Gene Fuqua, Executive Administrator, of the Cabinet for Economic Development.
Secretary Strong addressed the current economic development challenges facing the Commonwealth and the cabinet’s strategies to resolve them. He presented information to the committee showing that the state of Kentucky is doing well economically in comparison with other states. Some of the major economic challenges the cabinet is addressing concerns business retention. Across the country companies are experiencing cut backs. The goal of the cabinet is to prevent that from happening in Kentucky. Several companies in Kentucky have experienced major expansions. New job opportunities totaling 124,800 have come from existing business. Secretary Strong said that Kentucky’s per capita personal income is a major challenge but we are making progress and keeping up with the pace of the United States. The cabinet will continue to research ways to improve the pace but Kentucky is steady at this time. Annual poverty rate declines in the state are doing well. Kentucky had the 12th highest percentage decrease in the country. Manufacturing continues to be a great influence in our economy. Secretary Strong also added that direct foreign investments enable the economy of the state to stay strong. Currently we have several projects involving companies visiting the state to consider Kentucky as a potential place to do business. Budget problems exist due to Kentucky’s unemployment rates and the fact that we have an economy that is driven by sales tax and individual income tax. Education continues to be a challenge for us but we have made some gains from year to year but need to improve the pace.
Representative Palumbo commended the cabinet for doing a wonderful job. She then asked about the dates used during the presentation. The handout contained dates ranging from 1992 to 2002. Secretary Strong said that the time frames used are considered the most available data. The cabinet tried to look at a 10 year trend but the information was not available in all areas at this time.
Representative Pullin also commended Secretary Strong on an excellent job. She asked that he provide information about his office as well as the global trade offices. She also asked him to explain how those offices combined help Kentucky manufacturers and service industries in areas involving export. Secretary Strong explained that the Mexico office is a joint venture between the cabinet and the Department of Agriculture. At this point there has been no investment activity coming from Mexico to Kentucky. The cabinet is presently working with Kentucky businesses either to pursue missions or take groups to Mexico to introduce them to potential buyers. There have also been cattle opportunities in Mexico. Japan is a very difficult trade market due to some of their trade restrictions. The Japan and Belgium offices mainly deal with reverse investment opportunities.
Representative Geveden thanked Secretary Strong for the information provided by the cabinet and asked if the committee could have information on the jobs that have been lost in Kentucky. Secretary Strong said that the statistics used in his report are net figures. Plant closures, openings, and loss of jobs are all events calculated in the information provided.
Representative Geveden commended Secretary Strong and the cabinet on the Hyundai project. Out of fifty states considered for the site of the plant, Kentucky came in second.
Senator Stine invited individuals representing the hard wood industry to attend the next meeting due to time constraints.
Secretary Strong discussed the efforts to implement legislation passed during the 2002 Regular Session. The cabinet has revised their program criteria, their monitoring systems and also their compliance systems. They are also traveling throughout the state educating local officials on economic development issues. Preparations have been made to implement changes on HB 372 and 525 during this year’s legislative session. Secretary Strong does not foresee any obstacles in making these changes.
Senator Stine asked about the transition period after eliminating the Department of Coal County Development and returning that function to the Cabinet for Economic Development. Secretary Strong stated that the staff from the Department of Coal County Development is now working for the cabinet. There is a regional office in place that is responsible for handling coal county development.
Representative Adams referred to the KREDA map and asked if Owen County qualified as a KREDA county. Secretary Strong said that Owen County did not qualify due to criteria dealing with unemployment.
Representative Cornett asked about year to date coal severance tax, and the state of the coal industry. Secretary Strong said that there has not been a large decrease in revenue. There have been projects outlined for each community, therefore most of the coal severance dollars have already been committed.
Representative Smith commented that the legislative process changed the way counties assigned money for job training and what is the status of the process.
Secretary Strong responded that 20% of the money was being set aside for job training but the problem resulted from that money not being used. The money has now been routed back to the single county pool to be used by counties on various projects. Secretary Strong then discussed budget issues. In Kentucky, the Bluegrass States Skills Program training fund has an annual budget of about $3 million. The cabinet has funded $60 million of the new economy initiative and with current commitments, there is a projected balance of about $13 million. The loan pool is down and large loans are no longer made because the resources are not available. The Economic Development Bond Pool contains zero dollars. Without a budget, there was no reauthorization for funding for the present year.
Representative Palumbo asked if the Economic Development Bond Pool was depleted partly because of the Glendale property sale. Secretary Strong said that the dollars that were committed to the Glendale property sale were from the Economic Development Bond Pool and totaled around $6 million.
Senator Stine then introduced Bobby Clark, Board Chair for the Kentucky Commission on Small Business Advocacy and Betsy Nowland-Curry, CEO for the Kentucky Commission on Small Business Advocacy.
Ms. Curry first introduced Donna Lewis, Small Business Advocate and Project Manager in their office. She then explained that the goal and primary purpose of the organization is to make the small business community aware of state legislation and administrative regulations affecting them.
Bobby Clark reported some statistics on small business and also shared information on some recent activities of the organization. One of the projects mentioned was that of the Small Business Internet Portal, which is a resource for small businesses to use to voice their concerns while also be educated on areas in legislation. Research has shown that small businesses pay almost $7,000 per employee each year to comply with federal regulations and that Kentucky businesses spend $9.1 billion per year for compliance. By eliminating or lowering these types of expenses, the money can be routed to other areas that will be more beneficial for the state. Mr. Clark said that many issues facing small businesses relate to areas of economic development and insurance.
Senator Stine asked if they had done any research on the state medical cost. Mr. Clark responded by saying not at this time but they know it is significant.
Senator Stine introduced Dr. Mike Clark, LRC Economist.
Dr. Clark presented an overview of the economy in Kentucky in terms of primary economic indicators and industrial sectors. He also commented on the Corporation for Enterprise Development’s 2001 Development Report Card for the state of Kentucky. He indicated that the report is raw data and not completely accurate. Dr. Clark indicated that both the national economy and Kentucky’s economy have experienced a recent contraction. Approximately 6% of employment growth during the expansion has been lost during the recession. There are four sectors that have shown increases in employment throughout the recession: mining, services, construction and finance insurance and real estate. The manufacturing sector has experienced the largest losses during the recession.
The motion was made and seconded for adjournment. The Interim Joint Committee on Economic Development and Tourism adjourned at 3:41 p.m.