The 4th meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, November 20, 2003, at 1:00 PM, in the Brown-Forman Room of the Kentucky History Center. Senator Katie Stine, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Co-Chair; Representative Eddie Ballard, Co-Chair; Julie Denton, Brett Guthrie, Alice Kerr, Richard Roeding, and Damon Thayer; Representatives Rocky Adkins, Carolyn Belcher, Buddy Buckingham, Perry Clark, Tim Couch, Bob DeWeese, Ted "Teddy" Edmonds, C.B. Embry Jr, Bill Farmer, Keith Hall, Mike Harmon, Mary Harper, Thomas Kerr, Stan Lee, Thomas McKee, Brad Montell, Ruth Ann Palumbo, Tanya Pullin, Dottie Sims, Ancel Smith, Brandon Smith, John Will Stacy, Tommy Thompson, Charles Walton, Mike Weaver, and Robin L. Webb.
Guests: Paul Blanchard, EKU; Carl Breeding, AIK; Dean Stork, Lexmark; Rick Baker, Bruce Ray, Jai Giffin, Jerry Fox, SCUSA; Margaret Lane, Kent Whitworth, Anne Duncan, Kim Smith, Melba Hay, KHS; Gay Dwyer, KRF; Gene Fuqua, CED; Rachel Phelps, Henry W. Bentnam, Paul Dickison, Pendleton County Fiscal Court; Mike Ridenour, Lexington Chamber of Commerce; Michael Young, IBM.
LRC Staff: John Buckner, Committee Staff Administrator; Laura Taylor and Karen Armstrong-Cummings, Committee Analysts; and Cecilia Perry, Committee Assistant.
Chairman Stine welcomed all of the members to the meeting. With a quorum present, motion was made, seconded and passed to approve the minutes of the last meeting. Chairman Stine then introduced Mr. Jim Wallace, Kentucky History Center (KHC). Mr. Wallace welcomed the committee and gave a brief overview of the History Center. He introduced Mr. Kent Whitworth who was just named CEO of the Kentucky Historical Society. Mr. Wallace and his associates provided tours for the members following the meeting.
Chairman Stine then introduced Carl Breeding, Associated Industries of Kentucky (AIK) and Dean Stork, Lexmark to discuss Kentucky’s tax policies in relation to business development. Mr. Breeding said that he worked with a group of individuals last year to research Kentucky’s tax position compared to other states. Mr. Stork provided a PowerPoint presentation with a comparison of Kentucky to other states on major taxes levied on business, franchise taxes, and corporate income taxes.
Representative Palumbo asked the presenters to provide the committee with how much tax rates are in each state. Mr. Breeding said he would try to provide the committee with that information.
Representative Pullin asked about the increase in Kentucky’s general fund spending from 1990 to 2001. She asked how much of that was related to KERA? Mr. Stork said that the chart was produced by the CATO Institute and he did not have further information. Mr. Breeding said they would provide the committee with that report.
Mr. Breeding asked the committee to examine what current revenues are, how they are being spent, and to make adjustments within these fiscal constraints. In re-examining the tax structure, state government can observe areas where they can be more efficient, where cuts can be made, and how we can provide for things we need. After adjustments have been made, a tax reform project would be the next step. He told the committee that Kentucky businesses already pay more taxes than most other states levy on their business. The goal is to make Kentucky’s tax climate friendly to future economic development.
Chairman Stine introduced Commissioner Bill Brundage from the Office for the New Economy (ONE). Commissioner Brundage provided handouts and gave an update through a PowerPoint presentation on money spent on current projects. He discussed technology clusters and infrastructures that involve research, development, commercialization, and workforce. He also discussed the newer projects that ONE feels have great potential including cardiovascular products, natural products, advanced manufacturing, and industry and environmental technology. ONE is partnering with other entities to administer these projects. He referenced fifteen ONE satellite innovation offices around the state developed to make sure that every company in the state has the opportunity to seek assistance in adopting technology.
Chairman Stine asked how many jobs are generally associated with high-tech businesses, particularly in the biotech industry? Commissioner Brundage said that a lot of jobs have not been created yet because infrastructure is still being created at this point. He said some jobs have been created and he anticipates more to come later.
Chairman Stine asked what kind of contract terms or grant conditions are established to ensure that high-tech jobs for Kentuckians are produced through the grants and loan programs and also what sort of trade mark protection arrangements are in place so Kentucky may receive a share of the new products being developed. Commissioner Brundage said that it depends on who owns the technology. He said that the contracts they work with are rigid and are hard to dictate but there is a penalty clause for those who choose to walk away and not fulfill their obligation.
Representative Weaver asked Commissioner Brundage about the Unit of Action Maneuver Battle Lab located at Fort Knox and the subcontractors helping with this project. He asked if Kentucky has taken advantage of any of those subcontracts or have they been passed to other states. Commissioner Brundage said the subcontracts were made to out of state contractors because of the qualifications needed for the project and there being few companies in Kentucky that would meet the desired criteria. Representative Weaver said that it was his understanding that no companies in Kentucky bid on any of the contracts. He said not energetically bidding on these types of contracts does not speak well for Kentucky.
Chairman Stine commented on the safety and security project and asked if ONE is competing for some of the federal and homeland security grants that are available. Commissioner Brundage said that ONE is looking into such grants.
Representative Stacy commented on working with Commissioner Brundage on one of the projects outlined in the ONE handout. He said that Commissioner Brundage has been an unbelievable asset with rural projects and has been very direct with the companies he works with on such projects. He stated that Commissioner Brundage works on projects to see that all of Kentucky prospers and not just certain areas.
Chairman Stine asked how ONE ensures that a lot of the programs that are being implemented are not outsourced to other states. Commissioner Brundage said that outsourcing is only considered if there is a specialty product that simply can not be done in the state. ONE and other participants in these projects ultimately want Kentucky to prosper.
Representative McKee thanked Commissioner Brundage for his presentation. He wanted to comment on the Natural Product Alliance and thanked him for the research being done there. Representative McKee noticed that ONE was working with the University of Kentucky on this project and wanted to know if they channel any additional efforts through other land grant institutions and some of the aqua-culture initiatives that are in place. Commissioner Brundage said that in years to come ONE wants to have hundreds of companies participating and large land areas of 1000 acres or more to accommodate their needs for growth. He said that comprehensive universities would also be involved down the road.
Representative Buckingham commented on the ONE activity and the tremendous improvement in Kentucky ‘s infrastructure to help the growth of entrepreneurial efforts.
Chairman Stine asked what mechanisms are in place to sustain the organizational infrastructure for the new economy, such as the 11 high-tech incubator centers, the 9 “Special Opportunity” areas, and other aspects? Are they going to be self sustaining? Commissioner Brundage said that those infrastructures are there to help people and not to make a profit. Once infrastructure is built, economic development is re-engineered. He said research and development plays a critical role in the new economy. He stated that ONE is two years ahead of their initial goal.
Chairman Stine introduced Jeff Schlosser with TRI-ED and Joe Wind with Northern Kentucky University. Mr. Schlosser discussed the Commercialization Triangle in Northern Kentucky and the new economy. This triangle will help attract high tech jobs in the Campbell County area with the help of state assistance, ONE, and other entities. To create jobs more quickly, he asked that the committee continue to support Commissioner Brundage and ONE because research and development is a time consuming initiative.
Chairman Stine introduced Rick Baker, Jerry Fox, Bruce Ray and Jai Giffin with Sports Clinics USA. Rick Baker discussed Kentucky’s extreme sport opportunities and experiences. He discussed the development of adventure racing, involving a diverse group of people, that would take place in Kentucky’s state parks. Adventure racing is a series of outdoor sports tied together. This event has been televised and is a sport that has the potential to grow into a spectacular, international event in a very short period of time. This type of event could certainly help attract tourism in Kentucky because competitors, consisting of average people, are drawn from all over the world. This event imitates military expedition racing. Such as event would produce economic income from the competitors in the race. This event would showcase Kentucky’s natural beauty and its assets to the world. Companies such as Land Rover and Jeep are competing for the title sponsorship and other companies are joining in helping to sponsor these events.
Representative Brandon Smith asked if Mr. Baker and his associates have looked into the Nature Conservancy in Letcher County to host these types of events. Mr. Baker said that he has been looking at that area and agreed that it would be a good location. He commented that initially they had looked into the Red River Gorge and Carter Caves areas.
Representative Webb thanked the guests for their presentation and for helping to promote the Commonwealth.
The motion was made and seconded for adjournment. The Interim Joint Committee on Economic Development and Tourism adjourned at 2:50 p.m.