The 5th meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, October 23, 2008, at 9:00 AM, at Bluegrass Station, Lexington. Senator Alice Forgy Kerr, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Eddie Ballard, Co-Chair; Senators Julie Denton, Denise Harper Angel, and Gary Tapp; Representatives Royce W. Adams, Kevin D. Bratcher, Larry Clark, Will Coursey, Mike Denham, Ted Edmonds, Jim Gooch Jr., Keith Hall, Mike Harmon, Melvin B. Henley, Dennis Horlander, Joni L. Jenkins, Dennis Keene, Thomas Kerr, Adam Koenig, Brad Montell, Tim Moore, Ruth Ann Palumbo, Don Pasley, Ancel Smith, John Will Stacy, Tommy Thompson, Robin L. Webb, and Alecia Webb-Edgington.
Guests: Major General Stephen Collins (Retired), Director, Bluegrass Station; Roger Fries, President and Chief Executive Officer, Kentucky Employers’ Mutual Insurance Authority; Bob Quick, President and Chief Executive Officer, Commerce Lexington, Inc.; Len Heller, Vice President, Commercialization and Economic Development, University of Kentucky; Anthony Wright, Economic Development Officer, Lexington/Fayette Urban County Government; and Tony DeName, Director, Division of Unemployment Insurance.
LRC Staff: John Buckner, Committee Staff Administrator; Karen Armstrong-Cummings; Louis Pierce; and Dawn Johnson.
A quorum being present, the meeting was called to order. A motion and second by Representative Palumbo and Representative Harmon to approve the minutes of the September 18, 2008 meeting passed by voice vote.
Co-chair Kerr and Co-chair Ballard thanked all those involved for the use of Bluegrass Station and welcomed everyone to the joint meeting of the Interim Joint Committee on Economic Development and Tourism and the Interim Joint Committee on Labor and Industry.
Major General (MG) Stephen Collins (Retired), Director of Bluegrass Station, welcomed members and provided background information on the facility. The mission of Bluegrass Station (BGS) is to contribute to the socioeconomic impact on central Kentucky. Built in the 1940s, the 13-building, 2.2 million square foot facility sits on 291 acres, with approximately 274 acres available for future usage. Formerly an army depot, the facility was turned over to the Commonwealth in 1994 and re-named Bluegrass Station. This year, the final deed relinquishing all buildings and land to the state will be recorded. The facility is self-funded by tenants and receives no state funds. Eighty percent of the facility is occupied by government agencies. BGS leases to 27 commercial and eight residential tenants, with three anchor tenants generating 80 percent of the revenue. The occupancy rate is 130 percent with BGS leasing offsite space to meet demands. MG Collins said there are 2,040 tenant jobs with an annual payroll of $102 million.
MG Collins said BGS recently invested $11 million in new hangers. He noted that the original infrastructure is aging and must be replaced. State guaranteed infrastructure bonds of $4.4 million were issued for this purpose. MG Collins noted that any capital construction projects over $600,000 are overseen by the state. He explained that current challenges facing BGS include increasing facility size for customers to avoid off-site leasing, improving security, repair and renovation of roofs, bringing sprinkler systems up to code, completing the infrastructure upgrade, improving energy usage, and creating the Information Enterprise for BGS.
Next, Bob Quick, President and CEO of Commerce Lexington, Inc., Len Heller, Vice President, Commercialization and Economic Development, University of Kentucky, and Anthony Wright, Economic Development Officer, Lexington Fayette Urban County Government discussed the Bluegrass Business Development Partnership. Mr. Quick announced that the group recently received an award for “Partnership of the Year” from the International Economic Development Council.
Mr. Quick explained that although most economic development efforts previously were funded primarily by the private sector, in 2008, the city increased funding efforts dramatically. Mr. Quick provided an overview of the partnership. He said that it is a one-stop source for business and financial plans, loan program and tax incentive information, funding source assistance, access to service providers (accountants, lawyers, marketing, public relations, and advertising), real estate information, mentoring and university commercialization opportunities. For existing business retention and expansion, the partnership calls on 150 businesses annually to foster relationships and build trust. Workforce development initiatives include connecting businesses with higher education institutions to increase graduate retention in the Commonwealth and promoting minority business development. Mr. Quick explained that 60 percent of the group’s efforts are focused on entrepreneurial support through expanding venture and angel capital, creating clusters to retain and attract the best workers, promoting technology start-ups and supporting UK’s Entrepreneurs’ Club. The partnership also focuses on business recruitment through select trade shows, direct mail, and advertising. Emphasis is placed on strategic economic development partnerships and marketing Blue Grass Business Park. He said the Cabinet for Economic Development is also an instrumental partner.
Mr. Quick said the BBDP targets university alumni networks, automotive parts suppliers, high-tech manufacturing, technology-based businesses, equine associations, biotech and pharmaceutical companies. Mr. Quick noted that in fiscal year 2007-2008, 932 clients were served, $49,050,000 was received in funding with $25,000,000 in capital investments, 730 jobs were created, and 2,840 attended conferences.
Len Heller, Vice President, Commercialization and Economic Development, University of Kentucky, provided an overview of the process of intellectual property development. He explained that Dr. Lee Todd’s vision for UK is moving research to the marketplace which, in return, will drive statewide economic development. Mr. Heller said the university currently has 300 active patents in areas such as drug development and design, plant biotechnology, equine health, and medicine. Mr. Heller said that the highly successful state SBIR/STTR program, which provides funding matches for the commercialization of scientific projects that come from UK, has already depleted its funds for the current fiscal year.
Mr. Heller stressed the importance of venture capital in growing and keeping jobs in Kentucky. He said venture capital firms in other states, including California and New York, seek potentially successful start-ups here, invest millions, and then move them out of state. He explained that the BBDP links central venture capital funds and large funds on the east and west coast.
Mr. Heller explained the history of venture capital and angel investment. He said angel investors are private investors who look at all types of promising ventures for investment opportunities. Because angel investors and venture capital firms provide capital infusion to businesses in their earliest inception, they are invaluable in that they provide assistance where traditional lending institutions may be reluctant to do so.
Mr. Heller then discussed the growing importance of university research to businesses. He explained that Hewlett-Packard recently purchased Extreme Software in Coldstream Research Park and has plans to move more staff to the Coldstream location. He explained that Coldstream is 80 percent occupied with over 50 companies and approximately 1,000 employees. He said 600,000 square feet are leased and construction of 230,000 square feet of additional space is underway. Coldstream is funded through private investors and developers. The ultimate goal is to obtain funding through the private sector and avoid using university funds.
Anthony Wright said Lexington/Fayette County Economic Development Office understands that speed to market is important and this is accomplished through working with the BBDP and the Chamber to serve clients.
Representative Moore asked if companies reimburse the universities for R&D costs. Mr. Heller said there are contractual agreements. Mr. Quick added that the University of Kentucky is known worldwide for their quality and extensive research.
A motion was made and seconded to adjourn, and the meeting concluded at 10:30 a.m.