Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, September 15, 2011, at 1:00 PM, in Room 154 of the Capitol Annex. 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 Leslie Combs, Co-Chair; Senators Jared Carpenter, Julie Denton, Denise Harper Angel, Ernie Harris, Tim Shaughnessy, and Kathy W. Stein; Representatives Julie Raque Adams, John "Bam" Carney, Jim DeCesare, Mike Denham, Bob M. DeWeese, Myron Dossett, Ted Edmonds, Jim Gooch Jr., Jeff Greer, Keith Hall, Mike Harmon, Melvin B. Henley, Wade Hurt, Thomas Kerr, Kim King, Adam Koenig, Donna Mayfield, Tom McKee, Terry Mills, Fred Nesler, Ruth Ann Palumbo, John Short, Fitz Steele, Wilson Stone, and Addia Wuchner.
Guests: Mike Mangeot, President and Chief Executive Officer (CEO), Kentucky Association for Economic Development; Kevin Sheilley, President and CEO, Northwest Kentucky Forward; Mark Mangeot, Legislative Liaison, and Ron Brooks, Director, Division of Fisheries, Kentucky Department of Fish and Wildlife Resources.
LRC Staff: John Buckner, Louis DiBiase, and Dawn Johnson.
Approval of Minutes
A motion and second by Representatives DeCesare and Combs to approve the minutes of the July 21 meeting passed by voice vote. A motion and second by Representatives Greer and Hall to approve the minutes of the August 18 meeting passed by voice vote.
KentuckyUnited
Mike Mangeot, President and CEO of the Kentucky Association for Economic Development (KAED) said the purpose of the statewide nonprofit association of economic development professionals, service providers, and government agencies is to provide education opportunities, networking, and legislative advocacy. KentuckyUnited, a program of KAED, was created as a marketing tool for economic development. The program was created to address concerns about Kentucky’s ability to market itself and compete with other states in recruiting economic development projects. Other states, including Texas, Indiana, and Georgia, have significantly increased funding of their economic development marketing initiatives. KAED contracted with a research company to identify shortcomings of Kentucky’s current economic development approach by contacting partners and site consultants, and speak to companies that had approached the Cabinet for Economic Development (CED) but decided against locating in Kentucky. Executive interviews of over 100 individuals were conducted. The research concluded that the state’s top competitors were Tennessee, North Carolina, and Georgia. The three main reasons those states were chosen over Kentucky were location, costs, and aggressive incentives and marketing. When rating Kentucky, many said they could not rate Kentucky because they did not know enough about the state to offer an opinion. The research also concluded the most effective marketing tool was personal visits.
KentuckyUnited’s mission, Mr. Mangeot said, is to create a program to dynamically and aggressively market Kentucky to key business decision makers nationwide. KentuckyUnited’s goals are to increase awareness of Kentucky as a business location, provide cost effective marketing and sponsorship opportunities for local organizations that may not have large marketing budgets, and increase the number of prospects interested in Kentucky. Mr. Mangeot explained the program’s four partner levels. He noted that partners are now asked for a three-year commitment. A basic tenet of the program is to market the state as a whole rather than specific areas or businesses. Target audiences are site consultants, companies interested in expansion or relocation, existing Kentucky business affiliates, and entrepreneurial and fast growth companies.
KentuckyUnited has contracted with 310 Ltd. of Virginia for economic development prospect identification and to vet appointments. They identify 25 to 30 prospects per month. Kentucky United marketing strategies also include luncheons, bourbon tastings, event sponsorships, and in-state visits by key decision makers. Thus far, the program has resulted in nearly 300 face-to-face meetings, more than 75 additional contacts with site consultants through KentuckyUnited events, and an overall increased awareness among target audiences. Future activities include two regional in-state events, continued recruitment of top company sponsorships identification of additional marketing opportunities, and increased opportunities for smaller communities to participate.
Kevin Sheilley, President and CEO of Northwest Kentucky Forward, a regional economic group representing Henderson, Union, Webster, and McLean counties, explained how his agency benefits from being a KentuckyUnited member. He said marketing through the program far exceeds what Northwest could do independently.
Responding to Representative McKee’s question, Mr. Mangeot said rural counties with smaller budgets can partner, combine resources, and become a higher level program sponsor. Also, the program is being restructured to better help smaller communities do more. This will be most apparent with in-state events.
In response to Representative Harmon’s question, Mr. Mangeot said he was uncertain whether sponsorship dues were tax deductible but noted that KAED dues were partially deductible as a marketing expense.
Responding to Representative DeWeese’s question on what would improve Kentucky’s economic development competitiveness, Mr. Mangeot said issues he would like to see the 2012 General Assembly address are right to work, the business inventory tax, and the corporate and personal income tax. He noted that the trade-offs–higher sales tax and a local option sales tax–could be problematic as well. Kentucky’s tax system is competitive in some areas and not in others. Mr. Sheilley added that simplification of the business setup process and education are major concerns. Mr. Mangeot said Kentucky’s low energy costs are a competitive advantage, especially in manufacturing.
In response to Representative Stone’s questions, Mr. Mangeot said KentuckyUnited does not currently have a role in retaining existing businesses other than what is involved with company expansion. Business retention is left to local organizations and the Cabinet for Economic Development.
Responding to Representative Gooch’s question, Mr. Mangeot said timelines vary greatly between first contact and “shovel ready” projects. Mr. Sheilley added that the economic downturn has resulted in companies going through the process and then placing projects on hold. He estimated 20 to 25 Kentucky projects are currently on standby due to the economy.
Representative Gooch noted that new Environmental Protection Agency (EPA) regulations have the potential to increase utility rates by 40 percent or more. Responding to his concern on how this may affect businesses, Mr. Sheilley said manufacturers are aware of the EPA changes and the potential impact they may have nationwide.
Responding to Representative Julie Adams’ question, Mr. Mangeot said after a site visit by KentuckyUnited representatives, the Cabinet for Economic Development will follow up with the state’s incentives packages. He said KentuckyUnited is working with the cabinet to streamline the process.
Responding to Representative Dossett’s question on suggestions for the legislature, Mr. Sheilley said streamlining the process is the main request he has received from businesses. Mr. Mangeot said he would suggest the possibility of a local option sales tax. He noted the success of Texas’ local option sales tax and economic development program. He said KAED is also working on this for the 2012 session.
Representative Henley said there is a lot of misinformation on “green energy” and suggested it is not as cost effective when all expenses are considered.
Asian Carp Processing Facility
Mark Mangeot, Legislative Liaison for the Department of Fish and Wildlife Resources said it will take a concerted effort to handle the Asian carp invasion. Not only does it affect the environment, but tourism and economic development suffer the effects as well.
Ron Brooks, Director of the Fisheries Division, provided background on the Asian carp and their introduction into the United States. Carp have been cultured in China for at least 2,000 years and are a major food item in China. They were brought to the U.S. as a food product and as a solution to pond nutrification problems and overnutrified tertiary treatment plants. The fish escaped their confines during flooding in the late 1970s and entered the Mississippi River basin. They competed with native fish species for food and began dominating other species. Asian carp are in the Ohio and Mississippi Rivers as well as their tributaries.
Mr. Brooks said Asian carp are a danger to boaters as well. Vibrations in the water cause by boats make them jump, strike boaters and skiers. This has the potential to affect tourism in Kentucky’s lakes. Giving an example of their numbers, Mr. Brooks explained that during a 2009 Kentucky Lake study on paddle fish, over 5,000 pounds of Asian Carp were caught in one day by one fisherman.
Mr. Brooks explained his efforts of creating a processing facility in Wickliffe, Kentucky. The facility must be large enough to become a profitable exporter to China. Existing processing facilities in other areas lack storage space. Currently, there are four fish processors interested in the Wickliffe facility. He noted that negotiations with economic development representatives and Chinese businessmen have them within $700,000 of reaching an agreement on a processing facility. The facility will create up to 20 new jobs. One facility can process up to 50,000 pounds of Asian carp per day. The eventual result would be carp control. To address government concerns of perpetuating the Asian carp market, Mr. Brooks said an Asian carp restricted waters regulation proposal was passed recently that prevents this. It allows government entities to work with commercial fishermen by allowing controlled fishing and to develop measures to avoid hurting the sport fishing industry. He said the facility would also lead to a fish meal market. He noted that Chinese businesses are interested in other rough fish species as well. Once the Asian carp population is reduced, the program can transition to rough fish. Mr. Brooks noted how dire the Asian carp issue is. He said a $1 million investment in the facility by the state is a onetime investment with economic, tourism, and agriculture returns.
Responding to Representative Nesler’s question, Mr. Brooks said the Graves County aquaculture facility has not been considered. Representative Nesler explained that the legislature provided funding to the catfish facility 10 years ago but the facility closed. He suggested it be considered.
Responding to Representative Wuchner’s question Mr. Brooks said that transportation is included as part of the cost of the facility.
Mr. Brooks said he has been working on state, regional, and national levels to set up processing facilities to address the growing Asian carp problem. He noted with the mass spread of fish, more states will need to get involved.
There being no further business the meeting adjourned at 3:00 PM.