Call to Order and Roll Call
The 1st meeting of the Task Force on Economic Development of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, September 15, 2016, at 10:30 AM, at Shelby Valley High School in Pikeville, Kentucky. Representative Ruth Ann Palumbo, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Ruth Ann Palumbo, Co-Chair; Senator Ernie Harris; Representatives George Brown Jr., Daniel Elliott, Terry Mills, John Short, Wilson Stone, and Russell Webber.
Guests: Representative Chris Harris and Tony Toups, Advantage Capital Partners.
LRC Staff: John Buckner, Chip Smith, and Karen Brady.
Representative Harris explained the importance of his proposed legislation, the Kentucky Rural Jobs Act, which he believes will help foster economic progress in not only eastern Kentucky, but all of rural Kentucky. A void has been created in small rural communities across Kentucky by the reduction of the number of small community banks, thereby reducing the amount of capital available to local entrepreneurs. The bill is modeled after the highly successful New Markets tax credit program but will focus on rural jobs instead of urban areas.
Mr. Tony Toups, Principal, Advantage Capital Partners stated that access to capital for small businesses in rural areas has dropped off tremendously. This trend can be seen by the decline in employment and decline in business financing. Most significantly, over 20 percent of community banks have disappeared in the last five years alone. This lack of access to capital has created both a challenge and opportunity.
Mr. Toups stated that the rural jobs credit will be set up similar to New Markets. Federal licensing will apply, with either a license from the USDA to be a rural business investment company or a license from the SBA to be a small business investment company. The tax credit is structured in a way so that it does not negatively impact the general fund. It is a seven year credit; during the first two or three years, the credit is delayed. One hundred percent of the capital must be invested in the first two years.
To be an applicant fund, the application to the Department of Revenue has to demonstrate revenue positive. If an applicant does not meet projections, there are back-end penalties. When the initial investments are made, reports will be filed with the Department of Revenue showing the companies receiving the capital, the amount of the capital, who the investors are, and then annual follow up reports to show job creation, job retention, and economic impact.
Responding to a question from Representative Stone, Mr. Toups said there is no minimum number of employees for a small business to qualify for the tax advantage.
There being no further business, the meeting was adjourned at 10:53 a.m.