Interim Joint Committee on Tourism, Small Business, and Information Technology

 

Minutes of the 1st Meeting

of the 2017 Interim

 

June 7, 2017

 

Call to Order and Roll Call

The 1st meeting of the Interim Joint Committee on Tourism, Small Business, and Information Technology was held on Wednesday, June 7, 2017, at 10:30 AM, in Ballroom B of the Northern Kentucky Convention Center. Representative Diane St. Onge, Chair, called the meeting to order, and the secretary called the roll.

 

Present were:

 

Members: Senator Alice Forgy Kerr, Co-Chair; Representatives Diane St. Onge, Co-Chair, and Tommy Turner, Co-Chair; Senators Ernie Harris, Wil Schroder, Reginald Thomas, and Max Wise; Representatives Larry Brown, George Brown Jr, John Carney, Matt Castlen, Jeffery Donohue, David Hale, Angie Hatton, Richard Heath, Dan Johnson, Michael Meredith, Robby Mills, Melinda Gibbons Prunty, Steven Rudy, and John Sims Jr.

 

Guests: Casey Barach, Director, Kentucky Innovation Network at Northern Kentucky; Steve Parker, Commissioner, Dept. of Aviation, KY Transportation Cabinet; Todd Bloch, Deputy Commissioner, Dept. of Aviation, KY Transportation Cabinet; Glenn Anderson, UAS Engineer Department of Aviation, KY Transportation Cabinet; Jay Fossett, Principal, Strategic Advisers LLC; Eric Summe, President/CEO, MeetNKY/Northern Kentucky CVB; Jack Moreland, President, Southbank Partners.

 

LRC Staff: John Buckner, Chip Smith, and Emma Mills

 

Kentucky’s Angel Investor Tax Credit Program

Casey Barach, Director of Kentucky Innovation Network at Northern Kentucky presented “Kentucky’s Angel Investor Tax Credit Program – An Economic Development Success” with a focus on the entrepreneurship benefits of the Angel Investor Tax Credit Program. Director Barach reviewed three tenants of successful economic development:

 

·                    Attracting business to the region

·                    Retention & Expansion of business

·                    Entrepreneurship

 

To foster a successful Entrepreneurship Ecosystem, it is important to have key components: policy, finance, culture, supports, human capital, and markets. The Angel Investor Tax Credit focuses on cultivating the finance, or investment capital, component in Kentucky. Director Barach noted that prior to the enactment of the Angel Investor Tax Credit, Kentucky based businesses and start-ups tended to leave the state in search of investment capital. He feels the passage of the Angel Investor Tax Credit program in 2014 was a game changer for investment in Kentucky businesses.

 

Since 2014, Kentucky has developed a vibrant and robust entrepreneurship ecosystem throughout the Commonwealth. The purpose of the Kentucky Angel Investment Tax Credit program is to encourage qualified individual investors to make capital investments in Kentucky small businesses, create additional jobs, and promote the development of new products and technologies. Qualified individual investors making qualified investments in qualified small businesses may be eligible for incentives in this program. The Commonwealth, through KEDFA (Kentucky Economic Development Finance Authority), allocates the income tax credits to qualified investors.

 

As evidence of the popularity of the program, Director Barach pointed to the increase in pace of approved tax credits by KEDFA. In 2015, $3 million in annual allocated tax credits were approved over a span of eight months. In 2017, all $3 million in tax credits were approved in one month. In addition, when the program started, Director Barach said there were only a few registered investing “Angels”, mostly in the Lexington area, but as of 2017 there are 380 registered Angels investing in 85 companies with a total of 384 investments made. Some companies benefitting from the program include Wyzerr, Inc., an online survey building company; Paper Water Bottle, an eco-friendly packaging company; and Bexion Pharmaceuticals, a pharmaceutical company focusing on Cancer research.

 

Director Barach believes the next step for the program is educating people across the state. He would be willing to speak to the success of the Angel Tax Credit Program throughout the Commonwealth. Additionally, in order to continue the program’s success, he would like to address the program funding issue, which draws from a pool of funds that may run out in two years. He feels that annual funding may be more appropriate.

 

In response to a question from Senator Wil Schroder, Director Barach confirmed some investors in the program do come from out-of-state, such as from the Cincinnati area. Out-of-state investors could then sell the resulting tax credit.

 

Responding to a question from Representative Angie Hatton on how to expand the program, such as to Eastern Kentucky, Director Barach believes the best way to utilize the program is through educating investors throughout Kentucky about the program.

 

Aviation is Rockin’ Kentucky! General Aviation’s Impact on Economic Development

Steve Parker, Commissioner, Department of Aviation, KY Transportation Cabinet; Todd Bloch, Deputy Commissioner, Department of Aviation, KY Transportation Cabinet; Glenn Anderson, UAS Engineer, Department of Aviation, KY Transportation Cabinet presented “Aviation is Rockin’ Kentucky! General Aviation’s Impact on Economic Development” to highlight Kentucky’s importance to the nation in aviation innovation and expansion.

 

Commissioner Parker discussed the expansions taking place at CVG (Cincinnati/Northern Kentucky International Airport). DHL’s recent $108 million expansion of its cargo hub at CVG has resulted in 900 additional employees. Amazon, as well, recently announced a $1.4 billion investment to build its primary hub with CVG, which will support more than 100 Prime Air cargo planes. Additionally, Southwest Airlines announced began offering 55 weekly flights from CVG in early June. He believes these expansions will be an economic boon for the greater Northern Kentucky area, similar to what happened in Louisville after the UPS expansion. Additionally, the number one export from the state of Kentucky is aerospace aviation parts and components.

 

The Commissioner also highlighted aerospace initiatives being developed through state university education programs. For example, Morehead State University’s Space Science Center has become an important center for research in nanosatellite technologies. In partnership with NASA, Morehead has developed a nanosatellite with a research mission to find ice on the Moon.

 

Commissioner Parker pointed out to the committee that the General Assembly and Governor helped tremendously by allocating $10 million from the General Fund for fiscal year 2017-2018. He notes by doing that, they have changed the face of general aviation in Kentucky for a decade. The $10 million helped catch up deferred maintenance on the general aviation airports across the state. The Department of Aviation will also be requesting an additional $10 million per year until FY 2019-2020, which he believes could change general aviation in Kentucky for a generation.

 

The Department of Aviation is responsible for 59 airports in Kentucky, 53 of which are general aviation airports. The department is also responsible for 250 private airfields and heliports in Kentucky. In relation to Unmanned Aircraft Systems (UAS or drones), the department has also been designated the state government clearing house for all drone related activity. In practical terms, the department meets with a multi-cabinet working group that reviews aviation issues around the state, builds drones in-house to provide assistance other state departments and actively recruits UAS/drone related businesses to Kentucky. The department is also responsible for training state employees to fly drones safely and successfully according to FAA rules. The Commissioner’s goal is to have five to seven drone pilots and enough equipment in the department to provide drone aerial coverage to state entities in need of assistance. One example of new UAS/drone related opportunities coming to Kentucky is the new USA Drone Port in the Hazard area where companies can test and make drones. The port will also be used as a training facility to learn how to fly drones according to FAA rules.

 

Commissioner Parker also wants to impress upon the General Assembly the need to pass responsible legislation regarding drones. He notes there are a lot of states passing anti-drone legislation branding them as unfriendly UAS-business states. The Commissioner advises to not consider such legislation, but would advise the creation of an aviation caucus to advance Kentucky’s aviation enterprises.

 

In response to a question from Representative Carney, Commissioner Parker discussed aviation education in the K-12 school system. He points out there are 37 high schools in Kentucky teaching aviation as part of their curricula. Kentucky has been recognized by the Aircraft Owners and Pilots Association as having the best high school aviation education program in America. He brought up the problem of the National Air and Space Education Institute based out of Bowman Field that was an intrinsic support to the

37 high school aviation programs in Kentucky. It had a financial model that was unsustainable and went out of business. Commissioner Parker has been working extensively with legislators and universities to try to save the program by some other means.

           

Responding to a question from Representative George Brown regarding Bluegrass Airport in Lexington lagging behind Northern Kentucky and Louisville, Commissioner Parker acknowledged some of the limitations of the airport, such as the inability to lengthen the runways or expand additional runways due to the location of the airport. He did highlight other ways the airport is progressing, such as a new fueling hangar and through education outreach programs.

 

Riverfront Commons Story Map

Updating the committee on the Northern Kentucky Riverfront Commons Story Map were Jack Moreland, President of Southbank Partners, Jay Fossett, Principal with Strategic Advisers LLC, and Eric Summe, President/CEO of the MeetNKY/Northern Kentucky CVB. Mr. Moreland welcomed the committee to Northern Kentucky and explained that Southbank Partners is a non-profit organization that does economic development for six cities along the Ohio River, Ft. Thomas, Dayton, Bellevue, Newport, Covington and Ludlow with an inter-local agreement to develop the riverfront in all of these communities. Riverfront Commons is intended to be an 11 mile walking and biking trail along the riverfront lined with businesses and shops to attract tourism to Northern Kentucky. A thorough explanation of the project was presented in a video to the committee.

 

Following the presentation, Jay Fossett reviewed the interactive website for the Riverfront Commons project (http://nkyriverfrontcommons.com/). The website highlights existing trails, future trails and trails under construction along with amenities in the area, all of which will be interconnected.

 

Eric Summe continued the presentation with how this trail system will connect with the Northern Kentucky Convention Center in attracting tourism and conventions to the area. He noted the Convention Center has already booked a convention in 2024. The interactive website acts as a useful tool to show perspective convention planners what the Riverfront Commons will look like once the trail construction is completed. Mr. Summe noted the economic impact of a convention involving 300-400 people for 3-4 days could bring in $500,000 in visitor expenditures. The website will also be updated as construction is completed.

 

Adjournment

There being no further business, the meeting was adjourned at 12:02 p.m.