Call to Order and Roll Call
The 5th meeting of the Interim Joint Committee on Tourism, Small Business and Information Technology was held on Thursday, October 19, 2017, at 11:00 AM, in Wilmore, KY at Asbury University in the Andrew S. Miller Center for Communication Arts. The meeting was a joint meeting with the Interim Joint Committee on Tourism, Small Business, and Information Technology. 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; Senators Perry B. Clark, Denise Harper Angel, Ernie Harris, Stephen Meredith, Wil Schroder, and Reginald Thomas; Representatives John Blanton, Larry Brown, Matt Castlen, Jeffery Donohue, Chris Fugate, David Hale, Chris Harris, Dan Johnson, Kim King, Michael Meredith, Russ Meyer, Rick Nelson, Sannie Overly, Melinda Gibbons Prunty, Bart Rowland, John Sims, and Diane St. Onge.
Guests: Dr. Sandra Gray, President, Asbury University; Dr. Jim Owens, Dean of the School of Communication Arts and Professor of Media, Asbury University; Judge Terry Martin, Judge Executive, Hart County; Brandon Jennings, Director, Harlan County Tourism; David Cottingham, COO, Post Time Studios; Stephanie Stumbo, Executive Director, Kentucky Film Association; Deputy Secretary Regina, Kentucky Tourism, Arts and Heritage Cabinet; Jay Hall, Executive Director, Office of Film and Tourism Development, Kentucky Tourism, Arts and Heritage Cabinet; and Mary Ramer, President, Visit Lex.
LRC Staff: John Buckner, Chip Smith and Emma Mills.
Approval of Minutes
A motion to approve the minutes of the September 21, 2017 meeting was made by Representative Michael Meredith, seconded by Representative Larry Brown, and approved by voice vote.
Asbury University
Dr. Sandra Gray, President of Asbury University, gave a brief overview of the university after thanking members for continuing to invest in the progress and development of the Commonwealth. Asbury University was founded in 1890 and at the time was one of few institutions that admitted women. In the early 1900s, it began offering business and commerce courses which was uncommon during that period. Presently, half of the students come from out of state, and 16 percent of those students become Kentucky residents upon graduating. Dr. Gray commented on the recent partnership with The Kentucky Film Commission which has led to the creation of a certification program that will increase the labor force in the film industry. She extended the invitation to return the university at a later time to explore other programs besides the School of Communication Arts such as the equine program, The Howard Dayton School of Business, and the School of Education.
Dr. Jim Owens, Dean of the School of Communication Arts and Professor of Media Communication, stated that the School of Communication Arts has approximately 450 students majoring in programs such as journalism, theater and cinema production, worship arts, and media communication. Students majoring in media communication comprise nearly half of the School of Communication Arts. Media communication students have the opportunity to study areas of film, television, multi-media, media performance, media management, audio, and production design. Dr. Owens added that the academic excellence of the program can be attributed to a combination of education, experience, and industry recognition of the faculty that includes production design, sitcom directing for various networks, national Emmy awards, and prestigious honors for work on the National Geographic and Smithsonian channels. In addition, Dr. Owens also discussed the long term contract that the university holds with the Broadcast Division of the International Olympic Committee to provide broadcast training to students and personnel.
Kentucky Film and Digital Media Industry Efforts and Opportunities Across the Commonwealth
Judge Terry Martin, Judge Executive of Hart County, gave a local perspective of the economic impact seen in his area from the film tax incentives that the General Assembly approved in 2015. Several different projects have been filmed in Hart County and surrounding counties including one for the Hallmark Channel called An Uncommon Grace that added about $500,000 to the local area economies. Judge Martin attributed producers choosing to film in his area to the beautiful scenery, the hospitality of the residents, and the level playing field that was created by the tax incentives for film production. As a result of the successful completion of projects such as Mail Order Monster and Runaway Romance, the Southern Kentucky Film Commission was created by Hart, Barren, Warren, and Edmonson Counties to assist in attracting film producers to Southern Kentucky. Judge Martin explained that although the introduction of the film industry as a new form of revenue for the Southern Kentucky region is nontraditional economic development, it has the potential to add jobs in businesses that will be needed to supply materials and services to film production teams. In an effort to continue film industry development in the Commonwealth, a new infrastructure is needed, as well as the training of Kentuckians in order to provide a skilled film industry workforce. He suggested production studio being located in Southern Kentucky, internships and co-ops being offered to high school students, and training being done throughout the Kentucky Community and Technical College System.
Brandon Pennington, Director of Harlan County Tourism, also gave a local perspective of the possibility for film to be a viable industry in the state. Above Suspicion, which was a $13.5 million budgeted film and the largest budgeted film to come to Kentucky since Secretariat, was recently filmed in Harlan County. After learning that the movie would be filmed in Harlan County, the tourism officials and the community became dedicated to ensuring they were equipped with the proper resources, tools, and skills to be a film host. Mr. Pennington stated that the positive economic impact of being a film host can benefit local restaurants, hotels, law enforcement, laundry facilities, rental car companies, and even construction businesses. Residents also rented out their homes and were compensated for being extras in the film. Harlan County saw a $3 million economic impact during the filming of Above Suspicion. Displaced coal mine workers’ skills can also be funneled into the film industry by utilizing their talents as electricians, carpenters, and painters.
David Cottingham, COO of Post Time Studios, offered a film industry viewpoint by giving an overview of Post Time Studios. Post Time Studios is a full service production company that was established in Lexington in 1993. In 2003, it was one of the first production studios in the region to have a high definition editing system, which over the years led to an increased volume of clients and productions. Mr. Cottingham described the two factors he believes have made Post Time Studios successful. First, the studio considers their clients as partners and this allows for returning and continued business. Secondly, Post Time Studios is not industry specific and productions include a wide variety of projects in areas such as long form, short form, documentary film, marketing, training, safety, healthcare, tourism and athletics. Most of the talented staff that make these productions possible are natives of Kentucky and several are Asbury University graduates. In the last two years, the company has doubled its employees and moved into a larger facility. The new facility and increased staff has helped to attract larger budgeted productions. Mr. Cottingham expressed optimism about the current climate of the film industry in the state and will continue to develop in the future in part due to the film tax incentives. The incentives help with overall production plans, investments, and local spend; lock productions into longer contracts, which in turn can provide employment opportunities; and generate new tax revenue for the Commonwealth.
Stephanie Stumbo, Executive Director of the Kentucky Film Association, gave a detailed overview of Kentucky’s Film Tax Incentives, statistics and growth projections of the film industry since the incentives were passed in 2015, and industry needs. The purpose of the statutory provisions in KRS 148.544 was to encourage the film and entertainment industry to choose locations in Kentucky for filming and production, increase employment opportunities within the film and entertainment industry in the state, and develop a production and postproduction infrastructure in the Commonwealth. Since the start of the program in 2009 there has been a 900 percent growth in the number of productions coming to Kentucky. Additionally, after the modifications of the film tax incentives, 20 productions were completed in 2016 that generated $32 million in new economic activity, created 384 new jobs, and yielded approximately $3.2 million in new tax revenue for Kentucky. Thus far in 2017, there are 111 productions currently approved and there has been a 169 percent increase in growth from previous 12 months. Projections were completed by the Kentucky film Association for 2017 and 2018 using actual data from 2016 and taking into account variables such as percent of productions approved, percent of productions that are completed, production periods, and cost of projects. It is projected that 33 projects will be completed in 2017 that could potentially generate $86 million in new economic activity, create 1,038 new jobs, and yield $8.6 million in new tax revenue for the Commonwealth. It is projected that projects completed in 2018 could potentially generate $146 million in new economic activity, create 1,754 new jobs, and yield $14.6 million in new tax revenue for the Commonwealth. Ms. Stumbo said in order for the film industry to continue to thrive in the state the film workforce must be expanded to increase the crew base, dislocated workers must be retrained to maximize their skills that can be used in the industry, and an infrastructure must be more fully developed, specifically a studio being located in Kentucky.
Kentucky Tourism, Arts and Heritage Cabinet
Deputy Secretary Regina Stivers expressed her thoughts on the film industry providing great opportunities to dislocated workers and others across the Commonwealth. She also complimented Jay Hall, Executive Director of the Office of Film and Tourism Development, for learning the film industry and promoting Kentucky to producers.
According to Jay Hall, in the United States in 2016 there were a total of 455 original scripted shows and 718 films released nationwide. There are two million people employed in the film industry totaling around $51 billion in wages paid. Between 2011 and 2016 there was an annual growth of 2.7 percent and there is a projected growth from 2016 to 2021 of 3.1 percent. In Kentucky from 2009 to 2015, there was $16 million spent by the film industry that supported 192 direct jobs. The total investment made by the industry from 2016 to the present is $46 million that is supporting 552 direct jobs. The direct jobs include those that are working directly on the production itself and does not include the jobs that are from the ancillary industries that service the film communities.
The film industry in Kentucky will only be successful if it maintains three components which include film incentives, crew, and studios. The Kentucky Film Incentive is a 30 to 35 percent refundable tax credit. There is a 35 percent refundable tax credit for filming in an enhanced incentive county. Counties are certified or decertified every year based on factors such as unemployment rate and median income. Out of all the applications received to date by the Office of Film and Tourism Development, production companies have identified 60 out of 120 counties in Kentucky as potential film locations. The crew component is being fulfilled by developing the film industry workforce through the Kentucky Film Certification Program. The program was recently announced by Asbury University and consists of online training modules and hands on training at a local university or production company. The third factor involves constructing studios in the Commonwealth. Every $1 million in studio construction will support 10 jobs, have an economic impact of $1.6 million, and other businesses enjoy an additional $600,000 in sales. Every 100 jobs created by having studios supports 80 additional jobs in other businesses and has a $25 million economic impact. Mr. Hall said that some studios have had apprehension about locating in Kentucky in the past due to the lack of crew base and the uncertainty of the stability an incentive program. Benefits of a successfully developed film industry includes positive changes to the perception of Kentucky, an increase in film tourism, and potential city revitalization of film communities across the state.
In response to Senator Ernie Harris, Mr. Hall said the Office of Film and Tourism Development tries to post on its website and Facebook page the productions that have been filmed Kentucky. Judge Martin added that the Southern Kentucky Film Commission also posts about movies and others projects being filmed in the state on its website and social media accounts.
Answering questions from Representative Wilson Stone, Mr. Hall explained that the reason that only about 30 percent of approved productions actual come to fruition is ultimately due to issues with financing, crew base, and scheduling of actors. The two years window that was included in the film incentive legislation helps solve some of these issues. Ms. Stumbo stated that the 30 percent statistic is from 2016, the percentage will be higher from 2017, and the 2017 statistics will be available in 2018. She also stated that in an effort to increase the number of productions that film in the state, Jay Hall and the Office of Film and Tourism Development travel to and have lines of communication with directors, producers, and those who scout movie locations to promote the Commonwealth. The film commissions and associations also travel to market Kentucky.
Responding to Representative Kim King, Dr. Owens said that there are currently 15 students who are enrolled in the Kentucky Film Certification Program and the goal is to have approximately 100 individuals complete the program in the next year.
After Representative Chris Harris expressed concern about in-state corporations using the incentive program for the filming of commercials, Mr. Hall confirmed that Kentucky businesses do film commercials under the program. Ms. Stumbo stated that those in-state business commercials are included in the 111 currently approved projects. Kentucky has $12.1 billion in tax expenditures that includes incentives, tax deductions, and credits. The Kentucky Film Incentive Program accounts for a one hundredth of a percent of the total tax expenditures in the state. Answering a follow up question, Mr. Hall said that a full data set will be available for statistical analysis in July 2018 that will assist in determining how well the film industry has developed in the state since the implementation of the incentive program by the General Assembly.
Visit LEX
Mary Ramer, President of Visit LEX, gave updates on the status of the tourism industry in the Lexington area and several Lexington and Fayette County projects and expansions. The Lexington area currently employs about 26,000 in the hospitality industry and Ms. Ramer said she expects that number to increase in the future. For every dollar that the Department of Tourism spends on advertising the return on investment is $151 back to the state. Ms. Ramer said that that the areas of tourism and economic development often work together and she works closely with the city of Lexington, Commerce Lexington, and the universities.
The Lexington Convention Center Expansion is moving forward partly due to the 2015 legislation that loaned $60 million for its expansion. Construction will start in spring 2018 and is scheduled to be complete in about 45 months. The expansion will include an additional 100,000 square feet of contiguous exhibit space and 25,000 square foot ballroom. The Old Fayette Courthouse is currently being renovated with an expected completion date being in 2018 and will house administrative offices and a visitors’ center for Visit LEX, offices for Breeders’ Cup, and a restaurant. Construction for Centerpointe in downtown Lexington is also underway and will include a Residence Inn, a full-service Marriott, restaurants, and retail space. Ms. Ramer also detailed the planning of a park called Town Branch Commons that is slated to have an event space, amphitheater, several children’s play areas, dining options, and a water feature. Town Branch Commons is privately funded. Near the park will also be Town Branch Greenway, which will be almost three miles of greenway and has been supported through public funds.
The hospitality industry uses occupancy, average daily rate, and revue per average room for market analysis. For 2017 year to date, all three of these areas have increased from previous years’ statistics. The revenue per average room is up 5.7 percent. Lexington as a total of 7,790 hotel room spread out through 70 properties. Seven new hotels are scheduled to open in Fayette County between now and 2023. Ms. Ramer expressed her appreciation for the continued support of the legislature for its support of the tourism industry.
With no further business to come before the committee, the meeting was adjourned at 12:40 p.m.