Economic Development

Economic Development, Faster Lane, Workforce Development

MRGLSI 2016: Talent attraction today’s economic key

Louisville must draw immigration, especially international, to fill skilled jobs for native business

MRGLSI-2016-300x402

There is no silver bullet for building a robust, regional economy. If there was a clear path to success, then everyone would be following it. That’s simply not the case. It takes investment from business leaders, elected officials and the community as a whole to create a vibrant environment in which people want to work and live. The key ingredient however is clear: It’s skilled people.

The people who comprise a community are what make it go and grow. It’s time we started investing in them and bringing more talented people into Kentucky and Greater Louisville, as well as improving retention of skilled folks already here. Talent attraction is an issue facing communities across the country.

A shortage in qualified workers is one of the top complaints of GLI members. Since the economy rebounded, there are thousands of open high-wage jobs in Greater Louisville. Finding the right people to fill them is more difficult than ever.

In 1Q16, Greater Louisville had more than 8,800 job listings for positions requiring a bachelor’s degree or higher level of education. Those open high-skill jobs carried a mean salary of $79,000, which means that we are missing out on over $700 million in economic impact. When openings include associates degrees and skilled trades, the number of open positions more than double.

Increasingly, businesses are looking to economic development partners to help them recruit. It’s a complicated issue, but one we are ready to tackle.

Oftentimes, we hear that businesses do not have a great way to sell our region to job candidates and their families. Corporate recruiters will say they are good at selling their company, but not as prepared to sell their community.

It’s not just a job that will make someone move. They need to feel like they know the community to which they are relocating. Will there be a good place to meet people who share similar interests? What are the quality of life amenities? How is the traffic? Which neighborhood is right for me? These are vital to someone deciding to relocate, specifically millennials.

In the past five years, our inbound migration of that generation has been 4 percent, compared to 15 percent in places like Nashville. Clearly we must do better.

Strategies around attracting talent are as important as efforts to attract businesses. GLI is working on a number of strategies to support interested newcomers. Strategies like our Talent Ambassador Initiative; our talent toolkit; and our efforts around entrepreneurship.

We are creating an ambassador program that recruits corporate representatives, family members, college roommates and others to be an extension of Greater Louisville.

To assist them with this task, GLI is building an online talent toolkit offering information on career opportunities, real estate and a view into life in the area. It even has a cost of living calculator. This toolkit offers tangible information that helps us sell ourselves.

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A shortage in qualified workers is one of the top complaints of Greater Louisville members. (Brett Hait)

For the next year, GLI also will be focused on recruiting talented international professionals. Data shows that communities that have international migration are growing their talent base at a much faster pace. Louisville added a net 6,367 people to its population over the past five years thanks entirely to the inbound migration of international people.

We need to step up the game-plan for supporting and recruiting international talent to the area. Many times, these professionals are ready to step into jobs in the engineering and healthcare sectors. We need to support their transition and help them integrate into communities.

In addition to recruiting and growing talent, GLI believes that growing entrepreneurs creates a new pool of talent. GLI is known for its support of local start-up companies and while we grow businesses, we are growing new pools of talent focused on innovation. In the first quarter of this year alone, EnterpriseCorp, the entrepreneurial arm of GLI, helped five early-stage companies secure $2.79 million in funding.

There is a lot to do around this talent attraction and retention challenge, and GLI plans to be the loudest and most aggressive we have ever been on this issue. We will rally companies to join our efforts and we will inspire friends and family to be an extension of our cause. Together, we can bring our sons and daughters home. We can recruit friends who have never thought of living here before. And we can transform our population growth to serve companies and better our community. It’s a communal effort and we accept the calling.

Economic Development, Features, Features, January 2016, Technology, Workforce Development

Now Entering Silicon Holler

Two of the poorest and most rural counties in the state, and country, also have some of the fastest Internet service

Two of the poorest and most rural counties in the state, and country, also have some of the fastest Internet service

How fast is your Internet download speed? Twenty megabytes per second? Thirty? A hundred? If your download speed exceeds 100 mbps, you’re zooming past most of the rest of the nation. The national average Internet speed as measured by cloud service provider Akami in its 2015 State of the Internet report was 11.9 mbps. Worldwide, the average speed was 5 mbps. In rural areas, speeds are generally considerably slower, if there is service at all.

Cruising the Internet at those speeds in Jackson County or Owsley County, however, will get you run off the information superhighway. Those two counties – two of the poorest and most rural counties in the United States – have some of the fastest Internet speeds in the world: up to 1 gigabit per second.

And it’s not just in a handful of places in Jackson and Owsley counties. Thanks to a six-year, $50 million effort to run fiber optic cable throughout its service area, the People’s Rural Telephone Cooperative (PRTC), based in McKee in Jackson County, can deliver that 1 gigabit or 1,000 megabytes per second Internet speed to every home, business and school in the two counties.

Keith Gabbard, CEO,  People’s Rural Telephone Cooperative

Keith Gabbard, CEO,
People’s Rural Telephone Cooperative

Keith Gabbard, chief executive at PRTC, told a crowd gathered Oct. 22 for a “Gig launch ceremony” that PRTC had been in the fiber business for some time before deciding in 2009 to go with an all-fiber network.

“As of now, 100 percent of our customers have fiber available,” Gabbard said. “Every home and business has a fiber connection, or can have one. What we’ve done here is pretty impressive because we have it to every single home and business, not just in this town (McKee), but to every place to the farthest holler out. Everyone has the same capability.”

Fiber optic cables transmit data via pulses of light sent through glass or plastic strands slightly larger than the diameter of human hair. Traditionally data has been carried via copper wires that conduct electricity. In the early days, of course, the only “data” carried was voice data. With the growth of the Internet, phone lines and dial-up modems gave way to coaxial cable and high-speed routers. Coaxial cable is a thicker copper wire surrounded by insulation, like the one that probably runs to your modem or cable box. Ethernet cables like the one connecting your computer to your network contain copper strands that carry the data.

From copper to fiber, step by step

Copper tends to experience electrical leakage and is subject to electromagnetic interference, however, and its bandwidth – a measure of how much data it can carry – is less than fiber optic cable. Copper also needs a more extensive network of junction boxes to boost the signal as it travels over long distances.

On the downside for fiber, most computers are built to handle copper connections. Since any connection is only as fast as its slowest point, having fiber optic cable run up to your home or business only helps to the extent that the equipment inside the walls is maximized for speed. That said, the higher bandwidth of fiber optic cable means you can have a lot more going on inside your walls – a business, for example, could have multiple simultaneous videoconferences, multiple large data downloads, an entire phone system – and the outside wires can handle the traffic.

It wasn’t that long ago, relatively, that Jackson and Owsley counties had no phone service at all. The PRTC was formed in 1950 and used money available in the form of low-interest loans through the federal Rural Electrification Administration to construct a telephone network. Customers were owners of the business, and profits went to pay off the loans.

In an interview, the PRTC’s Gabbard said over the years the cooperative replaced and expanded the copper network repeatedly as the population grew and spread. The updating and maintenance were constant, he said, and as Internet use grew the PRTC heard from customers that they wanted better service.

In the 1990s, PRTC partnered with four other small Eastern Kentucky companies to form Appalachian Wireless. As part of the effort to build that cellular network, a 375-mile ring of fiber optic cable was installed. Fast forward to the mid-2000s. As PRTC considered ways to upgrade its Internet service, that fiber optic cable looked like a pretty good starting point.

The PRTC funded construction of its fiber optic network through a combination of timely grants from the Rural Utilities Service arm of the U.S. Department of Agriculture, loans, stimulus money from the American Recovery and Investment Act of 2009 and the PRTC’s own capital. After spending $50 million to complete the project, PRTC has about $19 million in debt outstanding. Money to pay that back will come from user fees, as well as the successful Appalachian Wireless business, Gabbard said.

Appalachian Wireless serves its own customers and collects fees from Verizon, which also uses the wireless network. With few other wireless providers willing to build their own networks in the mountainous terrain, the wireless business model is strong enough to help support PRTC’s broadband initiative, as well. That’s helped keep the PRTC from having to raise rates to cover loan servicing costs.

Gabbard said the availability of the loans and grants, plus stimulus money, presented a “once-in-a-lifetime opportunity.”

Mule power helps close digital divide

Mixing in traditional means as it moves to the modern cutting edge, People’s Rural Telephone Cooperative based in McKee has used a mule named Old Bub to help with its last-mile installations of fiber-optic based gigabit Internet connectivity to all its customers in Jackson and Owsley counties in Eastern Kentucky.

Mixing in traditional means as it moves to the modern cutting edge, People’s Rural Telephone Cooperative based in McKee has used a mule named Old Bub to help with its last-mile installations of fiber-optic based gigabit Internet connectivity to all its customers in Jackson and Owsley counties in Eastern Kentucky.

Fully 70 percent of the fiber optic network in Jackson and Owsley counties runs above ground. As it turned out, even the highest of high-tech networks had to rely on the lowest of low-tech methods for installation. At points in the tougher terrain, a mule named Old Bub pulled the cable from pole to pole. Some photos of the operation made the rounds via e-mail earlier this year.

The image of a mule pulling fiber optic cable through the mountains probably seems like a fitting juxtaposition to those not aware of Kentucky’s efforts to close the digital divide. The PRTC’s gigabit network stands out as an example of a fully local initiative, but the state has announced its own plans to improve and expand broadband access.

The KentuckyWired I-Way broadband initiative aims to provide reliable, high-speed Internet service to every county in Kentucky. The estimated $324 million project will build what’s known as a “middle mile” fiber optic network. State officials likened it to building a highway through the state. That highway will have some 1,100 “nodes” at government user sites, including five Kentucky Community and Technical College System sites in Eastern Kentucky.

The I-Way will provide tiered access to speeds up to 400 gigabits – yes, that’s 400,000 megabits – per second. Adequate end-user equipment will be essential to using such capacity, and it will be up to local communities to build the “last mile” – to connect individual homes and businesses to the nodes.

The recommendation to build such a statewide open-access network was one of many that came out of the Shaping Our Appalachian Region (SOAR) initiative co-chaired by former Gov. Steve Beshear, a Democrat, and Republican U.S. Rep. Hal Rogers, whose district encompasses most of Eastern Kentucky. Partly as a nod to that impetus and partly in response to the severe economic downturn in Eastern Kentucky due to the dramatic decline in coal jobs, KentuckyWired construction will start at the eastern end of the state and over the next three years extend 3,400 miles across the state to all 120 counties. Work in the 54-county SOAR region is expected to be finished in summer 2016, with the rest of the state completed by late 2018.

High speed for … jobs in the hollers

The kick-off celebration for KentuckyWired was held Aug. 31 at Hazard Community and Technical College. Beshear said the project would bring much-needed Internet access to all communities.

“The potential for every Kentuckian to tap into the global economy, compete for higher paying jobs, collaborate with researchers around the globe, take classes online, or access increased medical care make KentuckyWired one of the most important infrastructure projects in our state’s history,” Beshear said.

Rogers added that with the capacity and connectivity “the only limit is our creativity. It’s up to us to put this resource to work for economic diversity, job creation and improved opportunities for the people of Eastern Kentucky.”

Jared Arnett, executive director of SOAR, called the extension of broadband service “a literal economic lifeline” in today’s increasingly digital economy and said it can’t reach communities fast enough.

KentuckyWired is the state’s largest public-private partnership. A consortium led by Macquarie Capital of Australia will provide the bulk of the funding via the issuance of debt and equity. The General Assembly approved $30 million in direct state funding in 2014, and the federal government is kicking in another $23.5 million. In August, the Kentucky Economic Development Finance Authority approved the issuance of $232 million in revenue bonds to finance a loan to the consortium, KentuckyWired Infrastructure Co.

Payments on the debt will be made via the state transferring its current lease payments for Internet service to KentuckyWired. In essence, the state and local governments – anyone with a node – will be paying KentuckyWired to use the Internet.

This setup actually has PRTC’s Gabbard slightly concerned. The way things are worded now, local governments and school districts in the PRTC’s service area would end up being among those 1,100 KentuckyWired nodes, and could be told to use the KentuckyWired fiber network instead of the PRTC’s. That would cost PRTC money. Gabbard said he hopes the PRTC can work with KentuckyWired to avoid building a parallel fiber optic network in Jackson and Owsley counties.

Jackson, Owsley jobs only ‘a starting point’

The potential for high-speed fiber network duplication in one of the poorest parts of Eastern Kentucky carries a hint of irony given the overall lack of investment in the region historically. Nevertheless, from an economic development perspective it might not be possible to have too much of a good thing. The emergence of fracked shale gas in the past decade means significantly fewer coal jobs, but plentiful broadband brings better chances to create a diverse patchwork of technology jobs that can help fill the void – and create an entirely new economy centered around technology.

Jeff Whitehead, executive director of Eastern Kentucky Concentrated Employment Program, said the PRTC broadband project and KentuckyWired “takes the lid off of the potential for both economic development and for what people can do from their homes.”

EKCEP, based in Hazard, provides job training, employment assistance, career counseling and tuition assistance for half a million people in 23 Eastern Kentucky counties, including many hit hard by the loss of coal jobs. In 2015, Whitehead said, the PRTC gigabit network has led directly to some 110 new jobs in Jackson and Owsley counties. Almost all of them are for companies based out of state – one employer is based outside the United States – and involve customer service work done remotely, often out of one’s home. The average salaries for these jobs are around $20,000 a year, but most have benefits.

“That’s not knocking it out of the park at this point (in salary), but they are still jobs you can do from home and not have to spend gas money,” Whitehead said. “We’re not satisfied with that; it’s a starting point.”

Down the road, he said, fast broadband service could lead to more and better-paying technology jobs, the ability to do remote job training, and ultimately lay the groundwork for a new generation of locally grown technology entrepreneurs who will be job creators of the future. Eastern Kentuckians prefer not to have to leave their families and their connections to the land to find work. Being connected to the rest of the world via the Internet could mean fewer locals will have to leave, and it could draw in new people who need that connectivity but don’t want to live in a big city.

Isolation ends; school’s never cancelled?!

Local schools are already benefitting from better connectivity. Owsley County Schools Superintendent Tim Bobrowski said the gigabit network has allowed the district to expand the use of “virtual schools,” or instruction over the Internet. As a result, a district that formerly had to make up in the summer an average of 20 snow days per year now can engage students at home, via online programs like Blackboard and Edgenuity that allow students to complete coursework for up to 10 snow days. Additionally, students who get suspended can continue classwork from home as opposed to just sitting at home not learning.

Owsley County Schools officials are working on a plan to get laptops like Chromebooks into the hands of some classes next year – as many as two grades per school, Bobrowski said.

As limited as Eastern Kentucky’s economy has seemed in recent years, the possibility broadband brings has people excited. Change won’t come overnight, but already the region’s eagerness to embrace the economic opportunities technology has to offer is changing perceptions.

Some locals are still buzzing about a story that appeared in mid-November on medium.com’s tech-focused section Backchannel. The author profiled Bitsource, a Pikeville company that aims to turn former coal miners into code writers and make a profitable business out of it. The story by Lauren Smiley – “that lady from California” – showcased local entrepreneurship and, perhaps as importantly, local pride.

Hilda Legg, a former administrator of the USDA’s Rural Utilities Service and a past co-chair of the Appalachian Regional Commission, said the gigabit service in Jackson and Owsley counties could also serve as a point of pride as well as a practical way to connect a historically isolated area to the rest of the world. She praised the PRTC not only for having the foresight and willingness to take on the risk of building the fiber optic network but also for promoting it and showing customers how it can help them.

Legg has been called a “broadband evangelist” and she isn’t shy about describing the PRTC’s gigabit network as a blessing. Appalachia has a history of relying on help from outside – be it from mining companies to provide jobs or government programs to fight poverty. Broadband, Legg said, has the potential to change the way locals see themselves.

“We can’t have generation after generation looking to the outside for help,” Legg said. “We’ve got to work at changing the way we look at ourselves and this beautiful, abundant region. I hope it will embolden residents to broaden their opportunities. Quit looking at yourselves in terms of what you don’t have, but rather look at yourselves for what you do have.”

Most of the rest of America – even larger cities – don’t have gigabit Internet service, she said.

Fast Internet service isn’t an elixir for curing the unemployment, drug abuse and attendant health issues that persist in Appalachia, Legg said, but it can be an important tool.

“If you remain isolated, you don’t tend to be able to raise yourself up. It will take time and there are no simple solutions,” she said. “But you have to start with pride in what you have.”

Economic Development, Features, Features, January 2016

Communities’ Do-It-All Partner

The Purchase Area Development District managed a $1.3 million project that resulted in local elected leaders, business owners and partners to open a new Kentucky Career Center building in the Murray West Industrial Park. Funding included a $1,080,000 Community Facilities Loan from USDA Rural Development to the Murray-Calloway County Industrial Development Authority and $246,000 from Delta Regional Authority and the Kentucky Transportation Cabinet.

The Purchase Area Development District managed a $1.3 million project that resulted in local elected leaders, business owners and partners to open a new Kentucky Career Center building in the Murray West Industrial Park. Funding included a $1,080,000 Community Facilities Loan from USDA Rural Development to the Murray-Calloway County Industrial Development Authority and $246,000 from Delta Regional Authority and the Kentucky Transportation Cabinet.

Let’s face it: Area Development Districts are often mentioned but frequently misunderstood. Most people have a vague idea of the function of these organizations – Kentucky has 15 ADDs – which are vital conduits funding many state agencies but also foster many facets of human services, community development and workforce development.

Perhaps only the employees immersed in the daily mission of Area Development Districts, and their individual governing boards’ members, have a true understanding of their profound impact on the agencies they benefit and the state as a whole. For that reason, The Lane Report sat down with Kentucky Council of Area Development Districts Executive Director Darrell Link and other officials to illuminate the inner workings of ADDs.

The first surprising fact is that Kentucky’s ADDs have been around nearly five decades. The 15 entities in the Bluegrass State’s network comprise a collaboration of a large, diverse constituency of all 120 counties and 418 cities. Kentucky’s ADDs are governed by 572 board members and employ 850 people.

The mission: better quality of life

Darrell Link

Darrell Link

“Our strategic mission is simple: Together (the ADDs) foster regional strategies, solutions and partnerships that improve the quality of life for all citizens living in the commonwealth,” Link said.

They do it by working with federal and state officials, local government shareholders, and private- and nonprofit-sector partners. Historically, ADDs were created to pursue three key roles in regional development:

• Area-wide planning, program development and program coordination functions.

• Assisting local governments in provision of local services.

• Promoting and actively pursuing a public/private partnership at the local level as the basis for developing and strengthening the local economy.

“ADDs are a model for good governance, transparency and accountability,” Link said. “Because our governing boards are comprised of judge/executives, mayors and prominent community citizen members, they are in a unique position to hold each other accountable. Every budget and dollar is accountable; every program and service is reviewed regularly; and every policy enacted is fully vetted, debated and voted on by the board. All meetings are public, and all information is available on our websites and upon request.”

Kim Huston, president of the Nelson County Economic Development Agency, has benefitted from the Lincoln Trail ADD for 15 years.

“What I respect most about LTADD is that it’s governed by a board made up of our region’s city and county leaders who determine what the needs are of our local communities,” she said. “For our eight-county region, LTADD has been the local entity that ensures implementation of the specific public purpose of each federal award and takes responsibility for the administration of these programs, thus taking the burden off local governments.”

Bardstown and Nelson County are aided and impacted by the LTADD, Huston said, via various projects, from establishing the first regional economic development program to assisting with infrastructure construction in industrial parks.

“The most important issue we are tackling right now, hand-in-hand with the LTADD, is workforce development and ensuring that we have competent and skilled workers to place in our ever-growing industrial operations,” she said.

Rhonda Whitaker, district manager of government and community relations for Duke Energy Kentucky, has seen firsthand the impact of the Northern Kentucky ADD via the funding it provides to her local workforce investment board.

“For adults, the career and training services provided are critical, especially as our ADD is able to help workers (and youth) possibly retool for those sectors where jobs are most in demand,” she said.

The NKADD has been a key partner, Whitaker said, in the Advanced Manufacturing Workforce Development Coalition, of which she serves as co-chair. Its aim is to promote and fill skilled jobs for employers who can’t find sufficiently skilled workers.

“Our coalition is working diligently to change the awareness and perception about manufacturing opportunities in Northern Kentucky, and to create new training opportunities to help close the gap on unfilled manufacturing jobs,” she said. “We are also seeking innovative ways to pool training dollars to provide more opportunities for those who may find it a challenge to pay for such costs. The ADD has played a vital role in these efforts.”

Role as ‘grant sub-recipients’

Click map for a larger image

Click map for a larger image

The primary role of ADDs is to serve as the required pass-through, or grant sub-recipients (a federal technical term), for billions of dollars in federal money for the various programs and services it supports.

In this role, ADDs ensure money is distributed and services delivered in accordance with the numerous federal and state guidelines attached to the programs and services for each region. Management of these funds requires regular reporting, monitoring and auditing for compliance with state, federal and local laws.

ADDs are the local entity that ensures implementation of the specific public purpose of each federal award. ADDs determine which programs and organizations are eligible to receive federal assistance by measuring performance in relation to public policy objectives. They have responsibility for decision-making and are responsible for adhering to the federal statutory requirements outlined in each of the programs.

What do ADDs Support?

Kentucky’s ADDs provide behind-the-scenes assistance for three main types of state programs: community development; aging and disabilities; and workforce.

Community development programs for local governments and other agencies get ADD staff assistance in building programs for historic preservation, community revitalization, parks and recreation, public safety, infrastructure, housing and transportation enhancements. ADDs help identify funding sources, prepare grant/loan applications and administer grant/loan projects.

In 2015, the ADDs’ role in economic/community development included assisting cities and counties with tasks such as developing 600-plus infrastructure and community projects; obtaining $97.5 million in new state and federal grants; prioritizing transportation and road projects for inclusion in the statewide six-year plan; and providing business loans to start-up and expanding businesses through federal lending programs.

Aging and disabilities programs get support in the form of a variety of services through the long-established ADD system of Agencies on Aging and Independent Living. The AAIL mission is to seek economic security, enhance healthy aging and support public policy that enhances the lives of senior citizens and others of all ages with disabilities.

More specifically, AAIL created programs such as the Older Americans Act, which funds services that keep older adults healthy and active: congregate meals served in the senior centers; home delivered meals; transportation; health promotion activities; and socialization.

“In-home and disability services play a pivotal role in avoiding institutionalization and make a critical difference for our most vulnerable population,” Link said. “The nutritional component and services provided through senior citizen centers offer opportunities for social interaction that enhances the quality of life and improves the health of senior citizens.”

Other aging/disability services and programs established by the AAIL are:

• Homecare, which includes homemaking, personal care, transportation, respite and meals, both home delivered and meal preparation.

• Consumer-directed options programs allow clients normally eligible for traditional home health services to manage their own budget and hire staff to provide in-home services.

• Economic assistance, including help in enrolling in programs such as Medicare, Medicaid, prescription drug assistance, heating assistance, food stamps, farmers markets and food pantries.

• The National Family Caregiver Act, which provides counseling, support groups, training and respite to assist family or other informal, unpaid caregivers. The goal is to relieve some of the physical and emotional burden of caregiving, thus reducing the risk of institutionalization.

“The Area Development Districts have touched the lives of thousands of Kentuckians by allowing them the dignity of aging in place,” Link said.

How ADDs are misunderstood 

“The biggest misconception of ADDs is that we are a federal or state agency,” Link said.

Rather, ADDs are local units of government as defined by the Kentucky attorney general and designed to function as conduits for funding to local areas and programs, and ensure proper oversight of the administration of activities by various local officials and business leaders.

“ADDs are actually unique in their creation – we have our legal authority and governance addressed by all three elements of the public sector: federal (U.S. Department of Commerce actions), state (Kentucky Revised Statutes and attorney general opinions) and local (articles of incorporation and bylaws),” Link said. “We adhere to oversight and accountability through compliance with federal, state and local requirements.”

Why ADDs are good for Kentucky

In a nutshell, he said, ADDs work each day with a goal of improving the quality of life and delivering essential services to all Kentuckians.

In the Bluegrass State, ADDs facilitate local and regional prioritization of these services – such as solid waste, land use, water and sanitation, and transportation planning. ADDs assist in public discussion and prioritization of new transportation corridors; they make rankings readily known and available for citizens and for local, state and congressional leaders and their staffs.

When requested, ADDs provide counties and cities with research staff to study and make recommendations on the delivery of services – such as police, fire and rescue – to help local leaders make sound decisions that improve the quality of services while decreasing overhead costs.

ADDs assist small businesses by providing revolving loan funds, workforce training and education, and help them to fill jobs with qualified people.

Kentucky ADDs also provide technical staff to counties and cities to assist in writing and updating personnel policies, budgets, establishment of tax rates, writing and administering grants.

“All of this transcends political, geographical and parochial boundaries, which greatly diminishes the burden and need for each city and county to staff these positions in a vacuum or independent of each other,” Link said. “There is no other entity or organization that consolidates all of these functions and brings all of the local leaders together to discuss the delivery of essential services at the best cost by working cooperatively together than ADDs, which is a Kentucky win for the taxpayers.”

The most challenging aspect of his job, Link said, is ensuring Kentuckians understand that the ADDs are governed by local leaders who best understand the needs of their communities, hold each other accountable, promote good governance and are fully transparent in their decision making.

“Because the ADDs serve all of Kentucky and play a prominent role in improving the quality of life for every person in Kentucky, I feel my small contribution helps makes a positive difference and a big impact throughout the commonwealth,” Link said.

December 2015, Economic Development, Features, Features, One-On-One, One-on-One, Transportation

One on One: Candace McGraw, CVG CEO

Mark Green: Like the airline industry, CVG has had ups and downs the past decade as the industry contracted but air freight activity increased. How do you describe CVG’s current status?

Candace S. McGraw Candace S. McGraw was appointed CEO of Cincinnati/Northern Kentucky International Airport (CVG) in July 2011, coming from the Cleveland (Ohio) Airport System where she’d served as deputy director. McGraw previously worked as general counsel for Cleveland City Council, and legal counsel and deputy director of charitable gaming for the Ohio Lottery Commission. A Leadership Cincinnati graduate, she is chair of Skyward, the Northern Kentucky region vision organization. McGraw is an Airport Council International-North America board member. She was Best Boss in Northern Kentucky 2013, Outstanding Woman of Northern Kentucky 2015 and a YWCA Career Woman of Achievement 2015. McGraw holds bachelor’s and master’s in political science from Duquesne University and a University of Pittsburgh School of Law juris doctor.

Candace S. McGraw was appointed CEO of Cincinnati/Northern Kentucky International Airport (CVG) in July 2011, coming from the Cleveland (Ohio) Airport System where she’d served as deputy director. McGraw previously worked as general counsel for Cleveland City Council, and legal counsel and deputy director of charitable gaming for the Ohio Lottery Commission. A Leadership Cincinnati graduate, she is chair of Skyward, the Northern Kentucky region vision organization. McGraw is an Airport Council International-North America board member. She was Best Boss in Northern Kentucky 2013, Outstanding Woman of Northern Kentucky 2015 and a YWCA Career Woman of Achievement 2015. McGraw holds bachelor’s and master’s in political science from Duquesne University and a University of Pittsburgh School of Law juris doctor.

Candace McGraw: CVG is doing quite well. We’re moving in the right direction. In 2014, we had our first year-over-year increase in passengers in nine years. That was 3 percent. For 2015, we’re up over 6 percent in overall passengers year-to-date. In local passenger growth, we’re up 16.1 percent year-over-year, and more than 20 percent year-over-year for the past four months. In terms of passenger growth, we’re definitely moving in the right direction.

We had airline consolidation. When I started in the industry over 25 years ago, there were more than a dozen airlines, and now we’re down to three legacy carriers, Delta, American and United, and then Southwest. Those four passenger carriers carry over 85 percent of all U.S. traffic. It’s a markedly different industry.

MG: What is the financial model for airports?

CM: The majority of airports in this country are self-sustaining entities and operate off of three primary revenue sources. We generate revenue through landing fees, concessions, those sorts of things. We receive some federal grant funds. And we receive a Passenger Facility Charge user fee of up to $4.50 per passenger that exits your airport; that’s on the ticket price. We don’t operate off of any local revenue base. We are a tax revenue generator in terms of property taxes, payroll taxes, etc. So we operate much like a private business, but in a public realm.

We have an operating budget of about $126 million annually. We have about 400 direct employees under the Airport Authority Board. We have about 7,500 acres we’re responsible for. Just like every other business, we need to operate safely, securely, efficiently and generate more revenue than our expenses.

Next year, under our new (airline lease) use agreement, we’ll operate even more like a private business. Currently, at the end of 2015 under the existing use agreement, if we generate a profit everything goes back to the signatory carriers. Starting in January, we’ll keep a portion of the profits, and the carriers will get a portion.

MG: You mentioned 400 direct employees. Is that number stable, up or down?

CM: Since I’ve been here, it’s been consistent. We’re blessed to have a very long-tenured staff. For full-time employees, we have an annual turnover rate of less than 4 percent including retirements. We make an effort to hire the right folks, empower them and seek to have them stay over the course of time.

MG: How does the revenue streams pie slice?

CM: About half our business is reliant on airline revenue streams, and the other half is focused on land development, parking, concessions, etc. We, like all airports, are looking at how to generate what’s called non-aeronautical revenue – how can we not be as reliant on airline revenue streams? We’re at about a 50/50 split, which is very strong. We’re trying to diversify our revenue base.

MG: What are the key changes in CVG new lease or use agreement with its airlines?

CM: We’ve been operating on a use agreement – that’s our rates and charges, our business arrangement with our carriers – that’s been the same since 1972, with a few minor modifications. Years ago that model, called a residual agreement, was very standard. If the airport made money, the airlines received the profit; if the airport lost money, the airlines were obligated to pay any deficiencies. Therefore they had a certain amount of control over the airport’s expenditures and capital program. Right now, we have to get airlines’ approval for our capital program, anything over $50,000.

In the 1970s, pre-deregulation, the airlines had a stronger credit rating than the airports. They were viewed to be the stronger business thinkers. There was thought that maybe local airports didn’t have the business acumen to run it like the business that it is.

The new agreement, effective January 1, 2016, running for a five-year period, which is fairly standard now, will allow the airport greater control over its destiny. We’ve negotiated changes so we operate more like a business. We’ll have a revenue split with the carriers and keep some for ourselves over which we’ll have control. There are a number of significant changes.

MG: You have overseen development of a new strategic plan for CVG. Why was this necessary and what are its key elements?

CM: We’re actually taking a crack at our second strategic plan since I’ve been here. When I took my role as CEO in July 2011, we had a strategic plan to take us through 2015 that focuses on operational excellence, customer service, those types of things, efforts doing what we call the reinvention of CVG. We were going from a dominant single-carrier hub to a more multicarrier, locally based airport.

Working around our master plan, looking at our facility needs through 2035, we’re now working internally and with our board to finalize the next iteration of our strategic plan from 2016 through the end of 2020. Mirroring the continuing evolution of CVG, we’ll focus on wanting to be the best airport to fly from or for and to do business with.

MG: What facilities or infrastructure changes will take place?

CM: This airport is going through a huge metamorphosis. We had three terminals, Terminals 1, 2 and 3, and two Concourse A and Concourse B buildings. Terminal 1 closed prior to my arrival; administrative offices were there but no passenger operations. Terminal 2 had eight gates, and carriers – everybody but Delta – operated out of Terminal 2. Delta vacated Concourse A in 2010 and now uses only Concourse B.

In May 2012 we realized we needed to grow our other carriers. We negotiated an agreement with Delta where we took over Concourse A, renovated it from eight gates to 16 and moved the carriers from Terminal 2 into Concourse A. Recently we activated another three gates. We knew that growth was necessary. We have adequate gate space.

We recently moved administration out of Terminal 1. It and Terminal 2, which is closed, will be demolished beginning in January. After we take down Terminals 1 and 2, a consolidated rental car facility will be built in their place. It will be more customer service friendly and accessible for the rental car companies. The area on which the rental car companies are currently located will see some cargo development. After Terminals 1 and 2, four older outbuildings also will be demolished to make way for new development, and we’ll continue to evolve the facilities.

MG: In November, the Kenton County Airport Board gave you a five-year contract extension and a raise. Two years ago, though, former board members attempted to dismiss you. What has changed in 2 years?

CM: There’s no sense revisiting the past. We’ve evolved over time. We work very closely with the airport board; they’re all very good, qualified business thinkers. I was pleased they offered me a contract extension. I have one year left on my current contract and with another five I’ll be here through the end of 2021 at least, which is good because we’re going into new strategic plans and that will give us the opportunity to carry those through.

MG: How much of CVG’s property is developed and how much is left?

CM: Of our 7,500 acres, a lot is within the fence and is for the airfield. We have, though, hundreds of acres currently available for development. When the extension of Wendell Ford Boulevard is completed by the end of 2017, we’ll have additional acreage for development. One tenet we operate under is that we only lease land for long-term development; we’re not going to sell any land. It’s important for us to develop non-aeronautical revenue streams, and leasing gives us a sustainable revenue stream now and in the future.

We’re just in the infancy stage of our potential development. We recently signed a long-term lease with Dermody Properties, which is developing a 52-acre site to be a distribution center for Wayfair; a 900,000-s.f. facility is under construction. That was really our first foray into the development business. We’re marketing a number of sites.

MG: DHL has been growing, and FedEx is expanding. Was it a strategic goal of the airport to develop cargo further?

CM: Under our master plan, we’ve looked at areas for development that are best for aviation purposes – areas closer to the runways – for hangars, cargo facilities, those sorts of things. Farther out there are sites suited for warehousing, distribution, etc., and light industrial or commercial purposes. We’ve looked at what are the highest and best uses of land.

Cargo now is about 51 percent of our overall land use. It’s huge. DHL has gone through a tremendous expansion the past few years – since 2009, three expansions totaling $281 million worth of improvements. DHL has three global super-hubs, and CVG is their North American super-hub. We’d love to do some end-of-runway development that will bring in customers that want to locate near or adjacent to DHL. It would bolster their business and support our business.

MG: Does CVG, with its DHL facilities, look to Louisville International Airport and its UPS experience as a model?

CM: Sure. We’ve taken some tours and looked at some best practices, and we’re always happy to borrow some best practices from other airports, including our friends at UPS in Louisville.

MG: CVG reportedly has had the highest landing fees in the United States. Why was this and has this changed?

CM: Thank you for asking because this is a common misunderstanding. We’ve had some of the highest (italics)airfares(end ital.), which have no correlation with landing fees. Our landing fees are at or below all of our regional competitors. Airfares have been high because we had one dominant carrier; it was monopolistic. As we’ve become more multicarrier, our airfares have dropped. Competition brings lower prices. The most recent Department of Transportation statistics ranked us number six in airfare prices; traditionally we were number one. We’ll drop further when new statistics are released. It’s about growing competition, adding carrier diversity. An industry rule of thumb is that an airport’s (landing fee) cost as part of an airline’s budget is 4 to 6 percent. Airlines’ main cost is always fuel and labor. The landing fees here are very, very low.

MG: Does having significant air freight operations contribute to keeping overall airport operational costs down, thus making it more attractive to new commercial carriers?

CM: Cargo business is about 50 percent of our landed weight, so that’s a great revenue source for the airport. The cargo carriers pay the same landing fee as our passenger carriers, but a rule of thumb is that one large cargo plane’s weight is equivalent to 11 regional jets. We have about 50 DHL planes in and out of here every night, so they’re a great source of ongoing, consistent business. As carriers have come or gone, or expanded or contracted, the cargo business has been consistent if not growing, therefore keeping our overall costs down.

MG: What low-cost passenger carriers has CVG been successful in recruiting?

CM: Frontier started about a year and a half ago with six flights a week; now they’re huge. Allegiant started here a year-plus ago, and we’re now one of their top five airports. We have been Allegiant’s fastest-growing airport in their history. Allegiant and Frontier are now about 20 percent of our business, helping us attract new passengers. We had an untapped demand for vacation and leisure travel.

In January, Allegiant’s going to base three aircraft out of CVG. Allegiant’s model is to start a crew in the morning and end them every night at the same airport, so they’ll at least originate and end those three here. We’re hopeful that will spawn more flights. PSA, a regional carrier for American Airlines, has leased a hangar and they’re going to be starting a base of operations in January as well, with a flight crew and a maintenance base.

MG: What is the divide nowadays between business and pleasure travel?

CM: We were predominantly business traffic when I started here, probably 75 percent, and now we’re almost 50/50 in terms of business and leisure travel. Now that we have some low-cost carrier options, our passenger base is changing and evolving.

MG: CVG markets itself as offering more nonstop flights than any airport in the region, including direct international service to Paris, Toronto, Cancun, Montego Bay and Punta Cana. What is its business sweet spot?

CM: We do have more daily nonstop destinations than any airport in this region. We try to maintain that. We know business travelers prefer a nonstop when possible, so that’s important. People like to be able to travel in and out the same day for business. For leisure travelers it’s all about convenience and price, so our low-cost carriers and vacation packages are very attractive. The daily service to Paris is the only transatlantic direct flight in all of Ohio, Kentucky and Indiana, and gives you one-stop access to anywhere in the world. And Toronto does the same; that’s also a one-stop world connection.

MG: U.S. airlines today are profitable after having collectively lost billions of dollars for several decades. Does airline profitability affect CVG?

CM: What really affects airports is airline consolidation. At one time there were dozens of airlines; now, with the mergers, the top three and Southwest together control 85 percent of the traffic. The airlines now are running a very smart business. They’ve constrained the supply and increased the price; that’s why they’re profitable. Airports are fighting over the service, looking at aircraft, trying to figure out how they can fit into the network.

We develop business cases for the airlines. We know which cities we believe should have service, which cities are underserved, cities where we think an airline could upgauge an aircraft. We were losing passengers traveling to Washington, D.C., and thought this made no sense. What’s the issue? Well, they weren’t leaving early enough in the morning. We went to the carriers and said if you start service this amount of time earlier, you will gain X amount of passengers. And sure enough, that was the case. We try to lay out the business cases in as simple a way as possible why it would make sense for an airline to use CVG.

MG: There has been an economic impact study for CVG about three years ago. What were the findings?

CM: We published a study in April 2013 based on year-end 2012 statistics. We generate $3.4 billion in economic impact annually for this region, including Ohio, Kentucky and Indiana. It’s a huge economic impact. In 2016 we will do the same and base it on either year-end 2015 numbers or mid-year 2016 numbers. I would think we’ll grow beyond that $3.4 billion annual economic impact.

MG: What should the business traveler of today know about air travel that they might not be aware of?

CM: That’s an interesting question. Security measures, for instance, are only going to increase, given the world in which we live. People should be mindful to go online and find some bargains direct themselves. Go to CVGAirport.com; we give you tips on how to find the best deals.

MG: Do you have a closing comment?

CM: One of the things we’re very proud of is that we’ve won the Skytrax World Airport Award as the best regional airport in North America five years in a row. I attribute that to our great staff; they’re devoted to safety, security, customer service. I often say we don’t do one particular thing very well, we do a lot of smaller things very well, and it all adds up, I think, for a great customer service experience. And that’s our goal here. A lot of our sort of brand platform, as we want to say, we have world-class professionalism with a Midwestern charm. And I think our staff demonstrates that.

Economic Development, Features, Features, September 2015

Coal remains an economic cornerstone

Editor’s Note: Part of an ongoing Lane Report series on the ShapingOur Appalachian Region initiative to diversify Eastern Kentucky’s economy.

coalTOP

Bill Bissett at a news conference for Kentucky’s Friends of Coal license plate, which is now one nearly 100,000 personal vehicles in Kentucky. Pictured from left to right: House Majority Floor Leader Rocky Adkins, Bissett, Gov. Steve Beshear, Rep. Fitz Steele, and Speaker of the House Greg Stumbo.

“It is important to talk about decreases in coal production, the job losses in the coal industry and the effect this has on the region,” said Kentucky Coal Association President Bill Bissett. But he has a further message he believes is equally important: Coal is still in business, significantly.

“We are still mining 70 million tons of coal each year in Kentucky, and Kentucky is still a major player,” Bissett said. “Most importantly, we are mining that coal in a responsible and legal way.”

Since 2009, Eastern Kentucky has lost 8,500 well-paying coal-mining jobs, more than half the region’s coal-mining employment, as production has plummeted due to increased federal regulations, rising operation costs and increased competition from natural gas. The latest estimates are that fewer than 6,000 mining jobs remain.

The trend motivated Gov. Steve Beshear and U.S. Rep. Harold Rogers in 2013 to launch the Shaping Our Appalachian Region initiative that aims to diversify a regional economy that has long risen and fallen with coal mining. (See articles in the July and August issues of The Lane Report)

Bill Bissett, president of the Kentucky Coal Association, speaks during a rally at Capital Plaza in Frankfort in 2012 held to call attention to regulations by the federal Environmental Protection Agency that the industry said is causing the elimination of valuable coal jobs.

Bill Bissett, president of the Kentucky Coal Association, speaks during a rally at Capital Plaza in Frankfort in 2012 held to call attention to regulations by the federal Environmental Protection Agency that the industry said is causing the elimination of valuable coal jobs.

Bissett said he is not a “Chicken Little” predicting that the sky is going to fall.

“Our grandchildren’s grandchildren are going to be using coal,” he said. “Coal is not going away, but the time has come that we can no longer take it for granted.”

Because the industry’s jobs pay much more than suggested replacements and miner family spending supports others’ paychecks, he said, coal should be a key element of SOAR strategy.

Coal traditionally is a cyclical industry, but there is a growing view that recovery prospects are much dimmer now that hydraulic fracturing of underground U.S. shale formations has pumped cheap and environmentally friendlier natural gas into the energy market. Within the past year the United States became the world’s largest producer of crude oil and natural gas, and this summer natural gas displaced coal as the top fuel for U.S. power generation.

Bissett, in his five and one-half years as KCA president, has been at the epicenter of the national debate about coal, particularly as it relates to Eastern Kentucky. In fact, he calls Eastern Kentucky “ground zero” in what has become an increasingly contentious battle of jobs and economic prosperity versus potential environmental impact.

EPA to Ky: Cut carbon emissions 30%

An announcement last month from the Obama administration is a good example.

In early August, the Environmental Protection Agency released much-anticipated proposed final regulations concerning greenhouse gases (GHG) that, if implemented, will have a significant impact on Eastern Kentucky and consequently all of Kentucky, according to Bissett.

The EPA wants the commonwealth to reduce its annual carbon emissions to 63 million tons by 2030, a 30 percent decrease from baseline 2012 levels. Preliminary EPA regs had called for Kentucky to cut those emissions by 15 percent to 77 million tons, a target that already meant moving away from coal-fired electricity generation.

The Obama administration’s Clean Power Plan, the central piece in U.S. efforts to address climate change, aims by 2030 to reduce all power plant carbon dioxide releases by 32 percent below the levels of 2005.

“With 535 days left in office, President Obama and the United States Environmental Protection Agency have announced a final rule regarding the regulation of greenhouse gases (GHG) that will raise electricity rates and damage the reliability of electricity in the United States, while doing little to address the issue they seek to address of climate change,” Bissett said.

“While we are confident that this rule will not survive legal scrutiny in the courts, electric utilities are already moving away from coal to comply with the possible threat of this new regulation. While our nation’s economy will be harmed and electricity rates will ‘necessarily skyrocket,’ as President Obama announced on the campaign trail in 2008, this new regulation would be especially damaging to the economies of coal mining and coal-using states like Kentucky and West Virginia.”

Lower than average electric power rates in Kentucky have been a powerful draw for business attraction and growth, especially for power users such as manufacturing and metal production. Aluminum smelters and users have a big presence, and the state is home to the largest stainless steel producer in North America.

“This unilateral mistake by the Obama administration will be observed by other countries, such as India, China, Spain, Germany and many other existing and developing countries – but only observed,” Bissett said. “These countries are either moving back to coal after creating ‘energy poverty’ through more expensive forms of electricity production or developing coal-fired electricity sources like we did in the United States to build their economies.

“Although we have faced many new regulations regarding coal production and use from the Obama administration, it is clear that these GHG regulations are, by far, the most damaging and economically harmful when compared to any of the Obama administration’s previous actions,” he said.

“Simply put, there is no greater threat than these final GHG regulations to coal-powered economies like Kentucky’s economy, and we must do everything possible to stop this final rule and show the growing numbers of people and organizations against this wrongheaded and ineffective regulation.”

Underground mining down another 10%

The EPA’s proposed regulations came as second-quarter 2015 numbers on coal production and coal jobs were announced. According to energy.ky.com, Eastern Kentucky coal production decreased 5.4 percent during the second quarter.

Surface mines increased production by a marginal 0.5 percent. Underground mining operations decreased 10.3 percent but remain the leading coal extraction method in Eastern Kentucky. Below-surface mining accounted for 52 percent of regional production.

During the second quarter of 2015, the state reported, there were 5,889 persons employed at Eastern Kentucky coal mines, a decrease of 10.6 percent from the first quarter of 2015. Coal mines in Western Kentucky decreased total employment by 110 jobs or 2.9 percent.

Bissett is familiar with the numbers, but said there is more to the story:

“These (coal jobs) are jobs that start at $65,000-$70,000 a year, and many provide more than a six-figure income with overtime. In addition, for every coal job there are three more indirect jobs (i.e., heavy equipment operators) as well as induced jobs – those at gas stations, restaurants, etc.”

Bissett said the coal industry supports the efforts being undertaken via the SOAR initiative, but he is not enthused about efforts to create jobs in Eastern Kentucky through sectors such as tourism.

“These are jobs that start at $15,000 to $30,000,” he said. “Tourism is also a competitive field. Eastern Kentucky will be up against areas such as Gatlinburg that are already established. People also want easy access. The transportation infrastructure in Eastern Kentucky is still a challenge.”

Coal wants and needs to be at the table as plans are made to enhance the region, Bissett said.

“SOAR is doing its best to find the bright spots in Eastern Kentucky,” he said. “These are tough conversations to have, but we must have them and SOAR is making this happen.”

There are more tough times and tough conversations ahead for coal and Eastern Kentucky, Bissett predicts.

“We need to maintain what we have,” he said, “and this won’t be easy, particularly in light of Obama’s proposed regulations.”

The state and the industry, Bissett said, must also continue to maintain a market for coal.

“This is significant,” he said. “The market is going to change. Coal usage is going to fall off in certain states. The market may now be overseas. So many countries are now moving to coal for electrical production. The rest of the world is going a different way on coal usage. Overseas may now be the end user. The domestic market is now tenuous.”

The change will show up in our electric bills as well.

“Electricity rates are going to go up, particularly in Kentucky; the reliability of electricity is going to decrease,” Bissett said. “It will be interesting to see what happens if people are without electricity for a while.

For Eastern Kentucky, uncertainty will reign, especially when it comes to the region’s reliance on coal.

“Energy issues are constantly changing,” he noted. “Twelve years ago we were importing natural gas to meet demand; now we have an abundant supply. After the (2011 Tohuku) tsunami, Japan is now moving (back) toward nuclear power.”

August 2015, Economic Development, Features, Features

SOAR takes off: economic connectivity

Part 2 of an ongoing Lane Report series – Last month: Regional leaders join forces to stimulate entrepreneurship and turn natural attributes into competitive advantages. This month: SOAR takes off. Next month: The coal industry’s perspective.

This group of participants at the initial Shaping Our Appalachian Region summit in December 2013 pledged their personal and organizational support for the SOAR effort to take collective regional action to improve the Eastern Kentucky economy. The number of persons actively involved has now grown to more than 1,700.

This group of participants at the initial Shaping Our Appalachian Region summit in December 2013 pledged their personal and organizational support for the SOAR effort to take collective regional action to improve the Eastern Kentucky economy. The number of persons actively involved has now grown to more than 1,700.

On Aug. 31 – about 20 months after first gathering to explore strategies to lift the economic prospects of mountain counties whose mainstay mining jobs are crumbling – members of Shaping Our Appalachian Region (SOAR) will break ground on a $350 million opportunity-opening infrastructure project dubbed Kentucky Wired.

Also called the Super I-Way, the project will bring high-speed, high-capacity state-of-the-art broadband Internet access to every commonwealth county, but first to the mountains of Eastern Kentucky, where even basic access has been spotty due to its beautiful but challenging geography.

More than 3,000 miles of high-speed fiber-optic Internet cable ultimately will connect all of Kentucky’s 120 counties at an estimated cost of between $250 and $350 million. The first priority, though, is Eastern Kentucky, where work is expected to be complete by April 2016.

A long-discussed, decades-old need is finally being met, the biggest accomplishment yet for SOAR, and a way to say to the abundant naysayers that progress can indeed be made in Eastern Kentucky.

“The broadband initiative is one of the most significant aspects of SOAR,” said Gov. Steve Beshear, who co-chairs efforts to enliven the Appalachian economy. “Kentucky’s network will be one of the fastest, highest capacity networks in the nation.”

U.S. Rep. Hal Rogers addresses a Shaping Our Appalachian Region conference audience. He is co-chair along with Gov. Steve Beshear of an ongoing and growing initiative to diversity the economy of and create jobs in Eastern Kentucky.

U.S. Rep. Hal Rogers addresses a Shaping Our Appalachian Region conference audience. He is co-chair along with Gov. Steve Beshear of an ongoing and growing initiative to diversity the economy of and create jobs in Eastern Kentucky.

That capability will “help shape the future of our region,” Co-chair and Fifth District U.S. Rep. Hal Rogers said. “SOAR is moving into an exciting phase as we take another step forward with broadband implementation and work to attract more jobs and opportunities to the region.”

“Broadband is a stepping stone, a tool, but it will help us build local capacity,” said Jared Arnett, SOAR’s executive director. Broadband access has been Arnett’s top priority since becoming the founding executive director in November 2013.

In late July, there was another a big announcement from the co-chairs: a new dentist recruitment program in the form of loan forgiveness for dental students from Eastern Kentucky or those who choose to practice in the region. Two to five students will receive $100,000 each for two years through the program, with preference given to Eastern Kentucky natives. The program is supported by $500,000 in state funds and will be administered by the dental schools at the University of Kentucky and the University of Louisville.

Self-help key to SOAR approach

These actions fulfill pieces of a plan some 1,500 to 1,700 Kentuckians are collectively crafting. They are members of 10 working roundtable groups that collectively form the SOAR advisory council. By design, the groups foster discussion by and garner recommendations from those who live in the area. And most importantly, regional residents are urged to get involved.

They have. Working groups presented a final report to the SOAR executive board on Sept. 23, 2014 (see soar-ky.org), and are turning their focus to implementation.

The roundtables are organized by regional needs:

• Agriculture, community and regional foods, natural resources

• Broadband

• Business incubation

• Business recruitment

• Education and re-training

• Health

• Infrastructure

• Leadership development and youth engagement

• Regional collaboration and identity

• Tourism, arts and heritage

Each group has developed specific goals and priorities and in some cases started making progress toward them. For example, the business recruitment, retention and expansion group recommended five, first-year steps. One is to have an economic development site consultant complete an analysis of strengths, weaknesses, opportunities and threats (SWOT) for an eight-county region of Eastern Kentucky.

An original SWOT analysis for Pike County was a catalyst for Alltech to invest in the Marion Branch industrial property owned by the city of Pikeville – which is the kind of business investment that will help both the company and the region.

The 10 groups are working simultaneously on goals they expect can be accomplished from within a few months to a few years.

The Futures Forum is focusing on long-term strategies to improve the region. A development committee is building a financial base for SOAR to continue its work. It got a big boost with Senate Bill 168, which establishes the Kentucky Appalachian Regional Development Fund (KARDF) as a source for future appropriations for SOAR from the General Assembly. KARDF money may be used in support of job creation and retention, entrepreneurship, tourism, broadband deployment, workforce training, leadership development, health and wellness, infrastructure and economic diversity.

These groups all report to the SOAR executive board (see member lists), the two co-chairs (Beshear and Rogers) and Executive Director Arnett.

“What we are trying to do at SOAR is a new business,” Arnett said. “We are creating something out of nothing. We have put it on the line that we will do big things. People’s lives are on line.”

Goal is to stop ‘thinking by county’

Arnett personalizes that vision.

“When I look at SOAR, I think about my 5-year-old daughter,” he said. “We are going to see a region where she has opportunity here. She is going to have a quality education because we are making big strides in education. She is not going to be forced to get a traditional job in some city if she gets a four-year degree. If she chooses to be an engineer or a computer software, she will be part of a global economy and won’t have to leave here to have a good job.

“This region is going to be more about creativity and innovation. We are going to train the next generation to create the future rather than accept it. We are going to help them learn how to think and solve complex problems and be engaged and committed to the region.”

One overarching goal is to end people thinking by county and to get everyone thinking regionally.

“The economy doesn’t have any idea where the county line ends,” Arnett said. “The real (local) economy is probably six to eight counties. You can’t do every project in every county. We have to grow regionally. A big piece of our work is planning. Now is the time to start working to change behavior and do the things that create an environment where innovative businesses can grow.”

Arnett sees a big role for business.

“The key is when you have business leaders at the table and they remain committed to creating jobs,” he said. “SOAR is about strategic investment and growing the region. I hope business leaders will see the region as an opportunity rather than somewhere to avoid. There are many positives about doing business in the region. If you want to help, find a way to run a profitable business in the region.”

Beshear had another thought for business.

“We need ideas,” he said. “SOAR is not a top-down organization; it is an effort to empower all of Kentucky. As one part of the state goes, so goes the entire state.”

Rogers offered yet another role for business.

“We need businesses to become sponsors,” he said. “We need them to contribute to the (KARDF) fund and to recruit business to the region.”

Currently, SOAR Presenting Partners are the University of Kentucky, University of Louisville, KentuckyOne Health, and Pikeville Medical Center. Founding Partners are Aetna, East Kentucky Power Cooperative, Booth Energy, Forcht Bank, Kentucky Community and Technical College System KCTCS), and Passport Health Plan. Kentucky Partners are Community Trust Bank, Eastern Kentucky University, VanAntwerp Attorneys and Walters Automotive.

Back to the beginning

It was December 2013 when SOAR conducted its first summit. Despite decades of task forces, white papers, conferences and other initiatives that fell short at helping Eastern Kentucky break the grip of unemployment, poverty and low educational attainment, some 1,500 Kentuckians still gathered, listened, and discussed the future of the region.

Perhaps the hope for real change this time sprung from the group’s powerful bi-partisan leadership: Democrat Beshear and Republican Rogers, and the array of leaders SOAR attracted to delve into the major issues facing the region. Perhaps it came from its young, charismatic executive director, Jared Arnett, an Eastern Kentucky native whose success exemplifies what leaders hope for every person living in Eastern Kentucky.

Whatever the case, SOAR received an immediate boost when the White House designated eight Kentucky counties as a Promise Zone, improving their access to federal grant programs and stimulating job creation and education opportunities. A few months later the White House announced that through the POWER Initiative, Kentucky can apply for grants up to $38 million for coal communities to support economic and workforce development.

A month after that welcome message, Kentucky Agriculture Secretary Tom Vilsack announced Kentucky would now be included the U.S. Department of Agriculture’s StrikeForce Initiative: $220 million in grants and loans for infrastructure, homeownership financing and business development that Kentucky are eligible to apply for.

“The StrikeForce strategy of partnering public resources with local expertise is helping to grow rural economies and create jobs in persistent poverty communities,” Vilsack said.

The announcements continued to come in a flurry.

SOAR received a $750,000 grant from the Appalachian Regional Commission (ARC) to help cover its startup costs. The U.S. Economic Development Administration invested $312,000 to provide technical assistance for job creation and private sector growth. The Eastern Kentucky Concentrated Employment Program received federal grants of $11.3 million to continue efforts to help several thousand laid-off coal miners and their spouses find jobs.

Recently, Beshear announced a $20 million federal grant to fund a pilot project in southeastern Kentucky aimed at helping Supplemental Nutrition Assistance Program (SNAP) participants find jobs and pursue eventual self-sufficiency. In addition, a $1.5 million, five-year project funded by the Centers for Disease Control and ARC will address the region’s above-average rates of cancer and other chronic diseases by promoting screening and prevention. New funding also became available for a program to develop leadership among community health advocates.

In his position as governor, Beshear has been able to target funds for projects in Eastern Kentucky such as the $382 million expansion and four-laning of Mountain Parkway from I-64 to Pikeville. He has also set aside $2 million in single-county coal severance dollars in each year of the current budget.

One year later

One of the strongest cases that SOAR might succeed where other efforts have not could be seen in May. At SOAR’s second summit, 1,300 people hammered out and implemented strategies for regional growth and business development – using goals outlined in SOAR’s first year. The interest was still high, the hope still alive, the leaders still engaged, the plans fleshed out, the needle was moving.

Beshear promised to continue with SOAR after he leaves office later this year.

“I have already talked with the (2015 election) Democratic nominee for governor, and (Jack Conway) has assured me that he will continue my efforts with SOAR,” said Beshear, who leaves office in December but does not expect his involvement to end then. “SOAR is close to my heart. I will do whatever anyone in the SOAR leaderships asks of me.

“This is a very big effort and a long-term effort. We will not accomplish our goals in the short term,” Beshear added. “It is going to take several years. People have to understand that. The only way this happens is if people, particularly those who live in Eastern Kentucky, get involved.”

Rogers said the Republican nominee for governor, Matt Bevin, also has promised to remain involved in SOAR.

Look for part 3, Coal Speaks Out, next month.

Economic Development, Features

Mentoring Before Money

To help budding food service entrepreneurs operate their fledgling businesses legally in Louisville, Community Ventures partnered with the city health department to open the Chef Space Kitchen incubator downtown. Pictured during the June 29 groundbreaking are, from left, Louisville Metro Mayor Greg Fischer, Louisville Metro Council President David Tandy, Federal Reserve Bank Regional Executive Maria Hampton, Chef Space President Johnetta Roberts, Community Ventures President and CEO Kevin Smith, Susan Barry of the Community Foundation of Louisville and U.S. Congressman John Yarmuth.

To help budding food service entrepreneurs operate their fledgling businesses legally in Louisville, Community Ventures partnered with the city health department to open the Chef Space Kitchen incubator downtown. Pictured during the June 29 groundbreaking are, from left, Louisville Metro Mayor Greg Fischer, Louisville Metro Council President David Tandy, Federal Reserve Bank Regional Executive Maria Hampton, Chef Space President Johnetta Roberts, Community Ventures President and CEO Kevin Smith, Susan Barry of the Community Foundation of Louisville and U.S. Congressman John Yarmuth.

Kentucky and its cities have climbed national listings recently in categories such as best places to raise a family, best places to retire and top travel destinations, but arguably the most notable ranking was the commonwealth’s jump last year to fourth in the State Entrepreneurship Index (from No. 49 a year earlier).

The federal Bureau of Labor Statistics declared Kentucky has the highest percentage growth of business establishments in the nation, and the state received an “A” rating from the Kauffman Foundation and thumbtack.com for small-business friendliness.

A look around the state at the support programs in place for budding entrepreneurs reveals, though, that this success should come as no surprise – it is a product of acting with intention.

“Kentucky has a very strong and committed group of small-business service providers,” said Michael Ashcraft, senior area manager for the U.S. Small Business Administration’s Kentucky District Office. “The folks who do the work across the state are incredibly smart, dedicated and passionate, and they all seem to love what they do.”

Fusion-Corp

Fusion Corp., a Lexington custom website, print, ecommerce and design firm, launched in December 2014 with a loan from Community Ventures. Pictured are, from left Kim Wilson, senior SBA loan administrator with Community Ventures; co-owners Daniel Boone, Michael Baer and Tim Raymer; and Kim Bennett, senior commercial loan officer with Community Ventures.

Last year, SBA and its resource partners in Kentucky directly served about 25,000 people with one-on-one counseling, educational programs and requests for information. It did not, however, serve 25,000 people with money. Technical support is where it’s at – eventually.

“Most people initially come to us or our resource partners asking for money, such as small-business grants, which are very competitive and usually applicable only to those companies that are performing, high-tech, fast-growth sorts of companies,” Ashcraft said.

“However, once an SBA employee or resource partner counselor talks to the person, often they discover that the request for loans or grants often is masking other challenges for the business, such as slow-moving inventory, lack of sufficient working capital, poor accounts-receivable practices, bad marketing plans,” he said. “That’s where the free one-on-one counseling services and mentoring become very important.”

Money is important and often is a component of aid provided, but mentorship is even more so – since everyone needs a good return on their loan/investment.

“I would say the most important thing we do is we get them ready, so when they do get the money they can use it correctly,” said Rick Johnson of state government’s Kentucky Innovation Network. “They’ll always tell us they need money, and sometimes they’re right. But many times they’re not ready for money. They need to add a key person or to fix a process, or to finalize a prototype.”

Lexington-based Community Ventures provides targeted financial assistance and education statewide. President/CEO Kevin Smith points to three types of impactful business aid, all with degrees of financial investment: support for micro enterprise (typically one- or two-person businesses) through micro loans; mid-range loans; and the federal New Market Tax Credit program.

Since it was founded in 1993, Community Ventures has focused on small-business support in all stages, home ownership and other community programs. From humble beginnings and a staff of one, it now manages more than $121 million in assets and has a 38-member team in five regional offices.

“If you’re looking at job creation and large community impact, then you have to point to the New Market Tax Credit program,” Smith said. “We’ve put $179 million into Kentucky communities through New Market Tax Credit investments, including $11 million to help rebuild the downtown area after the West Liberty tornadoes. We put $23 million into the Bowling Green downtown renovation, $24 million into Owensboro to do the riverfront, $11 million in the Galt House renovations in Louisville.

“When you’re looking at really making communities different and creating jobs, you just don’t find a program that can have an impact like New Markets Tax Credits,” he added.

Small loans have big impacts

Even though the amounts of money invested are not as impressive, Smith said, it’s the small-business microloans that do the heavy lifting over the long haul and directly impact families on a daily basis. Through business training and micro enterprise, families are able to better themselves and ultimately their communities.

“On average those loans are about $9,000 to $10,000,” Smith said. “Where we saw the power of the micro loans is in the Great Recession when the banks pulled back from business lending. We would make about 80 to 90 a year, but when recession hit we got about 250 loans a year. I think it was the entrepreneurs who brought us out of that recession. They continued to create jobs, and I credit this micro-loan program as part of what got us back on track.”

Ashcraft agreed with that sentiment. The SBA set an all-time record for SBA loan dollars in Kentucky in 2011 at just under $200 million.

Also “extremely important to the economy,” he said, are the in-between programs through which a mid-level entrepreneur might get a loan of about $1 million and immediately create jobs.

Community Ventures receives small business loan capital from a wide variety of sources. New Markets Tax Credits come from the Community Development Financial Institution fund at the U.S. Treasury Department and most of the micro-enterprise dollars come from the SBA, which Congress created in 1953.

“That is one government entity that has remained solid and responsive to our community and the economy,” Smith said. “They are much more in touch than sometimes they get credit for.”

Ashcraft credits SBA’s “lean and mean” eight-person Kentucky staff for this.

“We are all passionate about what we do, and we have a great network of resource partners and other small business service providers, lenders and others across the state,” he said.

The SBA’s resource partners, such as SCORE, Small Business Development Center, and the Women’s Business Center of Kentucky, often are the face of SBA. They provide free one-on-one counseling for small business owners and aspiring entrepreneurs across the state.

“Many people are not aware of all of the free resources available,” Ashcraft said. “My primary role at SBA is to visit with chambers of commerce and other economic development organizations across Kentucky to increase awareness about SBA, its loan programs and free small business counseling and mentoring services through our resource partners, as well as small business contracting and exporting opportunities and programs.”

Network of relationships leverages resources

Part of the way the SBA can get away with having a small staff is by working closely with the referrals it gets through its resource partners.

SBA gets client referrals, Ashcraft said, from chambers of commerce, local city and county governments, universities (all of the SBDC offices in the commonwealth are affiliated with a university or college), the Kentucky Innovation Network (KIN), the Kentucky Cabinet for Economic Development, many commercial bank and nonprofit lenders, as well as other business association contacts, like the Kentucky Retail Federation, the Kentucky Restaurant Association, the Kentucky Society of CPAs, and the Bar Association.

“So we have built relationships with these other organizations over decades, stay in touch with them regularly and keep each other informed often about with program updates,” he said. “The small business resource organizations, particularly in Kentucky, work well together, like each other and know each other very well.”

Johnson, associate vice president of KIN, which has 13 offices across the state, works closely with SBA and its regional offices. Each KIN office has a local partner organization – in Lexington it is the University of Kentucky; in Louisville it’s Greater Louisville Inc.; in Northern Kentucky it’s Tri-ED. It has a fund matching program with those state and local partners.

“So right away, we’re sort of not siloed,” Johnson said.

Kentucky Innovation Network works with many organizations for funding, like the National Institute of Health, the state Council on Postsecondary Education and many more in a competitive process that works to target dollars but also find the best partner possible for an entrepreneur or small business.

“If anyone wants to start or grow a business in the state, we’ll hand them off if necessary,” Johnson said. “We listen to them and make an informed hand-off if need be. If any state organization is looking for someone to help them achieve something, we will help them. Too many people think in silos, but we’re trying to think across everything.”

He echoed similar sentiments to Ashcraft and Smith. Most people need more than just money, and that’s why KIN offers mentorship and follow through.

“They’ll always tell us they need money,” he said. “And sometimes they’re right, but many times they’re not ready for money. They need to add a key person or to fix a process, or to finalize a prototype. So typically there’s a little bit of coaching and mentoring they need before that. I would say the most important thing we do is we get them ready, so when they do get the money they can use it correctly.”

The network coaches and prepares entrepreneurs to go before angel investors and venture clubs to pitch their idea to get funding, and it even holds pitch competitions. KIN also gets entrepreneurs “investment ready” and set up with a team of coaches, whether that is legal counsel, financial advisors or business planners.

“Kentucky has a wonderful set of integrated tools, statewide, to work with their entrepreneurs,” Johnson said. “And that’s been showing up in the rankings the last few years, of great places for startups … The climate here has been great. Kentucky has gone from near the bottom of the pack to near the front of the pack, and that’s because of these integrative programs.”

It is working and will continue to work.

Start-ups, and aid, vary by region

Big things are happening regularly, Johnson said, and they display the diversity of the commonwealth.

“In Lexington and Louisville, you have the two research universities, so the entrepreneurs are a spinoff that leverage the research dollars here; they tend to look more medical-related or high tech,” he said. “In Northern Kentucky it’s a little bit more industrial, the types of startups; that’s the nature of that region. Northern Kentucky University has an informatics department, so you see some software startups. The agricultural-based solutions are in the central and western part of the state.”

Johnson noted a far Western Kentucky start-up that, as a solution to a big invasive fish species problem in the Lake Michigan area, processes and packages Asian carp for foreign consumption.

In Morehead, many projects revolve around the internationally acclaimed Kentucky Space program based at Morehead State University.

In the Appalachian region, KIN officials are talking with younger and younger students about controlling their own futures. KIN also runs the Governor’s School for Entrepreneurs held annually for high school students.

“The idea, from an economic development point of view, is catching really smart kids and getting them thinking about starting a business, and maybe they won’t leave the state; they’ll create that great company here,” Johnson said.

Later, the same “really smart kids” will have a leg up in winning SBA grants, such as originations from Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR), and State Trade and Export Promotion (STEP) grants.

Typically only about one in five SBIR Phase 1 research grant applicants nationwide get funding each year, Ashcraft said. For Phase 2 grants, about one in two get funding. For STEP grants, the dollar amounts are smaller (up to $7,000) but slightly more prevalent.

The state hopes some of the business-inclined students it takes an interest in now will take advantage later of some of the federal high-tech startup money that is available. Kentucky matches federal SBIR and STTR grant funds, dollar for dollar, the only state with 100 percent matching, not only for in-state businesses but also for companies that agree to move operations to Kentucky. The SBIR and STTR Matching Funds Program has awarded close to $51 million over the past decade and motivated nearly three dozen companies to relocate to Kentucky.

For business capital that must be repaid, SBA’s loan guarantee program and the Certified Development Company/504 Program for lending up to $5 million or more also are competitive in the sense that a business has to first go through rigorous preparation provided by SCORE, SBDC and the Women’s Business Center.

“The microloan program (amounts up to $50,000) is somewhat less competitive, but the businesses often must be involved with on-going technical (business) assistance from our microlenders across Kentucky,” Ashcraft said. “Kentucky has some of the best microlenders in the country.”

SBA is involved in 550 to 700 Kentucky lending transactions annually, nearly all of which are 7(a) general small business, 504 Program and microloans, he said, and its write-off rate is considered low.

The SBA even provides free lender training for banks across the state to ensure that lenders are always kept apprised of SBA policies and procedures.

 

Economic Development, Features

What Now for Eastern Kentucky?

Part 1 of 2. This month: Regional leaders joining forces to stimulate entrepreneurship and turn natural attributes into competitive advantages 

University of Pikeville assistant professor of chemistry Benjamin Clayton works with students Molly Frank of Greensburg and Wesley Barnett of Cynthiana, who are members of a team developing an organic feed additive for the poultry industry made from bloodroot grown in Eastern Kentucky.

University of Pikeville assistant professor of chemistry Benjamin Clayton works with students Molly Frank of Greensburg and Wesley Barnett of Cynthiana, who are members of a team developing an organic feed additive for the poultry industry made from bloodroot grown in Eastern Kentucky.

Bloodroot (Sanguinara canadensis), a dainty white flower with sun-colored stamens, might look like just another Eastern Kentucky woodland beauty. It is one of the faces also of an innovative way of thinking that could bring economic diversity and prosperity to a region seeking to answer the pressing question “what now?” after being buffeted for decades by economic forces beyond its control.

Business students at the University of Pikeville have developed a product called Rhizofeed from the bloodroot. Properties of its root, the students found, provide a natural antibiotic for chickens that is less expensive and more stable than probiotics. Its rhizome extract also has anti-inflammatory properties and has been linked to improving the immune system, regulating digestion and promoting weight gain.

Molly Frank, a biology major, and Wesley Barnett, a biology and chemistry major, work on a research project to developing a phytobiotic poultry feed additive derived from the bloodroot plant native to Eastern Kentucky.

Molly Frank, a biology major, and Wesley Barnett, a biology and chemistry major, work on a research project to developing a phytobiotic poultry feed additive derived from the bloodroot plant native to Eastern Kentucky.

After winning first place in four competitions with their business plan for Rhizofeed, the UPike students are now working with Alltech to bring the product to market. Nicholasville-based Alltech, a $1 billion company operating in 128 countries, makes and sells natural feed supplements that improve animal performance.

The Rhizofeed initiative is an example of new thinking and attitudes that state and regional leaders hope is the beginning of an economic revolution.

The coal mining jobs that have been a financial cornerstone in Eastern Kentucky for multiple generations are crumbling away in recent years. Coal has been cyclical, but this time growing worry is that a rebound is not going to come and the 7,000 miners laid off from well-paying jobs the past three years have little prospect of being called back.

The U.S. energy sector and industry in general is pivoting toward cheaper, more ecologically friendly and now very plentiful natural gas. Hydraulic fracturing has even made the United States the world’s leading oil producer again and is creating what looks like permanent change in the nation’s energy infrastructure – and the economies attached to it.

That was a major motivation behind the Shaping Our Appalachian Region (SOAR) initiative Gov. Steve Beshear and U.S. Rep. Harold Rogers launched in 2013 to stimulate discussion, thinking, collaboration and action to create new economic opportunity in Eastern Kentucky. Three multiday SOAR conferences have provided a framework for idea sharing and problem solving.

“We know we have natural attributes we can build into competitive advantages,” said Tim Gibbs, executive director of the Ashland Alliance. “For years it was coal, but that is not going to be the same driver as in the past. Other attributes are our cultural heritage, tourism and our central location (within an eight-hour drive of 50 percent of the country).”

One key strategy is to build a new culture of entrepreneurship in the region so that residents can create the bootstraps with which to pull themselves up via new businesses such as the one envisioned by the UPike student team.

Unconventional thinking and new business

Rhizofeed aims to target a multibillion-dollar poultry production industry – Kentucky’s top agribusiness sector by revenue – that is looking for alternatives to probiotics or antibiotics, a market expected to grow as an increasing number of major food companies such as McDonald’s demand antibiotic-free production. Grown, extracted and sold from Kentucky, Rhizofeed could diversify Eastern Kentucky’s regional economy while improving poultry production globally.

“This is unconventional when you think of agriculture,” said Howard Roberts, dean of the UPike Coleman College of Business, “but the agriculture market has to be much different in Eastern Kentucky. Traditional row crops won’t work here.”

This kind of thinking is at the heart of the UPike College of Business. Diversifying the Eastern Kentucky economy was one of the original goals when the business school was established in 2013 and remains the thrust today.

“We look at regional needs and try to be in tune to the needs of the region so we can respond with programs that meet that need,” Roberts said.

In 2011, the small local chambers of commerce of Floyd, Johnson, Knott, Lawrence, Letcher, Magoffin, Martin and Pike counties joined forces and became the Southeast Kentucky Chamber of Commerce to create an entity with enough resources to support business development regionally.

Like the economic diversification they are seeking, UPike programs have taken diverse directions. Healthcare is one example.

“We want to train young people for careers in healthcare, specifically healthcare management,” Roberts said. “We have done that by creating a new masters in healthcare management.”

Business recruitment is another focus.

“We have a strong need in this area to attract businesses and to focus on economic development,” Roberts said. “Most recently, through the Southeast Chamber of Commerce, we have hired Chuck Sexton who serves as economic development coordinator for the entire region. This will give us a focus we haven’t had before.

The list goes on.

The Kentucky Science and Technology Corp.’s IdeaFestival, an annual multi-day exploration of creative thinking aimed at stimulating business innovation in Kentucky, in June put on a one-day event in Pikeville focused on “The Future Of Healthcare.” It attracted folks not just from the region but from Louisville and Cincinnati as well.

A new office of the Kentucky Innovation Network opened in Pikeville to advise existing small businesses and help aspiring entrepreneurs write business and marketing plans. In the fall of 2016, a new UPike Kentucky College of Optometry will open, becoming the state’s first such school.

Success will revolve around talent

A new telecommunications program is already in place, designed to train and retrain displaced workers. Many of these workers could be employed with the expansion of dark fiber, a super high-speed Internet service that could make working from Eastern Kentucky as easy as working from New York City.

“When you look at Appalachia, the needs are great,” Roberts said. “Appalachian has a future that is going to be very different – becoming less dependent on extracting minerals and more on providing services. It will happen slowly, but I have no doubt we can have a dynamic transition to a diverse economy.”

Gibbs agrees, and the Ashland Alliance chamber of commerce and economic development organization he leads is another key player seeking economic success in Eastern Kentucky.

Gibbs believes future success will revolve around talent, which means shaping the region’s workforce.

“A lot of economic development is based on matching talents to opportunities, being able to find a skilled, innovative workforce,” Gibbs said. “Our workforce must be able to adjust to the new economic. We are trying to create a nimble structure that will give us a competitive advantage.”

Ashland Alliance started with the Kentucky Work Ready program, which employs a nationally recognized standard for workforce skills.

“To make positive change you have to have business and industry, political leaders, educators all at the same table speaking the same language. This program forces you to bring people together,” Gibbs said.

One of those meetings happened recently when area industry and educational leaders met to develop what they call a work field. High school seniors will be able to sign a contract and if they meet the conditions – certain coursework, no drug or alcohol incidents, solid attendance records, few tardies, soft skills development – they will be certified Job Ready and eligible to be hired by participating employers when they graduate.

“Educators listened to business and industry tell them what they needed,” Gibbs said. “Some of their needs are straightforward. They need people to show up. For example, one executive from AK Steel talked about what happens if someone is late. In the production process, they still have to cover that position. For them, if that person shows up late, it isn’t much different than them not showing up.

“Their operation is lean enough that every single person is important. They wanted one component of the (work field) plan to be whether students show up and are timely. This is an important indicator of a successful employee to them.

“We had all hands on deck in developing this plan. We knew if it the community didn’t embrace it, it wouldn’t be used. Now we will be able to match workers who need jobs with people who have what industry needs in workers.”

Make a “glorious heritage” an asset

While Gibbs believes there is nothing more important to economic success than investing in people, he said Eastern Kentucky also must take a multifaceted approach to growing business and jobs.

Gibbs believes the region’s cultural heritage – the Country Music Highway, the array of musicians who’ve come out of the region, the Jenny Wiley Theatre in Prestonsburg, the Paramount Theatre (now Arts Center) in Ashland – has barely been tapped.

“We can take better advantage of our glorious heritage,” he said.

The region’s central location in the eastern United States likewise has not been fully tapped, he said.

“At the Huntington (W.Va.) airport, the vast majority of flights are to Florida and South Carolina,” he noted. “We could be marketing to those states about the tourism opportunities here; the planes fly in both directions. For example, the Rush Adventure Drive Park in Boyd County had an event for ATVs and four-wheeling that was attended by 5,000 folks. That kind of thing is a huge opportunity. We have to re-evaluate what we have, how we value it, and how we market it.”

Meanwhile, there must also be a transformation from a place-based economy to a technology economy, according to Gibbs.

“We have to go from megabyte to gigabyte,” he said. “We are just now realizing what that can mean and how we can market it. It is similar to communities being electrified for the first time and getting water for the first time. We are not looking to be (ranked) in the high 40s of the states in terms of technology. We are looking for Eastern Kentucky to be in the top five.

“We did a trade trip to India a couple months ago. We were talking space
science – making micro satellites that do certain things very well. They can be built at one-tenth the cost of a (full-size) satellite. Every skill it takes to build these micro satellites we teach at our community colleges.”

Sites and certification count – a lot

Not everything is about change, however. Good industrial sites, a staple of economic success for decades, is still important today. Flat land is at a premium in Eastern Kentucky, but Ashland Alliance does have a 1,000-acre multiuse business site known as EastPark.

“We are lucky enough to have one of the 10 regional industrial sites,” Gibbs said. “We are not just certified ‘shovel ready’ but also as a quality site by McCallum Sweeney, a premiere site consultant.

“Certifications have become so much more important. It is a company’s way of eliminating risk,” he said. “They know you have training opportunities, know you have educational partners, have the bits and pieces they are looking for. We have done our due diligence. We are not ready in six or nine months. We are ready today. We are pre-certified.”

It is important to act quickly to help develop businesses and industries that make it possible for people to live and make a living in the region, said Peter Hille, president of Mountain Association for Community Economic Development (MACED).

“There has been a lot of focus on the 10,000 lost coal jobs, but even before that happened the region was characterized as economically distressed,” Hille said. “The Appalachian Regional Commission (created in 1963) has identified the area as economically distressed as long as it has been making that classification. That would be the same even if we replaced those jobs.

Hille said the topic is “a big conversation a lot of moving pieces, and quickly adds that it is an area with “enormous opportunities.”

Try it to see if it works

Taking advantage of those opportunities has been the focus of MACED since its inception in 1976. Hille said the organization has three key strategies:

• Community Investment – investing capital and technical assistance to create economic opportunities, protect natural and cultural assets, and provide critical services.

• Demonstration Initiatives – developing new approaches to old problems and testing them out on the ground.

• Research and Communications for Policy Change – conducting research on policy opportunities and barriers that results in better development practice and opportunities.

Within these strategies, MACED offers an array of programs. For example, the organization’s Energy Efficient Enterprises helps businesses become more energy efficient while reducing greenhouse gas emissions. Specifically, How$martKY , another MACED program, works with electric cooperatives to fund energy efficiency retrofits for homes.

“We were able to approve a $400,000 investment in a grocery store in southeastern Kentucky for an LED lighting retrofit,” Hille said. “The investment will pay off in two years, and the company will come out $100,000 a year ahead after making the investment.”

Forestry is another focus. The Appalachian Carbon Partnership promotes sustainable forest management through education, financial assistance, and new income options in the sale of carbon credits while the Center for Forest and Wood Certification helps landowners and wood products companies get involved in forest and wood certification.

The group also gets involved in policy development both on the front end in terms of research and on the back end in terms of helping to shape policy. The Kentucky Sustainable Energy Alliance, for example, advocates for state policies that support investment in energy efficiency and renewable energy. The Appalachian Transition Initiative fosters conversations about a more sustainable and prosperous future.

Eastern Kentucky Concentrated Employment Program, a Hazard-based organization that serves 23 counties, in June received a $7.5 million grant from the U.S. Labor Department to help address coal industry layoffs through its Hiring Our Miners Everyday effort. EKCEP received a $5.2 million Department of Labor grant last year.

These are not the only groups working on the issue. Perhaps the biggest effort by far is the SOAR initiative co-chaired by Gov. Steve Beshear and 5th District Congressman Hal Rogers.

Economic Development, Features, Features

More Business, Cheaper Power

When it comes to attracting companies to the Bluegrass State, near the top of the list of benefits economic development officials point to is Kentucky’s relatively low cost for reliable power.

Many power utilities play very active roles in economic development recruiting in their service areas, not only to grow their business but to more efficiently manage their demand loads. After Kentucky received the 2014 Governor’s Cup from Site Selection magazine for the number and size of projects it had, among those who attended a reception at the Governor’s Mansion to celebrate were, from left, Brad Thomas, associate manager of economic development for East Kentucky Power Cooperative; and Lisa Payne, lead economic development manager Louisville Gas & Electric and Kentucky Utilities. Pictured with them are Bruce Carpenter, executive director of Corbin Economic Development Agency; Hal Goode, president/CEO of Kentucky Association of Economic development; and John Bevington, deputy commissioner of the Cabinet for Economic Development.

Many power utilities play very active roles in economic development recruiting in their service areas, not only to grow their business but to more efficiently manage their demand loads. After Kentucky received the 2014 Governor’s Cup from Site Selection magazine for the number and size of projects it had, among those who attended a reception at the Governor’s Mansion to celebrate were, from left, Brad Thomas, associate manager of economic development for East Kentucky Power Cooperative; and Lisa Payne, lead economic development manager Louisville Gas & Electric and Kentucky Utilities. Pictured with them are Bruce Carpenter, executive director of Corbin Economic Development Agency; Hal Goode, president/CEO of Kentucky Association of Economic development; and John Bevington, deputy commissioner of the Cabinet for Economic Development.

According to the state Cabinet for Economic Development, last year Kentucky offered the lowest electricity cost of any state east of the Mississippi River and the fourth-lowest overall in the nation – 8.13 cents per kilowatt hour on average across industrial, commercial and residential sectors.

But that’s only part of the role electric and gas utilities play in attracting business to the commonwealth. Many are also directly recruiting companies and offering their own local incentives, backstopping public economic development efforts or even directly funding activities by underwriting key trade show visits.

Louisville Gas and Electric and its sister company Kentucky Utilities, American Electric Power, East Kentucky Power Cooperative and others have staff dedicated to economic development. Their staffs work with existing customers to help keep utility costs down and reliability up in order to retain businesses, and they partner with state economic development officials in providing information and actively recruiting new businesses. They house pages on their websites devoted to showcasing incentives; comparing water, gas and electric rates in Kentucky with other states; and offering maps showing available sites and properties in the utilities’ coverage area.

East Kentucky Power Cooperative is working on an app that will bring detailed information about the electric utility’s service area to mobile devices anywhere. LG&E-KU has an app that allows users to search anywhere in its coverage area for available properties, or focus in specifically on the Louisville and Lexington areas.

In October 2014, East Kentucky Power announced a partnership with StateBook International, an online marketplace where companies and site selectors can interact with and learn more about communities and economic development organizations. StateBook includes some 20,000 data points covering everything from workforce information and taxes to utility costs and incentives. East Kentucky Power’s member co-ops will be able to upload their own information to add to the StateBook database.

East Kentucky Power is the first utility in the country to partner with StateBook.

Together, LG&E-KU – part of publicly-traded PPL Corp. – and East Kentucky Power – a not-for-profit power generation and transmission cooperative made up of 16 distribution co-ops – serve slightly more than half of Kentucky’s 4.4 million residents.

LG&E-KU’s service area includes all or part of 90 counties and some large industrial and commercial users, including Toyota Kentucky’s Georgetown assembly plant, Nestlé, Ford, Johnson Controls and several of the state’s larger distilleries.

East Kentucky Power’s customers, spread across all or part of 87 counties, tend to be more rural and mostly residential, although the co-op is working to bring in larger industrial and commercial customers.

LG&E operates nine power generation plants, while East Kentucky Power runs four. Those power plants play an important role in why the electric utilities have an interest in attracting commercial and industrial customers.

Managing their power load demand

Utilities’ involvement in economic development goes back decades, said Nick Comer, external affairs manager for East Kentucky Power. Initially they wanted to build demand for their product. In the 1940s and 1950s, he said, some power companies would give away electric appliances. More recently, bringing in bigger users of electricity has more to do with keeping the load factor – or demand – on the power plants steady.

With residential users, demand spikes occur at different times of the day, Comer said. In the morning, people get up and use electricity as they get ready for work and school. Then they leave and usage drops down until afternoon, when people return home.

Industrial users of electricity use more power, but importantly they use it more consistently over time. Rodney Hitch, economic development manager at East Kentucky Power, said the more stable the use is, the easier it is on the power plants, which affects rates down the line.

“The power plants, they have to operate at the peak demand,” Hitch said. “So when you have this up and down shift and people – mainly residential – coming online and going offline, the power plants still have to generate at that maximum level. When we get that level, more consistent usage, the power plants may be able to operate less, expenses come down and everybody’s electricity costs come down. The more stable we can be, it helps everybody on the final end.”

To help attract consistent users like that, LG&E-KU and East Kentucky Power offer economic development riders, which effectively give large users a break on their bills. East Kentucky Power offers companies that locate in one of the co-ops’ territories discounts of 30 percent to 50 percent on the highest use part of their bills if they agree to provide a base load. The threshold to qualify is lower in counties with high unemployment, high poverty and low wages, Hitch said.

LG&E-KU’s economic development riders reduce demand charges for large customers in Kentucky so long as they contract for a minimum monthly billing load of 1,000 kVA. The discount is 50 percent the first year, 40 percent the second year and so on until the rider ends starting with the seventh year.

“In the utility business, we are always looking ahead and planning for the future,” said Liz Pratt, public relations specialist at LG&E-KU. “We have a team within the company that works closely to provide direct support for industrial customers.”

LG&E/KU team among nation’s best

Site Selection magazine, which covers corporate real estate and area economic development, publishes an annual list of the top economic development teams at utility companies. LG&E-KU made the list in 2000, 2002, 2004, 2012, 2013 and 2014. In last year’s entry, Site Selection wrote that the utility helped create 10,303 of the 12,598 new jobs in Kentucky in 2013. Those new jobs came courtesy of companies that invested $2.6 billion of the $3.1 billion Kentucky saw in facility location and expansion that year.

Joe Lilly, spokesman for the Kentucky Cabinet for Economic Development, said the state is happy to partner with the utilities and leverage their resources to bring in jobs.

“Kentucky’s utility companies have a strong story to tell prospective clients, and their ability to meet the needs of new and expanding industry makes them a tremendous asset,” Lilly said. “The fact is that we are all in the service industry. Companies look to us for solutions to roadblocks to their growth in Kentucky. Our utility partners work with us to break through those roadblocks and find solutions.”

For instance, the U.S. Department of Agriculture runs the Rural Economic Development Loan and Grant program (REDLG), which provides local utilities with zero-interest loans and grants that the utilities then pass along to businesses for economic development.

Because it’s a loan, “the cooperative is responsible for that loan,” Hitch said. “If the company goes out of business, that loan still has to be paid back. But they’re in partnership with this company and with the state to make sure it’s a good loan and a good project.”

Startup-Kentucky-tour

Brad Thomas, associate manager of economic development for East Kentucky Power Cooperative, and Shawn Rogers, then an Office of Entrepreneurship staffer with the state Cabinet for Economic Development, examine a Kentucky Space cubesat satellite at Morehead State University during a Startup Kentucky tour for out of state media last November. EKPC and LG&E-KU were underwriters for the tour.

Brad Thomas, economic development associate manager at East Kentucky Power, said incentives like those offered by utilities through the REDLG program are designed to add the “cherry on top of the sundae” on the incentive side to help close deals to get companies to move to or expand in Kentucky.

“At the end of the day we’re here to support the Cabinet,” Thomas said. “We want to make sure when they’re thinking about opportunities, they’re thinking about our 87 counties and our 16 co-ops. One of the key things about economic development is you want to make sure you’re picking the right locations. You don’t want a company to come in and leave three years later. You want to find a community for that company to come into for which the community can embrace the company as much as the company embraces the community. That’s not always the case, and by us working cooperatively we can tell the stories of our communities and help in that recruitment piece.”

East Kentucky Power’s service area extends from a small part of Grayson County in the west to part of Martin County in the east and from the Ohio River on the north to the Tennessee border on the south. As such, the cooperative is agnostic about where a particular company might choose to locate in its service area, Thomas said.

“We’d be happy for it to be in any one of those counties,” he said.

Several recent projects have landed in East Kentucky Power’s territory.

Putting a deal together

In September last year, Japanese metalworking and metal treatment company Kowa Kogyosho Co. announced plans to build an $8.3 million facility in Corbin that would eventually employ 30 people. Corbin straddles parts of Laurel, Whitley and Knox counties, which are served by Cumberland Valley Electric Inc., one of East Kentucky Power’s co-ops. The non-seasonally adjusted unemployment rate for that region in April was 6.2 percent. That compares to a statewide average of 4.8 percent and a national average of 5.1 percent, both also non-seasonally adjusted.

The Kentucky Economic Development Finance Authority (KEDFA) gave preliminary approval for $600,000 in tax credits and wage assessments through its Kentucky Business Investment Program, provided Kowa meets certain employment and investment targets, plus further benefits of up to $50,000 through the state’s Enterprise Act Initiative, which allows companies to recover sales and use taxes on construction costs, building fixtures, research equipment and development, and electronic processing equipment. State and local governments worked to build a road to access the site.

Cumberland Valley Electric provided a loan through the REDLG program that helped with construction of a speculative industrial building into which Kowa will eventually move, Hitch said.

Similarly, in May 2014 KEDFA approved up to $4 million in tax incentives and benefits to encourage Diageo to build a new $115 million distillery and warehouse facility on Benson Pike in Shelby County, adding 30 jobs to the local economy. East Kentucky Power offered to move some of its infrastructure, and its Shelby Energy Cooperative offered money through the REDLG program.

“We were at the table, helping that community and helping the state of Kentucky put their best foot forward, and we were fortunate that they did choose to locate in Kentucky,” Hitch said.

Also in Shelby County, when developers wanted to build the Outlet Shoppes of the Bluegrass mall at Interstate 64 and Buck Creek Road, East Kentucky Power installed a new substation and ran three miles of transmission lines in about seven months, a project that normally would have taken 18 months to two years.

The co-op is even happy about companies that don’t locate in its service area at all, said Hitch.

“That’s OK, too, because the state of Kentucky has been uplifted. And more than likely, the people working in that factory, they’re going to have their homes in our territory because we’re more of a rural area.”

Along with LG&E and other utilities like the Tennessee Valley Authority, Kentucky Power and Duke Energy, East Kentucky Power is a member of Kentucky United, a public-private partnership comprising economic development organizations at the state, regional and local levels. It is led by the Kentucky Association for Economic Development.

To be part of Kentucky United, Hitch said, members agree to represent the state, not their own interests.

Education and workforce development, too

“First and foremost we want investment to come to the state of Kentucky,” he said. “Now, we all want it to be in our areas, but bottom line, we’re working as one large team out there to promote the state of Kentucky.”

East Kentucky Power is also playing a key role in building a more skilled workforce in Eastern Kentucky tomorrow by changing parts of the K-16 education curriculum to emphasize science, technology, engineering and math (STEM). The co-op, along with Project Lead The Way, recently announced an initiative called STEM-Transforming Eastern Kentucky (STEM-TEK). Project Lead The Way is a nonprofit organization that specializes in providing science, technology, engineering and math-based curriculum for K-12 schools.

Working with Morehead State University, the Kentucky Educational Development Corp. and the Shaping Our Appalachian Region (SOAR) initiative, East Kentucky Power and Project Lead The Way are aiming to implement the STEM curriculum across 19 counties in Eastern Kentucky. That would include more than 80,000 students.

The project is starting with training and National Board Certification for 64 Eastern Kentucky teachers, said Hitch. STEM-TEK will pay for those teachers to receive certification from the National Board for Professional Teaching Standards with an emphasis on STEM training and leadership. They will receive master’s degrees and with those, will be eligible to earn more money teaching in their districts.

In the short-term, the goal is to implement STEM-TEK in seven Eastern Kentucky School districts that currently offer Project Lead The Way curriculum. As the program expands, its backers hope it will lay the groundwork for a more skilled workforce, which in turn could attract more high-skill, higher-wage jobs to Eastern Kentucky. Eventually the school superintendents and principals in STEM-TEK schools would serve on local industrial authorities and economic development councils, giving education a seat at the economic development table it currently lacks,
Hitch said.

“We see this as the beginning of a long-term effort to fundamentally change the environment for high-quality jobs and investment in the region,” said East Kentucky Power CEO Tony Campbell in a statement.

Eventual goal is transformational change

Former President Bill Clinton, right, announces the innovative STEM-TEK initiative during the Clinton Global Initiative America conference in Denver on June 10. At left, Tony Campbell, president & CEO of East Kentucky Power Cooperative, and Vince Bertram, president & CEO of Project Lead The Way, look on.

Former President Bill Clinton, right, announces the innovative STEM-TEK initiative during the Clinton Global Initiative America conference in Denver on June 10. At left, Tony Campbell, president & CEO of East Kentucky Power Cooperative, and Vince Bertram, president & CEO of Project Lead The Way, look on.

STEM-TEK got a boost in June when it was highlighted at the Clinton Global Initiative meeting in Denver, Colo. Campbell and Project Lead The Way President and CEO Vince Bertram joined President Bill Clinton on stage at the meeting, and Clinton praised the initiative as one of only a handful of examples of a state using its own education system to lay the groundwork for attracting good jobs.

“This commitment represents an investment in building out a highly-qualified STEM workforce that will attract businesses and high-wage, high-talent demand jobs to an area that desperately needs them,” Clinton said. “It will also keep more talented young Kentuckians in a newly revitalized part of the state.”

While initiatives similar to STEM-TEK have been implemented locally elsewhere, there has not been a strong push to use it at the regional level, said Thomas.

“I think that’s something that, from the perspective of EKPC representing a large territory, we can make those types of suggestions and put into play those types of efforts to really make an impact. If we develop the workforce, we hope the jobs come.”

Thomas said initiatives like STEM-TEK and the SOAR drive to improve broadband access in the region are transformational events for Eastern Kentucky.

“The opportunity we’re seeking right now is a future, because a lot of people in Eastern Kentucky do not see a future right now,” Thomas said. “If we can get the skill sets and a STEM workforce created there, that creates opportunities that exist nowhere else in the country.”

While some might find it surprising that a utility company is leading this charge, it makes perfect sense to East Kentucky Power, Hitch said. Bringing good companies with good jobs to Eastern Kentucky means more people living in the region, a better economy and more people paying their power bills. Although as nonprofits, power cooperatives are not concerned with making more money, they are invested in the quality of life of their users, said Comer.

“Really that’s why electric coops exist – our members saw the improvements to the lifestyle that access to electricity had in cities and they said ‘we want that,’ ” Comer said. “Extending that forward to today, people see that it makes sense to do economic development activities, to improve the quality of life for the small towns and rural areas. That’s what we’re doing.”

Economic Development, Features, Features

Kentucky Improves Film and TV Incentives

Diane Lane and John Malkovich were the stars of “Secretariat,” a Walt Disney Pictures movie release in 2010 that was the first to take advantage of Kentucky tax incentives for film and television production. Incentives were increased by the 2015 General Assembly to make the state competitive with other Southern locales that are seeing billions of dollars of business activity.

Diane Lane and John Malkovich were the stars of “Secretariat,” a Walt Disney Pictures movie release in 2010 that was the first to take advantage of Kentucky tax incentives for film and television production. Incentives were increased by the 2015 General Assembly to make the state competitive with other Southern locales that are seeing billions of dollars of business activity.

Kentucky became more financially attractive to film and television production companies on May 7 when Gov. Steve Beshear signed House Bill 340 to improve a series of financial incentives the state offers.

Qualified productions may take a refundable income tax credit of as much as 30 percent – up from a previous 20 percent – of approved production expenditures, which can include set construction, rental of properties, wardrobe, photography, sound services, editing and other post-production services, and more. Talent costs now are included as a production expense.

An additional 5 percent incentive is available for the use of Kentucky resident labor and for filming in “enhanced incentive counties.”

These production incentives are available to companies that spend at least $250,000 to produce films or television shows in Kentucky. For commonwealth-based companies, the spending threshold is $125,000.

“House Bill 340 gives Kentucky a strong advantage when competing with other states for outside film projects,” Beshear said. “Increased film production in Kentucky means a boost to local economies and an opportunity to highlight the Bluegrass state on both big and small screens across the world.”

Kentucky previously passed a series of film-production tax incentives in 2009. At the time, the package was attractive to out-of-state filmmakers and helped make the state more competitive. Walt Disney Pictures became the first to take advantage of the benefits with a $1.2 million tax credit.

The bill passed just as the studio, which had been waiting and wanted to shoot here, was about to announce filming of “Secretariat” in Louisiana. Instead, large chunks of that movie, starring John Malkovich and Diane Lane, were filmed at Keeneland, Churchill Downs and other spots in the state.

But Kentucky’s incentives soon slipped behind when states such as Georgia and Pennsylvania passed similar but more lucrative bills. The commonwealth film industry has bemoaned the situation as projects became harder to fund and movies moved elsewhere.

Situated in Kentucky but shot elsewhere 

Television filming was hard to attract also, and even shows set in Kentucky were not made in the Bluegrass. The successful 2010-2015 FX channel series “Justified,” centered on a U.S. deputy marshal based in Lexington with story lines that played mostly in Harlan County, used locations in Pennsylvania and California. It generated occasional amusement among sharp-eyed Kentucky viewers who noticed characters drive past palm trees in downtown Lexington.

Likewise, the History Channel’s very popular 2012 Kevin Costner miniseries “Hatfields and McCoys” made only minor use of neighboring West Virginia before flying off to Romania for principal photography.

Hopefully, that is set to change with the new availability of greatly improved incentives for filmmakers who choose to film in Kentucky. Legislators, representatives from the Department of Travel and Tourism, business leaders, and members of the area’s film community all worked together to create the updated package.

Mona Juett, deputy commissioner for the Kentucky Department of Travel and Tourism, describes the new incentives as “very competitive.”

HB 340 was introduced by state Rep. Rick Rand of Bedford (House District 47). Involved also with the 2009 film and TV incentives, Rand worked closely on HB 340 with other legislators, local industry experts, first lady Jane Beshear and the Kentucky Tourism Development Finance Committee.

“These shows and films can bring thousands of jobs and drive tourism to shooting locations during and after the final product, which has a positive impact on businesses in local communities,” Rand said. “There is also an unspoken prestige that comes with landing a major motion picture like ‘Secretariat’ and having the spotlight on Kentucky, giving the state an opportunity to feature its people and beauty.”

Mrs. Beshear testified this year that Kentucky had fallen behind 30 other states in its ability to attract the film industry.

Multibillion-dollar industry in the South

Rand points to Louisiana and Georgia as examples of Southern states that have had particular success in building their TV and movie production industries.

Since Louisiana enacted incentives more than a decade ago, New Orleans has built such a strong production community that it is sometimes called Hollywood South. In August 2014, Georgia reported that, thanks to hit TV shows like AMC’s “The Walking Dead” and numerous films, the state supports more than 75,000 jobs in the sector. Furthermore, the report states, that industry’s impact on the state economy weighed in at an impressive $5.5 billion.

To put that into perspective, film and broadcast’s impact on Kentucky’s economy was a mere $3 million in 2007, before introduction of the first incentive bill. By last year, that had grown but only to a still-paltry $15 million. The new credits, Rand says, brings Kentucky incentives up to levels seen in many other states.

The incentives are already being heavily promoted by Juett and her staff. A media campaign began in April with full-page ads in “The Hollywood Reporter” and “Variety” magazines. Representatives from the state will soon be flying to Los Angeles to meet with industry executives and producers. There will also be a series of roundtable meetings around the state, giving local actors, filmmakers and crew members the opportunity to learn more about how they might benefit from the expected influx of productions.

Someone who is pleased to hear about the bill’s passage is Brian Cunningham of Louisville’s ThoughtFly Studios. In the past few years, Cunningham and his partner Matt Niehoff have built a successful production company, creating promotional films for such businesses as Maker’s Mark and Churchill Downs. The pair recently wrapped filming of their second feature film, “Loss Prevention,” shot entirely on location in Louisville with a host of local talent as well as WWE’s Al Snow and Australian action star Vernon Wells, known for his roles in “The Road Warrior” and “Commando.”

Experienced hands are an incentive, too

“The biggest impact this will have, hopefully, is that it will bring more production/postproduction and give incentive for using more local talent,” Cunningham said. “That means income via working as crew, equipment rentals, and postproduction video and audio services. It also means more demand for specialized roles which will encourage more talent to come to and remain in the area.”

He echoes his colleagues in the local film community by emphasizing that more projects will ultimately lead to a more skilled and more experienced labor pool, something that, in turn, makes Kentucky more attractive as a location for entertainment production business.

In 2013, Cunningham released “Monsters Wanted,” an award-winning documentary charting a couple’s journey to making their dream of a major Halloween attraction a reality. He is pleased the documentary genre received special and advantageous inclusion in the film production incentive package.

Documentaries become eligible for credits under the new business inducements with a minimum expenditure of $20,000. For Kentucky-based companies, the threshold is even lower at $10,000.

Documentaries “are always a labor of love before they’re a financially viable investment,” Cunningham said, “so knowing that documentaries will be supported via these tax incentives will hopefully allow more ‘passion projects’ to get off the ground.”

A variety of other businesses not directly involved in productions also stand to gain from HB 340. Hotels, restaurants and catering companies are just a few examples of those who stand to gain work and contracts from projects. The single two-week “Secretariat” shoot in 2009 infused an estimated $6 million into the local economy, Juett said. Nearly any film, either directly or indirectly, is great publicity for the state and is “a huge plus” for the growing tourism industry.

Juett said two feature film productions have already been approved to receive HB 340 incentives. As further evidence of the state’s growing attractiveness to filmmakers, she cites the increased traffic to the Kentucky Film Office’s webpage listing potential locations.

Although it is still early, these factors seem to be supporting Rand’s prediction that “enhanced film incentives will make it more difficult for other states to compete with us.”

Those interested in learning more about the film tax incentives should visit the homepage of the Kentucky Film Office at filmoffice.ky.gov/default.aspx.