Interim Joint Committee on Appropriations and Revenue


Minutes of the 4th Meeting

of the 2002 Interim


October 29, 2002


The 4th meeting of the Interim Joint Committee on Appropriations and Revenue was held on Tuesday, October 29, 2002, at 1:00 p.m., at the Northern Kentucky Convention Center, in Covington, Kentucky. Representative Harry Moberly, Jr., Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:  Representative Harry Moberly, Jr., Co-Chair; Senator Richard Sanders, Jr., Co-Chair; Senators Brett Guthrie, Robert Leeper, Ed Miller, Gerald Neal, Johnny Ray Turner, and Jack Westwood; Representatives Royce Adams, Rocky Adkins, Dwight Butler, Jim Callahan, Mike Cherry, Larry Clark, Barbara White Colter, Jesse Crenshaw, Bob DeWeese, Bob Heleringer, Joni Jenkins, Jimmie Lee, Thomas McKee, Stephen Nunn, Charles Siler, John Will Stacy, Mark Treesh, John Vincent, and Rob Wilkey.


Legislative Guests:  Senator Richard "Dick" Roeding, 11th Legislative Senate District; Representative Jon Draud, 63rd Legislative House District; Representative Joe Fischer, 68th Legislative House District; and Representative Arnold Simpson, 65th Legislative House District.


Guests:  Robert Schrage, Northern KY ADD; Eric Summe, Delta Airlines; Jack Couch, KCADD; Gordon Melton, Enterprise Zone, Louisville; Christine Noone, Fidelity Investments; Mike Baker, Northern KY University; Phil Huddleston and Bert May, Kentucky League of Cities; Steve Cannely, Campbell Co. Fiscal Court; Johnna Fasold, Citi Corporation; Ed McQueen, Kentucky Farm Bureau; Greg Jarvis, City of Covington; Diane Steltenkamp, Art's Rental; Mike Hammons, Forward Quest; Doug Baum and Sheri Foster, Law Eng/Mactec; Eric Haas, National Rand; Joe Jennings, No. Ky Chamber of Commerce; Bill Verst, Campbell Co. Commissioner; Larry Maxey, SBS; Mike Ridenour, Lexington Chamber of Commerce.


LRC Staff:  Terry K. Jones, Louis Pierce, David Thomas, and Kathy King.


Chairman Moberly welcomed members and guests and thanked local officials, business representatives, and the Northern Kentucky Chamber of Commerce for the hospitality extended to the committee. He then recognized members of the northern Kentucky legislative delegation.


Chairman Sanders said the committee appreciates the opportunity to visit the northern Kentucky area. He said it is helpful for members to see firsthand what is going on in other parts of the state.


Representative Callahan said he is very honored that the chairs of the Appropriations and Revenue Committee chose to hold a meeting in the northern Kentucky area. He said local officials, business developers and owners, and interested citizens are united in their efforts to make northern Kentucky a better place to live and raise their families.


Senator Westwood thanked the committee for coming to northern Kentucky. He said the area is growing and prospering and it is important that it continue to do so because when northern Kentucky prospers, the whole state prospers.


Judge Steve Pendery, Campbell County Judge-Executive, said northern Kentucky's enterprise zones have been a major contributor to economic growth in the area, and its continued growth and success depends upon the renewal of the enterprise zones. Economic development in Campbell County has been almost entirely confined to its enterprise zone, which encircles the northern part of the county along the Ohio River. Campbell County currently has about 90 certified businesses in its enterprise zone. Northern Kentucky University (NKU) is a major focus right now for economic development because it is surrounded by the enterprise zone. The NKU project is envisioned as a commercialization triangle using NKU as a magnet to encourage knowledge-based industries to locate in and around the university. A $20 million development project is about to be declared at a site near the entrance of the university that will include a hotel, conference center, and office building with parking. There are 14,000 students at NKU, many of whom are trained in new-economy disciplines. Fidelity Investment is an enterprise zone company that has shown the way in this connection. They have hired over 200 students, who work on campus for the company while completing their degrees. It is anticipated that the commercialization triangle could bring in at least $100 million in new construction activity in and around the university. Because of current local, state and national economic situations, business entities and real estate executives have said development of the commercialization triangle may not be a reality unless the enterprise zone status is maintained. Judge Pendery said now is not the time to do away with a program that is such a vital tool for attracting businesses to the area. It is recommended, however, that the boundaries for employee hiring requirements be expanded. The LaFarge Plant, located in Campbell County's enterprise zone, is just across the railroad tracks from the community of Silver Grove. Even though Silver Grove is an economically depressed area whose residents live right next to the LaFarge Plant, they cannot be hired as employees because they live outside of the enterprise zone.


Judge Dick Murgatroyd, Kenton County Judge-Executive and former State Representative, said he also serves as chairman of the Tri-County Economic Development Corporation in northern Kentucky. Northern Kentucky must compete with Cincinnati for economic development, and the Northern Kentucky Enterprise Zone Program has been a very effective and powerful marketing tool used in that competition. There are approximately 200 large and small businesses located within the region and the businesses in the Kenton County enterprise zone employ more than 7,700 citizens. Judge Murgatroyd said new businesses are important to the area, but a main focus of the Tri-County Economic Development Corporation has been to promote retention and expansion of existing businesses. Judge Murgatroyd said the enterprise zone program has become even more important to communities because of the current economic situation. It has had a significant positive impact on the quality of life in this community and throughout the Commonwealth.


Newport Mayor Tom Guidugli said he recognizes every day how important the enterprise zone is to northern Kentucky. Newport is a 207 year old city with a 100 year old infrastructure located across the river from Cincinnati, a major metropolitan city. Financial incentives play a significant role in luring businesses to the Newport side of the river. In Newport, the enterprise zone program has benefited over 60 businesses. It has assisted in generating over $250 million in investments in the community, and it has created over 1,800 jobs in the community. Mayor Guidugli said urban development presents challenges not found in beltways, or industrial parks. Enterprise zones provide jobs for the residents of the community and taxes for city, county, and state government. He said the city of Newport strongly encourages support of Kentucky businesses by continuing the enterprise zone program because it works for the good of all Kentucky.


Covington Mayor Butch Callery said the city of Covington was designated as the most distressed city in the United States in 1979. Since institution of the enterprise zone program in 1984, the city has been revitalized and is now prospering because of that program. Previously abandoned buildings and sites that were once considered not developable have been rehabilitated and renovated. One of the buildings renovated is an 1836 building, the oldest commercial building in the city of Covington. From 1984 through September of this year, 260 enterprise zone businesses have created more than 6,400 jobs and invested more than $700 million in capital improvements for the area. These businesses are investing in themselves and the city of Covington, and the removal of this incentive will certainly negligently impact any decision to invest further. Mayor Callery said an enterprise zone only helps level the playing field, and it has been very valuable to northern Kentucky. Abuses should be corrected, but the program should be extended because it is a viable asset for economic development that helps communities, counties, and regions grow and prosper.


Representative Heleringer asked if any businesses have threatened to leave the area if the enterprise zone program is not extended. Mayor Callery said he has not heard from any company saying that they are going to leave, but the city has heard from some businesses that are concerned about how they might be impacted in the future, especially companies that are considering expansions.


Rich McCarty, Director of Economic Development, Greater Louisville, Inc. said Louisville's enterprise zone provides a competitive advantage nationwide that is a vital and effective tool contributing to the Louisville area's success. Developments such as Riverport, College Industrial Park, West End Development, industrial parks surrounding the airport and UPS, and several downtown development projects, including revitalization of East Main and West Main, have created and retained countless new jobs generating significant capital investment, and also generating new state and local tax revenues. Mr. McCarty said enterprise zones are important to the entire state.


Senator Leeper said a lot of the discussion on enterprise zones has centered on competition with bordering states and that the incentives offered are successful in attracting industry to areas with enterprise zones. But, he said, there are communities out in the state that do not have an enterprise zone and those communities are also competing for economic development projects. Communities without enterprise zones argue that they may have a better chance of attracting development if there were not any enterprise zones. Mr. McCarty said he could not speak for any negative impacts an enterprise zone may have on a particular county, but the enterprise zone in Louisville and Jefferson County has a positive impact on the entire region surrounding Louisville and Jefferson County.


Senator Leeper said some enterprise zone programs have come under criticism because they expanded their enterprise zone, and even though the expansion was within the criteria of the program, it was felt that the expansion was done solely for economic development gain to the county rather than the true spirit of the enterprise zone program as it was set out to be. Mr. McCarty said he cannot say whether the intent of the original law has been abused, but expansion of the zone in Louisville and Jefferson County has resulted in a positive impact on the region.


Representative Clark said enterprise zones were established to promote economic growth in economically depressed areas. He asked what percentage of land in the enterprise zone in Jefferson County is currently being used. Mr. McCarty said he would provide that information.


Chairman Sanders said some states are requiring contractual agreements with companies that accept incentives. If a business pulls out of the program the business must pay back the benefits it received. Mr. McCarty said most companies currently in an enterprise zone realize the importance of the zone and the importance it plays on their business plans. If changes are made to the enterprise zone, perhaps the existing businesses could be grandfathered in and a cap placed on the amount of benefits they could recognize in a given year, or term.


Chairman Moberly asked for a motion to approve minutes from the August and September meetings. A motion was made by Representative McKee to approve the minutes. The motion was seconded by Representative Nunn and adopted by voice vote.


The meeting was adjourned at 2:35 p.m.


All meeting materials and a tape of the full meeting is available for review in the Legislative Research Commission library.