The1st meeting of the Budget Review Subcommittee on Economic Development and Tourism, Natural Resources and Environmental Protection of the Interim Joint Committee on Appropriations and Revenue was held on Friday, October 14, 2005, at 1:00 PM, in the Recital Hall of the University of Kentucky Singletary Center for the Arts in Lexington, Kentucky. Representative John A. Arnold, Chair, called the meeting to order, and the secretary called the roll.
Guests: Provost Scott Smith, University of Kentucky (UK); Mr. Tom Ludt, Member of the Kentucky Horse Racing Authority; Deputy Secretary Lisa Underwood, Environmental and Public Protection Cabinet (EPPC); Jerry Miller, Executive Director of Finance and Administration, Commerce Cabinet; George Ward, Commissioner of Parks, Commerce Cabinet.
LRC Staff: Jack McNear, Kevin Mason, Jeffery Hancock, and Spring Emerson.
Chairman Arnold welcomed Provost Smith and asked for an explanation of the position. Mr. Smith welcomed the subcommittee to the campus today on behalf of President Lee Todd and the University of Kentucky. He went on to state that the provost is the Chief Academic Officer of UK, responsible for not only the instructional programs, but also the academic aspects of research and public service as well. Mr. Smith added that he is currently serving in the capacity of provost temporarily, and is the Dean of the College of Agriculture. He stated that the university has accomplished some marvelous milestones in the past five years. Without any proportional increase in state appropriations, UK has increased the size of the entering freshman class by more than 700 students; increased overall enrollment by about 4,000 students; and, most remarkably, the quality of the student body has been increased at the same time. The faculty has met the challenge of dealing with 4,000 more students, and has increased research funding by approximately 80% over a comparable period of time. UK has also been transformed in the last few years to focus on issues of economic development and those areas of concern within the scope of this committee.
Chairman Arnold expressed his thanks for the university's excellent research, promotion and demonstration of uses of new and proficient energy sources such as ethanol and biodiesels. Co-Chairman Harris added that Mr. Smith is continuing the fine tradition of Deans of the College of Agriculture that has been in place over many years.
Chairman Arnold announced the LRC Hurricane Relief Fund Project and its acceptance of donations which will be used for disaster relief services for those afflicted by the recent hurricanes in the Gulf states.
Mr. Tom Ludt, member of the Kentucky Horse Racing Authority and Chairman of the International Wagering Hub Subcommittee, gave a brief presentation on the status of the quarterly International Wagering Hub progress report. He introduced Lisa Underwood, Deputy Secretary of the Environmental and Public Protection Cabinet (EPPC). Mr. Ludt stated that work is currently underway to draft the final issues on definitions, wagering rules, and approval processes for the Hub. He went on to say that some of the issues resulting in the delay are integrity, security, and the settlements of an account wagering system. There is controversy related to off-shore Hubs, and a business proposal is being put together for the state of Kentucky that will address these issues in such a way that will make the Hub Center here very large, comprehensive, and state-of-the-art.
Chairman Arnold asked if there is a timeline for the project to be completed. Mr. Ludt replied that there is no actual date set at this time, but the goal is to have applications coming into the Horse Racing Authority by the end of this year.
Chairman Arnold asked how much revenue is estimated for Kentucky. Mr. Ludt replied that the Hubs in the state of Oregon generated almost $1 billion in handle, and the way they generate income for the state is one quarter of one percent, plus the daily fee. He added that to give an idea of the revenue for Kentucky at this point would, unfortunately, be complete speculation. An attempt is being made to come together and learn from all the different Hub operators so that we can put together the structural basis which would allow this to be a superior product.
Chairman Arnold inquired about the number of foreign countries participating or wagering here. Mr. Ludt stated that his belief is that there will be no foreign countries, but went on to say that the Hub's structural base, from an integrity standpoint, encourages more people that are betting off-shore to bet through Kentucky instead. He added they would not be international companies. Chairman Arnold asked if they will be wagering through Kentucky. Mr. Ludt replied in the affirmative.
Senator Harris asked what we can do to make Kentucky's Hub unique in order to attract people to us. Mr. Ludt replied that legislation has allowed flexibility with tax bases and a structural plan. Senator Harris inquired if an existing Hub is to be relocated to Kentucky, and as a private enterprise, would they bear the cost of coming here. Mr. Ludt replied that is correct. He added that he doesn't believe that we could create an environment that will make a Hub relocate, based on one quarter of one percent. Senator Harris asked if the one quarter of one percent is fairly common in the industry. Mr. Ludt answered that Oregon set up legislation with the incentive being that low, and is the reason the majority of the revenue is run through an Oregon Hub.
Chairman Arnold asked how much it will cost the state to implement the Hub. Mr. Ludt replied that the hope is that it will be implemented and run entirely by private enterprise, with the state being only a recipient of tax dollars.
Jerry Miller, Executive Director of Finance and Administration, Commerce Cabinet, came forward to give a presentation regarding the implementation of the most recently passed budget. He stated that at the beginning of the current administration, the Commerce Cabinet had 4.9% minorities employed, and that figure has increased to 6.5% and progressing. Representative Palumbo asked for a definition of "creative class." Mr. Miller replied that it relates to artists. He continued by stating that the Arts Council, the Kentucky Center for the Arts, and the Artisan's Center are being promoted in order to create an environment where artists can make an honest living preparing crafts or selling their art through the Commerce Cabinet. This synergy was created when pieces of the Arts and Humanities Cabinet were melded into the Commerce Cabinet. An attempt is being made to cross-promote and convert that artistic talent into helping the economy. Representative Palumbo expressed her agreement.
Representative Simpson applauded the cabinet for the increase in minority employment and asked for more detail on the types of jobs included, whether seasonal, blue collar or white collar, etc. Mr. Miller replied that the numbers quoted include permanent employees, both part-time and full-time positions, and does not include seasonal employees. Commissioner George Ward, Department of Parks, added that one of the Deputy Commissioners of Parks is an African-American, an acting Park Manager at Pennyrile is an African-American, a newly-hired Assistant Manager at Kenlake is an African-American, and an offer is in the process for an African-American as Assistant Manager at Barren River. Commissioner Ward stated that at the beginning of this administration, the percentage of employment of minorities for the Department of Parks was 2.8% and is now 3.9% and growing. A few areas have been identified where there are pockets of both African-American and Hispanic communities near some of the parks, and the plan is to target those areas for employee recruitment. Representative Simpson applauded those efforts and commented that his hope is that other areas of state government follow suit.
Commissioner George Ward gave a brief presentation relating to the Department of Parks. Chairman Arnold inquired about quality inspections of produce, beef and dairy products being purchased from local farmers. Commissioner Ward replied that they work closely with the Department of Agriculture and extension agents across the state, who work directly with the farmers to ensure quality products.
Senator Harris asked what is their greatest return on investment. Commissioner Ward replied that lodging supplies the greatest return to the state, so improvements which will result in more overnight visitors are being made. He went on to say that the four largest parks have the most potential (Lake Barkley, Kentucky Dam, Cumberland Falls, and Lake Cumberland) and the focus is on them. The guideline being used is the AAA Tourbook and its rating system. Those four resort parks are currently rated as AAA Two-Diamond level, and an attempt is being made to bring those up to AAA Three-Diamond level.
Chairman Arnold commented that he recently had the opportunity to stay overnight at Greenbo and was very pleased with the accommodations. He added that there is not enough promotion of the parks statewide. Commissioner Ward went on to say that last fiscal year approximately $300,000 was budgeted for marketing, and this fiscal year it has been increased to over $800,000. It is being used for billboard advertising, a full-page advertisement in the AAA Tourbook for Kentucky and Tennessee, radio commercials, the Toyota promotion, etc. Representative Palumbo expressed her thanks and appreciation for a job well done.
Representative Hoffman inquired about concerns from the merchants in downtown Berea regarding the Artisan's Center. Commissioner Ward stated that the artists are thrilled with the Artisan's Center, but gift shop owners have mixed opinions. Some of the gift shop owners have dropped artists who provide their products to the Artisan's Center, and other gift shop owners have picked up artists who have some products at the Center but not their complete line. He went on to say that the goal is to direct more people to downtown Berea, and interstate highway signage has been installed which resulted in a 60% increase in visitors overnight.
Representative Hoffman asked about the affect on the Horse Park of the relocation of the Bluegrass Stockyards directly across I-75. Commissioner Ward replied that the state has taken a neutral posture on the issue, but the Horse Park Commission is opposed to it. Developers of the Stockyard have met with the Commission on several occasions in an attempt to resolve the issue, and as a result the Stockyard facility has been moved back from the road considerably, and is not visible from the highway.
Mr. Miller then gave a brief presentation outlining the Department of Tourism and the Office of Sports Development. Representative Palumbo inquired about "Dew Action." Mr. Miller responded that it is an extreme sports tour sponsored by Mountain Dew, which includes bikes, boards and blades - motor bikes, trail or dirt bikes, skateboards, rollerblades, etc. Representative Palumbo inquired about the location of the tour. Mr. Miller replied that it is a six-city tour, with Louisville being the location of the opening event of the tour each year.
Representative Simpson asked if the Department of Fish and Wildlife revenue is received solely from the collection of fees. Mr. Miller replied that the agency receives no General Fund dollars, and it is operated entirely on agency-generated funds with the exception of some federal grants, and even their capital is generated internally. One large source of revenue they have received in the last few years is the Federal Fees In Lieu Of Program, which is a Stream Mitigation Act and includes specific criteria.
Chairman Arnold asked what is being done at General Burnside Island State Park. Commissioner Ward replied that one of the plans for General Burnside is to make it an attractive location for a private development resort, including renovation of the existing 18-hole golf course.
Representative Palumbo requested a list of renovations occurring at each park, including ongoing projects, and who is doing the work in each area. Commissioner Ward will provide that information to the subcommittee at a later date.
Representative Simpson asked if the monies flowing through the agency go exclusively to state parks or if there is any occasion where agency funds are used to assist local governments, such as cities or counties, in the upkeep or improvement of their parks. Commissioner Ward replied that the agency does not provide local governments money for the upkeep of local parks, but does supply some assistance for the upkeep of historical covered bridges with mowing and trash removal.
Chairman Arnold inquired about the dollars listed for studies being performed at Herrington Lake and Kincaid Lake. Commissioner Ward replied that $2 million was set aside for the initial plans and the purchase of land for a new state park, as well as to fund the studies. Mr. Miller added that the Frankfort Riverfront Feasibility Study is an ongoing study that includes the Frankfort Convention Center project. Chairman Arnold inquired about the cost of the study. Mr. Miller replied that it was approximately $60,000.
Chairman Arnold asked if the Wildlife Education Center at Mammoth Cave is a federally funded park. Mr. Miller replied that the Wildlife Education Center would not actually be on Mammoth Cave Park, but in the three-county area along I-65.
Representative Palumbo inquired about projects in Ohio County. Mr. Miller replied that there is a proposed Artisan's Center, and the feasibility study has not yet been done. He went on to say that there has been some discussion of doing a feasibility study for an Artisan's Center West, and joining it with the Bill Monroe Bluegrass Music Museum.
There being no further business, the meeting was adjourned at 2:20 P.M.