Tobacco Settlement Agreement Fund Oversight Committee





<MeetMDY1> June 14, 2005


The<MeetNo2> Tobacco Settlement Agreement Fund Oversight Committee meeting was held on<Day> Tuesday,<MeetMDY2> June 14, 2005, at<MeetTime> 1:00 PM, in the conference room at the Kentucky Tobacco Research and Development Center at the University of Kentucky<Room>. Senator Vernie McGaha, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Vernie McGaha, Co-Chair; Representative Carolyn Belcher, Co-Chair; Senator Charlie Borders; Representatives Adrian K Arnold, James R Comer Jr, Charlie Hoffman, Thomas M McKee, and Tommy Turner.


Guests:  Keith Rogers, Brian Furnish, and Catherine Ball, Governor's Office of Agricultural Policy; Dr. Maelor Davies, Dr. Orlando Chambers, Dean Nancy Cox, and Drew Graham, University of Kentucky College of Agriculture; Michael Judge, Kentucky Department of Agriculture; Shana Herron, Community Farm Alliance, Dean Wallace and Frank Penn, Council for Burley Tobacco.


LRC Staff:  Lowell Atchley, Tanya Monsanto, Biff Baker, Carl Frazier, and Kelly Blevins.


Senator McGaha, the presiding co-chair, opened the meeting by thanking Dr. Maelor Davies for giving the Committee the opportunity to conduct its June meeting at the Kentucky Tobacco Research and Development Center.


Next, Co-Chair McGaha asked Mr. Keith Rogers and Mr. Brian Furnish, director and deputy director respectively of the Governor’s Office of Agricultural Policy (GOAP), to report on the May Agricultural Development Board meeting. During the review of the Castle Hill Farm Inc. winery project, Representative McKee asked if the company had purchased grapes exclusively from 12 Kentucky producers in 2004. Mr. Rogers said he believed that was correct. Responding to a question from Representative Arnold, Mr. Rogers said they typically require reports from funded entities for a five-year period. Also, he said the stipulation that the company buy grapes from Kentucky producers “when possible,” was a requirement of the Woodford County Council, which provided the funding.


The GOAP representatives next turned to the Allied Food Marketers West company, which received a $2,991,561 grant/loan to assist in the development of a marketing and distribution model for Kentucky producers and “Kentucky Proud” products. According to a description of the project, Allied Food Marketers West has a goal of creating a business incubator over the duration of the project that will assist producers in the steps they must go through to pursue their business ideas and create viable products with solid marketing programs. Mr. Furnish said the ADB had felt there was a “missing link” in distribution of Kentucky-made products. He said the missing element involved marketing and setting up a one-stop shop for those projects.


 Mr. Furnish said Allied Food Marketers would set up a system taking Kentucky producers from product conception to reality. He said they had identified 35 Kentucky companies that could benefit from Allied’s expertise. Mr. Furnish mentioned some companies and business entities that had achieved some success, but could reach an even wider market for their products.


During discussion, Representative Comer said the marketing project was needed. He then asked why a grant/loan of $3 million was required. Mr. Furnish responded that a large portion of the funds would pay salaries, plus cover other expenses such as equipment and establish a presence at events like the Kentucky Expo. Mr. Furnish said Mr. Rick Raque, of Allied Food Marketers, had assisted smaller companies gain a market niche. Mr. Rogers added that Allied Food Marketers will be set up separately from Mr. Raque’s other companies.


In response to a question from Representative Arnold, Mr. Furnish said those receiving Allied’s services would not be charged a fee, but could have other costs such as labeling and the like. Addressing Co-chair McGaha’s tobacco dependency question, Mr. Furnish said the clients that Allied assists must show tobacco dependency.


During the continuing discussion, Representative McKee asked for a list of the 35 companies identified as potential clients. The GOAP representatives said they could supply the list, but later alluded to keeping the list confidential. They pointed out that all 35 clients might not be successful. Officials said about a fourth to a third of the 35 had received tobacco fund grants.


Mr. Rogers said one idea being discussed was to have a Kentucky Proud section in Kentucky grocery stores that would display a variety of Kentucky-made products. Addressing a question from Senator Borders about a two-year commitment to clients being assisted, Mr. Furnish said the companies would not be tied to Allied after two years, but could choose to remain as clients.


After reviewing other projects, Valentine’s Gourmet Ice Cream, Mountain Cattlemen’s Association, and Ballard County Conservation District, Mr. Rogers turned to no-funded projects from the May ADB meeting.


Representative McKee said he was concerned about the denial of funds to the Caldwell County Conservation District for a farm safety project. He said he would be interested in knowing more fully the Agricultural Development Board’s rationale for its decision. He noted the project would have affected farm families, not production agriculture. In his response, Mr. Rogers said the board had denied similar projects in the past and reviewed House Bill 611 and determined such projects were not in line with the legislation. Mr. Rogers also said the Kentucky Department of Agriculture has a farm safety division that could use added resources.


Referring to a request from SKAC Inc. for funds for freshwater shrimp harvesting equipment, Representative Comer asked about the status of shrimp production in the state. According to the GOAP officials, some production is taking place and marketing had included roadside-type sales.


Mr. Rogers also updated the Committee on the status of approximately $124 million Phase II replacement payments, authorized by the 2005 General Assembly and supplemented by the Burley Tobacco Growers Cooperative. Mr. Rogers said the Phase II checks would be mailed the week of June 20 and recipients should receive their payment later that week. He said distribution costs would total less than $200,000.


Next, the Committee heard a presentation by Dr. Davies on the work being done at the Kentucky Tobacco Research and Development Center (KTRDC). Dr. Davies’ remarks revolved around KTRDC’s work in the area of plant-made pharmaceuticals and plant natural products. Dr. Davies said that, as a segment of the drug industry, biotech products were projected to reach the $110 billion mark by 2010. He mentioned the increased opportunities to create drugs from plants such as tobacco. Dr. Davies said KTRDC had been focusing increasingly on the creation of drugs from natural products. The research center provides new plants, methods, and grower contacts for companies. It also assists in research and developing solutions. He said the research center represented a useful bridge between farmers, companies, and the U.S. Department of Agriculture, which regulates the industry.


Dr. Davies said growth of the industry was unpredictable, but he said there was a need to assure that Kentucky remained in the forefront of growing the special tobacco needed for plant-based pharmaceuticals. During his presentation, Dr. Davies mentioned four biotech companies with Kentucky ties that KTRDC is working with: Large Scale Biology, Plant Biotech, Chlorogen, and Icon Genetics.


Following Dr. Davies’ remarks, Representative Belcher, Committee co-chair, said Kentucky should be involved in the plant-made pharmaceutical development effort. She said she hoped the Legislature would remain committed. Other Committee members also expressed support for the research and development endeavor.


During the discussion, Dr. Davies said it had been difficult to get large drug makers interested in plant-made drugs, but they now seemed to be more interested.


Following the presentation and prior to adjournment, Committee members and others toured the KTRDC facilities. Copies of Dr. Davies’ Powerpoint slides are on file with meeting materials in the LRC Library.


The meeting adjourned at approximately 3:30 p.m.