Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> February 14, 2006


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> February 14, 2006, upon adjournment of the House and Senate Chambers, in<Room> Room 131 of the Capitol Annex. Senator Vernie McGaha, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Vernie McGaha, Co-Chair; Senators David E Boswell and Joey Pendleton; Representatives Adrian K Arnold, James R Comer Jr, Charlie Hoffman, and Thomas M McKee.


Guests:  Keith Rogers, Brian Furnish, and Catherine Ball, Governor's Office of Agricultural Policy; Jeff Harper and Laura Knoth, Kentucky Farm Bureau.


LRC Staff:  Lowell Atchley and Kelly Blevins.


Following roll call, the presiding chair, Senator McGaha, asked Mr. Keith Rogers and Mr. Brian Furnish, executive director and deputy director respectively of the Governor’s Office of Agricultural Policy (GOAP), to present their monthly report of state and county projects reviewed at the previous Agricultural Development Board (ADB) meeting, and also to update the Committee on an earlier meeting. (The Committee approved the January 2006 minutes once a quorum was established later in the meeting.)


Mr. Rogers began by briefing the Committee on the Agricultural Development Board’s January 13 meeting during which the board received the completed study on the vegetable cooperative production and processing business in Kentucky. According to Mr. Rogers, the study recommended a proposed business structure for cooperatives that envisioned cooperatives continuing to function at Owensboro and Georgetown, but with a main facility located in or near Elizabethtown. He said the plan would require an up-front infusion $500,000 in capital, plus approximately $1.5 million in transition money. He said an entity would be needed to take over the proposed cooperative business operation, but no such entity had been identified.


Next, Mr. Rogers updated the Committee on the status of the West Kentucky Growers Cooperative, which had recently sold its assets, including 156 acres of land and equipment, to satisfy its debts to various mortgage and lien holders, including the ADB. According to Mr. Rogers, the cooperative was in default of its outstanding loans with the board. He said the issue would be discussed during the upcoming February ADB meeting.


Committee members discussed with Mr. Rogers the impact on growers and on-going discussions with companies interested in taking over the facility.


Mr. Rogers turned to projects considered during the January 20 ADB meeting. Most of the subsequent discussion focused on an Owensboro Grain Company LLC project to construct a biodiesel refining facility. The biodiesel refinery would have the capacity to generate as much as 45 million gallons of biodiesel annually. The ADB granted $1 million to the company for the facility, plus some counties contributed $108,000 in grant money.


Responding to a question from Rep. McKee, Mr. Rogers said it was likely that biodiesel produced at the facility would be distributed throughout the state because the forgiveness aspect of the loan allowed for a 50-cent per gallon rebate on biodiesel sold to tobacco-dependent producers.  Later, Senator Pendleton said he believed the rebate would open up the market for biodiesel users and also help soybean sales.


During the discussion, Senator Boswell expressed his concern about the company having to compete with the more common oil-based petroleum.


In terms of other projects, Chairman McGaha asked about the demand for a wool rug book, to be published by a Montgomery County funds recipient, The Shepherd’s Rug. Mr. Rogers said the applicant was able to show that over 200 farm families would benefit from the book in the first year.


The GOAP executive director also explained the status of a Lexington Lions Club project to use $100,000 in Fayette County funds to build a livestock education and show facility at Masterson Station Park in Lexington. Mr. Rogers said the ADB placed the project on its pending list to receive additional information on a marketing plan and past precedence in granting money for similar projects. 


Mr. Rogers also referred to two informational items in members’ folders. The first was the board’s resolution in support of a Kentucky agricultural heritage center. He said the board had indicated it would make a one-time commitment of $1 million to the planned center. The resolution noted that the Agricultural Development Board “should be seen as a catalyst for the project and not as a future source of funds for construction and operations of the facility.”


The GOAP official also brought the committee’s attention to the board’s position on potential subleases of cooperative facilities. According to the guidelines, an outgrowth of the West Kentucky Growers Cooperative situation, the board suggested that certain criteria be met in leasing, including improving opportunities for farmers to grow and profit from vegetable production.


Finally, the committee discussed an issue raised by Representative Arnold, that perhaps legislation should be considered to provide a per diem to Agricultural Development Board members, who currently receive an expense allowance, but not a per diem. According to Mr. Rogers, the board meets several times a year and individual members visit projects and attend other activities. He said he would provide additional information on the number of board meetings last year.


The meeting ended at approximately 5 p.m.