Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> November 7, 2007


The<MeetNo2> Tobacco Settlement Agreement Fund Oversight Committee meeting was held on<Day> Wednesday,<MeetMDY2> November 7, 2007, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Mike Denham, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members>Senator Carroll Gibson, Co-Chair; Representative Mike Denham, Co-Chair; Senators Charlie Borders, David E. Boswell, and Joey Pendleton; Representatives Royce W. Adams, James R. Comer Jr, Charlie Hoffman, Tom McKee, and Tommy Turner.


Guests:    Mr. Keith Rogers, Executive Director, Governor's Office of Agriculture Policy; Mr. Mac Stone, Director, Division of Value-added Plant Production, Kentucky Department of Agriculture; Mr. Jeffery Hall, State Executive Director, USDA Farm Service Agency; and Mr. Tom Keene, Hay Marketing Specialist, University of Kentucky, Department of Plant and Soil Sciences.


LRC Staff:  Lowell Atchley, Biff Baker, and Lindsey Murphy, Committee Assistant

Representative Mike Denham, the presiding co-chair, opened the meeting by expressing his appreciation to all those who extended their well-wishes and assistance during and after his recent heart surgery.


The Committee approved minutes of the September and October meetings, without objection, on motions respectively by Senator Pendleton and Senator Gibson, and seconded by Representative Hoffman and Senator Borders.


The co-chair next asked Mr. Keith Rogers and Mr. Tim Hughes, Executive Director and Deputy Director respectively of the Governor’s Office of Agricultural Policy (GOAP), to report on the county and state projects considered for funding during the October Agricultural Development Board (ADB) meeting.


After reviewing the model programs recommended for approval at the recent ADB meeting, Mr. Rogers turned to state and non-model projects. He spent much of his time reviewing the Agricultural Development Board’s approval of a $1 million state loan and $3,000 multicounty allocation to upgrade Specialty Foods Group’s Owensboro meat products plant. Specialty Foods was expected to use the funds to help purchase and install equipment to manufacture 20 million pounds of natural and processed beef, pork, and poultry products, with a preference placed on using livestock and poultry raised in Kentucky. The ADB agreement called for a portion of the loan to be forgiven, based on the meats supplied by Kentucky producers.


Specialty Foods Group (SFG) also had applied for tax credits through the Kentucky Development Finance Authority (KEDFA).


Senator Boswell, of Owensboro, thanked the Agricultural Development Board, KEDFA, and other entities for their assistance to SFG. The company, the former Field’s and Fisher’s packing companies, had been an outstanding corporate citizen in Owensboro for years, the senator said.


According to Senator Boswell, the installation of a new hot dog line at the factory, funded with tobacco settlement dollars, was good because the company heretofore had to outsource that manufacturing process. The senator said families in Owensboro were “less tense” about their future, thanks to the funding.


Senator Pendleton also thanked those involved in the business endeavor for their persistence in seeing it through to fruition.


The senator asked about the timetable for SFG to begin processing and selling meat products. According to Mr. Rogers,  KEDFA still needed to finalize its portion of the financing package. He predicted it would be March or April of 2008 before the company could begin producing as a result of the expansion.


After reviewing projects denied ADB funding, particularly two that would have offered broadband wireless Internet service to some counties, Mr. Rogers responded to a data request and information from Senator Pendleton regarding the marketing of Kentucky farm products.


Mr. Rogers described the potential for the FSG plant in Owensboro to distribute food products, in particular, those marketed under the “Kentucky Proud” label.


Responding to additional questions from Senator Pendleton regarding other distribution efforts, Mr. Rogers said no umbrella entity existed to distribute Kentucky farm products, although Allied Food Marketers, which facilitated the marketing of Kentucky Proud products, and the Kentucky Center for Agriculture and Rural Development had done some work in that area.


Kentucky farmers and growers could produce products, but marketing was lacking, the senator observed. He mentioned a firm called Grasshopper Distribution, based in Louisville. Mr. Rogers later said they had worked with an application from Grasshopper Distribution, but it was unlikely the ADB would approve their bid for funds.


Next, responding to Senator Gibson about funds existing unused in county accounts, Mr. Rogers said the all counties would probably have $4-$5 million in their accounts by next February or March, before the annual tobacco settlement payment in April. But some counties essentially had no funds in their accounts, he said.


On another subject, Mr. Rogers said there was some funding available for honeybee keeping through model programs. He and Mr. Hughes also said Kentucky State University received funding earlier for work in honeybee research, education development, and marketing.


Next, Representative McKee asked Mr. Rogers about a proposal that counties be allowed to get a draw on their 2008 tobacco settlement payment to fund current needs related to the effects of the 2007 drought.


According to Mr. Rogers, GOAP staff surveyed officials in about 20 counties with the greatest need and found that about a third would use the funds, about a third would not, and a third wanted more details. Given that information, the ADB took no action, but left the issue on the table for further discussion, according to Mr. Rogers.


County officials interested in obtaining funds indicated they would use the funds for hay and straw storage, and on-farm water improvements, Mr. Rogers told Representative McKee. Mr. Rogers said the issue would probably be discussed when the board met later in November.


Next, Co-chair Denham called on four speakers to discuss state and federal efforts to deal with the effects of the drought.


Speaking first, Mr. Jeffery Hall, State Executive Director, USDA Farm Service Agency, updated the Committee on the loans and benefits available to Kentucky farmers to cover crop and livestock losses from previous disasters. He said FSA offices were currently taking applications for the various crop and livestock disaster programs.


Next, Mr. Tom Keene, Hay Marketing Specialist, University of Kentucky Department of Plant and Soil Sciences, updated the Committee on what farmers could do to meet their current forage needs and plan for the future. Mr. Keene encouraged producers to not panic, to not procrastinate, to do their homework, to be better managers than before, and exercise due diligence. Mr. Keene said their goal was to get information out regarding what farmers could do.


Following him was Mr. Mac Stone, Director, Division of Value-added Plant Production, Kentucky Department of Agriculture, who discussed the activities of a working group, which had met periodically to discuss ways to mitigate the effects of the drought on farmers. Mr. Stone mentioned the significance of an executive order waiving size and weight restrictions on vehicles transporting hay and other livestock forages through and into the Commonwealth. He livestock producers were dealing with the drought, and mentioned that plant nursery operators also were impacted.  He discussed forage options the special committee had discussed, including mowing state highway rights-of-way and park lands.


Finally, Mr. Rogers discussed some of the ADB-approved changes to model programs, making them more “drought friendly” for livestock and forage producers, and other education actions.


Following the presentations, Co-chair Denham said farmers in his area had indicated the biggest problem was the cost of transporting hay. The co-chair said he was pleased that agencies were working together on drought relief.


The speakers responded to Senator Boswell’s question regarding the potential for interstate cooperation on drought relief. According to Mr. Stone, the dry conditions had affected a number of states, some more severely than Kentucky, and those states had sought aid earlier. He said they had talked with officials with other departments of agriculture about hay shipments, but the cost of diesel was a drawback. Regarding train shipments, hay commanded a lower freight rate and would receive less preference that consumer goods, according to Mr. Keene.


Next, Mr. Hall responded to Representative Adams that producers could apply for funds to clean out ponds, but the moneys were not available at that time.


Representative McKee commended the co-chair for bringing the drought program before the Committee. Even with the recent rains, he said, the effects of the drought remained a problem. He suggested another survey in counties to determine what needs still existed.


Responding to Representative McKee, Mr. Hall said funds anticipated to cover 2005 and 2006 losses probably would not be available until February 2008.


Documents distributed during the Committee meeting are available with meeting materials in the LRC Library. The meeting ended at approximately 11:45 a.m.