A “Competitiveness” Analysis For Creation & Retention
The severe and nearly-unprecedented meltdown of the U.S. financial markets during September and October 2008 make it essential that the 2010 Kentucky General Assembly fully evaluate through the Kentucky Cabinet for Economic Development our current array of incentives. Beyond increasing support for all levels of education, support for the development of improved incentives to help Kentucky’s small, medium and large businesses so that they grow and prosper in today’s global economy is necessary.
Chamber position:
We support new strategies designed to increase jobs with existing Kentucky employers and by attracting new employers to Kentucky. We advocate a regional approach, not county-by-county, to economic development marketing, entrepreneurship and business retention and expansion. The Chamber urges the 2010 General Assembly to work in cooperation with the Cabinet for Economic Development and Kentucky’s economic development regions during the 2010 Interim period to determine a) Kentucky’s tax structure competitiveness b) if Kentucky’s current reliance on performance-based tax credit incentives, which were clearly innovative and first-in-the-country in the early 1990’s, are competitive with our surrounding states as well as other metropolitan regions and c) to make the necessary improvements in our economic development incentive offerings.
Enhance Job Training Grants
Kentucky is recognized by site selection consultants and corporate real estate executives for a competitive and effective job training grant program through the Bluegrass State Skills Corporation (BSSC). The framework is well-established but the funding is lacking. Funding for BSSC was increased significantly in the 2006 General Assembly to $11 million and both new and expanding companies accessed these funds to provide needed job training skills development for Kentucky workers both creating and preserving jobs. In 2008, the BSSC funding was cut to $3 million, thus severely affecting Kentucky’s ability to grow through new and expanding companies. Northern Kentucky Tri-ED reports that only one-half of the applicants Tri-ED works with annually receive funding under BSSC. During the Wilkinson Administration the total funding for the program was $5 million.
Chamber Position:
Training grant funding for the Bluegrass State Skills Corporation should be increased to $6 million ($3 million increase) to meet the current training grant needs of Kentucky.
Establishment of a Headquarters (HQ) Incentive Tool
Immediate relocation costs can be prohibitive to both large and small companies willing to move their HQ operations to Kentucky. The current KJDA incentives do not provide sufficient coverage of such relocation costs. Kentucky needs to develop a tool to specifically recruit HQ companies through a fund that provides a relocating company a forgivable loan to be applied to their relocation costs. Local, private and state matching dollars will create the initial fund and companies that benefit from the fund will dedicate a portion of the occupational tax from each relocated company to be applied to the fund’s replenishment. In essence, the fund becomes a one-time funded, partially offset, state investment that can generate significant and recurring returns. Specific eligibility requirements would be set for companies interested in the fund.
Chamber Position:
The Chamber supports the proposal that a state and local fund be created to recruit high potential companies to relocate HQ operations to Kentucky.
Preserve the Economic Development
Partnership Board
Currently, Kentucky statute (KRS 154.10) establishes the Economic Development Partnership Board in a way that its Board members serve independent of the Governor’s Office and the General Assembly. Companies considering relocating to Kentucky, or existing companies considering expansion, both respect and appreciate that this Board’s decisions are based on business knowledge, not political considerations.
Chamber position:
The Chamber believes the Economic Development Partnership Board is working. The current system promotes continuity, high-level staff professionalism and independent decision-making.
Commercialization and Innovation
Northern Kentucky supports the work of the Kentucky Department for Commercialization and Innovation (DCI) as part of the Kentucky Cabinet for Economic Development to expand the Commonwealth’s innovation and technology economy. The Northern Kentucky ezone has been designated as the Innovation and Commercialization Center (ICC) for our region and has delivered the most new jobs with the least amount of state and local funds than any other ICC in Kentucky. The program is successful and worthy of continued support.
Chamber position:
While the Chamber recognizes that the 2010 General Assembly may see limited legislative activity in this area, these programs are the future of the Northern Kentucky’s economy. Funding in the “seed capital stage” and “venture capital” as well as creating regional “angel groups” by providing matching dollars and/or tax credits will accelerate creation and growth of these worthwhile companies.
Angel Investment Tax Credits for Individuals to Spur Job Creation
Currently, only angel investment funds (groups, not individuals) are eligible for tax credits under the Kentucky Investment Fund Act passed in 2000. “Angel investors” are groups who provide capital for business start-ups, usually in exchange for convertible debt or ownership equity and play a critical role in this process by providing both capital and guidance to the entrepreneurs. The creation, development and commercialization of high tech ideas and enterprises are critical to Kentucky’s future growth and competitiveness. Entrepreneurship is a major contributor to Kentucky’s growth in productivity, wealth and quality jobs. A recent study by the Center for Venture Research concludes that angel investments are a significant job growth driver. Improving the angel investment environment in Kentucky will drive growth in high paying jobs.
Chamber Position:
The Chamber supports a minor change in previously approved income tax credits under the Kentucky Investment Fund Act (KIFA) to stimulate angel investments by individuals in Kentucky. This proposal will allow individuals making angel investments to be eligible for the previously allocated tax credits and would make Kentucky competitive with 18 other states (including the border states of Indiana and Ohio).
