Regional Report: Kentucky Continues to Break Records in 2019
Low business costs are drawing businesses to Kentucky, as the state also tries to equalize opportunity in its rural areas through Opportunity Zone incentives.
Kentucky has the lowest cost of doing business in the nation, according to a recent CNBC poll. Its many tax incentive programs provide the funding options necessary to create customized incentive packages that meet the specific needs of businesses investing in the state. This proactive and pro-business approach has generated nearly $23.5 billion in announced capital investments across the state over the last four years.
The number-one priority for businesses is a skilled and plentiful workforce. Kentucky provides expert workforce recruiting and training assistance, for both new and existing employees, through its Kentucky Skills Network. Kentucky colleges and universities work with the state to create the job skills and training that businesses need. With both existing and incoming companies needing workers, Kentucky and its partners are collaborating to develop “pipelines” of qualified workers for various industries, using methods such as apprenticeships and innovative science, technology, engineering, and math (STEM) programs for K-12 schools.
“Kentucky job growth will continue in its top five sectors of advanced manufacturing, healthcare, transportation/logistics, business services/IT, and construction/trades,” says Dr. Jay Box, president of the Kentucky Community and Technical College System in the Lane Report. “Last year 75 percent of the credentials we awarded were in these five sectors. We will continue to push secondary and postsecondary education to align programming in these areas to better prepare skilled workers to meet the needs of business and industry.”
Major industries in Kentucky include automotive, aerospace, primary metals, food and beverage, logistics/distribution, manufacturing, chemicals, plastics, rubber, and healthcare. Automotive, steel and aluminum, aerospace, pharmaceuticals, distribution/logistics, and food and beverage have dominated new project announcements since 2016.
Automotive-sector growth has been especially sustained. Over the last four years, 222 automotive projects have been announced, totaling more than $6.3 billion in capital investment and creating 11,000-plus jobs. For example, Ford plans to invest $550 million in an expansion at its assembly plants in Louisville to help with the launches of the new Ford Escape and Lincoln Corsair. Toyota will undertake a $238 million expansion at its Georgetown plant to create production lines for the Lexus ES Hybrid and RAV4 Hybrid.
Steel and aluminum fabrication are key industries that supply the automotive industry with parts; these industries are also expanding to keep up with increased production at automotive facilities across Kentucky. A recent example is Kobelco Aluminum Products and Extrusions, which manufactures aluminum bumper and sub-frame materials and had just reached full capacity at its new facility in Bowling Green; it just recently announced a $42 million, 90-job expansion to keep up with customer needs.
With its central U.S. location (within a one-day drive of two-thirds of the U.S. population) and excellent transportation infrastructure network, Kentucky also has one of the strongest logistics/distribution industries in the country, which continues to expand. In Louisville, UPS plans a $750 million expansion at its World Port distribution hub. Infrastructure upgrades include a new maintenance hangar, runway improvements, and flight training facilities. The Kentucky Skills Network will provide recruitment and job placement assistance and customized training.
A Job for Every Kentuckian
Despite the overall low unemployment rate in Kentucky, many employers still need workers to fill open positions. This lack of skilled workers slows down the overall economy and growth opportunities for these companies, especially manufacturers.
“Workforce issues continue to top the business community’s list of serious concerns, and we will make major efforts to engage employers in creating ‘talent pipelines’ as a solution,” notes Dave Adkisson, president and CEO of Kentucky Chamber of Commerce, in the Lane Report.
Economic growth in Kentucky varies significantly by region, with the strongest growth in the bigger cities and the deepest declines in the rural eastern part of the state. For example, over the past eight years, Louisville added 2,700 businesses and 80,000 jobs, with $13 billion in capital investment announced in the last four years. In contrast, however, outside its MSAs, especially in the eastern coalfields, unemployment can be as high as 15 percent. More equal economic growth across the state would better distribute capital investment and tap into plentiful labor pools that are eager for work and training.
“It is a challenge our cabinet and many partners continue to tackle,” says Jack Mazurak, communications director for the Kentucky Cabinet for Economic Development. “The goal is to get employers to select these rural counties to build their operations and hire local workers for good-paying positions.”
One approach is through Opportunity Zones, which are low-income, distressed, and contiguous districts where companies can receive significant federal tax breaks and deferrals for investing in a variety of economic development projects. In 2018 Kentucky was among the first U.S. states to have its Opportunity Zones certified by the U.S. Department of Treasury. Kentucky’s Opportunity Zone (KYOZ) initiative provides the runway for regions that are lagging in economic development success to move forward.
“It aims to encourage and attract significant institutional, corporate, and individual investment into these regions and the Cabinet will work with local partners to ensure the commonwealth takes full advantage of the federal policy,” adds Mazurak.
Kentucky offers 144 Opportunity Zones across 84 of the state’s 120 counties. It also offers an enhanced incentive version of its main tax-incentive program — qualifying projects opting to locate in enhanced-incentive counties can receive performance-based tax incentives over a 15-year period, instead of the usual 10-year term.
Other efforts to boost employment include retraining, apprenticeships, and site and building development initiatives. “Even if they’re smaller parcels, workforce re-education is key to landing base-hit projects that might employ 30–100 people and not require a major metro population to draw upon,” says Mazurak. “By taking a comprehensive, all-hands approach, we are confident we can extend economic development opportunities across the state and continue to increase Kentucky’s labor force participation rate, especially in our more rural areas.”
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