KY lawmaker hopes he can give struggling rural areas more ‘tools to compete’ for new jobs
More rural parts of Kentucky could be given assistance when competing for business, jobs and better economic growth opportunities if a bill sponsored by a Pikeville Republican, currently working its way through the legislature, becomes law.
Sen. Phillip Wheeler’s Senate Bill 197 is intended to help create more balanced economic growth across Kentucky.
The legislation would create a tiered incentive structure for an income tax credit program that already exists, where counties are scored based on their unemployment rate and population rank.
In the current program, eligible companies bringing jobs to Kentucky can get a break on payroll taxes per authorized job. New rules in the policy would let the lowest-performing counties, in tiers three and four — or those with declining population or high unemployment — hand out more money per job to companies interested in locating within them.
That additional help through the Kentucky Business Investment program is meant to create more job opportunities in every part of the state, but will especially put rural communities in a better position to compete for high dollar investment, Wheeler said March 6 before the bill passed off the Senate floor.
“When we create opportunities in rural Kentucky, we strengthen the entire state,” he said. “This legislation provides a practical framework to help communities that have worked hard but need additional tools to compete.”
The tier system is fluctuating, rather than fixed, allowing the state’s Cabinet for Economic Development to reevaluate often and provide the right resources when and where they are necessary.
“The flexibility of the system, I believe, is what makes this bill special because it allows the economic development cabinet to take it county by county, region by region and target those incentives in such a way that we have balanced economic growth throughout our commonwealth,” Wheeler said.
Tennessee and South Carolina have similar tiered system policies that direct higher incentives to more distressed areas in an attempt to foster development. In Tennessee, tax credits and financial assistance are given for site preparation and in South Carolina, some of the incentives are for infrastructure fixes and workforce development.
The Kentucky Business Investment program allows for wage credits in order to attract business to the state. The credits are often based on a percentage of increased payroll or number of jobs created; if wages are not kept at the promised rate or employment opportunities do not materialize, a company may not receive the tax benefit.
Now that the bill has passed the Senate, it is awaiting assignment to a committee in the Kentucky House. If it passes committee, it could go to the full House for a vote.
‘A stronger carrot’ to incentivize Kentucky investment
The business investment program would join other Kentucky incentives like the Kentucky Product Development Initiative in using a tiered system that has steered development into rural parts of the state, said Economic Development Cabinet Secretary Jeff Noel.
“This is about benefits for areas of Kentucky that deserve it,” Noel said Feb. 26 in testimony on the bill in front of the Senate Standing Committee on Economic Development, Tourism, and Labor. “And that’s what this bill does; it helps those deserving communities.”
Colby Kirk, president and CEO of One East Kentucky, told the committee he’s been successful in economic development with the tools at his disposal as he recruits businesses for and markets a nine-county region.
But a few years ago, a French company that had visited three times and was sold on the community and its people backed out of a project because it was going to cost more than $2 million to locate on a former southeastern Kentucky coal mine. It would have been cheaper in West Virginia or in Pennsylvania, Kirk said.
“If I have a stronger carrot and incentive to offer a company that outweighs that change in benefit — if they like the community enough, if they like what we’re selling them, from a supplying and logistics standpoint — I know we’re going to win some projects; I feel really confident,” Kirk said. “This bill isn’t a silver bullet. We’re not going to win 1,000 jobs overnight, but it’s going to give me some more tools that I can take to a company and say that we’ve got a fair shot.”
Noel started his testimony explaining a weekend frustration: “I was told by my boss to fix a toilet and I took my toolkit in and somehow or another, I won’t blame her, but somehow or another, about half of my tools were gone, which made it a very frustrating process.
“And I say that to kind of describe the art of economic development. If your toolbox doesn’t have all the tools in it, you can’t really fix anything,” Noel said.
A Senate floor amendment that was adopted allows some large economic development projects outside of Kentucky to qualify if they are within 20 miles of a Kentucky county in the lowest tier, employ at least 250 full-time workers and are located in places that maintain reciprocal tax agreements with the state.
Employees living in Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia or Wisconsin but working in Kentucky already can file forms to exempt their wages from double taxation. Projects in those states that meet the other qualifications could receive incentives under Wheeler’s bill.
Beyond finding more ways to attract local investment and create local jobs, Noel said implications of the bill for Kentucky’s future are at stake. Many federal grants are allocated using formulas that factor in population size, income level and poverty rate.
“I think the authors of the bill and all of us recognize this is intended to create jobs, but I think the real benefit is ... help keep people here,” Noel said. “Population growth is a critical factor for all federal funding. It’s also a critical factor in companies saying, ‘I can see my future workforce in that area.’”
.JPG)