Martin Co. Business Center is all government

A year after opening, the Martin County Business Center hasn't attracted any businesses, as local officials had hoped when they spent $6 million in coal severance taxes to build it.

The state Cabinet for Health and Family Services moved its local welfare office onto the Business Center's second floor last year. This summer, the Martin County Board of Education will move its office onto the first floor, requiring Martin County to spend $900,000 more preparing the building.

Given the Business Center's stated purpose — luring high-tech companies and other private employers to Inez, an isolated Appalachian town of fewer than 500 people — some residents are asking what went wrong. It's being debated in county elections and on local Web sites.

"That's $7 million we've spent that hasn't created one job," said Darriel Young, a Democratic candidate for Martin County judge-executive in Tuesday's primary election.

"I don't know if they didn't plan ahead or what," Young said. "But with the Board of Education moving in, you've got another taxpayer agency paying rent in a building the taxpayers built. That doesn't sound like any kind of economic development to me."

The incumbent judge-executive, Kelly Callaham, who is running against Young, attributes the criticism to local politics. While it's true the Business Center hasn't brought jobs to Inez, it's an attractive office building in a town that previously didn't have one, he said.

"This is a long-term investment in our community's future," Callaham said. "We got to clean up a part of the town that was something of an eyesore."

There was some talk of moving Inez City Hall into the Business Center as well, but nothing came of it, Callaham said.

'Always a gamble'

The state legislature established coal severance taxes in the 1970s to compensate coal-producing counties for the loss of a natural resource. The taxes were to be used to diversify local economies, given the cyclical nature of coal mining.

Unfortunately, a lot of coal severance money is spent on projects sponsored by local officials without a clear strategy or oversight from the state government, said Justin Maxson, president of the Mountain Association for Community Economic Development in Berea.

"If the goal of this project was to create jobs, it sure doesn't look like they've gotten there," Maxson said. "I'm not surprised. It's rare that just adding a building automatically brings you a company."

The state Department for Local Government, which dispenses coal severance money, said it monitors projects to ensure funds are spent as planned. But those plans are developed locally, and because the tax money technically belongs to the counties, the state has little authority to reject plans, it said.

"Speculative buildings are always a gamble. They're always a risk," said Amy Barnes, the department's branch manager for coal development.

Martin County schools superintendent Mark Blackburn said the Board of Education needed a new office anyway because its current building is at least 70 years old and dilapidated. The board will pay $80,440 a year to rent 7,661 square feet from the Martin County Economic Development Authority, which owns the Business Center.

The Cabinet for Health and Family Services agreed in 2008 to rent 12,685 square feet in the Business Center to house its local welfare office. The yearly rent of $133,192 is triple what the cabinet previously paid for a smaller Inez office just a few hundred feet away. At the time, cabinet officials said they needed more space because of program growth.

Serious obstacles

Martin County faces serious obstacles to economic development, according to a 2008 study of the county by the Federal Reserve Bank.

The county is unusually poor even by rural Kentucky standards and isolated in narrow valleys with limited road access to the outside world, the bank noted.

Looking at its potential workforce, the bank said roughly half of adults don't have high school diplomas and about half of working-age men claim to be disabled. More than most places, Martin County relies on welfare, food stamps, Social Security and disability checks to survive.

"Apart from the declining coal industry, Martin County residents have extremely limited employment options, and many lack the skills and training to find and keep the jobs that are available," wrote Jeff Gatica, senior community affairs adviser at the Federal Reserve Bank of Cleveland. "The effects of multi-generational poverty also loom large; many residents are the second or third generation in their families to be on welfare."

Given this reality, said Maxson of MACED, it doesn't make sense for the government just to erect buildings and wait for high-tech companies to relocate to Inez. He said employers value an educated workforce and modern infrastructure as much or more than getting a free building.

Martin County tried the build-it-and-jobs-might-come approach five years before the Business Center by spending $1.2 million in coal severance taxes on a speculative factory building. It remains vacant today. Callaham, the judge-executive, said he has talked to a few prospective tenants without success.

"Affordable space is a nice recruitment tool, but it's not the most important tool," Maxson said. "It has to be part of a larger development strategy."

This story was originally published May 17, 2010 at 12:00 AM with the headline "Martin Co. Business Center is all government."