By Jack Rogers
From the September/October 2012 issue
Many governors reserve their attention for the largest projects that come to their states. But we often get releases from Kentucky in which Gov. Steve Beshear hails smaller job-producing initiatives. When we sat down with Gov. Beshear for this Governor’s Report, we asked him why he feels it’s important that every step forward, big or small, gets its share of the state spotlight during tough economic times.
“Since coming into office, my number one priority has been on the retention and creation of jobs,” he said. “Despite strenuous economic times, Kentucky has found ways to work with companies, big and small, to make investments for the future. Job by job and company by company, we’re turning Kentucky’s economy around, and I feel strongly that every job, every investment is worth celebrating.”
Gov. Beshear recently presided over the opening of the Kentucky-Argonne Battery Manufacturing R&D Center, which already has drawn at least one key player in advanced lithium storage materials to Lexington. Beshear is confident a full supplier network will develop in Kentucky to support the emerging advanced battery industry.
“As the lab’s reputation grows, so will its funding from federal grants and from research contracts with companies locating here to use this open access facility,” he said. “This builds a critical mass of research-based companies, which in turn will attract a network of suppliers. We’re already starting to see this happen with firms like nGimat, which moved part of its operations from Atlanta to Lexington in order to access the Kentucky-Argonne facility. We’re excited by this early success and are confident others will follow, especially as studies show that for every dollar invested in public research, there is up to four dollars invested by the private sector into industrial research and development.”
Kentucky plans to leverage biomass and biofuel resources as well.
“One of the goals in Kentucky’s energy plan is to produce 12 percent of our motor fuels from biofuels by 2025. I still think that’s very achievable and we already have ethanol and biodiesel plants operating in the Commonwealth. The real potential for Kentucky lies in the more than 500,000 acres of farmland that can be converted to growing biofuels feedstocks, such as switchgrass, without impacting our food crops. This resource alone could provide more than 360 million gallons of ethanol per year,” Beshear said.
Gov. Beshear recently returned from another successful trade mission to Japan. Japanese-owned companies operate more than 156 facilities in Kentucky and the state has the second-highest Japanese foreign direct investment on a per capita basis. We asked the governor what has made Kentucky so attractive to Japanese investments.
“Japanese companies are drawn to Kentucky for a variety of reasons, including an extensive existing network of Japanese companies and the presence of multiple Japanese Saturday schools,” he said. “Because of our history with the Japanese business community, we also share a lot of personal connections and have built strong relationships over the years, which have cultivated a level of trust and confidence among companies to do business in Kentucky.”
Amazon has had a huge presence in the state for years, with several distribution/fulfillment centers and now a new customer service center. Beshear credited Kentucky’s geographic advantage as a decisive factor in the fierce competition among states for Amazon facilities.
“Kentucky is blessed with a great geographic location. Companies operating in our state can access over two-thirds of the U.S. market within a day. Logistically, this creates significant advantages in getting a product or service to market. We are also home to the largest UPS Worldport Hub in North America and DHL’s U.S. hub, offering next-day service to the world,” the governor said.
Kentucky’s governor favors performance-based incentives like those available in the Kentucky Business Investment Program.
“All three forms of assistance [in the program] require companies to perform and each has its advantages,” he explained. “The difference is the timing of when the incentive is received. Performance-based incentives require companies to perform prior to receiving an incentive. Companies must create jobs before claiming the wage assessment and be profitable before claiming a corporate income tax credit. Providing incentives after achieving a performance measure usually requires less time and resources than providing an up-front incentive.”
Kentucky earned our 2011 Deal of the Year Gold Award for the new partnership with Ford, which will invest more than $1 billion in its Louisville plants and extend a relationship that stretches back nearly a century. Beshear outlined the critical factors that convinced Ford to double-down on its commitment to the state.
“We knew it would take a significant investment for Ford to retool. As a result, we created new incentives allowing us to partner with Ford and reduce that burden so that more money could go into hiring employees, updating machinery, and ultimately improving their facilities,” he said. “Once their state-of-the-art manufacturing improvements were complete, we knew they would need a workforce capable of operating in an advanced manufacturing environment. Therefore, we committed $10 million to help Ford create that workforce. This type of commitment illustrated to Ford that Kentucky was in this partnership for the long haul.”
Gov. Beshear is confident the resurgence of manufacturing will continue to be a driver of the nation’s economic recovery, and Kentucky will help lead the charge.
“I am very confident that the resurgence of manufacturing in the U.S. will lead the economic recovery momentum, especially in the area of advanced manufacturing,” he said. “Kentucky has deep manufacturing roots, and it’s because of our strength in manufacturing, especially in the automotive industry, that our percentage employment increase rose faster than any other state in the eastern U.S. last year and was 7th highest overall.”
Gov. Beshear noted the irony of the manufacturing revival, especially in the wake of years of pronouncements by experts that manufacturing in the U.S. was “dead.”
“I’m just glad Kentucky didn’t drink the Kool-Aid,” the governor said with a smile.