Kentucky’s economy begins 2014 with a vigor not seen since the real estate bubble and Wall Street greed crashed the economy more than five years ago. Still, happy days are hardly here again.
Economist Paul Coomes issued a report for the Kentucky Chamber of Commerce last month that showed uneven recovery across Kentucky, based on the growth of wages and salaries. The state as a whole starts the year about 34,000 jobs (2 percent) below 2007, the year before the collapse.
Lexington and Louisville have been slower to rebound than the state as a whole. Owensboro had the strongest job growth, thanks largely to a major hospital construction project and a downtown riverfront redevelopment project financed by a local tax increase and $40 million in federal money.
Federal spending also was responsible for Hardin, Madison and Christian counties being the state’s leaders in terms of wage and salary growth. They benefitted from nearby military bases and the destruction of chemical weapons at the Bluegrass Army Depot.
Eastern Kentucky’s economy is usually the state’s weakest, and that is especially true heading into 2014. The region has lost 6,000 coal jobs recently because of four big factors: cheaper western coal, even cheaper natural gas, dwindling coal reserves in the mountains and stricter regulations to limit the environmental damage and health effects caused by mining and burning coal.
Overall, private business around Kentucky seems to be coming back to life. Although interest rates remain extremely low, community bankers grumble that regulations intended to rein in the excesses of Wall Street and biggest banks have made it difficult for them to lend money.
David Adkisson, president of the Kentucky Chamber of Commerce, said the state’s business community overall is poised to do better in 2014 than in recent years. But there are lingering concerns about the financial impact of health care reform.
“There’s growing optimism, but there’s not enthusiasm yet,” Adkisson said of the state’s business climate, noting that Kentucky’s central location is a plus. “That’s an advantage nobody can take away.”
Business people will be keeping a close watch on the General Assembly session that begins Jan. 7. The state budget will again be the biggest issue, with a lot of attention focused on restoring recent cuts to educational investment. But, as usual, there is likely to be little appetite among lawmakers for comprehensive tax reform to address chronic state funding shortages.
Adkisson said some beneficial tax changes are likely, and Kentucky should reap some savings from recent reforms to prisons and state employee pensions.
Here are some economic stories to watch in 2014:
■ Lexington’s huge medical services industry should see a lot of action as major construction projects progress and the Affordable Care Act expands the availability of health insurance.
University of Kentucky Chandler Medical Center’s $1 billion expansion should see the completion of its 64-bed cardiovascular floor. Baptist Healthcare Lexington, formerly Central Baptist, will be going full tilt on its $230 million renovation and addition, scheduled to be finished in late 2015. Shriners Hospital is moving forward with plans for a new facility near Kentucky Children’s Hospital on the UK campus.
■ The Federation Equestre Internationale will announce this year whether the 2018 World Equestrian Games will be held at the Kentucky Horse Park. That was the site of the 2010 Games, which were successful thanks in large part to the active sponsorship of Alltech, the Nicholasville-based nutrition supplement company. Alltech also is the main sponsor of the 2014 Games, Aug. 23-Sept. 7, in Normandy, France.
With so many excellent competition facilities already in place, Lexington would seem to be in a good position to again host the Games, providing another big boost to Kentucky’s economy.
■ After five years of delays, construction is supposed to begin soon on the huge CentrePointe hotel, apartment, office and retail development in downtown Lexington. Developer Dudley Webb demolished a block of historic buildings for the project in 2008 but couldn’t get financing to build.
The first step in construction will be excavating a huge underground parking garage without breaching the century-old culvert containing Town Branch Creek. Because CentrePointe is getting some tax breaks, the city required Webb to show proof of construction financing and put up $4.4 million to restore the site in case he runs out of money. The goal is to keep CentrePasture from ending up as CentrePit or CentrePond.
■ This year will see more details about proposals for redeveloping Rupp Arena, Lexington Center and the huge surface parking lots surrounding them. And then there is the visionary plan to create Town Branch Commons, a connected greenway along the path of long-buried Town Branch Creek. They are ambitious proposals that will require even more ambitious financing plans.
■ The state Transportation Cabinet is likely to decide by late this year whether to recommend construction of the I-75 connector highway between Nicholasville and Interstate 75 in Madison County. Boosters say the $400-plus million project would be good for business. But opponents call it a special-interest boondoggle, a waste of public money that would cause substantial environmental damage to a section of the scenic Kentucky River Palisades south of Lexington.
■ A lot of excitement was generated Dec. 9 when more than 1,500 people gathered in Pikeville for a public forum launching a bipartisan effort to create new economic development strategies for Eastern Kentucky. Gov. Steve Beshear, a Democrat, and U.S. Rep. Hal Rogers, a Republican, are leading the project, called Shaping Our Appalachian Region, or SOAR.
The coming year will show whether the effort called SOAR, or Shaping our Appalachian Region, amounts to a breakthrough or just more empty talk.
■ Another ambitious economic-development effort is the Bluegrass Economic Advancement Movement, or BEAM. Mayors Jim Gray of Lexington and Greg Fischer of Louisville launched it with the goal of attracting more advanced manufacturing jobs to the 22-county region around and between the two cities, which already includes Toyota Motor Manufacturing Co. and many of its suppliers.
In late November, Gray and Fischer unveiled a BEAM strategic plan around the ideas of embracing innovation, increasing Kentucky exports and improving education and workforce development. It’s a sensible vision, but whether Kentucky leaders will find the political will to invest in making it happen remains to be seen.
Staff writers Janet Patton and Cheryl Truman contributed to this report.