Lexington one of six ‘university cities’; can it take advantage of it?

October 18, 2015
Mayor Jim Gray, right, greeted University of Kentucky President Eli Capilouto at a Lexington Forum luncheon on Jan. 24, 2012. Photo by Pablo Alcala.

Mayor Jim Gray, right, greeted University of Kentucky President Eli Capilouto at a Lexington Forum luncheon on Jan. 24, 2012. Photo by Pablo Alcala.


Lexington has been a college town for more than 200 years. But when Scott Shapiro, a top aide to Mayor Jim Gray, was benchmarking local data against other cities recently, he discovered something interesting: Lexington was one of six U.S. cities whose numbers place them in a unique category.

This group, which he calls “university cities,” have distinct characteristics that make them different from smaller college towns or major cities with big research universities. And those characteristics translate into big economic development opportunities in the 21st century’s knowledge-based economy.

“This is one of those ah-ha moments,” Gray said of the analysis.

So, how can Lexington capitalize on this insight? We’ll get to that in a moment.

First, let’s see what Shapiro discovered about university cities, which he defined as metropolitan areas of between 250,000 and 1 million people with students making up at least 10 percent of the population.

Each city has a diversified economy closely tied to a major urban research university. In addition to Lexington, the cities are Madison, Wis.; Ann Arbor, Mich.; Fort Collins, Colo.; Durham-Chapel Hill, N.C.; and Lincoln, Neb.

Each city has an abundance of attributes that naturally come with universities, including educated people, talent, openness to new ideas, innovation, entrepreneurialism and a lot of arts and culture.

These cities seem to have more of these attributes than college towns, in short, because they are big enough that many students can stay after graduation rather than moving on to find economic opportunity.

But unlike major cities with universities, these six university cities have a lower cost of living, less crime and, in many ways, a higher quality of life.

Shapiro’s analysis found, for example, that 42 percent of adults age 25 and older in university cities have at least a bachelor’s degree, compared to 29 percent nationwide.

High education levels seemed to have a big influence on productivity and wages. When adjusted for the cost of living, Shapiro found that the median annual salary in university cities is only about $700 below that of the nation’s 15 largest cities.

Unemployment rates from 2009 to 2013 averaged 6.3 percent in university cities, compared with 8.7 percent in other similar-sized cities and 8.8 percent in the nation’s largest 15 cities.

Business starts averaged 16.3 percent higher in university cities than in similar-sized cities, and only slightly below the rate for the nation’s largest cities. The number of non-profit organizations, which often drive social entrepreneurship and improve quality of life, was almost double that of similar-sized cities.

University cities are much safer. Violent crime averaged 36 percent lower in the six university cities than in similar-size cities and 40 percent lower than in the nation’s 15 largest cities.

And university cities are more fun. They have 47.2 percent more arts, recreation and entertainment places per thousand residents than the average of similar-size cities. And while they average fewer cultural assets than the 15 largest cities, they have more of them per thousand residents — 25.7 percent more.

One key attribute of a university city is being the “right” size to balance economic opportunity, cost of living and quality of life. And therein lies a danger. While Austin is what many university cities aspire to become, the Texas capital has lost some luster as housing costs and traffic headaches have risen.

Shapiro has started a blog (Universitycities.org) to share news and ideas about university cities, and he is talking with the University of Kentucky about hosting a national symposium on the topic next year.

This subject isn’t just of interest to academics; it has a lot of practical application.

Lexington’s mayor sees the university city model as an important lens through which to view many things, from business recruiting efforts and workforce-development strategies to land-use planning and infrastructure investment.

“I think it helps us in the sorting and filtering process,” Gray said. “When you know who you are, you have a better chance of getting where you want to go.”

For one thing, he said, it shows that Lexington’s economic development strategy should be mainly built around leveraging assets that grow out of the presence of UK, Transylvania University and other education centers.

It also underscores the importance of making sure affordable housing is available and traffic doesn’t get out of control. It means Lexington should nurture cultural institutions and other quality-of-life infrastructure that talented, educated people and the companies that want to hire them look for in a city.

The next step, Gray said, is to benchmark Lexington’s data against the five other university cities to assess strengths and weaknesses.

“I think we’re poised for exploiting the knowledge economy in a better way than the industrial cities have been,” Gray said. “It’s a question of how do you really take advantage of that.”

Like minimum wage increase, new overtime rule long overdue

July 5, 2015

Hard work should pay off. That belief is at the heart of the American dream.

It also is why the U.S. Labor Department’s plan to make more salaried workers eligible for overtime pay is good news for both workers and the overall economy.

Like an increase in the minimum wage, it is long overdue.

Since 1938, federal law has required hourly workers to be paid time-and-a-half for each hour worked beyond 40 hours per week. There is an exception for managers and professionals, who are presumed to get good pay in return for more flexibility and, often, longer work weeks.

But here’s the problem: the salary level at which that exemption kicks in has been increased only once in 40 years.

In 1975, more than 60 percent of salaried workers were eligible for overtime pay. Because of inflation, that figure has fallen to 8 percent, according to a recent analysis by the Economic Policy Institute.

As a result, salaried “managers” who earn as little as $23,660 a year often work many extra hours for no extra pay. Some end up earning less per hour than the hourly employees they manage. This happens most often in retail and service industries, such as fast food.

This antiquated threshold salary of $23,660 is below the poverty line for a family of four, which is now set at $24,250. As a result, some of these managers are eligible for public assistance, which means taxpayers are directly subsidizing business profits. That makes no sense.

President Barack Obama last year told the Labor Department to review the overtime rule. That resulted in a proposal, announced last week, to raise the salary threshold for workers exempt from overtime next year to $50,440, returning it to roughly the 1975 level, accounting for inflation.

The new rule calls for that threshold to rise over time with inflation, linking it to the 40th percentile of income, which is where it was when the Fair Labor Standards Act became law in 1938.

The White House says the rule change would increase pay for nearly 5 million workers in the first year, 56 percent of whom are women and 53 percent of whom have a college degree.

The president’s action, which does not require the approval of Congress, has drawn howls from business interests and the politicians who receive their campaign contributions and loyally push their agendas.

As with almost every regulation Obama has proposed to help average workers, expand health insurance coverage and clean up the environment, these politicians argue that it will “kill jobs” and hurt the economy. In fact, the opposite is true.

Under this rule, if businesses don’t want to pay overtime to low-salaried managers, they can hire more hourly workers at straight time. That also would give those managers more time for a second job to supplement their income or spend time with their families, as they choose.

Opponents argue that businesses can’t afford to pay workers more, that this isn’t a good time. Have you ever known them to say anything else?

The United States has had 63 straight months of job growth, with businesses creating more than 12.5 million jobs. The Labor Department reported Friday that 223,000 jobs were created in June and the unemployment level fell to a seven-year low of 5.3 percent.

But the problem is that, for nearly four decades, wages have not kept pace with improvements in worker productivity. They haven’t even come close. Middle-class pay has stagnated and been eroded by inflation.

Meanwhile, stock prices are near all-time highs. Executive compensation has soared into the stratosphere. And corporate profits have roughly doubled over the past three decades, rising from 6 percent to 12 percent of gross domestic product.

A recent study found that 90 percent of income growth since 2009 has gone to the richest 10 percent of families.

Why has recovery from an economic crash caused mostly by financial speculation been so slow and uneven? Here is a big reason: consumer spending is the largest driver of the economy, and most people don’t have much extra money to spend.

Like a minimum wage increase, this would help fix that problem and show average Americans that hard work does pay off.

When candidates talk about prosperity, whose do they mean?

May 10, 2015

Have you ever wondered why Kentucky is always near the bottom when states are ranked by economic health and well-being?

There are several reasons. But one is that many of our politicians are either wealthy business executives who fund their own campaigns or people who suck up to wealthy business executives to fund their campaigns.

Either way, the interests of wealthy business executives are what become priorities, and they have as much in common with the interests of average Kentuckians as, well, night and day.

This is why politicians perpetuate several economic myths, and why many policies that would improve the economy and lives of many Kentuckians are rarely enacted. What are these myths?

To start with, business executives are not “job creators.” In fact, executives often make more money and Wall Street rewards their companies when they cut jobs rather than create them.

The real job creators are average people who buy the goods or services businesses produce. Consumer spending accounts for 70 percent of all economic activity and indirectly drives much of business capital spending and investment. The more money people have to spend, the more jobs will be created.

Many successful executives also keep wages for everyone but themselves as low as possible to boost “efficiency” and profits. That’s why average people should beware of politicians who are against raising the minimum wage, which has declined in value for decades as executive compensation has soared.

Opponents always argue that raising the minimum wage would do more harm than good, but decades of experience has shown otherwise. Raising the minimum wage also leads to higher pay for other low-wage workers, giving more people more money to spend and boosting the economy.

Beware of politicians who advocate so-called “right to work” laws. These laws aren’t really about protecting anybody’s “right to work”; they are about weakening unions and protecting big employers’ “right” to pay workers as little as possible.

Beware of politicians who rail against government regulation. Sure, you can always find examples of over-regulation. But regulation keeps business executives from cheating and hurting the rest of us and ruining the environment we all share.

It is no coincidence that America’s economy was most prosperous in the decades when average workers’ wages were higher, unions were stronger and government was a watchdog of business instead of a lapdog.

Things started changing in the 1980s with “pro-business” policies and “trickle-down” economic theories that resulted in the highest level of wealth inequality in nearly a century, not to mention the greatest economic crisis since the Great Depression and a slow, uneven recovery.

Beware of politicians who want to abolish “Obamacare.” They want to take health care away from several hundred thousand Kentuckians with no plan to replace it other than vague promises of “free-market” solutions.

The free market has never provided good health care for low-wage people. Most hospitals and clinics began as charities, not businesses. Almost every other industrialized nation has a health care system run largely by government, delivering better care at less cost than our private insurance-based system.

Beware of politicians who are “friends of coal.” Kentucky will continue mining and burning coal for decades, but coal is the past, not the future. Most coal jobs will never return. Repairing coal’s damage to Kentucky will be a huge, costly challenge, and we don’t need to make the mess any bigger than it already is.

Renewable energy is the future, and the more Kentucky politicians deny climate change and cling to the past to protect coal-industry profits, the further behind this state will fall.

What Kentucky needs are leaders willing to invest in education, entrepreneurship, economic infrastructure beyond just highways and the social services necessary to keep average people healthy and able to work.

We need leaders with enough courage to create a modern tax system that grows with the economy and eliminates special-interest loopholes that sap government of the resources needed to address Kentucky’s many challenges.

As you listen to the candidates for governor seek your vote in the May 19 primary and Nov. 3 general elections, ask yourself this question: When they promise prosperity for Kentucky, whose prosperity are they talking about? Yours or theirs?

If Congress, state won’t raise minimum wage, Lexington should

March 29, 2015

The minimum wage has a big impact on low-wage workers, many of whom must rely on public assistance to make ends meet, as well as the overall economy, which is driven largely by consumer spending.

The $7.25 federal minimum wage hasn’t been raised since 2009. Its value adjusted for inflation has lost more than 25 percent since its peak in 1968.

Congressional Republicans have refused to raise the federal minimum wage. But many states and cities have raised theirs, realizing its importance to both low-wage workers and local economies.

The Democrat-led Kentucky House recently approved a state minimum-wage increase that was rejected by the Republican-led Senate. Louisville’s Metro Council in December approved a gradual minimum-wage increase to $9 over three years, which is being challenged in court.

Urban County Council member Jennifer Mossotti has proposed gradually raising Lexington’s minimum wage to $10.10 an hour by July 2017 and tying future increases to the consumer price index. The proposal also would gradually raise the $2.13 minimum wage for tipped workers, who haven’t seen an increase since 1991, to $3.09 over three years.

Council members are unlikely to consider the issue before June. But when they do, Jason Bailey, director of the Kentucky Center for Economic Policy, has put together a good report about the low-wage Lexington workers who would be affected.

Among the highlights: An increase would directly lift wages for about 20 percent of Lexington workers, 90 percent of whom are older than 20 and 30 percent of whom are 35 and older. Fifty-seven percent are women, 54 percent work full-time and 26 percent have children at home. Read the full report at: Kypolicy.org.

Businesses usually oppose minimum-wage increases — if not the very idea of a minimum wage — saying that increasing labor costs forces them to put people out of work and raise prices. Studies have generally shown those effects to be negligible, and the economic impact to be positive.

A minimum-wage increase is long overdue. If federal and state officials won’t do it, Lexington should join other cities and states that are.

Interesting tidbits buried in annual Kentucky economic report

March 22, 2015

When the University of Kentucky’s Gatton College of Business publishes its annual Kentucky Economic Report, most people just pay attention to the front of the book, which predicts whether the state’s economy will rise or fall, and by how much.

But I think the rest of the book is more interesting. It is filled with great bits of information that not only tell us about the economy, but offer some clues about the state of Kentucky society, too.

Here are a few gleanings from the 2015 report, published last month by Christopher Bollinger, director of the college’s Center for Business and Economic Research:

CBER■ Kentucky’s landscape may be mostly rural, but its economy is all about cities. The “golden triangle” bounded by Lexington, Louisville and Cincinnati contains half the state’s population, 59 percent of the jobs and 54 percent of the businesses.

■ Wages in metro counties in 2012, the most recent figures available, were 29 percent higher than in “mostly rural” counties and 20 percent higher than in “somewhat rural” counties.

■ How can rural counties improve wage rates? The report offers advice from Mark Drabenstott, director of the Center for the Study of Rural America: encourage home-grown entrepreneurs, “think and act regionally” and find a new economic niche in high-value, knowledge-based industries that leverage the region’s strengths.

■ If you feel like you haven’t had a raise in years, you are probably right. Kentucky’s average weekly wage, when adjusted for inflation, is about the same as it was in the first quarter of 2007.

■ Kentucky’s poor and lower middle-classes have gotten 4.4 percent poorer since the late 1970s, while the state’s middle class has lost 7.5 percent in inflation-adjusted household income. Upper middle-class Kentuckians have seen household income rise 7.7 percent, while the richest 10 percent have seen a rise 16.7 percent. All segments of Kentuckians did much worse than their peers nationally.

■ Kentucky’s earned income per-capita relative to the national average increased steadily from 1960 to 1977 and peaked at 80 percent. But it has fallen since 1977 and is now at 75.4 percent, ranking Kentucky 46th among the states.

■ Lexington and Louisville have seen steady employment gains since 2010 or early 2011 and have returned to or exceeded their pre-recession highs.

■ The disappearance of family farms isn’t news, but the report has some interesting statistics. Kentucky has roughly one-third the number of farms it had in 1950 and the average farm size has doubled. Kentucky lost 8,196 farms during the 2007-2012 recession, the largest decrease of any state. Most of that decline was likely farms going “idle” rather than being developed, the report said.

■ There has been a marked increase in value-added farm products such as jams, salsa, wine and jerky. The production of value-added foods, adjusted for inflation, has risen from $3.34 billion in 1993 to $5.1 billion in 2011.

■ While tobacco has declined sharply, the value of the state’s other major crops — corn, soybeans, hay and wheat — has improved considerably. The most dramatic growth has been in poultry. Broilers (chickens raised for food) are now Kentucky’s most-valuable farm commodity; chicken eggs are 10th and farm chickens are 12th.

■ What Kentucky industry sector has lost the most jobs in the past 25 years? If you guessed coal, you’re wrong. Kentucky in 2013 had 45,000 fewer manufacturing jobs than it did in 1990, a 16 percent decline. The sector that gained the most jobs was educational and health services: 103,700 more people work in those areas, a 67 percent increase.

■ There were 364,000 more Kentuckians employed in 2013 than in 1990, a 25 percent increase, beating the population increase of 19 percent. About 95,400 Kentuckians work for companies that are majority foreign owned.

■ In various measures of “community strength,” Kentucky is on par or better than the national average. Crime rates are lower. Kentuckians tend to trust their neighbors more. They report higher levels of “emotional support and life satisfaction.” But they give less to charity and volunteer less than the national average.

There’s more good stuff in the 2015 Kentucky Annual Economic Report. To download a full copy, click this link.

Urban-rural divide will challenge Kentucky economy in 2015

January 5, 2015

141231Downtown0113b21C Museum Hotel is expected to open in late 2015 after renovation is completed on the century-old First National Building, right. But the old Fayette County Courthouse, left, will be one of Lexington’s biggest redevelopment challenges. Photo by Tom Eblen 


As a recent economic study notes, Kentucky’s economy is really nine very different regional economies that reflect a national trend: urban areas are doing well, but rural areas are struggling.

Lexington and Louisville together accounted for 45 percent of the state’s job growth over the past five years, according to a study by economist Paul Coomes for the Kentucky Chamber of Commerce.

That means Central Kentucky this year should continue to capitalize on several sources of momentum, including manufacturing growth, entrepreneurship and urban redevelopment, as well as Lexington’s growing reputation as a good place to live, work and visit.

The biggest manufacturing news this year is likely to be Toyota’s new Lexus assembly line. When the $531 million Georgetown plant expansion is finished late this year, 600 additional workers will make 50,000 Lexus 350 ES cars a year, in addition to the current Camrys, Avalons and Venzas.

But as manufacturing becomes more automated, the demand for higher-skilled workers increases. “Having a skilled work force is going to be a huge factor” in future growth, said Bob Quick, president of Commerce Lexington.

Central Kentucky continues to see an influx of workers and professionals from elsewhere. That is helping to fuel not only manufacturing, but business and professional services and entrepreneurial efforts, Quick said.

That also is good news for Lexington’s urban redevelopment initiatives, which finally seem to be hitting their stride. While the public’s attention was focused in recent years on the long-stalled CentrePointe project, a lot of good things were happening.

Victorian Square was renovated and rebranded as The Square, breathing new life into the downtown retail-restaurant development. This year will be a test of whether that concept can succeed.

A lot of small-scale urban redevelopment has been happening in places such as the Jefferson Street restaurant corridor, whose latest addition is the Apiary; the East End; National Avenue; South Limestone and North Limestone areas.

This could be a big year for the Newtown Pike corridor between downtown and the new Bluegrass Community and Technical College campus. Developers of Thistle Station, a proposed 16-story apartment building, hope to begin construction this year and open in fall 2016.

While the Rupp Arena and convention center reconstruction have been put on hold, city officials continue to move forward on Town Branch Commons, an innovative plan to create a linear park downtown that could attract new development.

“You’re seeing a deeper bench for the strategy of downtown,” Quick said. “Even when the Rupp piece didn’t work, we didn’t lose our downtown vision.”

Late this year, the 21C Museum Hotel should open after an extensive renovation of Lexington’s first skyscraper, the century-old First National Building.

But 21C is across the street from downtown’s biggest redevelopment challenge: the old Fayette County Courthouse. It was shuttered in 2012 because of lead contamination and structural problems from years of neglect. Officials this year need to come up with a plan for renovating and reusing this landmark.

The Breeder’s Cup at Keeneland Oct. 30-31 could pump $50 million into the local economy. It also should provide an incentive to finish a variety of projects, just as the Alltech FEI World Equestrian Games did in 2010.

Kentucky’s biggest trouble spot is Eastern Kentucky, where the coal industry is in permanent decline. Will the Shaping Our Appalachian Region initiative this year create jobs in Eastern Kentucky, or just more talk?

Dave Adkisson, president of the Kentucky Chamber of Commerce, said everyone also will be watching to see how Ft. Knox and Ft. Campbell fare as the military downsizes after long, costly wars in Afghanistan and Iraq.

Adkisson thinks Kentucky exports will remain strong. One of the fastest-growing exports is likely to continue to be bourbon whiskey, which is enjoying global popularity.

But international trade has been both a blessing and curse. The Kentucky Center for Economic Policy estimates that 41,100 jobs have been lost in the state since 2001 because of America’s growing trade deficit with China.

Will Congress and the president finally address China’s currency manipulation and other unfair trade practices? Or will new global export agreements now in the works simply ship more Kentucky jobs overseas?

One of the biggest issues facing every Kentucky region is the lack of real wage and per-capita income growth, which is below the national average and a drag on the economy. House Democrats have talked about raising the state’s minimum wage this year, but business groups and Republicans oppose it.

Want to improve the economy? Narrow the growing wealth gap

December 21, 2014

Many politicians and business executives like to complain about the slowness and fragility of the economic recovery. Then they push policies to keep it that way — or make it worse.

What they don’t seem to understand is that the best way to improve the economy is to put more money in the pockets of average people who will spend it.

Instead, these politicians and executives oppose raising the minimum wage, which has been $7.25 an hour since 2009 and losing ground to inflation for decades. A low minimum wage keeps wages just above it depressed, too.

Then there are the perversely misnamed “right to work” laws. Their real purpose is to weaken what is left of labor unions so that big business, which already seems to have bought control of government with campaign contributions, has nobody to challenge its power.

Add to that efforts to repeal Kentucky’s “prevailing wage” law, which would cut the pay of working men and women who build public construction projects.

The biggest drag on the economy — and perhaps the biggest threat to America’s long-term prosperity — is the widening wealth gap between the haves and have-nots. Narrowing the gap is in everyone’s best interest, whether they realize it or not.

The prevailing-wage law became a flashpoint last week at a state legislative meeting. The law is designed so that public construction projects pay wages that reflect those in the local community. But as so much of the construction industry has become non-union, critics argue that the law puts too much emphasis on higher union wages.

The Legislative Research Commission compiled a report showing that construction workers on state projects earned $8 an hour more than those on private projects. Workers on 12 school district projects earned $11.37 an hour more.

But critics objected to the analysis, saying it looked only at labor costs, not total project costs. Might more skilled, better-paid workers complete projects faster and better? Besides, higher wages help strengthen local communities.

The irony is that most of the legislators who think construction workers are overpaid have little to say about the sometimes obscene compensation policies at state government’s highest levels.

Kentucky’s public pension systems are among the most under-funded and least transparent in the nation, yet they provide rich benefits for part-time legislators and other high-ranking officials smart enough to game the system.

And then there is the case of the Kentucky Community and Technical College System president, long the nation’s highest-paid community college leader. He recently retired with a $300,000 handshake.

Warren County’s Fiscal Court last week approved Kentucky’s first county “right to work” ordinance, although it is unclear if it is legal under state law.

Republican legislators and chambers of commerce would like to make Kentucky a “right to work” state. That would make Kentucky more “friendly” to companies that want to come here and pay low wages. Studies show right-to-work states often do have faster job growth — as well as lower overall wages and higher poverty rates.

Since Congressional Democrats failed to overcome Republican opposition to raising the federal minimum wage, a statewide minimum-wage increase has been proposed by Democrats in the Kentucky General Assembly. Last Thursday, Louisville’s City Council raised the local minimum wage to $9 by 2017 on a 16-9 party-line vote.

Predictably, business groups and right-wing activists argue that would cause huge job losses — even though it has never happened with previous minimum-wage increases.

Since Ronald Reagan was elected president in 1980, economic policies and trends have largely been based on “trickle-down” economic theory — the notion that if the rich get richer, everyone else will prosper, too. Trouble is, it hasn’t worked that way.

Wealth inequality in the United States is now higher than at any point since the 1920s. The vast majority of all income growth is going to the rich. Corporate profits and the stock market are at record highs. But average workers are losing ground, and the overall economy remains sluggish.

This is a global problem, too, prompting Pope Francis to take up the issue last year in a papal statement worthy of a few amens.

“Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” the Roman Catholic Church’s leader wrote. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power.”

Higher minimum wage would be a step toward economic justice

January 20, 2014

On this national holiday honoring the legacy of the Rev. Martin Luther King Jr., it is worth remembering that he focused on more than racial justice. The next big issue on his agenda was economic justice.

King was murdered in 1968 while in Memphis to help striking sanitation workers get better pay and treatment. At the 1963 March on Washington for Jobs and Freedom, where King delivered his “I have a Dream” speech, one of the key issues was raising the minimum wage enough to lift many workers out of poverty.

While America has made great strides in racial equality and opportunity, it finds itself in a similar economic situation to what those marchers faced 50 years ago. The income of the wealthiest Americans has soared over the past three decades, while middle-class wages have stagnated and many low-wage workers have fallen into poverty.

The gap between the rich and everyone else is wider than it has been for a century. There are many reasons for this, from manufacturers moving overseas for cheap labor to the decline of unions and tax code changes that favor non-wage income, most of which goes to wealthier people.

The minimum wage hasn’t risen in five years, and low-wage workers’ earnings have continually fallen behind inflation. The Economic Policy Institute estimates that 28 million workers — the bottom 20 percent by income — earn less than $10 an hour.

The minimum wage of $1 to $1.25 an hour that marchers in 1963 said was too little would now, with inflation, be worth more than today’s minimum wage of $7.25. The $2 minimum wage the marchers were seeking would now be worth more than $15.

President Obama favors a plan by Congressional Democrats to raise the minimum wage to $10.10 over three years, with future increases automatically tied to the rate of inflation.

At least seven Nobel Prize-winning economists and eight former presidents of the American Economic Association have endorsed the move. But the idea has met opposition from Congressional Republicans, whose economic agenda can best be described as Robin Hood in reverse.

Assuming political gridlock keeps Congress from acting, the General Assembly should adopt a similar proposal by House Speaker Greg Stumbo, D-Prestonsburg, to gradually raise Kentucky’s minimum wage to $10.10.

Opponents of raising the minimum wage argue that it causes many companies to hire fewer workers, but there is little evidence to prove that. A number of studies by respected economists show little job loss from minimum-wage increases.

Another argument is that higher minimum wages lead to higher consumer prices. But studies show price increases, when they occur at all, amount to only a fraction of the wage increase.

Another argument is that few people actually earn the minimum wage, and many of them are teenagers. After years of high unemployment, many workers at or slightly above the minimum wage are adults supporting families.

Increasing the minimum wage tends to have a ripple effect on slightly higher wage rates at the bottom of pay scales, and that also would be a good thing.

What I find most galling is that many low-wage workers at some of the nation’s biggest and most profitable corporations earn so little that they qualify for public assistance.

Bloomberg News estimated last month that Walmart employees get $2.66 billion in government assistance each year because of their low wages. University researchers in Illinois and California reported last year that Kentucky’s 32,000 frontline fast-food workers make such low wages that 46 percent qualify for public assistance that costs taxpayers $115 million.

Why should taxpayers be subsidizing profitable companies? Shifting some of the burden back onto employers in the form of a higher minimum wage only seems fair.

In addition to being good for low-wage workers, a higher minimum wage would help the whole economy. Low-income people spend a much greater share of what they earn than do wealthier people. So, when they have more money to spend, it helps the whole economy and generates more tax revenues.

The minimum wage is long overdue for an increase. If Congress won’t do it, Kentucky lawmakers should.

As King once said: “The time is always right to do what’s right.”


Some Kentucky business stories to watch in 2014

January 6, 2014

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. 

Will SOAR be a new beginning, or just more talk about Appalachia?

December 8, 2013

You have to wonder: Will the Shaping Our Appalachian Region summit Monday in Pikeville be the start of something big, or just another feel-good effort that doesn’t amount to much?

More than 1,500 people have registered to attend the conference called by Gov. Steve Beshear and U.S. Rep. Hal Rogers, who said they wanted ideas from throughout Eastern Kentucky for strategies to diversify the region’s economy.

There have been dozens of conferences on this topic over the years, but this one offers some hopeful signs. For one thing, it is the first high-level, bipartisan effort. Politicians who usually dance to the tune of the all-powerful coal industry are actually asking other people what they think.

But once the talking is over and the reports are written, will leadership, public investment and private capital get behind the good ideas? Will anything really change?

soarlogoCreating a sustainable, broadly prosperous economy in a region that has never really had one will be a monumental challenge.

Eastern Kentucky has never lacked for intelligent, hard-working people. But it has been handicapped by isolation, lack of education and opportunity, corrupt politics and powerful economic forces beyond its borders and control.

Since the late 1800s, the region has gone from subsistence farming to large-scale timber extraction to increasingly destructive methods of coal mining. The result has been a classic colonial economy, where most of the wealth flowed out of the region, or to a small local elite, while a large underclass survived on welfare and charity.

This cycle of poverty and dependence has led to hopelessness, drug abuse and other social problems, as was outlined in the most recent chapters of the excellent series Fifty Years of Night, by Herald-Leader reporters John Cheves and Bill Estep.

Can a new and different chapter be written for Eastern Kentucky?

In calling this summit, Beshear and Rogers cited the loss of more than 6,000 coal jobs over the past two years. But they wisely avoided their usual “war on coal” rhetoric, which blames the industry’s problems on long-overdue environmental regulation and enforcement.

The main reasons for declining coal production are cheaper Western coal and even cheaper natural gas. Besides, coal employment in Eastern Kentucky has been falling for three decades, from a high of 37,505 in 1981, primarily because of industry mechanization and a shift from deep to surface mining.

Eastern Kentucky’s current coal employment is 7,951, the lowest in generations, and that is unlikely to improve much. Coal will continue to be a presence. But because the large, easy-to-mine reserves are gone, most of the coal jobs will never return.

There are no “magic bullet” solutions to replacing Eastern Kentucky’s coal-based economy. (Not that coal itself was ever a magic bullet. Even when coal employment and production were at their peaks, the coal counties were still among the nation’s poorest.)

The citizens group Kentuckians for the Commonwealth has some good ideas about what a new Eastern Kentucky economy should aspire to. Those principles would be a good starting point for Monday’s conversations.

KFTC’s vision calls for a “just” transition that promotes “innovation, self-reliance and broadly held local wealth.” It urges more citizen participation in decision-making, and calls for restoration and protection of the environment and public health. It also urges leaders to “consider the effects of decisions on future generations.”

Tourism and outdoor recreation are often mentioned as potential economic opportunities, but that will require cleaning up some of strip mining’s environmental damage. Kentucky should lobby for money to do that work from the federal Abandoned Mine Lands fund, which could keep thousands of former coal miners employed for years.

Home-grown entrepreneurship and technology jobs are other often-mentioned possibilities to building Eastern Kentucky’s middle class, but they will require serious state investments in education and infrastructure to attract private capital. Kentucky’s tax-phobic politicians and the citizens who elect them have never been willing to make such serious investment, and that must change if anything else is to.

Shaping a new Eastern Kentucky economy will require a lot of creativity, commitment and hard work, not to mention leadership, inclusion and accountability.

There will be many obstacles to overcome, not the least of which is cynicism. It will be a long process. But Monday in Pikeville is as good a time and place to start as any.

Governor’s Scholars alumni hope to create powerful network

September 10, 2013

Randall Stevens was a shy kid from Pikeville when he was chosen for the second class of the Kentucky Governor’s Scholars Program in the summer of 1984. It literally changed his life.

“I think I became me in those five weeks of that program,” Stevens said. “It’s a huge confidence builder. It’s a social awakening with an academic background that really develops leadership.”

The experience inspired Stevens to study computers and architecture at the University of Kentucky, he said. Since then, Stevens has created several software programs and the companies to produce and market them. He also started Base 163, an incubator work space for Lexington technology entrepreneurs.


Randall Stevens

Stevens has met many other Governor’s Scholars over the years whose experiences were similar to his. That got him thinking about the potential of an alumni network, both for the former scholars and for Kentucky’s future.

He recently helped start the Governor’s Scholars Program Alumni Association, which will have its first gathering Sept. 27 and 28 at the Kentucky Center in downtown Louisville. The event is affiliated with the annual Idea Festival there that week.

Speakers at the event include several former scholars: U.S. Rep. Thomas Massie, a Republican who represents Northern Kentucky; Drew Curtis, founder of the online humor site Fark.com; Jeff Fugate, president of Lexington’s Downtown Development Authority; and Rebecca Self, founder of FoodChain, an urban-agriculture nonprofit in Lexington.

Former scholars interested in attending the event or becoming affiliated with the alumni group can get more information at Facebook.com/gspsync or GSPsync.tumblr.com, or by email at gspsync@gmail.com.

The Governor’s Scholars Program began in 1983, with 230 rising high school seniors from across Kentucky who were brought together on Centre College’s campus in Danville for a summer enrichment program. The program is the oldest of its kind in the nation. This summer, about 1,100 students participated on three college campuses.

Scholars are chosen through a competitive process. The program is free to them and is financed by state government and private donors. Governor’s Scholars are eligible for big-dollar scholarships at virtually all of Kentucky’s public and private colleges and universities.

Stevens figures that there are now 25,349 Governor’s Scholars Alumni with three decades of accomplishments, life experiences and personal networks that could have enormous value. Simply publicizing what other former scholars are doing could spark ideas and create job opportunities.

The idea of the Governor’s Scholars Program was to keep Kentucky’s “best and brightest” from leaving the state. Surveys show that about half of all scholars now live here. But Stevens and others think that original goal was too narrow.

gsplogo“It’s not good to try to keep them in Kentucky,” he said. “Just keep them connected to Kentucky.”

For one thing, Stevens said, when scholars leave Kentucky to achieve their dreams, they can end up in good positions to help future scholars achieve theirs.

Former scholar Darlene Hunt of Lebanon Junction went to Britain, Chicago and Los Angeles on her way to becoming a successful actress, producer and television writer. Matt Cutts of Morehead went on from UK to earn a doctorate in computer science from North Carolina and is now a top executive at Google.

“Having a Matt Cutts at Google is better for the network than if he had stayed here,” Stevens said.

Also, he said, Kentuckians often have a habit of achieving success elsewhere and moving back to home, bringing back knowledge and sometimes jobs and investment capital.

Some high-profile examples include Alan Hawse, a top executive with Cypress Semiconductor, whose move back from California led to creation of a technology development center in downtown Lexington. Self, the FoodChain founder, and her husband, Ben, moved back to Lexington from Boston after a company he helped start ran President Barack Obama’s 2008 online campaign. He and three partners then started West Sixth Brewing Co.

“The network is more valuable than just having people here,” Stevens said. The oldest scholars are now reaching mid-career and rising to positions of wealth and influence, he said. “The real power could be what happens when they do want to come back.”

Tax reform group has some good ideas; will they go anywhere?

December 10, 2012

Tax reform in Kentucky has always reminded me of that old quip about the weather: Everybody talks about it, but nobody does anything about it.

After nearly a year of study, the Blue Ribbon Commission on Tax Reform that Gov. Steve Beshear appointed to study Kentucky’s tax code and suggest changes finished its work last Thursday and announced recommendations. A final report is due to the governor by Dec. 15.

Will Beshear embrace his task force’s recommendations and try to sell them to the public and legislators? Will the General Assembly’s leaders exercise the leadership needed to build political consensus and make change happen?

You have to give the task force credit. Rather than proposing safe but inadequate “revenue neutral” tax reform, task force members had the courage to recommend a plan that would add $690 million in revenue during the first year.

That’s still short of what Kentucky needs, but it’s a start. Pension obligations will eat up at least $350 million and the state budget has already been cut a dozen times for a total of more than $1.6 billion.

Among the task force’s good recommendations:

■ Raise the cigarette tax to $1 a pack, up from 60 cents. Given the high public cost of smoking-related diseases in Kentucky, it should be even higher, such as the $1.60 that some task force members proposed. But at least Kentucky’s cigarette tax will no longer be the lowest in the region.

■ Amend the state constitution to allow local-option sales taxes. This is a big issue for Lexington, Louisville and other cities desperate for additional revenue to meet the needs of their urban populations and economies.

■ Make the state income tax more progressive, easing the burden on low-income wage-earners and putting more of it on high-income taxpayers. Much of that would be done by limiting deductions and exemptions.

The task force also recommended creating an earned-income tax credit to give relief to low-wage families. It would be modeled on the federal earned-income tax credit, a Republican idea that has been an effective, low-cost tool for reducing poverty among the working poor.

■ Eliminate two taxes that have always seemed like insults to two of Kentucky’s signature industries, horses and bourbon. The first is the sales tax on horse feed. Cattle feed is not taxed, but horse feed is, which has never seemed fair.

The other is the property tax on barrels of bourbon aging in warehouses. Bourbon has become a worldwide phenomenon, and Kentucky makes more than 90 percent of it. But this tax gives both established and new distillers a reason to look to elsewhere to build production facilities, which could risk Kentucky’s industry dominance.

■ Expand the 6 percent sales tax on goods to include some services. This could broaden Kentucky’s tax base as the economy continues to shift from goods to services. It is essential that Kentucky tax revenues grow with the economy, and this is one way to do it.

The task force also recommended cutting corporate taxes by abut $100 million. It is an article of faith among some business people that corporate taxes need to be as low as possible. But that seems unnecessary, because studies have shown that Kentucky’s corporate taxes already are competitive with peer states.

“What are we going to gain by making them lower?” asked Jason Bailey, a task force member and director of the Kentucky Center for Economic Policy, a Berea-based research group. “The corporate income tax is a very small part of doing business.”

Rather than cutting Kentucky’s already-low corporate taxes, Bailey thinks more jobs could be created by investing that money in education, health and infrastructure. Those are areas that companies look at when choosing a good place to do business, and they are areas where Kentucky is behind many other states.

Overall, though, the task force recommendations are the most positive talk in decades toward real, much-needed tax reform. Whether Kentucky’s political leaders will do anything about it remains to be seen.

Lexington entrepreneur hopes to revolutionize consumer credit

September 3, 2012

Shane Hadden spent more than a decade in New York City, figuring out ways for corporate clients of Credit Suisse to lower their borrowing costs. That work gave him some ideas about how to do the same for average consumers.

So, three years ago, the 43-year-old Danville native moved back to Central Kentucky with his wife and three young daughters to create Float Money LLC. After three years of development and testing, the Lexington-based company backed by local investors launches this month in Kentucky and two other states. Here is how it works:

Float members use the company’s Web site to make purchases, either from online retailers such as Amazon or by buying gift cards to local merchants and chains such as Meijer, Macy’s, Kmart, CVS and Speedway. Merchants pay a commission on those sales, which is how Float makes its money.

In return for their purchases, Float members build up a line of credit they can borrow from without any interest or fees, Hadden said. The more of their spending Float members do through the Web site, and the better their standard FICO credit score, the higher their line of credit grows over time. Credit lines range from a few hundred dollars to $20,000.

The idea is to give consumers a no-cost borrowing alternative to credit cards. But people who use credit cards to earn rewards, such as airline points or cash back, can still use them to buy through Float.

Float members can draw on their credit line at any time for any purpose, essentially taking out 10-month personal loans that must be repaid at the rate of 10 percent per month, Hadden said.

Like any loan, repaying the line of credit is a legal obligation. But what happens if a loan isn’t repaid on time? Credit that members earn with future purchases through Float goes to pay off their loan rather than increasing their line.

“Even if you owe money, you’re still going to need to spend money on essentials,” Hadden said. “Those future purchases are an asset you have, and we’re unlocking it.”

Float has signed more than 1,000 merchants so far to participate in the system, Hadden said. About 300 initial members have been testing the system since last November. Floatmoney.com is now accepting new members.

Hadden thinks Float will be popular, because a lot of people get in trouble with credit cards, whose high interest rates can rapidly compound debt on unpaid monthly balances. Americans now have more than $2.5 billion in outstanding consumer credit, about $866 million of which is with credit cards and other forms of revolving credit, according to Federal Reserve Bank of Philadelphia.

Hadden’s concept isn’t really new: It is essentially the old-fashioned kind of credit that small stores once gave regular customers, or the no-interest loans retailers still give customers to make major purchases, such as a new car, furniture or appliances.

What’s different is that the Internet now provides a way to combine the buying power of huge numbers of customers. As Float adds members and merchants, it hopes to use that buying power to get higher commissions for itself and discounts for members.

Hadden said he isn’t aware of any other companies with the same business model: the ability to create absolutely free, general-purpose credit in return for making everyday purchases.

Float isn’t a bank; legally, it is a state-regulated finance company. The company plans to expand nationwide as it is licensed and recruits local retailers in each state. In addition to Kentucky and neighboring Ohio, Float is launching in Massachusetts because its own lender, Developer Finance Corp., is based there.

Given the size of the consumer credit market, Hadden is optimistic about Float’s long-term growth potential. He plans to keep the business based in Lexington.

Hadden said the company’s other investors include: W.T. Young LLC; Cheddars restaurant owner Lee Greer; Internet entrepreneur and West Sixth Brewing partner Ben Self; and Donald Mullineaux, a longtime banking and finance professor at the University of Kentucky.

“I thought it was a novel idea that addresses a significant need,” Mullineaux said, noting that credit card interest rates are very high even though bank rates are at historic lows. “When I first heard about it, my initial response was, ‘What’s the catch?’ There’s not one.”

Occupy Wall Street strikes a chord with many

October 16, 2011

Businessman Richard Knittel joined pickets Wednesday evening as part of Lexington's Occupy Wall Street on Main Street. Photo by Tom Eblen

The casually dressed Occupy Wall Street protesters in downtown Lexington last Wednesday evening looked curiously at one another when Richard Knittel approached wearing a suit and tie.

He didn’t want to argue with them. He wanted to join them.

Knittel, 69, of Versailles, explained that he isn’t against capitalism — among other things, he is chairman of a Canadian company that uses environmentally friendly technology to mine metals. But he agreed with the protesters that big money has too much influence in America, especially when it comes to profit-driven disregard for the environment.

“I want people to see that even people with suits on are joining this,” Knittel said before picking up a spare protest sign and waving to passing motorists on Main Street.

Since Occupy Wall Street protests began Sept. 17 in New York’s financial district, similar demonstrations have sprung up in more than 1,300 American cities.

The Lexington protest began Sept. 29 on the sidewalk outside Chase Bank Plaza. Protesters — whose numbers have ranged from two to two dozen — said they have tried to be polite and not make a mess. They have appreciated Lexington police for keeping drunks and troublemakers away. Supporters bring them food, and Gene and Natasha Williams let them use restrooms in their restaurant across the street.

Some people have cast Occupy Wall Street as liberals’ answer to the conservative Tea Party. Both movements include average, passionate people waving protest signs and American flags. Both also have their share of crackpots, are fuzzy about their goals and solutions and are easy for critics to lampoon.

Still, both movements have struck chords with the public because, for so many people, the American dream seems to be slipping away. People on the left, right and in the middle think the system has been rigged against them.

I visited Lexington’s Occupy Wall Street protesters several times last week. Most were 20-something students and low-wage workers, although the group included teachers, retirees, a veteran, a local food activist, an unemployed computer programmer and a man who said he is homeless. Some talked idealistically, but most just seemed worried about the future.

The protesters said they are concerned about economic injustice and political corruption. They aren’t against capitalism, just the crony capitalism and greed that they blame for the financial crisis and widening economic disparity.

Among common themes: The rich have gotten exponentially richer while middle-class workers have lost economic ground for three decades. Financial speculators, who largely caused the 2008 crash and were bailed out by taxpayers, haven’t been brought to justice. Politicians of both parties receive so much corporate cash that they are only looking out for business interests.

“This is about shaping the national discourse so it is more people-based than profit-based,” said Robert Wilhelm, 24, a University of Kentucky student. “People who were part of the Tea Party before it got corporate sponsorship have even come by and said they agree the system is broken.”

Janet Tucker, 64, a retired nurse, said she thought it was important to come out and protest. “But I don’t spend the night here; I leave that to the younger folks,” she said.

“We’re spending trillions on wars overseas, and we can’t afford to deal with all the problems we have here,” Tucker said. “It’s not that there isn’t money; it’s where it is. We need to look at our priorities as a nation.”

Protesters said they have been encouraged because, for every obscene gesture or shout of “get a job” they receive from a passerby, they get 10 thumbs-up or honks of support.

“A lot of folks are struggling, and I think they’re making these connections,” said Greg Capillo, 23, a college graduate who works in a coffee shop. “The ultimate issue is corporate involvement in democracy, because it speaks to the structural elements of democracy itself.”

It is hard to predict the future of Occupy Wall Street. The demonstrations will surely wane as winter comes. Protesters say they don’t want to be co-opted by the Democratic Party the way the Tea Party movement has been by the Republican Party.

The significance of protest movements is never the movements themselves, but how they shape public opinion over time. A national poll last week by Time magazine found that 54 percent of respondents viewed Occupy Wall Street favorably. That compared to 27 percent who viewed the Tea Party favorably, down from 41 percent in December 2009.

Comparing Occupy Wall Street to the Tea Party might not be the best analogy. Better ones might be the Bonus Army veterans who occupied Washington during the worst of the Depression, or even the civil rights movement of a generation ago.

Throughout history, this nation has been forced to address obvious injustice and inequity when enough people objected. The protesters on Wall Street — and on Main Streets across America — seem to be hoping that this time will be no different.

Author finds hit with common-sense money advice

September 19, 2011

High finance has gotten so complicated that many so-called experts no longer seem to understand it. Wall Street has become a computer-driven casino, where huge gains can become huge losses within seconds.

Personal finance can be much simpler. In fact, a whole information industry has sprung up to preach common-sense money management to average people who forgot or never learned time-tested strategies.

Richmond’s Don McNay, a financial consultant and syndicated columnist, is the author of a new book, Wealth Without Wall Street, that has been selling briskly on Amazon.com since it came out in paperback Aug. 25 ($9.99, Kindle $5.99). The hardback ($19.99) debuts Tuesday at a 7 p.m. signing at Joseph-Beth Booksellers.

“I don’t just complain about things; I give people practical advice to do something about their situation,” McNay said. “It’s about taking control of your finances and your life.”

McNay’s timing is perfect: Unemployment is high; many people are struggling with debt; and the public is angry at Wall Street fat cats, who are back to their old shenanigans after receiving $700 billion in taxpayer bailouts three years ago.

It also doesn’t hurt that two of the nation’s most popular personal finance gurus — Clark Howard and Dave Ramsey, whose philosophies McNay generally shares — also have new books out. McNay said his book is benefitting from Amazon’s computer-generated referrals. “People who pull up their books see, ‘You also might like this,'” he said.

McNay, 52, who writes for Huffington Post and several small Kentucky newspapers, owns a company that specializes in what are called structured settlements. He helps people who get big payouts from an insurance settlement, or maybe a lottery win, manage and conserve their money.

His slim, easy-to-read book isn’t technical; it’s more like common-sense advice from a wise uncle.

McNay said he has learned how to explain things simply after years of working with accident victims, many of whom have little education and many financial problems. Plus, he and his own family have made a lot of mistakes over the years.

For example, McNay said, he became a successful broker in the 1980s and splurged on all the trappings — a Mercedes-Benz, a big house and a fancy office in downtown Lexington. Then he lost it all through a complicated real estate investment he didn’t understand. He had to dig himself out of debt.

The book tells several other painful stories that taught McNay lessons. “It’s embarrassing,” he said, “but it’s real life.”

Here is a sample of McNay’s advice:

Avoid credit cards: McNay said most of the pushback to his book has come from readers who say credit cards can be great tools when managed properly. But he avoids them because he doesn’t want to be like too many Americans and let credit cards become a debt trap. McNay, who said he has always struggled with his weight, compares credit cards to keeping fattening food out of his house; if it’s there, he will eat it.

Work for yourself: Not everyone is cut out to own their own business, but if you are, do it. It’s hard work, but it gives you more control over your life and future.

Get rich slowly: To McNay, that means don’t spend more money than you make. Avoid debt. Save through conservative investments. Consult an attorney when necessary. Have a will and life insurance to protect your assets. Not only does this make you richer, it will remove a lot of stress. “It takes power away from those who can control you,” he said.

Move your money from a big bank to a small one: Wall Street has so much power, McNay said, because so much of Americans’ money is invested in big banks. They were behind most of the risky activities that tanked the economy. Big banks also make only 28 percent of small-business loans, while small banks, defined as those with less than $1 billion in assets, make 34 percent.

“A lot of this really is common sense, and it’s about balancing power in your favor,” McNay said. “These are things that could spark a revolution.”


Lexington, Louisville partnership makes sense

August 15, 2011
Mayors Greg Fischer, left, of Louisville and Jim Gray of Lexington. Photo by Mark Cornelison

Mayors Greg Fischer, left, of Louisville and Jim Gray of Lexington announce the project in Louisville last Thursday. Photo by Mark Cornelison

LOUISVILLE — The Bluegrass Economic Advancement Movement was announced Thursday with all the fanfare that two cities’ business leaders could muster.

A furry University of Louisville cardinal mascot escorted Lexington Mayor Jim Gray to the stage of a Galt House ballroom as a furry University of Kentucky wildcat did the same for Louisville Mayor Greg Fischer. More than 1,000 people from both cities applauded, and a marching band played the Superman movie fanfare, symbolizing the goal of creating a super-region for advanced manufacturing.

The hype might have been goofy, but the ideas behind the effort and the process for achieving it could be an economic game- changer, not only for Louisville and Lexington, but for the entire state.

Brookings, the public- policy think tank, chose Lexington-Louisville as one of seven regions where it will work with business, government and educational leaders to develop a plan for regional economic development. The idea is to focus on business sectors that already are strong and have potential to become major players in international trade.

Brookings thinks regions, rather than individual cities, are the economic powerhouses of the future, especially as the world becomes more urbanized. More than half the world’s population now lives in urban areas, up from 30 percent in 1950 and 2 percent in 1800. By 2030, it could be 60 percent.

Kentucky mirrors the trend. More than 55 percent of Kentuckians live in urban areas, which account for 72 percent of the gross state product of $50.5 billion a year. More than 2 million of Kentucky’s 4.3 million people live in the 27 counties that make up the Louisville- Lexington region, which includes Elizabethtown. Metro Louisville accounts for 31 percent of gross state product; metro Lexington, 14.2 percent.

Fischer got the ball rolling with Brookings. A review of 11 previous economic studies quickly identified advanced manufacturing as an area for focus. Manufacturing employs 65,000 people, or 11 percent of the work force, in metro Louisville, and 30,000, or 8 percent of the work force, in metro Lexington.

The biggest manufacturing niche is the auto industry, with the Toyota assembly plant in Georgetown, two Ford assembly plants in Louisville and suppliers across the state.

Manufacturing jobs were key to creating the American middle class a century ago, and it is no coincidence that the middle class has declined as manufacturing has moved overseas. But some of that high-end manufacturing is moving back to the United States, and Kentucky has the potential to attract it, Fischer said.

“This is a can-do region with enormous assets,” said Amy Liu of Brookings. “We think there’s a real opportunity to succeed here.”

So what could make this different from so many well-intentioned but marginally successful economic development efforts in Kentucky? Several things.

Brookings brings a level of expertise to which Kentucky has rarely had access. The institution is donating its services, valued at about $750,000. Kentuckians are providing about $250,000 in support services and expertise, which will be paid for with private donations.

Fischer and Gray — two new mayors with similar entrepreneurial backgrounds and political outlooks — are powering the initiative. Sports entrepreneur Jim Host will chair the effort. Host is one of Kentucky’s most capable leaders — a drill sergeant with a strong record of getting things done in both cities. His most recent accomplishment: building the KFC Yum Center in downtown Louisville.

Host will lead a 15- to 20-member committee the mayors will appoint soon. And if the mayors are smart, two of those appointments will be the presidents of UK and U of L, which will be vital to this effort’s success.

The committee will develop a specific business plan to be announced by the end of 2012. The key to execution will be forming partnerships among government, industry and education groups. The public may offer suggestions at Facebook.com/bluegrassmovement.

Beyond the goal, though, this cooperative effort could be a big deal for Kentucky. That is because Louisville and Lexington — cities only 70 miles apart but long separated by cultural differences and sports rivalries — will be working more closely than ever before.

The effort also will focus statewide attention on the economic importance of the Louisville and Lexington metro areas. After all, 40 cents of every tax dollar generated in Louisville goes to the rest of the state, as does 23 cents of every Lexington tax dollar, Host noted. When the cities succeed, the whole state benefits.

“The leverage potential this has, we don’t even know,” Gray said. For example, he noted, Jefferson County school board members invited Fayette County school board members to the announcement luncheon. What might a closer working relationship there lead to?

“Greg and I naturally see alliances as a big deal,” he added. “And in this case, one-plus-one could add up to three, four or five. That’s what all of this really represents.”

Debt obsession will only make economy worse

August 8, 2011

If your home caught fire, would you put out the flames, or ignore them and focus on fixing a leaky pipe that could eventually flood your basement?

You would call firefighters, of course, and deal with the pipe after the emergency had passed. Unless, that is, you were a member of Congress.

Think of government debt as a pipe that has been springing leaks for a decade. If not fixed, it will eventually ruin the house. The fire in this analogy is America’s stagnant economy and high unemployment rate.

With that in mind, here is the best way to describe what Congress and President Barack Obama did last week: They wrapped tape around a small piece of the leaky pipe and poured gasoline on the fire.

The debt-ceiling fiasco did little to solve America’s real debt problems, although they were a start. But the bipartisan compromise will make our economic slump worse instead of better. Fears of a relapse into recession sent stocks plunging last week in the steepest market slide since October 2008.

The only realistic way to reduce government debt is to cut some spending, increase tax revenues, bring down soaring health care costs and make long-term adjustments to entitlement programs that will put them on sound financial footing. It is not rocket science; more like basic plumbing.

“We don’t have a revenue problem!” Republicans like to say. “We have a spending problem!” They are only partly right.

We do have a spending problem. We have committed what could become $3 trillion fighting wars in Iraq and Afghanistan, and now we’re messing around in Libya and who knows where else on the sly. The military industrial complex spends untold billions on high-tech weapon systems we don’t need. Waste and fraud abound.

The same skyrocketing health care costs that are breaking families and businesses are making the Medicaid and Medicare programs unsustainable. Social Security must cut benefits, raise the dedicated tax or both.

But we also have a revenue problem. Sorry, Tea Partiers: you may think you are “Taxed Enough Already,” but you are taxed less than you have been in decades.

Thanks to huge 2001 tax cuts, plus tax breaks and loopholes for special interests, tax revenue as a share of gross domestic product is at its lowest point since 1950. After reaching a peak of 20.6 percent in 2000, it is now 14.8 percent, according to an analysis by the Center for American Progress.

The United States has lower taxes than most developed countries, especially for wealthy people and corporations. Top marginal tax rates, tax rates on investments and corporate tax revenues as a share of GDP are the lowest they have been since World War II.

Trickle-down economic theory — what President George H.W. Bush famously called “voodoo economics” — won’t revive the economy. It will just continue a 30-year trend of stagnant middle-class wages and huge income growth for the rich.

A big reason America’s economy is stalled is that too many average people don’t have jobs. Many who do have jobs still don’t have much disposable income. Until a lot more people have more money to spend, the economy won’t recover.

Republicans’ obsession with paying down debt — and Democrats’ willingness to cave in to them — will only make the economy worse, at least for the next year or two. Republicans hope to use that for political advantage. Democrats seem scared of their own shadows.

Since banks and corporations have recovered, neither political party seems to care much about the rest of us. I guess we know who they really represent.

This obsession with reducing debt in a weak economy risks a replay of the malaise Japan suffered in the 1990s when it followed that strategy. The same thing happened here in 1937, when debt-obsessed politicians stopped much of the New Deal spending that was getting America back to work from the Great Depression. The result: a double-dip depression that didn’t end until World War II.

Political leaders need to stop admiring their taped-up pipe and notice that America’s house is burning down.

Chamber can have big influence on improving Kentucky

July 18, 2011

I am increasingly impressed with the leadership of the Kentucky Chamber of Commerce. Rather than just taking care of business, it seems to realize that improving life in Kentucky will help create economic prosperity.

That was apparent at last week’s annual meeting in Louisville. The agenda focused on substantive discussions of two of Kentucky’s biggest issues, coal and education.

For example, the keynote speaker on coal was journalist James Fallows, whose Atlantic magazine cover story last December was one of the best things I have read on the subject. “Coal is inevitably going to be a major part of the world’s energy solution for the foreseeable future,” he said. “But that role will be and has to be different.”

While Fallows characterized his remarks as a “good news speech,” it was nothing like the hot air we usually hear from the coal industry and its cheerleaders.

No matter how successful the world is at developing alternative energy, coal will remain a vital fuel for decades, Fallows said. But he stressed that global economic, scientific and political trends will require that coal be mined and burned in more environmentally friendly ways. It is smarter to lead change than be trampled by it.

Solutions built around market incentives — such as the ill-fated “cap and trade” proposal — would be better than regulation because they would encourage business creativity and flexibility, Fallows said. But if business wants market-driven change rather than regulatory change, he said, “high-level industrial leadership is important.”

Fallows was followed by Michael G. Morris, chairman of American Electric Power, whose remarks were titled “Coal Under Attack.” While saying that coal must get “cleaner,” his rambling presentation was filled with the usual clichés about new environmental rules being unfair and unreasonable.

Morris bragged about how much less pollution coal-fired power plants emit now than they used to — as if that were the result of industry leadership rather than government regulations that most utilities fought every step of the way.

Morris repeated an earlier claim that new regulations will have a “devastating effect” on AEP, shutting down 6,000 megawatts of generating capacity. But as another speaker pointed out later, two-thirds of that capacity was going to be retired anyway because of a 2007 pollution settlement with the Bush administration.

I was impressed that so many chamber members seemed wise to Morris, even ignoring most of his attempts at applause and laugh lines.

Morris was followed by Rodney Andrews, director of the University of Kentucky’s Center for Applied Energy Research. He gave an excellent but rushed presentation that echoed many of Fallows’ points and made a persuasive economic and environmental argument for making coal-fired power plants more efficient. I would like to have heard more from him.

The chamber announced some initiatives that could have a big impact. The New Agenda for Kentucky Campaign focuses on action plans in five areas: improving schools, modernizing government, remaining competitive in energy resources, doubling international exports within five years and improving Kentuckians’ health and wellness.

Perhaps the most impressive effort is the Kentucky Leadership Institute for School Principals. AT&T and other companies are giving money to send many Kentucky school principals to the respected (and expensive) Center for Creative Leadership in North Carolina to get the kind of high-level leadership training that business executives receive.

The chamber also unveiled a follow-up to its 2009 “Leaky Bucket” study, which underscored how huge increases in state spending for public employee health care, Medicaid and prisons were contributing to a short-change of education.

That report provided encouragement — and political cover — for landmark legislation earlier this year to rewrite Kentucky’s criminal code. It will reduce the number of non-violent offenders in jails and prisons, send more drug offenders to treatment and save a lot of taxpayer money in the process.

The chamber’s new report, called “Building a Stronger Bucket,” offers more suggested policy changes, including moving new state employees to a 401(k)-style pension plan.

Too often in the past, Kentucky has fallen behind the rest of the nation when narrow economic or political interests wielded too much power. Building a better future will require that many perspectives be considered and many voices be heard.

Still, no single group can do more to make this state a better place to live than a progressive organization that represents a broad spectrum of the business community. The Kentucky Chamber of Commerce seems to be stepping up to the challenge.

How lazy can we be if we’re 4th best city for business?

July 6, 2011

Soon after Men’s Health magazine made Lexington an international laughingstock by naming it America’s most sedentary city, Forbes magazine has given the local business community something to brag about.

Lexington’s No. 4 ranking in Forbes’ annual Best Places for Business list is up from No. 9 last year. Louisville is ranked No. 14.

Forbes ranked Lexington better than all of the cities that Commerce Lexington’s annual Leadership Visit has gone to recently: Greenville was No. 60; Madison, No. 63; Pittsburgh, No. 69, Austin, No. 7; Boulder, No. 44 and Oklahoma City, No. 28.

Forbes said it arrived at its rankings by weighing a series of metrics, such things as job and income growth, costs, quality of life and educational attainment. Read more about the methodology here.

In my Business Monday column, I will discuss these rankings — which are more about magazine promotion than anything else — and how comparing one place to another is more difficult than it seems.

Chamber knows Kentucky art is good for business

February 27, 2011

FRANKFORT — When the Kentucky Chamber of Commerce decided to renovate and enlarge its headquarters to create more public space, chamber president David Adkisson said, “I kept saying I wanted something really Kentucky.”

He considered asking architects to design the 7,000-square-foot addition to look like a fancy Bluegrass horse barn, or even a bourbon distillery warehouse.

“They convinced me that wasn’t the way to go,” Adkisson said, as he gave me a tour of the beautiful, but conventional, new space.

What is happening instead is a better reflection of Kentucky’s uniqueness: the Chamber is filling its new building with a diverse collection of original art and furniture by the state’s contemporary artists and craftsmen.

Since the new space opened in April, it has been a big hit, with members of the business advocacy group and with other Kentucky organizations that have used the new meeting rooms, Adkisson said.

He said the project has more than achieved his goal of making the Chamber’s headquarters, near the intersection of Interstate 64 and U.S. 60, a prominent “front door” to Frankfort.

“We’re in the business of showing off the best of Kentucky, so this was a natural,” Adkisson said. “We made a conscious effort to create a gallery-like atmosphere that would showcase the artwork. Now, when groups come here, the art immediately becomes the focus of attention.”

The project also has been a significant boost for Kentucky artists — and not just because the Chamber has so far spent about $50,000 buying and commissioning pieces. Louisville distiller Brown Foreman gave $40,000 toward the art project, and most of the rest so far has come from building-project money, Adkisson said.

Lori Meadows, executive director of the Kentucky Arts Council, worked closely with the Chamber to identify artists and pieces for the building.

“It’s incredibly important for the Chamber to recognize that to complete a building, you need art,” Meadows said. “A lot of time went into the selection of pieces to make sure they were appropriate for each spot.”

The additional space was built onto the front of the Chamber’s existing 10,000-square-foot building. The two sections are connected by a new, light-filled lobby. The upper parts of the tall lobby walls are covered with panoramic Kentucky scenes by Jeff Rogers, a Lexington photographer best known for his two Kentucky Wide books.

The Chamber’s new board room is dominated by a round conference table designed by Brooks Meador of Interspace Limited in Lexington and produced by furniture maker Shawn Strevels of Faulkner Fain in Nicholasville.

The board room’s largest wall displays four large seasonal landscape paintings of Kentucky wilderness by John Lackey of Lexington. Light from a corner window illuminates a leaded-glass sculpture by Dan Neil Barnes of Lexington.

The building’s largest meeting space — the AT&T Teleconference Room — has a 10-painting suite by Lexington artist Dan McGrath, depicting scenes of commerce across the state.

The new addition also features paintings by Chris Segre-Lewis of Wilmore and Darrell Ishmael of Lexington, and mixed-media pieces by Kathleen O’Brien of Harrodsburg. There are decorative platters made by porcelain artist Wayne Bates of Murray, and a coffee table in the reception area made by Mark Whitley of Smith’s Grove.

“Our goal is to buy one new piece each year,” Adkisson said. After a few more pieces are purchased, he said, the Chamber plans to publish a brochure for visitors, telling about each artwork and the artist who created it.

“I think it’s exciting that they are realizing the value of art and supporting it,” said Ishmael, who in addition to being a successful artist is an executive with East Kentucky Power Cooperative in Winchester. “I think it’s really refreshing, and I wish other businesses would do it.”

Meadows said the Chamber’s collection has inspired several executives to contact her for help in acquiring original Kentucky art for their companies’ buildings. “That’s exactly what we want to see happen,” she said.

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