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. 


A few Kentucky business highlights; poetry not included

December 29, 2013

By newspaper tradition, each year at this time, business news highlights were recounted in rhyme. Well, maybe I’m dull. Maybe I’m lazy. But to read a whole column in verse makes me crazy.

So here are some things that made news in Kentucky, but none of them will rhyme, so count yourselves lucky:

■ Toyota announced in April that it would build Lexus vehicles in the United States for the first time on a new line at its 6,000-employee Georgetown assembly plant. The company plans to produce 50,000 Lexus ES 350 luxury sedans a year, beginning in 2015, adding 750 more jobs.

■ Kentucky’s hottest commodity in 2013 was bourbon, as more drinkers around the world developed a taste for this state’s native spirit. Especially popular were high-end boutique bourbons: single barrels, small batches and specially finished recipes.

Distillers put up more than 1 million barrels a year for the first time since 1973 and were expanding their facilities in every direction. Nine craft distilleries either were licensed or announced plans to build.

All of this fueled the popularity of tourism along Central Kentucky’s Bourbon Trail. The Evan Williams Bourbon Experience opened in Louisville, while Wild Turkey built a new visitors center that will open in 2014.

Bourbon’s popularity had some distillers worried about supply. Maker’s Mark ignited a customer backlash — and a lot of free publicity — when it announced in February that it would water down its bourbon a little, then quickly changed its mind.

Bourbon also figured into one of Kentucky’s most highly publicized crimes of 2013: the theft of $26,000 worth of coveted Pappy Van Winkle from a warehouse at the Buffalo Trace Distillery in Frankfort.

■ Kentucky farm cash receipts hit a record $6 billion in 2013, just a year after topping $5 billion for the first time. Much of that was the result of the rebounding horse industry. Sales of Thoroughbred yearlings at Keeneland were up 28 percent in September, while sales of bloodstock were up 38 percent in November. Kentucky breeding rebounded for the first time since 2007, the Jockey Club said.

Also in agriculture, the local food movement gained more traction. St. Catharine College in Springfield launched a sustainable agriculture program, joining similar programs at the University of Kentucky and Kentucky State University aimed at training a new kind of Kentucky farmer.

The Lexington Farmers Market expanded its calendar, and chef Ouita Michel, perhaps Central Kentucky’s highest-profile local food entrepreneur, opened her fifth restaurant, Smithtown Seafood, at the Bread Box development on West Sixth Street. Some of Smithtown’s fish and greens are raised in the next room by Food Chain, a sustainable agriculture non-profit.

■ R.J. Corman started a dinner train from Lexington to Versailles in August. Sadly, soon afterward, the Nicholasville railroad magnate and philanthropist died at age 58 following a long battle with cancer.

■ Lexington saw several new stores in 2013, the biggest of which was a 159,000-square-foot Costco warehouse at Hamburg.

The city also got some innovative new restaurants, including National Boulangerie, a French-style bakery; Coba Cocina, a Mexican-inspired restaurant with Las Vegas-style architecture; and Athenian Grill, a former food truck. Alfalfa, the downtown restaurant that was organic before organic was cool, celebrated its 40th year.

But as the year ended, the venerable retailer Sears was having a liquidation sale at Fayette Mall and preparing to leave Lexington after 80 years. Before moving to the new mall in 1971, Sears was on Main Street, where the Chase bank tower now stands.

Miller & Woodward Jewelers, a Lexington institution since 1931, was closing its doors at the end of the year so owner Russell Pattie could retire. And Talbots Outlet, a popular women’s clothing store that moved from Victorian Square to Hamburg, announced that it would be closing in 2014.

■ Lexmark, Lexington’s biggest technology company, spent much of 2013 trying to show that it isn’t just a printer manufacturer anymore. The company is working to reinvent itself as a leader in various kinds of digital data manipulation services.

■ Lexington’s huge hospital industry saw the opening in September of a new $129 million, 300,000-square-foot Eastern State Hospital off Newtown Pike at the Coldstream Research Campus. It was a long-overdue replacement for one of the nation’s oldest mental hospitals, which had been located on Newtown Pike between Fourth Street and Loudon Avenue for nearly 200 years. That site is now the new campus for Bluegrass Community and Technical College.

 


Awesome Inc.’s Demo Day gives a look into local business future

September 10, 2012

There are basically two kinds of economic development strategies: import new businesses and jobs from elsewhere, or grow your own. Kentucky’s leaders have long focused on the first strategy, with a lot more misses than hits.

Awesome Inc. — a startup-business accelerator in downtown Lexington run by a bunch of smart, young techies — works with local investors and entrepreneurs to create home-grown businesses and jobs.

Last Wednesday, I joined about 100 other people at Awesome Inc.’s offices for Demo Day to watch five groups of young, local entrepreneurs make presentations about the companies they are working to create.

Before the presentations, Nick Seguin, a former manager of entrepreneurship for the Kauffman Foundation, discussed why this work is important for both communities and individuals.

“If we want more jobs, startups are what matter,” Seguin said, noting that most net new jobs in America are created by businesses less than six years old. But, he cautioned, “Success is built on a lot of failures.”

Entrepreneurship requires more than individual effort, he said. It needs a supportive community with the right kind of mind-set, funding, business services and employees.

The five companies that presented last week are all trying to harness online or mobile technology to create profitable new ways of solving problems or adding value.

Three of the teams were chosen earlier this year for an intense 14-week development program. In return for office space, a little seed money and a lot of advice, Awesome Inc. (Awesomeinc.org) and its investors get a small stake in each company, a common model for such accelerator organizations.

TagaPet is developing a pet tag system that uses electronics, including GPS and mobile phone technology, to reunite lost pets with their owners. Michael Ward said he and his two business partners love animals, and their idea grew out of that passion — an important motivator for many entrepreneurs.

Tags would be sold through pet stores and veterinarians, and customers then pay a monthly subscription fee for online tracking services. While a competitor already offers a similar product, Ward said he thinks there is room for more players in a nation with millions of pets.

Rate My Rental  is a Web site that its developers hope to launch in Lexington at the end of the year to let college students rate properties where they have lived as a guide to future renters. So far, they have gathered listings for 800 properties and 400 reviews of them from former tenants, partner Sam Blake said.

The company’s business model allows landlords to list a property on the site for free, then pay 10 percent of the first month’s rent if it is rented through the site. Blake and his two business partners, all University of Kentucky students, developed the idea to help others avoid the rental nightmares they experienced.

Fanbouts is a Web site being developed to aggregate fan-generated sports content — videos, photos, tweets, etc. Partner Jim Wombles said the site would make money through premium subscriptions and advertising.

Presentations also were made by an “alumni” team, which had been through Awesome Inc.’s program earlier, and an “associate” team that has ties to Awesome Inc. investors.

Crowded is a mobile app developed by an alumni team that allows fans at professional baseball games to use their smart phones to play trivia games and participate in predict-the-play contests at the stadium. The app is now in beta testing. The company would make money from advertising.

Crambu, the associate team, seemed to be furthest along. It provides an electronic platform for hotels to collect feedback and requests from guests, who use their own smart phones or iPads furnished by the hotel.

Partner David Booth said an initial version of the software has been in testing in three hotels in Kentucky and California, and the latest version will soon roll out to 11 hotels in several states. Hotels pay $1 per room per month for the service.

Will all of these companies succeed? Probably not. Will some of them? Maybe.

With the right culture and support, Seguin said Lexington entrepreneurs can develop the companies of the future, just as Kentuckians developed such success stories as Kentucky Fried Chicken and Alltech.

“It doesn’t need to just happen in Boston, Austin, Boulder or the Bay,” he said.

Awesome Inc. founder Brian Raney put it more bluntly: “Step 1 is do something. Step 2 is keep going. Most people get lost at Step 1.”