Where We Stand 2016

Where We Stand

2016 Legislative Priority Agenda January/February 2016

NKY Chamber Business Journal

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PENSION REFORM

COVER STORY

ADVOCACY

NKY Chamber Policy Position: The Northern Kentucky Chamber of Commerce supports a three-tiered approach to public pension reform during the 2016 Legislative Session of the Kentucky General Assembly. Comprehensive reform of the retirement system should include: •

A broad performance audit of the Kentucky Employee Retirement System (KERS) Non-Hazardous Fund

•

Increased transparency across all Kentucky public pension funds in accordance with prevailing national standards

•

A collaborative approach among interested stakeholders on a funding mechanism and benefit changes for new hires that will stabilize the Kentucky Teachers Retirement System (KTRS)

Guiding Principles

Background

These reforms will begin the process of ensuring the viability of Kentucky’s public pension systems into the future and will:

The lack of funding within Kentucky’s public pension funds has reached crisis levels. Considered to be among the least healthy public pension systems in the nation, the Commonwealth faces a multi-million dollar pension shortfall. Due to the inviolable contract between the state and current retirees & vested active employees, there exists a legal obligation to fund future payouts to these groups. This will happen even if it means cutting other vital parts of state government operations.

•

Decrease the likelihood of future funding cuts to other parts of the state budget including investments into transportation infrastructure, P-12 & postsecondary education, and healthcare programs, capital projects, and others

•

Protect the cash flow of current and future retirees, which creates a positive economic impact into Northern Kentucky’s economy on a daily basis

•

Respect the commitment made to outgoing retirees who are already vested in the public pension system

If the pension systems continue down a path of irregular funding and low transparency, public investment will be severely cut in areas of infrastructure, education, health care, and other key budget line items. By passing meaningful pension reform, the General Assembly will not only address the needs of thousands of current and future state retirees, but also protect key parts of the state appropriation process that allows for proactive investment into Kentucky’s future.

PUBLIC PRIVATE PARTNERSHIPS NKY Chamber Policy Position: The Northern Kentucky Chamber of Commerce supports the enactment of legislation to enable the creation of public-private partnerships (P3) for a wide range of infrastructure projects at all levels of government.

Background Information Public construction accounts for roughly $1.6 billion annually in state spending. By partnering with and leveraging the private sector, we believe the Commonwealth could experience cost savings, better quality, access to expertise and the ability to meet demand on projects like public buildings, infrastructure, parks, public schools, IT improvements, and more. To date, 33 states including ALL of Kentucky’s neighboring states use P-3s to inject the expertise and efficiencies of the private sector into public projects.

This P3 legislation would not only allow Northern Kentucky to compete with other regions of the country, but would also permit private investment to flow on projects that are slowed due to a lack of state funding. While replacement of the Brent Spence Bridge itself is the most prominent example, many forget how P3s would also positively impact the broader I-75 corridor, the backbone of Northern Kentucky’s economy. P3 legislation will spur investment on the bridge, the corridor, and advance other projects in our region that the state cannot currently afford.

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States with P-3 Capability January/February 2016

RIGHT TO WORK: ALLOW KENTUCKY TO COMPETE ON A LEVEL PLAYING FIELD NKY Chamber Policy Position: The Northern Kentucky Chamber of Commerce urges the General Assembly to enact a Right to Work law to permit freedom of choice for employers and employees when it comes to decisions surrounding labor union participation.

A Right to Work piece of legislation should include provisions that: •

Allow every worker the freedom to decide on labor union membership for themselves

•

Prohibit requiring any potential job candidate to join a labor union as a condition of employment

•

Permit employers a right of refusal to withhold labor union dues

Guiding Principles The growing number of states adopting Right to Work makes it vital that Kentucky does so as well. This is an economic competitiveness issue that our region not only needs to promote future economic growth, but also to retain existing jobs that currently fuel our local economy. Right to Work is an economic development tool to enhance Northern Kentucky’s economic growth.

Further, the decision of a worker or potential worker who does not wish to affiliate with a labor union should be no less deserving of protection than the decision of that worker to affiliate with such a labor organization.

Background According to the Bureau of Economic Analysis, Right to Work states showed a 42.6% gain in total employment from 1990 to 2011, while non Right to Work states showed gains of only 18.8% over the same period. Wisconsin became the nation’s 25th Right to Work state in 2015.

LIFT NKY Chamber Policy Position: The Northern Kentucky Chamber of Commerce supports the General Assembly to provide a Constitutional Amendment to the Kentucky Constitution to allow for a local option sales tax.

Background Information The Local Option Sales Tax provides more control to local communities by giving citizens a new tool to invest in local economic development priorities. This local flexibility affords citizens the opportunity to vote directly on up to a 1% sales tax to raise funds for specific infrastructure projects. The temporary tax would be required to have a sunset.

The Local Option brings Kentucky in line with 37 other states already utilizing this tool, and has the potential to give citizens the ability to dedicate millions of dollars to local initiatives.

January/February 2016

NKY Chamber Business Journal

Potential 1% Local Option Boone

13,023,006

Campbell

5,267,406

Kenton

8,337,702

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TAX REFORM: ANGEL INVESTMENT NKY Chamber Policy Position: The Northern Kentucky Chamber of Commerce supports a legislative proposal to raise the cap on Angel Tax Credits from its current annual cap of $3 million to $5 million.

Background Information The program began in January 2015 and the current funding cap of $3 million was fully allocated in August. The Cabinet for Economic Development has stated that they will support an increase in the annual cap. The program has met its mission, to stimulate angel level investing in the Commonwealth. The key performance indicators for the program are as follows:

• Investors qualified under the program - 183

• Total credits approved - $3M

• Companies qualified under the program - 65

• Total investments under the program - $6.8M (some investments have not closed, once they close, the total is expected to be $7.5M

• Investments qualified under the program - 171

TAX REFORM: HISTORIC TAX CREDIT NKY Chamber Policy Position: The Chamber encourages the Governor and the Kentucky General Assembly to modernize Kentucky’s Historic Preservation Tax Credit by implementing the following changes:

• Sunset the availability of awarded credits • Increases the total credit cap • Removes the annual deadline and accept applications on a rolling basis Background Information The Historic Preservation Tax Credit is a critical tool for redevelopment in both urban centers and rural towns. However, in its current structure, the credit lacks predictability and effectiveness. Because of the cap on the amount of credit awarded annually and the proportional allocation of the capped credit to eligible projects, developers, bankers, and investors have no way to anticipate the amount of tax credits which the project will ultimately receive. This makes it difficult to rely on the credit as a financing source for difficult rehabilitation projects and delays redevelopment process.

Historic Preservation Tax Credits create jobs and revive construction trades all while creating destinations for heritage tourism.

Because Kentucky competes with many bordering states for business development and jobs, it is important to make the Historic Tax Credit a functioning tool to promote the Commonwealth’s cities as attractive places to conduct business.

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January/February 2016

STATE TAX REFORM 1. Expansion of the Retention Initiative and the Research & Experimentation Credit NKY Chamber Policy Position: The Northern Kentucky Chamber supports the expansion of the Retention Initiative and the Research and Experimentation Credit.

Background Information Expand Retention Initiative: Expand the scope of the KY Economic Development Finance Authority (KEDFA) KY Reinvestment Act (KRA) to include “service and technology” companies. The tax incentive of a tax credit up to 100% of corporate income or limited liability entity tax liability generated by or arising from the project is available for up to 10 years from the date of final approval (or when the authorized incentive amount is realized, whichever comes first).

• Only a few states have a retention incentive • This is aimed at keeping companies here if they would otherwise move

• Company still has to meet all requirements. This just

Research and Experimentation Credit: There is a federal credit of 7-9% for certain expenses: “transfer pricing”. This encourages R&D and involves attraction of talent. Some other states, including Indiana, have aggressive incentives. The recommendation:

• KY should mirror the eligibility standards and

methodology of the federal program, like most other states.

• KY should become a leader in promoting new innovation nationally, offering a grant in lieu of the credit at 75% of the otherwise eligible tax credit. The total grant should be capped at $5M annually; $250K per company

expands scope to include the types of companies we want

2. Single Portion Sale Apportionment Tax Reform NKY Chamber Policy Position: The Northern Kentucky Chamber urges the state to study the impact of the Single Portion Sale Apportionment.

We need to ensure that the change would not hurt school funding and also need to focus on “good” jobs.

Background Information Kentucky needs simplicity to be more competitive with other states, especially Ohio. This shifts more tax burden onto businesses located outside of KY that conduct business here. About 24 states are already using single factor.

• Provides tax cuts to corporations housing large share of nationwide property and payroll in KY but large share of sales outside KY

• Creates the potential for tens of thousands of new jobs

TAX REFORM: TIF (TAX INCREMENT FINANCING) NKY Chamber Policy Position: The Northern Kentucky Chamber supports a legislative amendment to change the definition of a qualifying mixeduse project for state TIF participation to match the definition of a mixed-use project for projects throughout Kentucky, consistent with the definition applicable for projects in Louisville and Lexington.

Background Information Currently qualifying mixed-use projects in locally created TIF districts may be eligible for a pledge of state tax revenues. To be a mixed-use project, a project must have at least two qualifying uses, and each qualifying use must be at least 20% of the project’s net finished floor space, or 20% of the project’s total capital costs.

In projects located in Louisville and Lexington, if a project has more than two qualifying uses, one use must meet the 20% requirement, and the other uses may be added together to meet the 20% requirement. The recommended change would allow the definition of a mixed-use project currently applicable only in Louisville and Lexington to be consistent for projects across the state.

This change will make other projects eligible for a pledge of state incremental tax revenues and will encourage increased development throughout the state. It will also put development projects in other areas of the state on a level playing field with those located in Louisville and Lexington.

January/February 2016

NKY Chamber Business Journal

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NKY CONSENSUS COMMITTEE: FINAL RANKINGS Process Overview: Every other year, in preparation for the Kentucky General Assembly budget session, the Northern Kentucky Consensus Committee solicits input to identify, prioritize and advocate capital construction projects for the Northern Kentucky region. The Committee consists of over 70 representatives appointed from business, government, non-profit and other community organizations from the eight Northern Kentucky counties. The Northern Kentucky Legislative Caucus created the 70-person committee in 1989 with the sole purpose to make annual capital project recommendations for our region.

From this year’s process emerged two great areas of need in Northern Kentucky for the 2016 budget session: improving the urban core and addressing substance abuse issues in the community. Urban core investments are seen as vital to the region’s ability to continue the current excitement and the growth in the river cities. As a response to the heroin epidemic, the Consensus Committee is requesting funding for private entities to expand treatment to help alleviate addiction.

These top five priorities for 2016 include an estimated $116.7 million in improvements.

1.

Gateway Urban Metro Campus Phase II: Gateway’s mission is to improve access to higher education and to bolster the economic vitality of the region. The development of the Urban Metro Campus has begun to address the need to raise the educational attainment levels of the urban core. It is critical that the momentum experienced through Phase I be continued through Phase II that includes renovations of the former YMCA building and the Two Rivers building. The Two Rivers building will be converted into a state of the art learning environment. The Urban Metro Campus will have a continuing catalytic effect on the community as it ignites a renaissance in residential living, retail and general economic development.

Estimated Ask: $31 million

2.

Transitions’ Treatment Expansion: To address Northern Kentucky’s heroin epidemic and the rising need for residential addiction treatment and detox beds, Transitions requests at least $1 million toward the purchase of a facility in Kenton County, completion of capital improvements, and the first year of operating funds for expansion of services. Transitions is currently at full capacity and has waiting lists of one to three months for all programs. This expansion will double the number of residential beds and triple the number of detox beds available to the general public. The new site in Kenton County will serve Northern Kentucky residents age 18 and older and their families (of which approximately 90% of these patients are heroin addicts).

Estimated Ask: $1.1 million

3.

Children’s Home of Northern Kentucky Adolescent Residential Treatment Facility for Substance Use Disorders: Northern Kentucky continues to struggle with the heroin epidemic and its impact on our community’s youth. There are currently no funds being dedicated to providing more treatment beds for adolescents who have not yet entered the Juvenile Justice system, causing a great need for these types of beds. Children’s Home is proposing the construction of a 24 bed residential facility at their Covington campus to meet the needs of the community’s most vulnerable youth struggling with substance use disorders and co-occurring disorders. This new facility will meet a public need, and will have a long-term positive economic impact on the region by being more cost-effective than hospitalization, providing youth with skills to remain drug free in the workforce, and breaking the chain of addiction.

Estimated Ask: $5.6 million

3. Northern Kentucky Water District Infrastructure Upgrades: The river cities of Bromley, Covington, and Ludlow in Kenton County and Bellevue, Dayton, and Newport in Campbell County have around 150 miles of unlined cast iron water main that is between 60 and 110 years old and is in urgent need of replacement or rehabilitation. This is critical to the public health, safety, welfare, and economic vitality of the Northern Kentucky region.

Estimated Ask: $69 million (Note: this project tied with CHNK) 5.

Roebling Point Building Adaptive Re-Use: Adaptive re-use of 303 Court Street in Covington will serve as a platform for entrepreneurship, knowledge-based economy and business support services, and professional level education programs. This building is situated in a key location in the urban core and the primary objective is leveraging the Property’s locational attributes to attract a high impact economic development driver to accelerate the revitalization of Northern Kentucky’s river cities.

Estimated Ask: $10 million

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NKYChamber.com

January/February 2016

NKY CONSENSUS COMMITTEE: FINAL RANKINGS Process Overview: Every other year, in preparation for the Kentucky General Assembly budget session, the Northern Kentucky Consensus Committee solicits input to identify, prioritize and advocate capital construction projects for the Northern Kentucky region. The Committee consists of over 70 representatives appointed from business, government, non-profit and other community organizations from the eight Northern Kentucky counties. The Northern Kentucky Legislative Caucus created the 70-person committee in 1989 with the sole purpose to make annual capital project recommendations for our region.

From this year’s process emerged two great areas of need in Northern Kentucky for the 2016 budget session: improving the urban core and addressing substance abuse issues in the community. Urban core investments are seen as vital to the region’s ability to continue the current excitement and the growth in the river cities. As a response to the heroin epidemic, the Consensus Committee is requesting funding for private entities to expand treatment to help alleviate addiction.

NKY LEGISLATIVE CAUCUS Kentucky State Senate

Senator Julian Carroll District 7

Senator John Schickel District 11

Senator Damon Thayer District 17

Senator Paul Hornback District 20

Senator Chris McDaniel District 23

Senator Wil Schroder District 24

Kentucky House Of Representatives

Representative Rick Rand District 47

Representative Sal Santoro District 60

Representative Brian Linder District 61

Representative Ryan Quarles District 62

Representative Diane St. Onge District 63

Representative Tom Kerr District 64

Representative Arnold Simpson District 65

Representative Addia Wuchner District 66

Representative Dennis Keene District 67

Representative Joe Fischer District 68

Representative Adam Koenig District 69

Representative Thomas McKee District 78

January/February 2016

NKY Chamber Business Journal

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Chamber Snapshots

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NKYChamber.com

January/February 2016