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New proposal would redirect TVA funds to counties for economic development

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New proposal would redirect TVA funds to counties for economic development

FRANKFORT -- Funds for economic development in many Kentucky communities are in short supply, but a bill currently before the state legislature would bring an influx of new money into the 39 counties impacted by the Tennessee Valley Authority.

Senate Bill 130, which is sponsored by Sen. Stan Humphries, R-Cadiz, seeks to direct some $6 million a year from money now going to the state's General Fund to those 39 counties for the specific purpose of funding projects that would help local communities attract new businesses and help existing ones expand.
The TVA is exempt from paying taxes, but it makes an annual "in-lieu-of-tax" payment to the state, typically about $30 million, based on power usage, property, assets, and other factors. Currently, 70 percent of that payment goes to the counties, cities and schools in the areas where TVA assets are located, while the remaining 30 percent is allocated to Kentucky's General Fund. The measure proposed by Sen. Humphries would redirect about half of that 30 percent, a maximum of $6 million per year, to TVA-impacted counties for economic development purposes only. The 70 percent of funding currently going to counties cities and school would not be affected or reduced at all under the proposal.

Acknowledging that the decision to redirect money from the General Fund is a difficult one, Humphries emphasized that his bill specifies that none of the new funds would be used for salaries, marketing or other "soft" expenses.

"Our intent is to never see a penny of this money wasted," Humphries said, "We want to see actual boots-on-the-ground projects, grant matches, and opportunities to incentivize local economies to make a real difference in our communities." Humphries added that there would be legislative and public oversight on how the funds were used.

The issue was discussed at a recent meeting of the Senate Appropriations and Revenue Committee, where Mark Manning, President of the Murray-Calloway Economic Development Corporation, said his county would benefit enormously from the potential infusion of funds.

"Economic development is a struggle, especially in rural communities. In our particular area, we are suffering greatly from a lack of good industrial sites and available buildings," Manning said, noting that recently a company that expressed interest in locating in the area eventually chose Tennessee instead because no appropriate space was available.

Echoing Manning's testimony was Cumberland County Judge/Executive John Phelps, who told committee members that Kentucky communities are "not even in the game when we try to compete with Tennessee. We don't have funding, we don't have industrial parks, our general funds are strapped with other expenses, and we can't always look to grants. We're getting looks now and we need to be prepared."

Fulton County Judge/Executive Jim Martin said the requested funds would not be a gift to the recipient counties, but rather an investment in much-needed job creation that has the potential for significant economic returns to the community and the state. Noting that the population of Fulton County is stagnant and predicted to decline primarily because of lost jobs, Martin said his community "suffers from not having the money available to involve ourselves in the strategies it takes to create jobs, which is the only way to regain our economic viability."

Jim Henderson, Simpson County Judge/Executive, echoed Martin's emphasis on the potential return on investment that would come from providing more economic development funding to struggling communities. Henderson cited the example of a company that relocated to his county after a two-year recruitment process that eventually resulted in a $2 million land gift, $1.5 million in site preparation, provision of all site utilities, and a 10-year occupational tax abatement. "It was a huge investment, but the return on investment has been great," he said, adding that many communities would not have had the ability to provide the financial incentives that eventually turned the tide in Simpson County's favor.

Ken Winters, a former state Senator from Murray and current chair of the Murray-Calloway Economic Development Corporation, summed up the benefits of redirecting funds to economic development projects in the region. "Eighty-five percent of the contacts coming into our communities are going to leave if we don't have a suitable site for them," he said. "When all our counties prosper, Kentucky prospers, too."
House Bill 168 makes a similar proposal and is also currently before the General Assembly.

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