The Lane Report -- Fast Lane December 1999


	FAST LANE - December 1999 STATE More Grants Awarded by Commonwealth Ag Department FOLLOWING up on the $2.1 million in value-added grants awarded to agribusiness producers earlier this year, the Kentucky Department of Agriculture has awarded an additional $1.44 million in grants to seventy recipients for projects ranging from dairy product market development to secondary wood. There were 175 grant applications in all. Among the allocations: $151,900 to the Jackson Purchase RC&D Foundation for development of a cooperative fish hatchery; $75,000 to the Kentucky Soybean Association; $50,000 to the Adair County Cattlemen's Association; $39,200 to the Kentucky Small Grain Growers Association; over $48,000 to the Kentucky Aquaculture Association for a shrimp processing plant; over $44,000 to the Kentucky Nursery Landscape Association; $35,000 to the Kentucky Wood Products Competitiveness Corporation; $16,000 to the University of Kentucky to develop a butter product; over $10,000 to the Russell County High School FFA chapter to start a landscape plant nursery and marketing program. Almost $191,000 was approved to assist the conservation districts of many counties in facilitating grazing and forage programs. Grants of $100,000 each were awarded to three producer-owned fruit and vegetable cooperatives, and $84,175 will go to fund a sweet sorghum cooperative in Montgomery County. Kentucky farmers also stand to receive federal payments for weather-related crop losses, as well as $64 million in recently approved federal aid to compensate for nationwide low prices for grain, soybeans and cotton. STATE Governor Patton Ready to Clean Up Things AFTER a landslide election victory, Governor Paul Patton proposed to cleanse the land with mandatory garbage collection in all 120 Kentucky counties. It's the first time a sitting governor has come out in favor of such a measure. Twenty-three counties already have mandatory collection. While Patton favors a recycling component in his plan, he's leaving it to legislators to devise a plan, whether it's Greg Stumbo's proposed "bottle bill," Natural Resources Cabinet secretary James Bickford's proposed 1-cent tax on drink containers or another compromise plan. Patton said his goal is to "totally stop the additional accumulation of illegally disposed-of solid waste in Kentucky, and begin the process of cleaning all of it up." LOUISVILLE Kroger Cancels Thunder Over Louisville Sponsorship CITING costs, especially for ancillary activities, the Kroger Co. has told the Kentucky Derby Festival that it will no longer sponsor the "Thunder Over Louisville" fireworks display and airshow. The colossal event, now 10 years old, draws more than a half-million spectators along the Ohio River in downtown Louisville and the adjacent Indiana shore. The Year 2000 extravaganza, scheduled for April 22, is now threatened unless the Derby Festival can find an alternative sponsor. The cost of the show has always been a secret, although most observers estimated that Kroger contributed as much as $250,000 a year. In making its announcement, the company did state that it rented 375 rooms at the Galt House complex and complained ancillary costs made sponsorship "unprofitable". Lesser sponsors include United Parcel Service and Tyson Holly Farms. The 1999 "Thunder" became controversial when the Louisville Board of Aldermen objected to a 15-minute segment of the airshow reenacting the Japanese attack on Pearl Harbor. Although state economic development officials also asked the Festival to cancel that segment, the Festival threatened instead to cancel the entire event, and cited public support for its position. The Board backed down and the show went on as originally planned. STATE Survey Seeks Opinions of State Workers WITH its $1 billion expansion plans clouded by a shortage of local workers, United Parcel Service (UPS) is surveying potential employees' attitudes about moving to Louisville to work and study. The survey is being conducted in cooperation with Greater Louisville, Inc., the University of Louisville (U of L), Jefferson Community College (JCC) and Metropolitan College. The latter is a new program, supported by UPS and staffed by U of L and JCC to integrate part-time work at UPS with tuition-free course work at the company's Louisville sorting facility. Students also receive company benefits, in addition to their regular pay, and reimbursement for books. There are about 1,100 participants with a goal of 2,500. One hindrance to attracting workers and students from outside the metropolitan area is the apparent perception among rural young people and their parents that Louisville is a large and forbidding city. The sponsors hope to use the survey results, which won't be collected for several months, to develop more effective recruiting and marketing appeals. LEXINGTON City Seeks to Jump on Convention Expansion Bandwagon MAYOR Pam Miller is pushing a plan to spend $45 million on renovating and expanding Lexington Center's convention facilities, Rupp Arena, shops and the Opera House. Amid signs that the city's convention business is slowing, Miller hopes to garner $30 from the state and fund the rest locally. Lexington officials would like to expand their facilities in order to keep pace with recent expansions in Louisville and Covington. A PricewaterhouseCoopers study from last year showed that the Center presently generates around $13.5 million a year in spending. The study warned that figure could fall to $9.4 million without expanding, while expansion held the potential to bring the amount as high as $25.8 million a year. Yet in a recent "study of studies" evaluating convention center expansion proposals in 30 cities, the Pioneer Institute of Boston found that consultants routinely overestimate potential increases in attendance, ignoring past performance and under-utililization of present space in the push for ever-larger projects. Over $5 billion is forecast to be spent in convention space expansion in the U.S. over the next three years. At the recent FFA convention in Louisville, which had over 40,000 attendees, convention space proved adequate for all but the keynote presentations. But participants found that amenities like adequate transportation and restaurants were lacking to serve such large numbers. Meanwhile, as the sheen is barely gone from Covington's new facility, Northern Kentucky tourism officials are lobbying legislators for a one percent increase in the area's hotel room tax in order to help pay for Cincinnati's proposed convention center expansion. Another concern in Lexington is the continued presence of the University of Kentucky basketball program at Rupp Arena. While the current lease only extends through 2004, both University president Charles Wethington and athletic director C.M. Newton have strongly endorsed the renovations. LOUISVILLE United Parcel Service Initial Public Offering a Huge Success UNITED Parcel Service (UPS), which has been a privately-held company for all 92 years it has been in operation, has made its first public stock offering -- and the issue has soared. The company offered 190 million Class B (voting) shares in early November at an initial price of $50 a share, but investors soon drove the price up to nearly $70 in early trading. The issue, which represented 10 percent of the company's ownership, means that the shipper now has a market value greater than that of General Motors or Merrill Lynch, and more than six times greater than rival Federal Express. UPS plans to utilize the $5 billion in capitalization to fund acquisitions to expand its burgeoning support services for on-line merchandise. STATE Overpayments Put Kentucky Medicaid Under Intensified Scrutiny SAPIENT Corporation's HealthWatch Technologies, hired by the Commonwealth to uncover and help recoup Medicaid overpayments, told a federal House Commerce Committee panel that it is seeking to collect over $14 million in overpayments to health care providers made during a three-year period from 1995 to 1998. Over $40 million in overpayments was identified, so the final total to be collected may be much higher. So far, only 25 cases totaling $1.5 million are being pursued criminally, as most of the overpayments are being termed legitimate billing mistakes. Meanwhile, new Health Services Cabinet Secretary Jimmy Helton is being asked to come up with a new plan to deal with Medicaid managed care, which serves 157,000 of the estimated 513,000 Medicaid recipients in the state through the only two established partnerships, in Lexington and Louisville. Officials have noted that managed care could save Kentucky's $2.5 billion Medicaid program up to $117 million annually, but legislators want billing and administrative problems solved first. LOUISVILLE Louisville Receives Five Downtown Housing Proposals FIVE development groups have submitted proposals for market-rate housing for a parcel adjacent to Waterfront Park and close to the new Slugger Field. The proposals had been sought nationwide by the City of Louisville and Mayor David Armstrong. The city will now select a preferred developer and begin negotiating a final agreement, perhaps by the end of January 2000. Mayor Armstrong has established a $3 million development loan pool to be matched by an equal amount from private lenders, to help finance the project. Projects range from 55 to 162 units and from $8.7 million to $33.5 million in estimated cost, including commercial space and parking. Submitting proposals were Bravura Corporation and Fleur de Lis Development LLC, both of Louisville; Cobalt Realty LLC also of Louisville in partnership with McCormack Baron of St. Louis; Dorian Development of Cincinnati and Mansur Real Estate Services of Indianapolis. In a related development, Mayor Armstrong also has announced that the city, through its housing authority, is seeking a $15 million grant from the Department of Housing and Urban Development to rebuild decaying low-income neighborhoods around downtown. If the grant is approved, residents could begin applying for loans and mortgage assistance in January, 2000. The two plans -- to develop a mixed-income downtown housing core -- are consistent with others nationwide. Twenty-three such projects are in operation in 20 cities with 100 more in the planning stage. Louisville has its own mixed-income project at Park DuValle on Algonquin Parkway near Churchill Downs. LOUISVILLE GE Employees Approve Plan to Save 800 Jobs at Appliance Park UNION employees at General Electric Company's Appliance Park have voted by a wide margin to accept a negotiated compensation and investment plan that will preserve 800 jobs at the sprawling complex -- and perhaps maintain its entire remaining production for the foreseeable future. The complex in southern Jefferson County employs almost 7,000 persons, including 4,600 members for the Electronic Workers Union. About 90 percent of the eligible union workers voted in the ratification election, with the final vote counted as 3,055 for the plan and 1,199 opposed. The plan, announced just two weeks prior to the election, capped a year-long negotiating process that at one time threatened all major production lines at Appliance Park. Instead, management and the union agreed that 800 jobs on the refrigerator line would be saved -- although 400 would be eliminated -- and the company would make a $200 million investment in Appliance Park to accommodate new lines of energy-efficient appliances. Without worker approval, GE planned to move all 1,200 refrigerator jobs to a facility in Mexico. The original action was strictly economic, the company stressed repeatedly. Workers in Mexico earn about $2 an hour while union members at Appliance Park receive an average of $28 per hour in wages and benefits, the highest in the industry. One important concession made by the union, in addition to the surrendering of 400 production jobs, was the decision to accept quarterly lump-sum bonuses instead of percentage raises in base pay, an accounting procedure that will save GE almost $60 million a year because future retirement benefits are predicated upon base pay. LOUISVILLE Three Louisville Entities Included in Inc.'s 500 Fastest Growing Companies THREE Louisville metropolitan companies, one since acquired by a Canadian rival, have been included by Inc. magazine among the 500 fastest-growing companies in the U.S. Accent Marketing Services Inc., which has just been purchased by Maxxcom Inc., APB Energy Inc. and Axxis Inc. have all made the list of companies whose average five-year growth is more than 1700 percent. Both Accent and Axxis are repeaters from the 1998 list, a rare feat. Accent, with 1000 employees in eight locations nationwide, handles warranty and customer service calls for major manufacturers and retailers. Its new parent is itself a division of MDC Corp., which is traded publicly on the Nasdaq exchange. APB Energy brokers natural gas and electricity in a deregulated environment. It now has 100 employees and more than $12 million in sales since its founding in 1993. Axxis, with 140 employees in three locations, designs and stages shows for conventions and major business events. Its sales have grown from $1 million in 1994 to $18 million last year. LEXINGTON November Breeding Stock Sale Records Highest Dollar Volume Ever WHEN the final gavel fell, Keeneland's 13-day November Breeding Stock Sale stood as the highest dollar volume thoroughbred auction in history. Gross sales totaled $317,666,000, topping the previous industry record of $264,657,770 set during last year's November sale. The total number of horses sold- 3,461- bested the previous record of 3,379 sold a year ago in November. The average price, $91,784, increased 17 percent from $78,234 last year but fell slightly short of the sale record, $96,605, for 1,881 horses sold during the 1983 breeding stock sale. Several major dispersals got the sale off to a strong start. Wycombe House Stud sold 22 horses for $12,262,000, an average of $557,364; Robert H. and Bea Roberts sold 185 horses for $12,225,000, an average of $66,081; Silverleaf Farm sold 52 horses for $10,583,000 for an average of $203,519 and the estate of Paul Mellon sold 11 horses for $4,884,000, an average of $444,000. The top price of Friday's final session was $37,000 paid by John D. Murphy, Sr. for a weanling colt by Pioneering out of Stay With Bruce. Dixiana Farm, Inc., as agent, sold the weanling. Keeneland sold 186 horses during the final session for $1,585,400. LOUISVILLE Meeker Seeks Global Franchise for Churchill and Thoroughbred Racing CHURCHILL Downs, no longer merely one thoroughbred racetrack with one famous day of racing, is developing a global franchise for itself and the sport, its president, Tom Meeker, told business students at the University of Louisville. Meeker, who has overseen the transformation of the track, was granted the John W. Galbreath Award for outstanding success in the equine industry. During his 15 years at Churchill Downs, the track developed its simulcasting and intertrack wagering systems, opened the Sports Spectrum centers, purchased regional tracks, marketed the Kentucky Derby and Triple Crown races as international events, developed the Television Games Network (TVG) of interactive thoroughbred horse racing and became a public holding company. "We want to become the provider of choice for all broadcast and cable-cast horse racing," Meeker said, stressing that his company "will be in terrific position" to secure a significant share of the $100-billion-a-year international market for horse racing and pari-mutuel wagering. Business Briefs A Compilation of Statewide Business and Economic News STATE The Bluegrass State Skills Corporation approved over $721,000 worth of funding for 29 worker training projects across the Commonwealth. Over 2,300 workers will receive entry level, skills upgrade or related skills training at collaborating technical and community colleges and training centers. Four business leaders received the Governor's Economic Development Leadership Award in early November: Bruce Brooks of Frankfort, Executive Vice President and Chief Lending Officer of Farmer's Bank and Capital Trust; Rev. John E. Chowning of Campbellsville, a catalyst in implementing initiatives in his home region after layoffs in the textile industry; Cornelius A. Martin of Bowling Green, president and CEO of Martin Management Group and a longstanding leader in the African-American community; James R. Pritchard of Elizabethtown, retired U.S. Army colonel and town mayor, who has been instrumental in recruitment efforts and community service for three decades. Officials from 21 states recently attended a Commercial Vehicle Information Systems Network Conference in Lexington, where they learned that Kentucky is one of the leaders in the use of technology to enhance driver safety. Since 1996, when Kentucky Vehicle Regulation became one of seven pilot agencies nationwide to develop technology in this area, commercial vehicle fatalities have decreased 42 percent. The innovations have included electronic registration and permitting, electronic inspection and clearance of vehicles and safety warning and monitoring systems. The Federal Communications Commission will distribute $225 million to seven largely rural states to support rural phone service. Kentucky will receive $18 million annually under the plan, but the Kentucky PSC has yet to determine how it will be used. Until recently, only small phone companies were eligible for money from the FCC's universal service fund, but now those funds are available to large corporations to offset their rural service costs as well. As of the first of November, the switch to the 270 area code became mandatory in western Kentucky. Callers who still dial 502 will get a recording and a charge for a wrong number. The change affected 345 different phone exchanges. Uncertain callers can access all relevant information, including all the affected exchanges, at Bellsouth's website: www.bellsouth.com/areacode. Fifth Third Bancorp completed its purchase of CNB and its subsidiary, Civitas Bank, making Fifth Third the third largest bank in Indiana. CNB had $7.9 billion in assets. Louisville lenders Banker Financial Group and Mortgage Company of Kentucky have merged to create Kentucky's largest privately held commercial mortgage banking firm, with more than $600 million in assets. The merged firm has a Lexington office, and will likely open an office in Northern Kentucky in the near future. Cleveland-based American Greetings is buying Cincinnati-based Gibson Greetings for $162 million. American Greetings has a plant in Corbin that employs 950 and another in Bardstown with 850 workers. Site Selection magazine says Kentucky has the 11th-best business climate in the United States. Ten Southeastern states ranked in the top 25, including No. 1 North Carolina, making the region a hot corporate destination for plants and office complexes. The Cabinet for Workforce Development has awarded $900,000 in the form of 12 School-To-Work Grants to be utilized by counties throughout the state. The 5-year-old KERA-implemented program brings middle school and high school students into contact with various businesses and career options through activities like career days, workplace visits, work-site training and career-related courses. ASHLAND Revenue from Ashland's new 1.5 percent payroll tax will probably far exceed the city's initial estimate of $2.6 million, based on early receipts from only half of the businesses slated to pay. Present revenue estimates now range from $4 million to $5 million. Possible uses for the money are city pension fund debt reduction and a road paving and improvement program, among others to be eventually considered and acted upon by the city commission. BARDSTOWN After over $1 million in rehabilitation costs, the Old Talbott Tavern has reopened. The building was destroyed by fire in March 1998, but now reclaims its post as the focal point of local tourism. CARLISLE Jockey International will close its sewing plant in Carlisle at the end of the year, citing competitive pressures and cheaper foreign labor. The shutdown will affect 300 to 350 employees. CROMWELL Perdue Farms employees recently celebrated 1 million hours -- or 30 million chickens processed -- without a lost-time accident. The company employs about 800 people at its plants in Cromwell and Livermore. Poultry sales currently make up about 17 percent of Kentucky's agriculture sales, and the industry employs 6,000 people statewide. CYNHIANA Concept Packaging Group became the first facilities supplier to receive the Value Improvement Award from Toyota for its five years of continuous cost reduction efforts. Concept designs and manufactures a variety of containers for the service parts Toyota ships to its distribution centers. ELIZABETHTOWN Hardin Memorial Hospital is looking to fill two vacancies in its young open-heart surgery program, begun in 1997, after the resignation of the program's founder, Dr. William DeVries. His former partner in the effort, Dr. Dennis Vaughan, left late last year, after Hardin County's fiscal court, which also acts as the hospital board, dissolved DeVries' contract as medical director of the program. At the time, DeVries cited political motivations to his removal, though he continued to practice surgery at the hospital. FRANKFORT Franklin Fiscal Court approved the first of many $30,000 monthly payments to help cover a bond issue for Webster Heating and Specialty Products. The $3.2 million bond issue was passed in 1991. County officials have set aside $270,000 in the current budget to make payments through the end of the fiscal year on behalf of the financially troubled company. FRANKLIN Danafilms, Inc. of Westborough, Massachusetts will build an $11 million manufacturing facility to produce polythylene films, supplying major manufacturers in the packaging, tape and medical industries. Danafilms is the first company to locate in the new 100-acre Franklin-Simpson Industrial Park. The plant will employ 20 people initially. GLASGOW Officials broke ground on the $9 million South Regional Postsecondary Education Center, a collaboration between Western Kentucky University and the Kentucky Community and Technical College System. The center is the first of five centers authorized by the General Assembly, and is expected to open in the fall of 2001. GEORGETOWN Aichi USA, a Delaware-based subsidiary of Japan-based Aichi Steel Corp., will buy Louisville Forge and Gear Works for an undisclosed amount. HAZARD A federal court in West Virginia ruled that dumping mine waste into streams violates the Clean Water Act. The decision by U.S. District Judge Charles Haden II was met with criticism by Kentucky coal mining officials. Officials with the U.S. Office of Surface Mining, United Mine Workers of America and local government all expressed concern that the ruling could seriously impact or even halt strip mining and mountaintop removal operations in the area. HOPKINSVILLE Dana Corporation won three quality awards from the Commonwealth, and its plant in Hopkinsville won the Governor's Gold Quality Award, the state's highest honor, at presentation ceremonies in Lexington. Dana operates nine plants in Kentucky. JACKSON Under a provision of a bill signed into law in late October, the U.S. Department of Defense will spend $10 million on new security locks manufactured at Appalachian Regional Manufacturing (ARM) in Jackson and at Tri-County Assembly in Williamsburg. ARM president Linda McGinnis, whose facility employs over 100 people, welcomed the news. "Representatives Bunning and Rogers have done their part in helping to keep jobs in an area that desperately needs it," she said. LEXINGTON Prices for the Fasig-Tipton fall yearling two-day sale, were up 20 percent over last year. Gross sales were $5,724,800 for 431 yearlings, up 22 percent over last year. Hilliard Lyons has teamed with PNC Advisors -- the $68 billion wealth management arm of PNC Bank Corporation -- to open a joint office in the Market Square building in downtown Lexington. A total of 26 Hilliard Lyons consultants and brokers will work alongside six PNC Advisors to offer a broad range of financial products and services in what PNC Regional President Michael N. Harreld calls "a holistic approach to our clients' financial needs." Imperial Paging, owned by Frank and Chiquita Hall, was named 1999 Minority Business of the Year by the Greater Lexington Chamber of Commerce. In addition to pagers, the firm has added cellular phones, and is looking into entering the day-care business. LONDON It will be early 2000 before a revised evaluation is completed concerning the proposed I-66 corridor through Laurel and Pulaski counties, according to deputy state highway engineer for planning and program management Mike Hancock. Among topics to be looked at in more detail are the impacts on the Daniel Boone National Forest and on the karst topography and underground aquifers running beneath the proposed route. MAYFIELD A renaissance of building activity is occurring in Mayfield. A new YMCA recently opened its doors. The 35-year-old Mayfield Shopping Plaza is attracting new tenants as it undergoes $500,000 worth of renovations. And the Fuller Community Facilities Corporation has $4 million worth of plans in the works for the former Mayfield Community Hospital, including an adult day-care facility and 40 independent-living apartments, hospice and home health care services and the Grace Medical Clinic. NORTHERN KENTUCKY Cincinnati/Northern Kentucky International Airport officials expect to spend about $10 million to sound-insulate 300 houses within flight paths in an effort to update the airport's noise plan. The airport will also buy and demolish about 50 houses to make way for a proposed north-south runway. The airport board will consider the plan in February, and the FAA must also approve it before federal monies could be spent. Because of a change in corporate strategy, GE Capital Information Technology Solutions has outsourced 294 of the planned 819 jobs to have been part of its new headquarters planned for this area. The previous number of jobs would have brought the company $19.1 million in state tax incentives. Now the total tax break is $15.25 million, and all the jobs, outsourced and otherwise, will remain in Northern Kentucky. Average salary is expected to be over $50,000 for the GE jobs. OWENSBORO According to Sales & Marketing magazine's Survey of Buying Power, retail sales in Owensboro topped the $1 billion mark for the first time in 1998. The numbers also show that sales have grown faster there than in Bowling Green and Evansville, Indiana, though those two cities' sales totals are higher. Owensboro-Daviess County Regional Airport needs a lot more boardings in order to hit the benchmark of 10,000 and qualify for $500,000 in federal entitlement funds. Officials are even giving away free meals at a local restaurant to boost airport use, primarily of Northwest Airlink and MidAmerica Jet flights. PADUCAH As Kentucky's $125 million share of the $328 million tobacco portion of the federal farm relief bill is distributed, you won't find dark-fired tobacco farmers on the list. While quotas for burley were cut by nearly 29 percent and flue-cured by 15 percent, the smokeless variety has experienced a relatively painless five percent cut in its quotas. Most of the nation's dark-fired tobacco is grown in western Kentucky and Tennessee, with about 300 producers in Kentucky growing it exclusively. PIKEVILLE Pike and Floyd counties are in the preliminary stages of collaborating on a regional industrial park in northern Pike county. Officials hope to garner funding through an economic development grant and through coal severance tax money. There is also the possibility of involving two more counties in the project. SALYERSVILLE The U.S. House of Representatives approved a plan sponsored by Representative Hal Rogers that will provide $250,000 for a tourist information and visitor center at a pioneer village now under construction in Magoffin County. SOMERSET Tecumseh Products, a manufacturer of engines and compressors, will shut down a production line on Dec. 27, eliminating 430 jobs. The plant, which until now has employed more than 1,000 people, has been located in Pulaski County for 20 years. WEST LIBERTY Lion Apparel has intermittently laid off workers in recent weeks because of a slowdown in orders for firefighter turnout gear. Plant manager Dorothy Adams said the slowdown is expected to continue until new national safety standards are issued after the first of the year. 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