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COVER
STORY - June
2001 by Adam Bruns No Turning Back
Any community has a point of critical mass, and East Kentucky Corporation executive director Thomas D. Jones says many of our towns are approaching it. “Small communities with post offices and not a whole lot else are really starting to hurt,” he says. “Once you lose enough, you can’t sustain the corner grocery store, the general store, the hardware store, and you start to lose the fabric of these counties.” Except for Appalachia, the Southeast as a whole looks as healthy as the West Coast in terms of attracting people, with robust growth emanating from Atlanta and Charlotte, and Florida still gaining on everybody. What’s more, the metro areas of Cincinnati, Louisville, Nashville and Knoxville all ranked high in last year’s Places Rated Almanac, which appraises quality of life based on criteria like education, job outlook, transportation and cost of living. It’s just that pocket of mountains and the small towns below that shifting threshold that keep on losing. Glasser points out a study by the Census of the Retail Trade which indicated that between 1977 and 1997, the number of grocery stores in the nation fell by 61.2 percent, men’s stores by 46.6 percent and hardware stores by 40.6 percent. So is the dearth of real main streets a problem for Kentucky’s economy? Have the places losing people lost too much to regain? Or will the tremendous growth of other areas of the state be more than enough to offset – and maybe even help out – the stragglers? Asked about where the leavers are going, Jack Couch, executive director for the Kentucky Council of Area Development Districts in Frankfort, says, “Some are relocating to areas in both Kentucky and Tennessee with improved employment opportunities, while those retiring are moving to Tennessee and Florida.” A look at Tennessee’s Census 2000 figures confirms the suspicion. The state as a whole grew by 16.7 percent, and a town like Clarksville – positioned so close to the border that it’s practically considered part of the same metro area as Hopkinsville – has grown by 37 percent. It comes as no surprise that as recently as 1997, over $100 million was spent there on construction. Appalachian
exodus Where there isn’t population loss, there’s job loss: Seven of the top 10 counties in unemployment in March project like a spike from Breathitt County all the way up through Lewis County on the Ohio border. However, there are hopeful signs that a more entrepreneurial outlook is taking root wherever the topography of old habits permits. The rising number of permits for natural gas and oil drilling in the region, combined with the Presidentially-backed push for a renewed appreciation for coal, might just mean a turnaround is in the offing. Even so, the most distressing of all the statistics is not just the scarcity of people, but the scarce resources of those that remain. The most recent poverty numbers from the Kentucky State Data Center, based on 1997 information, show that while Kentucky moved from the 6th to the 9th poorest state since 1989, 23.1 percent of Kentucky children under 18 years old live below the poverty threshold. Plotted on a map, four of the five poorest counties (Owsley, Wolfe, Lee and Clay, from poorest to least poor) are not only contiguous to one another, but form a crescent of poverty that embraces the zone of population loss in Appalachia. But contrary to general perception, new plants are still opening in the region. In Hazard, DJ Inc./NYPRO Joint Ventures has opened a plastic injection molding plant that will eventually employ 75 people in its contract manufacturing operation. DJ had already located a 77-employee facility in Hazard in 1997, as well as operating a plant in Louisville that employs 400. The firm merged with Nypro in 1997. The initial Hazard operation has enjoyed 42 percent growth in sales and 21 percent growth in employment over the past three years.
“There is a fairly thriving coal business in Knott County right now, “ says Paul Hall, executive director of the Kentucky River Area Development District, which includes Breathitt, Knott, Lee, Leslie, Letcher, Owsley, Perry and Wolfe counties, “and others are coming back. The coal business in the last six months has grown by leaps and bounds, but it’s cyclical – always has been and always will be. Fifteen years ago, people saw the industry declining and declining, so consequently we don’t have trained skilled workers – the average age of coal miners is probably in the forties.” Might the current boom bring people back in a highly competitive job market? “It very well could draw people back from out west,” says Hall. “In 1974 I was working in the coal business, and we recruited people from all over. We’re probably drawing some back that have been in the Golden Triangle, particularly in construction work.” As for the touted “clean coal” operations, Hall welcomes new projects like the permitted application from Lexington-based Enviropower to build a facility in Knott County. “That would be a godsend,” says Hall. “It would accomplish several things: clean up undesirable waste areas, provide some economic windfall for the area, and provide a much-needed source of electricity.” When state leaders speak of severing their ties from that old economy, coal severance funds play a major role, emanating from the Office of Coal County Development created in 1997 by Gov. Patton. Regional business parks backed by around $75 million of those funds have begun to take hold in an effort to reach the goal of having a park within 50 miles of every citizen of a coal county. The projects include sites like Coalfields, Southeast Kentucky and EastPark, while several others are still getting infrastructure into place.
“Our agency is working with business parks in Perry, Wolfe, and Letcher Counties,” says Paul Hall, adding that the latest arrival was actually a transplant from the growth area of Winchester – Kentucky Steel Truss Buildings. According to a recent video both written and produced by Gov. Patton, “Eastern Kentucky: The New Appalachia,” 67,000 adults living in Kentucky’s Appalachian area are either unemployed or underemployed. Copies of the tape were recently sent out to 350 Fortune 500 companies and 25 call center companies – a business sector that has found Kentucky an ideal place to locate in recent years.
“We’ve had about 6,500 jobs created in the 43 counties we cover that have been related to back office and call center kinds of activities,” he reports, “but they cannot sustain the area. For some, they do become a career, but that’s certainly the vast minority.” Jones points out that call centers were an especially good match for the welfare-to-work transition period. Such an established core of centers may also lead to the attraction of higher-level information technology businesses, including inbound customer service and help centers. “With the various regional industrial parks, we’ve also had around 24 small manufacturers equating to about 4,000 jobs,” says Jones. “This is everything from secondary wood products to metalworking to fabricated plastics. When those types of jobs open up, we do get some returning sons and daughters.” “In the past, we had a high unemployment rate,” says Jones, “but when companies came that were legitimately interested, we were not ready to capture those opportunities. We didn’t have water and sewage capacity, existing buildings, etc. Now we have developed the sites. Now we’re poised to capture those opportunities.” Passing
through The Far West has also seen a loss, but it’s not yet down for the count. Hickman and Fulton Counties have both lost people, and Purchase Area Development District executive director Henry Hodges says it’s because of two things: agriculture trends and cheap foreign labor. “Those two factors would be responsible for a significant portion of the population loss,” he says. West Kentucky Corporation recently completed analysis of trends in its 44-county area, and executive director Steve Zea says that the Purchase area is the only one in a situation that demands immediate attention. “If you look at all the areas, they’ve had some ups and downs, but they concluded the 1990s better than they started the decade,” he says. “But in the Purchase area, that is not the case.” Zea points out that the Purchase area is fourth-highest in both college-level education attainment and per capita income, but hasn’t seen concomitant growth in property tax assessments, payrolls, jobs, or establishment of businesses. And he says other states may have something to do with that. “There are some differences in the tax structures that make it profitable for an individual to work and shop in Kentucky but live in Tennessee,” he says. He also indicates that while sales taxes are lower in Kentucky, the proximity of towns like Murray and Hopkinsville to Tennessee (approximately eight miles) makes it convenient to be a straddler and reap the benefits of both states. Zea and area officials have some ideas to combat the losses. “This area has just recently created a marketing group called Center Point,” he announces. “Part of their strategy is to market directly to site consultants, and to selected markets in industry clusters, through mass mail campaigns and trade shows. We’re targeting plastics, automotive and river-related industries, as well as telecommunications and other value-added companies like insurance companies. There are not less than five spec buildings going up in the area, and the region also has under consideration a 3,500-acre regional industrial park.”
“They’re trying to do something about what’s happened to them in the past decade,” he says. “A lot of the things that have happened were not caused by adverse activity in this region, but created by external business factors like industry consolidation. We have a lot of skilled labor, and a great location – between Nashville, St. Louis, Indianapolis and Memphis, about six hours from Chicago.” In fact, the seemingly trivial fact that the area’s sports fans are almost all both St. Louis Cardinal followers and Tennessee Titans boosters speaks to the length and breadth of Kentucky, and the diversity and interdependence that each of its regions has to deal with on its own terms. “We’re in a different economic market,” says Zea. “We don’t get really excited about new flights in Louisville or Northern Kentucky. We get excited about new air service in Paducah, St. Louis, Memphis or Nashville. What I’m saying is that’s the business pattern we’re in – when companies in this region look for technical support, it’s from Nashville or St. Louis.” But without the support of a populace, Henry Hodges says that point of critical mass may soon be faced by some western communities too. “With some of the small governments, it is difficult if you continue to lose people, and continue to lose businesses, to have a tax base sufficient to meet the bare standards,” he says. There’s every possibility that the appearance of population loss may be nothing more than a typical American population shift. Again paralleling the Great Plains region, the “losing” areas of Kentucky are also realizing some gain from non-resident citizens, both tourists and second-home owners. Vacation and second homes were just part of an 18 percent rise in housing between 1990 and 2000, five percent above the national rate of 13 percent. That same difference separated the state’s higher rate of owner occupancy of homes from that of the U.S. as a whole: 71 percent versus 66 percent. “We have seen some of that retiree or second home trend,” says Paul Hall. But he adds that the effect is dampened by the lack of adequate recreational and health care facilities to serve a retiree demographic. Tom Jones thinks that a closer look at the home and household numbers will lead Kentucky toward more definitive solutions. “When we had the last coal boom, it was at the same time that the baby boomers were forming those households,” he observes. “Now their children are leaving the nest because there aren’t enough jobs for those shadow boomers to stay.” The best hope, however, is that unlike the period after World War II, the out-migrators aren’t going quite as far away as Chicago or Detroit. They’re going instead to Northern Kentucky, Louisville, or thriving smaller towns like Glasgow. “We tend to see that they keep their eyes on what’s going on in the home community,” says Jones in expressing hope for the future of the shrunken town. “If an employment opportunity comes up consistent with their training and skills, they appear back home again. There’s a real tie there, particularly in these mountain counties. They’ll take that opportunity and be back here pretty quick.”
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Copyright 1996-2001, by Kentucky Business Online. All rights reserved. Editorial
content is copyright 2001, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
To many
observers, Kentucky’s leaking counties are just as
dire a problem as its leaking reservoirs in yet another
drought year. And all this while the state’s
population as a whole has grown by 10 percent to just
over four million. But it’s a pattern that repeats
itself on the national scale. As reporter Jeff Glasser
recently explained in U.S. News & World Report, the
nation as a whole grew by 13 percent, and the Great
Plains region, comprised of 10 states, grew by 10 percent
as well. But among the 334 counties in that Great Plains
region with fewer than 15,000 people, 228 of them –
nearly 70 percent – lost people since 1990.
Secretary of
Economic Development Gene Strong, interviewed earlier
this year, said that the parks are truly starting to get
the attention of a lot of businesses, adding that
“communities have a lot of flexibility in
negotiating with these companies. It’s a very good
program, which gives these communities an opportunity to
compete for more capital-intensive companies than they
have in the past. It’s fair to say that in Eastern
Kentucky, they’re going to be major players.”
But Tom Jones says
call centers, especially the outbound variety,
aren’t a long-term answer.
Of course, in
addition to those spec buildings are some quite useful
– and quite large – older buildings made
available by other companies’ departures. Most
encouraging of all, says Zea, is that the people still in
the area – following the successful example of
much-lauded Campbellsville to the east – aren’t
laying down in defeat.