Confronted with the unexpected loss of 1,400 high-paying industrial jobs, the Louisville metropolitan area is organizing public and private resources to attract comparable new employment, recycle the existing site and provide opportunities for the affected workers.

This focused coordination of resources has earned the community the national designation as a "Rust Belt Rebounder." And, it has already demonstrated startling results -- two major employment announcements that combined triple the number of manufacturing jobs lost -- all within two months.

Events were triggered when Philip Morris, once one of Louisville’s largest employers, announced February 24 that it would be closing its West End cigarette manufacturing facility on December 31, 2000. The company also told state and local officials at subsequent meetings that the decision is irrevocable, although Philip Morris would consider public proposals for the plant. The city of Louisville already has a plan in place utilizing its enterprise zone tax incentives and its success in re-using other industrial "brownfields."

The announcement means that the remaining 1,400 employees -- the company had 4,000 local employees as recently as 1980 -- would lose their jobs. Governments would lose the resulting tax revenues and the community would lose the company’s strong support for the arts and social programs.

The losses are significant. The average affected wage is $21.50 an hour for a $62 million payroll. That, in turn, generates $1.4 million yearly in local occupation taxes shared by the City of Louisville and Jefferson County and $3.3 million in Kentucky personal income taxes. Finally, Philip Morris, a mainstay of employment in Louisville’s West End, contributes $500,000 annually to such organizations as the United Way, the Fund for the Arts and the Urban League.

Just one week before the Philip Morris announcement, the U.S. Census Bureau released a report identifying the Louisville area as the fourth most successful "Rust Belt Rebounder" among 11 north-central cities. The report cited significant increases in metropolitan area population, job growth, business start-ups and real income since 1990, following a decade of decline.

Greater Louisville, Inc., the private employer organization contracted by the city and county to lead the job development effort, hailed the report as evidence the "public-private partnership is working," despite the Philip Morris announcement. "In the past 10 years, we’ve gone from chasing work to chasing workers," a Greater Louisville, Inc. spokesperson told the Louisville Courier-Journal.

In fact, within a month of the Philip Morris announcement, the community was able to report that two major employment expansions will triple the cigarette manufacturing jobs lost, before they are even terminated.

Ford Motor Company will add 1,100 workers to its Louisville Truck Plant to build the new Excursion sport-utility vehicle. And Sykes Health Plan Services, a relative newcomer, will build a new corporate headquarters and campus in the burgeoning Eastpoint Business Center, adding 2,900 employees to the 700 already in the area.

The Sykes facility, actively pursued by Greater Louisville, Inc., will eventually produce a $92 million payroll because the company employs many nurses and physicians. That payroll will more than compensate for the loss of the Philip Morris tax revenues.

Despite the happy coincidence of Ford’s decision and the high-profile success of the Sykes expansion, local development officials are cautiously advocating strategies to attract and encourage smaller employers, through infrastructure and education, tax incentives and the recycling of vacated sites, including, perhaps, the Philip Morris plant.

This strategy of building solidly upon a few major successes is what state economists call "the Toyota effect," referring to the related economic activity generated by the huge manufacturing plant in Georgetown.

In an interview with The Lane Report one year ago, Gene Strong, secretary for the Cabinet for Economic Development, said that tax and workforce incentives used to attract the plant, controversial at the time, have since generated a "total economic output" of 125 support facilities throughout the state that employ 30,000 persons and produce two percent of the state’s gross domestic product.

That analysis is confirmed in "The Leadership Challenge Ahead," a report prepared by the Long-Term Policy Research Center, a think-tank established by the legislature to change the way governments gather information to make decisions.

The Center reported that smaller employers, those with 100 or fewer employees, account for "all" of Kentucky’s recent job growth, a total of 135,000 jobs in a six-year period. Major employers, on the other hand, eliminate as many jobs as they create and represent a "zero percent" growth rate.

Michael T. Childress, executive director of the Center, ironically speaking at the University of Louisville on the same day as the Philip Morris announcement, urged local officials to seek control of the to-be-vacated plant and incorporate it into a program of site recycling and "organic" job growth. "It’s a well maintained site," Childress said. "It ought to be very marketable."

Although it has been most recently identified with the Sykes expansion, Greater Louisville, Inc. also supports the brownfields recycling program. "It doesn’t make sense to keep building new facilities farther and farther away from the city when we have good sites available here," said Mike Bosc, the vice president of community relations for Greater Louisville, Inc. Bosc also stressed that the area’s major industrial parks, Bluegrass in Jeffersontown, Eastpoint in Anchorage and the Riverport in southeastern Louisville -- are all reaching capacity and few large-scale alternatives exist.

So, what are the incentives available to businesses in the enterprise zone and what exactly is a brownfield?

The enterprise zone, which overlaps with most of the Louisville city limits, allows local and state tax abatements for "certified" businesses that hire a significant portion of their workforce from the residents of the zone itself.

Qualifying businesses receive exemption from state sales taxes for purchases of new and used equipment and machinery, motor vehicles for business uses, building materials for rehabilitation or new construction and state income tax credits for hiring the unemployed or those receiving public assistance. Furthermore, older companies benefit from a five-year moratorium on increased property taxes for rehabilitated structures and five-year exemption from city ad valorem taxes for new manufacturing facilities.

Three recently reported projects take advantage of these incentives. Eckhart Aluminum, a German-owned company that occupies the former Reynolds Metal facility in south Louisville, is beginning a $20 million expansion that will eventually create a few new jobs but more importantly will support the company’s continued operations in the area. It employs almost 1,000 persons at three facilities.

Nationwide Life Insurance Company will build a 300,000-square-foot building in the College Industrial Park adjacent to the University of Louisville for unspecified use. And AAF International, which will move its headquarters from its present location to a new campus in eastern Jefferson County, will sell the site along Central Avenue and Churchill Downs to a private developer with plans for a hotel and retail plaza.

All three occupy sites that once were brownfields.

According to the Office of Health and Environment, which supports the Louisville Development Authority, a brownfield is an "abandoned, idled or under-utilized industrial or commercial facility where expansion or redevelopment is complicated by real or perceived environmental contamination." There are approximately 80 such sites in Louisville, containing about 430 acres, not including the potential Philip Morris plant. Few are larger than 10 acres. Exact data is difficult to calculate, because the city has no confirmation or power over privately-held commercial property, except for non-payment of taxes," explained Bruce Traughber, executive director of the Development Authority.

"Many of these can go along for years unused and unusable because the owners won’t sell," Traughber said.

Nevertheless, new mayor David Armstrong has established a goal that Louisville will "identify, select, acquire, market and sell" these sites "at relatively little cost" to the city, Traughber continued, adding that one major obstacle is that certain sites are so degraded that no acquiring company can accept the on-going environmental liability without a waiver of responsibility from the selling company. And few selling companies are willing to accept such liability themselves. Consequently, some sites can only be acquired by public agencies, immune to liability claims.

In spite of liability issues, Louisville has had three such successes in the past year. Slugger Field is being built to incorporate the former Brinly-Hardy warehouses, which date from the Civil War; The Home of the Innocents will build its new campus upon the former Bourbon Stock Yards; and Papa John’s Cardinal Stadium straddles the CSX rail yard, "maybe the most degraded site in the country," according to Traughber.

One brownfield that apparently won’t be marketed is Bowman Field, the city’s general aviation airport. Despite a study by the Aviation Authority proposing a 60-acre industrial park, Mayor Armstrong told The Lane Report he saw no need for future commercial development at the airport while other sites are available.

And the future for the Philip Morris plant? It contains five major buildings on a 36-acre site that is "pretty clean" for an industrial property, according to Traughber. It has a recorded tax value of $8.5 million, after depreciation, but it may be too specialized in its present state. "Who is going to want a four-story factory?" Traughber asked.

And, of course, the plant still belongs to Philip Morris, and will until December 31 2000, or longer. Traughber estimated that any transfer to the city could not take place before mid-2001, two years from now. But, to his knowledge, no one is discussing any such plans until the company announces how it will compensate the 1,400 employees who will lose their jobs.

Although Mayor Armstrong stressed that Philip Morris officials told him severance benefits would be "very generous," none have been reported, and it is very unlikely any of the Philip Morris employees will find comparable work at the Ford Truck Plant or with Sykes Health Plan Services at its Eastpoint Campus. Those positions will be filled before the Philip Morris positions terminate. But the plant will remain as a opportunity for someone. "Together, we will solve the problem," Mayor Armstrong promised. Spoken like a "Rust Belt Rebounder."