Accountable USA - Kentucky

Good Jobs First director Greg LeRoy long referred to Kentucky as “the black hole of economic development” for its unabashed appetite for other states' jobs. The state began providing big subsidy packages with its $147 million deal for Toyota in 1985, and its Rural Economic Development Act was an early lure designed for interstate job piracy. 

A quarter-century later, the state is still giving subsidies to automakers, but a domestic company has been a major recipient. In 2008 Ford Motor got a $180 million tax credit deal for its two plants in Louisville (see below). Another big beneficiary of the state’s largesse is UPS, which has received tens of millions of dollars in subsidies for the expansion of its giant package sorting hub in Louisville (see below).

In June 2009, Gov. Steve Beshear signed legislation which consolidated four existing subsidies into the Kentucky Business Investment (KBI) program: the Kentucky Rural Economic Development Act, Kentucky Industrial Development Act, Kentucky Jobs Development Act, and the Kentucky Economic Opportunity Zone Act.

The Mountain Association for Community and Economic Development (MACED), a tax and budget watchdog group, has long pushed for the state to provide a more comprehensive analysis of its economic development spending. While waiting for that to happen, the group has produced its own unified development budget.  Although the state does not report company-specific tax credits claimed, it does estimate revenue lost to an exemption for coal used in electricity production and from a similar exemption for industrial machinery.

In the 2010 legislative session several bills were introduced that would have improved the accountability of the state’s economic development efforts. These initiatives were unsuccessful, but the state already had a good transparency system for some of its major subsidy programs. The Kentucky Financial Incentives Project Database, created in 2008, discloses recipient name, cost, and estimated jobs and wages for two of the five major subsidy programs we track. Outcome data is available for Kentucky Business Investment.

 

Click on the links below for the latest data on Kentucky:

 

    Corporate Misconduct in Kentucky:

            Results page for Kentucky in Violation Tracker

    Subsidy Deals in Kentucky:

            Results page for Kentucky in Subsidy Tracker

    Tax Revenue Lost by Kentucky Governments to Subsidy Programs:

            Results page for Kentucky in Tax Break Tracker (available soon)

    Mega-deals in Kentucky:

            Spreadsheet of subsidy deals over $50 million (can be filtered by state)

    Institutional Schematic for Enforcing Disclosure in Kentucky:

            Kentucky GASB-77 Roadmap

    Exemplary Journalism on Economic Development Incentives in Kentucky:

            (available soon)

 

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Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Bluegrass State Skills Corporation Grant-in-Aid Program

two-part program offering grants and corporate income tax credits to compensate companies for training their new and existing employees

$4.3 million (CY2012)
48/100
56/100
63/100

Coal Used in the Manufacture of Electricity

sales and use tax exemption on the purchase of coal used to manufacture electricity

$75.4 million (FY2013)
0/100
10/100
18/100

Kentucky Business Investment (KBI) Program

corporate income tax credits and “wage assessments” (subsidies drawn from employee wages) for firms which meet job creation, wage, benefit, and investment requirements; enacted in 2009 to replace and consolidate four earlier programs

$296.9 million (CY2012)
77/100
93/100
77/100

Kentucky Enterprise Initiative Act

sales and use tax refund on qualified expenditures for firms which meet investment requirements (higher incentives available if located in an enterprise zone)

$18.1 million (FY2013)
52/100
10/100
38/100

Machinery for New and Expanded Industry and Certain Industrial Machinery

sales and use tax exemption for machinery used in manufacturing or processing

$61.6 million (FY2013)
0/100
10/100
28/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Ford Motor (2007 and 2008)

In October 2008 Ford received approval from the Kentucky Economic Development Finance Authority for some $180 million in corporate income tax rebates. The deal was designed to support the retooling of the automaker’s two Louisville plants to produce both small cars and sport utility vehicles. Gov. Steve Beshear put out a statement claiming that the tax breaks would protect the jobs of more than 5,000 Ford employees and thousands more at its suppliers. The new tax package was a revision of a $60 million deal the state had given to Ford in November 2007. Despite the subsidies, Ford continued to reduce the numbers of hourly workers at the plants through buyouts.  While getting tax reductions from the state, Ford was sought a reduction in the property tax assessment for one of the Louisville plants. It eventually won a change that allowed it to reduce its tax payment by nearly $1 million.

In December 2010 Ford announced plans for a $500 million overhaul of the Louisville facility, saying that it would add 1,000 jobs and become one of the most technologically advanced auto plants in the country. (Key sources)

UPS (1998 and 2006)

In 1998 UPS was awarded $35 million in Jobs Development Act tax credits for an expansion of Worldport, its overnight package-sorting hub in Louisville. The subsidies were modest for a project costing $1.1 billion. In 2006 history repeated itself as UPS qualified for another $31 million in those credits with another billion-dollar expansion of the facility, projected to add 5,000 new jobs. The deal was also expected to qualify for $20 million in sales tax rebates on construction materials. The company later negotiated to locate the new facility in an industrial park within a tax increment financing district known as the Renaissance Zone. UPS agreed to have the construction work done under a project labor agreement and its hourly workers are Teamsters. The expanded Worldport was completed in 2010.  (Key sources)

Walmart in Kentucky

  • At least 2 Wal-Mart locations have received subsidies worth about $28.3 million in Kentucky.
  • At least 4 Wal-Mart locations in Kentucky have challenged their property tax assessment, recouping about $344,000.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. Kentucky is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.

For more information, see the Kentucky page of Wal-Mart Subsidy Watch.