Kentucky business leaders and policy makers see an improved economy in 2014. No one expects breakout improvement, even now more than five years after the Great Recession struck. But there are green shoots with clear potential for strong growth if they are sustained.
Increased tourism in 2013, with distinct links to the burgeoning Kentucky Bourbon Trail, is credited with sparking four hotel projects in the Louisville area. Although still significantly below “normal,” new housing starts increased more than 30 percent last year, generating early broad optimism not only in construction fields but among the makers and suppliers of all the products that households need.
The brightest area for Kentucky is auto manufacturing. The state is number three in U.S. vehicle production, and 2014 is expected to be at least the best for sales and production since 2007. The commonwealth has more than 450 manufacturing operations at all levels of the production process. All four finished product sites –Ford’s Louisville Assemby Plant and Kentucky Truck Plant in Louisville, GM’s Bowling Green Assembly Plant, and the sprawling Toyota Motor Manufacturing, Kentucky plant in Georgetown – all are in growth modes, building new or updated models.
Toyota is adding its first U.S. Lexus assembly operation to Georgetown, Ford is adding a newly unveiled Lincoln compact SUV at LAP, and the new seventh generation of the iconic Corvette is coming off the line in Bowling Green.
Agriculture had a record 2013 on the heels of a record 2012. It could be even better in 2014, but that depends on the weather.
Economic progress is uneven and remains slow overall. The state’s western coal field is expanding, but the in Eastern Kentucky it is contracting. Federal healthcare reform continues to be a source of uncertainty for business in general even though Kentucky state government’s rollout of the health insurance exchange has been one of the best in the nation. Health insurance rates are expected to get worse this year before they potentially get better, with business shifting more cost to employees, taking a bite out of their disposable income.
Government revenues are increasing slowly but are linked to employment, which is expected to end the year still under pre-recession levels.
“Louisville tourism set records in 2013 in the number of conventions hosted and tourists visiting our area. Overall, tourism realized a revenue growth of 5.5 percent year-over-year. Because of the growth in tourism, we have had four new hotel project announcements that will bring an additional 800 hotel rooms to Louisville. Plus, several additional hotel projects are in the works. We are forecasting growth of around 3 percent in 2014. The reopening of Kentucky Kingdom amusement park in May will provide an added bump in tourism.”
James T. Wood, FCDME; President & CEO
Louisville Convention & Visitors Bureau
“The merger of American Airlines and US Airway, will likely make the airline industry stronger and more stable. While the reduced number of airlines may affect competition and ticket prices, consolidation in recent years should lead to more efficient and consistent service for passengers. Blue Grass Airport will continue to work with airlines to encourage new routes or more frequency in the region. The new year will also provide a starting point for implementation of our master plan, ensuring that our airport provides the highest quality facilities and services.”
Eric J. Frankl, A.A.E.; Executive Director
Blue Grass Airport
“Recently released data and reports from tourism colleagues around Kentucky lead me to be optimistic about the business forecast for tourism growth in 2014. The U.S. Travel Association’s Travel Outlook Forum in October reported leading indicators point to a steady growth in both leisure and business travel this year. Every indication suggests interest in bourbon, adventure tourism, horses and family travel in general will continue strong growth in 2014, and Kentucky is ideally positioned to take advantage of these trends.”
Bob Stewart, Secretary
Tourism, Arts and Heritage Cabinet
“Kentucky did not suffer the speculation that plagued other regions, thus we should continue to see a steady rise in the commercial real estate sector. There is a trend toward ‘haves’ and ‘have nots’ in commercial real estate, with well-positioned properties distancing themselves from underperformers. On the financial side, it appears the Federal Reserve has done all it can to prop up the economy, and now government must balance its finances at national and local levels. Entrepreneurial spirit is very alive, but fear of the unknown in healthcare, government spending and regulation is what stalls most private investment now. Kentucky’s urban centers are giving great thought to how to succeed on a local level, thus we should see exciting news from them.”
Malcolm Bryant, CCIM; President
The Malcolm Bryant Corp.
“A sputtering economy burdened with increasing regulations and entitlements will continue to challenge small businesses in Kentucky and nationwide. This offers unlimited opportunity to organizations in the Bluegrass that can successfully adopt to the new economic normal: Customers want goods and services delivered immediately, with a quality standard approaching perfection, and as close to free as possible. In 2014 and over the next several years, Kentucky businesses that can successfully maintain or create a compelling value proposition for their customers or clients – letting their competitors race each other to the bottom – will emerge as the clear winners.”
Edward Jerdonek, AIA, LEED AP; President/CEO
Luckett & Farley
“Last year was the best the auto industry has seen in half a decade, and the forecast for 2014 looks bright. This is good news for Kentucky; as business picks up, Toyota, like many automakers, is responding with a new wave of investments to help us build better cars. Locally, preparations are underway to begin production of the first U.S.-made Lexus model in 2015, and that means new jobs for the Bluegrass. We gained a lot of momentum in 2013 – the industry and Toyota. This gives me great optimism going into the New Year.”
Wil James, President
Toyota Motor Manufacturing, Kentucky, Inc.
“The way Kentuckians communicate has changed. With nearly 4 million wireless subscribers and 3 million wired and wireless broadband connections, consumer demand requires providers to invest in new technology. Modernizing Kentucky’s communications laws to incent investment in Internet Protocol (IP)-based and wireless networks instead of older technologies is critical to competitiveness. There is a growing consensus among Kentuckians that the innovation and connectivity brought about by new communications technologies will drive our future economic growth. Kentucky risks falling further behind if we don’t take steps to enable providers to invest hundreds of millions of dollars in the networks consumers and businesses demand.”
Hood Harris, Kentucky State President
AT&T
“2014 will be a great year for the commonwealth as we keep building upon our successes in entrepreneurship development, auto manufacturing, and biotechnology and health sciences. Expanding our global outreach as it relates to export activity and foreign direct investment remains an important goal. We will continue our vigorous efforts to enhance workforce development and will work with local leaders to diversify the economy of our Appalachian region, which will improve Kentucky’s competitiveness and overall economic health. Thanks to the tireless and dedicated efforts of many people from across the state, we are creating a more robust business climate in Kentucky.”
Hon. Steve Beshear, Governor
Commonwealth of Kentucky
“In 2014, we expect a small, steady increase in new housing starts and in manufacturing, signaling continued economic recovery. At the same time, water providers are balancing much-needed infrastructure investments with water sales and revenue that are declining. A positive sign for long-term performance and sustainability is a growing consensus for regional water solutions that bring value and improved service. Water utilities continue to provide an excellent value; the average daily cost for Louisville Water residential customers is 75 cents for a dependable, high quality supply.”
James H. Brammell, PE, PLS; President/CEO
Louisville Water
“Kentucky’s economy will improve further in 2014, particularly in Southcentral Kentucky where Bowling Green and Warren County leaders will continue their united effort to attract new business and industry. Higher education is a primary driver for Kentucky’s economic recovery, and WKU will keep providing over 4,000 highly talented, well educated graduates each year for the workforce, and most will work in Kentucky. We also will produce graduates from the Gatton Academy, many of whom will pursue baccalaureate and graduate degrees at Kentucky universities. WKU will continue attracting scholars from across the globe to our campus, many of whom will stay in Kentucky for permanent jobs.”
Gary A. Ransdell, President
Western Kentucky University
“After perhaps the last major airline merger, the industry should stabilize and focus on replacing 50-seat regional jets with new efficient aircraft. Airlines are very cautious; communities need to focus on service retention rather than expansion. Growth will come from better use of existing routes and larger aircraft. Louisville International Airport is well positioned and will continue providing good connectivity to the global market. As the world’s seventh busiest cargo airport, its major role in the local and national economy will continue. The future for air cargo and logistics in the region is bright.”
Skip Miller, Executive Director
Louisville Regional Airport Authority
“As we begin to slowly rebound from our state’s most challenging economic period since the Great Depression, thanks to a strategic budget reallocation overseen last year by our Board of Regents, faculty and staff, EKU is positioned for progress on several key fronts: investment in our people; funding academic programs, initiatives and operations; support fort student success; and re-engagement with Richmond and our Appalachian region. I am an optimist: EKU will help Kentucky turn its difficulties into opportunities as we improve the quality of life for all.”
Dr. Michael T. Benson, President
Eastern Kentucky University
“Among Bowling Green area milestones achieved in 2013 were six economic development announcements creating more than $240 million in investment and over 380 jobs, complemented by growth in almost every sector. 2013 was a great year for the South Central Kentucky region, and I look for 2014 to be another prosperous year. Currently, we’re working to improve the availability of a trained workforce, a top priority for the region. According to one report, we’ll need 4,500 new workers by 2016, and we’re on track to meet that goal.”
Ron Bunch, CEO
Bowling Green Area Chamber of Commerce
“I am very positive about potential manufacturing growth in Kentucky this year. Based on recent National Association of Manufacturers numbers, industrial production is predicted to expand from 2.4 percent growth in 2013 to 3.1 percent in 2014. More importantly for Kentucky, national auto production is on the rise, with estimates light vehicle sales should grow from 15.5 million to 16.1 million units in 2014. Kentucky’s national prominence in automobile and parts manufacturing makes this is good news. Manufacturing’s growth in Kentucky for 2014 will continue to be predicated on our ability to manage growing overhead expenses from healthcare and energy costs, as well as finding the necessary skilled workforce.”
Greg Higdon, President/CEO
Kentucky Association Of Manufacturers
“In 2014, Kentucky will continue slow, uneven economic growth. As 2013 concluded, 38,000 fewer Kentuckians were working than at the recession’s beginning in 2007, and employment won’t reach pre-recession levels this year. That means modest General Fund revenue growth, making education funding in the legislative session a challenge. Higher education will face financial challenges, increased market competition and concerns from policy makers about affordability, accountability and accessibility. Still, the state will continue to graduate more with quality undergrad and graduate degrees. Our research and community engagement will be a positive driver of economic activity in 2014, adding needed jobs and income growth.”
Dr. James Ramsey, President
University of Louisville
“The economic health of Central Appalachia is of great concern as the coal sector downturn continues to impact the region’s economy. Education and economic diversity will be central to the region’s future, and the University of Pikeville has been blessed with exponential growth. Our College of Arts and Sciences, the Kentucky College of Osteopathic Medicine and the Coleman College of Business are financially viable and sustainable. As leaders, we must be academically entrepreneurial, inspiring our students to develop and grow small businesses, which have become the backbone of Kentucky’s economy.”
Dr. James L. Hurley, President
University of Pikeville
“With regard to the overall economy, we expect it to continue along the path of steady, modest recovery, with sales, capital investment and hiring all tracking somewhat higher. At Windstream, we see the convergence of telecommunications and IT continuing in 2014, with increasing demand for our cloud and managed services. Business customers want an end-to-end communications and services provider, and Windstream is built for that role.”
Barry Bishop, Region Vice President
Windstream
“The Thoroughbred industry saw continued signs of resurgence in its racing and breeding segments in 2013, giving us confidence entering the New Year. Keeneland’s September Yearling and November Breeding Stock sales, both major barometers of industry health, each realized double-digit growth as a result of enthusiastic participation from domestic and foreign buyers. Record attendance and wagering at the spring and fall race meets was a tribute to our great fans and their appreciation of quality racing. All of these factors create momentum that bodes well for an exciting 2014.”
Bill Thomason, President
Keeneland Association
“With a few exceptions, economic growth in Kentucky continues to be sluggish. EKPC and our member coops are particularly sensitive to Eastern Kentucky’s unique challenges. We have increased efforts to help grow jobs and investment, particularly in manufacturing, and are working to keep electric rates among the lowest in the nation, which is critical. Federal regulations pressure rates as utilities make difficult compliance decisions. Although EKPC’s plant fleet is largely retrofitted to meet immediately looming regulations, carbon regulations could be a game-changer. EKPC is managing strategically through these industry sea-changes. EKPC’s June integration into PJM Interconnection provides market access to sell surplus power and purchase affordable energy.”
Tony Campbell, President & CEO
East Kentucky Power Cooperative
“Kentucky American Water, the commonwealth’s largest investor-owned water utility, invests $20 million annually into infrastructure and systems, and this commitment in our 10-county service area is necessary to maintain high-performing, quality drinking water systems. We will continue investment in 2014, while staying focused on becoming more efficient without sacrificing service. Communities facing challenges due to pension and education funding shortfalls as well as aging infrastructure are looking at the benefits public/private partnerships can bring, and we will continue to highlight the unique benefits such as access to capital and unique operational expertise that Kentucky American Water offers.”
Cheryl Norton, President
Kentucky American Water
“Kentucky agriculture enjoyed a banner year in 2013 with record farm cash receipts of about $6 billion. We expect similar results in 2014 as horse sales again are forecast to do well, and tight supplies should support beef cattle prices. As always, weather is pivotal in the success of crops. We expect more growth in the Kentucky Proud marketing program. I look forward to seeing hemp seeds planted in Kentucky this year for the first time in two generations. I support passage of state legislation to allow benefit corporations, which would bring millions of dollars of new investment.”
James Comer, Commissioner
Kentucky Department of Agriculture
“We predict Kentucky’s economy to slowly but unevenly gain momentum in 2014. Companies that have maintained or increased technology investments through the downturn are poised to reap benefits of more efficient, easier-to-manage IT systems. As balance sheets ease, we forecast those organizations that haven’t invested will begin to catch up, which is positive for our business. However, Kentucky’s lack of uniform access to high-speed Internet service restricts efficiency gains clients could realize from cloud computing. Budgetary cutbacks in education have lead to a less-qualified workforce. These are key investments the commonwealth should be making.”
Dave Sevigny, President
DMD Data Systems Inc.
“2014 looks very promising. Demand for more capacity in the industrial and commercial sectors signals encouraging economic growth in 2014. Today’s successful companies learned from the challenges of the worst economic recession since the Great Depression, which hit the engineering and construction sector particularly hard. Most companies are experiencing better efficiency in operations than ever before, with the challenge being to drive that efficiency as demand continues to grow. To solved this riddle, we integrated our precast manufacturing operations with our experienced design-build team. Prosperity will come to companies that deliver higher value solutions that are difficult for their competitors to follow.”
J. Todd Ball, President
Bristol Group Inc.
“The construction industry is often the first to see recovery as business owners prepare to ride a rising tide of the economy. As Alliance Corp. has talked to clients whose construction needs we serve in business sectors such as industrial, commercial/retail, government and education about their plans for 2014, we are encouraged. We think commercial, office, retail and industrial building will increase in 2014. Institutional, governmental and educational building will remain steady. While we had a good 2013, we predict we will have a better 2014 in terms of number and dollar value of construction projects.”
Tommy Gumm, CEO, Alliance Corporation
“The Kentucky Restaurant Association represents the restaurant industry, the state’s largest private sector employer. KRA members are just beginning to recover from the recession, so we remain concerned about any regulation or legislation that would hinder that recovery, such as a restaurant tax or increased permitting fees or local taxes. KRA works closely with agencies to monitor proposals and encourages members to stay in contact with elected officials.”
Stacy Adams Roof, President & CEO
Kentucky Restaurant Association
“Louisville finished 2013 with payroll trends and jobs surpassing the pre-recession peak. Job creation and business investment should improve further in 2014. The environment continues to be favorable to start-ups in terms of costs and ability to access customers and capital. In 2013 GLI worked with 136 companies to help create 3,574 new jobs with a $47,300 average salary and over $570 million in investment. In 2014, GLI and regional business and community partners will begin the Advantage Louisville 5-year strategic plan that identifies the region’s greatest innovation and economic growth opportunities; it will focus efforts on strategies that drive more high-paying jobs and increase wages. We’ll work to ensure Kentucky offers a competitive tax and regulatory environment to allow cities to capitalize on opportunities.”
Craig Richard, President & CEO
Greater Louisville Inc.
“Amid declining U.S. enrollments, the University of Kentucky attracted its largest, best prepared and most diverse first-year classes each of the past two years. New academic and research space enables us to recruit top researchers from around the world who pioneer new ideas and discoveries – expanding our role as a key economic engine that creates jobs and growth opportunities through research, healthcare, service and educating Kentucky’s future high-skilled workforce. Our extension network keeps serving communities in new ways. UK HealthCare has grown into our region’s flagship academic medical center and works with local health professionals to provide the best care close to home across Kentucky. In 2014, we expect UK to improve while responding to external financial constraints and the ever-changing higher education industry.”
Eli Capilouto, President
University of Kentucky
“Owensboro Health foresees a 2014 full of evolution and opportunity. Medicaid expansion and commercial exchanges bring the opportunity to serve populations we may not have been able to in the past. Regulatory changes for Medicare, Medicaid and commercial insurance plans will challenge hospitals and physicians to navigate the new rules for providers. Compliance and implementation of new processes will increase costs. Coupled with declines in reimbursement for the healthcare rendered, this will add pressure. Owensboro Health is engaged, adjusting protocols and processes to evolve care delivery to meet these challenges. We are confident our primary focus on quality of patient care will yield better outcomes, reduced readmissions, lower costs and improve health in the communities we serve.”
Philip Patterson, President/CEO
Owensboro Health
“The year 2013 was one of anticipation and planning for Humana, getting ready to welcome thousands of Kentuckians who previously did not have access to medical insurance into the health system. We wanted to ensure these individuals and families had relationships with the primary care physicians who can coordinate the care they need. Humana supports this integration of medical treatment by aligning our physicians’ incentives with evidence-based, high quality care and by offering doctors and hospitals real-time, actionable information. A tremendous amount of work lies ahead in 2014, but we are encouraged by the outcomes we have already seen – outcomes that tell us Humana members can truly achieve lifelong well-being.”
Jeff Bringardner, President
Humana of Kentucky
“Hospitals, physicians, medical diagnostic centers and durable medical equipment makers will enjoy increased revenue because of expansion of Medicaid in Kentucky. The continued absence of cost transparency, however, means healthcare consumers will still access care at high-cost providers with no means of comparing the quality of care. Costs will continue to experience double-digit increases since the Affordable Care Act does little to stop it; in fact, in the short run, ACA-created increases in demand will increase the cost of insurance, which is just a function of healthcare cost. Insurance companies will prosper because their profits are tied to the cost of care, rather than on reducing expenses. Employees will suffer financially because employer-sponsored plans will shift more cost to employees to obtain reduced premiums. Small employers in Kentucky will find value in association-sponsored health insurance programs.”
Jim Dingus, Vice President
BB&T Benefit Services
“Competition in the workers’ compensation insurance market in Kentucky is expected to remain stable in 2014. Employers weighing coverage options should make certain that competing insurance providers are financially stable and provide the tools necessary to help control workers’ compensation costs. KEMI will continue offering competitive rates to employers who control their own destiny by promoting workplace safety and preventing injuries on the job.”
Jon Stewart, President & CEO
Kentucky Employers’ Mutual Insurance
“The Affordable Care Act and expansion of Medicaid coverage will drive change in the industry, and impact both cost and access to care. We must have a system of care in place to accommodate newly insured patients. Other challenges include health plan changes shifting more costs to employees, increase “consumerism” in healthcare and bring declining usage rates of inpatient services. KentuckyOne Health will continue working to increase access points to ambulatory and outpatient care using innovative approaches like telemedicine and virtual urgent care, among others.”
Ruth W. Brinkley, President/CEO
KentuckyOne Health
“2013 was good for Louisville jobs. With more than 12,000 new jobs, we have officially recovered from the prolonged recession. My goal for 2014 is to fine-tune our strategies to focus more on higher-wage jobs that support families and strengthen the middle class. Long term, this must involve making capital investments in our community – vital to recruiting and retraining innovators and skilled workers. LIFT (Local Investments For Transformation) is my top legislative priority because it will allow Louisvillians to vote about whether, when and where to invest using local-option sales taxes. This sort of local control – at the ballot box – is the best way to make investment decisions. Let Louisville voters decide.”
Greg Fischer, Mayor
Louisville Metro
“Kentucky’s future and that of our nation will be one of immense challenge. Our economic impact in the world is shrinking, albeit modestly, and the prospects are that most of us – including the remarkable students we educate at Centre College – will be asked to work and serve harder and longer than our parents and grandparents. We will prosper, but in a more measured way, which might be for good. America remains the greatest nation for opportunity, innovation, service and leadership. However, we must never forget our nature to set aside our comforts and our successes to move all folks forward.”
John Roush, President
Centre College
“As the national economy recovers, the Bluegrass Region is attracting jobs, companies and investment. The past few years have been very active for our Economic Development Division and our partners of the Bluegrass Business Development Partnership (Lexington-Fayette Urban County Government and the University of Kentucky). In 2013, we celebrated companies new to Lexington and others that expanded. This will continue because of our educated workforce, diverse economy, strengthening housing market and growing high-tech sector. We must stay in front of key site-selection consultants and use creative recruitment efforts like the BBDP’s rent subsidy program and the city’s new Lexington Jobs Fund for grants and loans to create jobs at existing businesses and attract research and high-tech jobs.”
Bob Quick, President/CEO
Commerce Lexington
“2014 will bring continued delays and revisions in implementation of the Affordable Care Act. With Republican control of the U.S. Senate possible in the 2014 elections, there will be a sense of urgency by Republicans and Democrats to soften the impact of the ACA as constituents realize the ramifications of implementation. The ACA was based upon carefully constructed alliances among the major components of the healthcare industry. Each delay and revision creates risks that the alliances negotiated by the Obama administration will implode and the ACA statutory scheme will no longer be viable.”
Vickie Yates Brown, President/CEO
Nucleus: Kentucky’s Innovation Center
“Change remains the Kentucky’s coal industry central theme in 2014. While we see expansions of current operations and expect new mines in Western Kentucky, the situation in our Eastern Kentucky coalfield remains concerning. Although Eastern Kentucky has lost more than 6,000 direct mining jobs and decreased its production by nearly a third, Eastern Kentucky still mined almost 40 million tons of coal in 2013 – if it were a state, Eastern Kentucky would be seventh in U.S. coal production. While analysts still project concerns of future job losses and production declines, Eastern Kentucky will continue to mine coal for decades. The two questions are: How much coal will be mined, and who will be the end user for Eastern Kentucky coal?”
Bill Bissett, President
Kentucky Coal Association
“Tourism was an economic shining star in 2013, continuing a two-year trend of revenue and employment growth. The Lexington hotel market experienced 8 percent revenue increase. The VisitLEX convention sales team closed the year with a record group/convention booking pace. Our new Lexington Visitors Center served more than 25,000 visitors, double 2012. Our core attractions Equine and Bourbon continue to thrive. Trends for 2014 are positive, with travel-related revenue expected to increase 4 percent to 5 percent. The VisitLEX team is excited about the coming year and proud to be a key player in Lexington’s economic future.”
Jim Browder, President
VisitLEX
“In 2014 Kentucky should continue the positive growth trend in its entrepreneurial economy. The commonwealth is in a significant restructuring from an economy based on large “foundation” industries and businesses to one largely fueled by start-ups and growth of innovation-driven enterprises. In 2013 we saw very positive signs. According to Fast Company Magazine, Kentucky ranked second nationally in percent growth of startups per million residents. The DNA of these types of companies is much more in keeping with where the global marketplace is headed … exactly the kind of businesses that will be the basis for future economic growth and prosperity.”
Kris W. Kimel, President
Kentucky Science and Technology Corporation
“2014 may be the Chinese Year of the SNAKE, but for Kentucky it will be the Year of the TREP – as in enTREPreneur. In an economy based on innovation, TREPs have displaced corporations as engines of business advancement. Working at minimalist accelerators, Ivory Towers and dorm rooms, TREPs think the unthinkable, create the improbable and make it the inevitable. Large companies move with the winds of global economics, markets and policies, leaving entrepreneurial firms room to create from scratch or respond to localized needs. With most net job creation coming from fast-growth entrepreneurial firms, and Kentucky gaining momentum with its efforts to develop and support entrepreneurs, 2104 should see above average job and wealth formation in the 50- to 500-employee “gazelle” company sector – sustainable, solid, diversified growth deserving of the Year of the TREP designation.”
Kent Oyler, Managing Director
OPM Financial
“Our 2014 vision is reflected in the agenda of our 30th International Symposium in Lexington in May: Our growing Crop Science division is improving fruit, grain, and vegetable yields and quality. Life Sciences’ potential Alzheimer’s therapeutic is undergoing clinical trials. Animal Health anticipates significant growth from its core B2B unit and an “on-farm” promotion team. Aquaculture is expanding production in Kentucky from 400 per week to more than 40,000 fish per week. Alltech will increase its focus in Africa, and China will continue as a major market with Dr. Mark Lyons, vice president of corporate affairs, in his third year leading operations there. During the Chinese Year of the Horse, we will celebrate with the Alltech FEI World Equestrian Games 2014 in Normandy, France. And in addition to naturally enriching animal foodstuffs, we anticipate our algae technology will revolutionize human DHA supplementation.”
Pearse Lyons, President
Alltech Inc.
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