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Commentary on Kentucky – July 2011

By wmadministrator

Kentucky Cities Recognized as Good for Families
Parenting magazine has published its annual list of the Best Cities for Families, and Kentucky’s cities score highly. Louisville is No. 10 and Lexington is No. 18.

Cities were ranked on great schools, affordable homes, low crime rates, jobs, and parkland. Said the magazine’s editors: “You want the best for your family, and that includes great schools, affordable homes, low crime rates, plenty of jobs, and lots of parkland. So we crunched more than 8,000 bits of data in 84 categories to determine this year’s top places to raise kids.”

Washington has the greatest historic monuments anywhere, Austin claims the title of Live Music Capital of the World, plus has 27,000 acres of parks. Boston spends $23,000 per public school student a year. Honolulu is a tropical paradise with a good economy powered by tourism and the military.

Louisville has an impressive list of family-friendly assets as well.
Parenting says: “Site of the Kentucky Derby, the famous Thoroughbred horse race, Louisville offers both pasture-rich grasslands and Midwestern city culture. The affordable housing means you can live comfortably amid lots of parkland and top-notch schools.

“Home to the Louisville Slugger Museum & Factory, the Kentucky State Fair, and Americana arts and crafts, Louisville is also known as the ‘City of Parks.’ And it’s making a fourth appearance on the America’s Promise Alliance’s list of 100 Best Communities for Young People.”

See the magazine’s comments at http://tiny.cc/zt0a0
Lexington was No. 5 on the list last year, when Parenting said: “Known as the Horse Capital of the World, Lexington offers plenty of stable tours and activities, as well as arts, dining and great music venues for bluegrass, country, and more.” For 2011, Lexington still fares well, ranking 18th.


Med Tech Operating – Cost Study Ranks Lexington, Louisville Pictures of Health

Lexington and Louisville are among the very lowest-cost locales in America for medical technology manufacturing, according to a new study.

Kentucky’s two major cities scored second and third best in the nation in a corporate location study by The Boyd Co. of Princeton, N.J., of costs in 55 comparative locations in the United States and near-shore alternatives in Canada, Mexico and Latin America.

The medical devices and supplies industry already is an important to the regional and state economy, employing 2,300 workers in Kentucky with an annual payroll of $80 million, according to Boyd, which presented its findings to a private audience in Lexington in mid-June.

The study by Boyd, a top site selection consultant, analyzes all major geographically variable operating costs pivotal to a medical supplies company’s decision as to where to locate new production. It scaled costs for a 175,000-s.f. plant employing 325 and shipping to a national U.S. market.

Annual costs among the U.S. locations range from a high $30.7 million in San Jose, Calif., to a low $22.56 million in Sioux Falls, S.D. Second-place Lexington registered $22.66 million annually and Louisville $22.68 million.

A Maquiladora border site in Mexico registers the overall lowest operating costs in the Boyd study at $16.8 million per year. Costa Rica, a popular near-shore destination for medical devices and supplies manufacturing, shows costs of $17.8 million per year.

Economy raises role of costs
Comparative costs rule the corporate site selection process like never before in the present difficult economy, the report states, especially in the medical device industry, which has the added cost of FDA regulatory review and a new 2.3 percent tax under healthcare reform.

The industry is facing lower demand because high unemployment means less health insurance coverage and slower traffic at hospitals, according to Boyd. Meanwhile, the trend of aggressive hospitals buying out physician practices is weakening the price leverage medical device makers have held over doctors and putting pressure on margins.

In today’s slow-to-recover economy, improving bottom lines on the cost side of the ledger is often easier than on the revenue side for medical device makers. FDA regulatory costs are mostly fixed; other costs such as labor, taxes, power, real estate and shipping vary widely by geography, the Boyd study finds. That means site selection can address the cost equation.

Jobs wash back on U.S.
Labor climate issues are seen as especially pivotal as Boyd is forecasting that thousands of final assembly and quality control jobs within the medical devices and supplies industry will be washing back on U. S. shores over the next decade. They will return from China, India and the Caribbean basin due to security issues; greater FDA scrutiny; heightened patent, counterfeiting and piracy concerns; and expanded compliance arenas coming under review by the FDA as well as the FAA (for the growing interactive, wireless technologies and healthcare I.T. sectors).

According to John Boyd Jr., a principal in The Boyd Co., where these medical devices jobs wash back on U.S. shores will largely be led by labor issues, i.e., costs, local skill sets, and labor-management relations along with state tax climates.
A Henry Clay Tribute Gives Giant His Due
For an evening last month at Transylvania University in his hometown, Henry Clay was alive again.

It was Lexington’s first ever Henry Clay Week, and just as when he roamed courthouses, halls of government and the social scene two centuries ago, the force of his personality drew to him the powerful – in this case sitting Speaker of the House John Boehner and his two immediate predecessors, Nancy Pelosi and Dennis Hastert.

Kudos to the organizers at the Henry Clay Center for Statesmanship, based at his former law office. May the Clay Week of 2011 be the first of many.
Clay was a key figure in U.S. history, as we all learned in school. His leadership and legislative prowess averted the Civil War by decades, allowing a young nation to knit together more strongly. Schools, streets, buildings and more bear his name, but modern-day Kentucky generally pays little mind to this profoundly important man. Deeply partisan but ultimately a patriot, Clay is referred to in history as “The Great Compromiser.”

His regard was such when he died in 1852 that church bells tolled for hours across the entire United States. Clay was the first to lie in state in the U.S. Capitol, a gesture not repeated until President Lincoln’s assassination. His body took a circuitous route home to Lexington through the country’s major cities so tens of thousands of Americans could glimpse the procession and recognize Clay’s passing.

First in Lexington and Frankfort then Washington, he played a leading role in public life for a half century. The U.S. Senate sometimes canceled proceedings so members could attend major speeches by the charismatic Clay, who could hold audiences for hours with his dramatic baritone. In an Illinois eulogy he later said embarrassed him at its inadequacy, Abraham Lincoln did manage to say of his idol: “The long enduring spell with which the souls of men were bound to him is a miracle. Who can compass it?”

Washington’s modern-day Speakers came to participate in a forum titled “The Role of the Speaker of the House: A Tribute to Henry Clay.” Boehner, Pelosi and Hastert set aside their partisan differences for 90 minutes to discuss the challenges of political and legislative leadership. Each well knew it was Clay who turned the speakership into the fulcrum of Washington power it remains today.

Boehner said he has read “at least 10” biographies of Clay, whose first term as Speaker began 200 years in 1811 – on his first day as a member of the House.
At the conclusion of the forum, kept lively by moderator John Harwood of CNBC, Boehner, Pelosi and Hastert each reverently received the Henry Clay Medallion in recognition of lives’ work reflecting the ideals held by Henry Clay. Other living past Speakers Newt Gingrich and Jim Wright, who were unable to attend, were given the medallion in abstentia; Tom Foley is a previous recipient.
Clay’s life and ideals remain worthy of our attention.
We hit our thumb rather than the nail on the head in one photo caption while cobbling together our June issue article about the impressive rate of capital construction at Kentucky colleges and universities the past few years.
The one we’re smarting a little about is the caption on page 28 with an image of the $30 million Center for Health, Education & Research building at Morehead State. It incorrectly identified the architect and contractor. Ouch!
RossTarrant Architects designed the building, and D.W. Wilburn Inc. was the contractor; both are based in Lexington. That feels better already.
Another Blue Chip 25 Member
There is a final addendum to the 2011 edition of The Lane Report’s annual Kentucky Blue Chip 25 list of the largest publicly held corporations based in the state. Our ongoing research identified Rhino Resource Partners LP (RNO:NYSE) after a tip from the Kentucky Cabinet for Economic Development.

Founded in 2003 and based in Lexington, the steam and metallurgical-grade coal producer went public in mid-2010. As a result, Rhino reported revenue of  $305.6 million in 2010, which ranks it 18th among publicly held Kentucky based companies. Its reported net income was $41.4 million. Rhino Resource Partners (rhinolp.com)had a market capitalization of $570.5 million as of June 21.

Rhino holds interests in surface and underground mines in Central and Northern Appalachia, the Illinois Basin and the Western Bituminous region. As of Dec. 31, 2010, it operated five underground and five surface mines in Kentucky, Ohio and West Virginia.

The company has 897 full-time employees. David Zatezalo is president and CEO.