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Economic_Digest

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                                     Formed in January 2004 from the merger of the Greater Lexington Chamber of
                                     Commerce, Lexington United, and the Lexington Partnership for Workforce De-
                                     velopment, Commerce Lexington Inc. is the business organization for the Blue-
                                     grass. On behalf of business, Commerce Lexington also works with local govern-
                                     ment and surrounding communities to enhance business and economic devel-
                                     opment opportunities in and around the Lexington area.

                                     The professional staff of Commerce Lexington is prepared to assist you by
(800) 341-1100 or (859) 225-5005     providing specific information based upon your project's requirements. We
                                     would be happy to help you make the Bluegrass your new home.
(859) 225-5008

www.commercelexington.com
                                     In an effort to focus Lexington’s economic development efforts on a knowledge-
ggreathouse@commercelexington.com    based economy, the University of Kentucky, the Lexington-Fayette Urban Coun-
                                     ty Government, and Commerce Lexington’s economic development divisions
                                     formed a new, collaborative effort called the Bluegrass Business Development
                                     Partnership (BBDP) in January 2007. Cooperation between all economic devel-
                                     opment entities has been in place for years, but with the growing number of
                                     entrepreneurial and technological companies in Central Kentucky, the need for
                                     the more formal partnership became evident.

                                     The Bluegrass Business Development Partnership’s goal is to be a one-stop, su-
         Updated February 11, 2011   per-service provider, linking entrepreneurs with the information they need to
                                     be successful, including assistance in financial planning, business plans, funding
                                     sources, real estate, and service providers.
                                                                                                                                                                     3


                                                                                     Hewlett-Packard, Xerox, and a thriving underground tech and biosciences com-
                                                                                     munity.
Located on a plateau at the edge of the Cumberland Gap, the Bluegrass is the
financial, educational, retail, health care, service, and cultural center of Cen-    Joining horses and high-tech is healthcare. The healthcare industry continues to
tral Kentucky. From the excitement of cheering your favorite horse down the          be at the forefront of economic growth for Lexington and the Bluegrass. All
stretch to unsurpassed collegiate athletics to working with companies from           three major hospitals in Lexington are planning or have started major expan-
around the globe, the Bluegrass offers all the amenities of a major metropolitan     sions of their current facilities. Along with the UK Chandler Medical Center,
area with the immediate escape of pastoral countryside.                              which offers Colleges of Allied Health Sciences, Dentistry, Medicine, Nursing,
                                                                                                               Pharmacy, and Public Health; seven other colleges in
Lexington-Fayette County is the merged urban county                                                            the Lexington area are involved in medical-related
government at the center of an eight-county alliance                                                           instruction.
that represents the Bluegrass Region.
                                                                                                               Finally, there is higher education, the crown jewel of
Local residents and businesses alike know how great                                                            the Bluegrass. Anchored by the state’s flagship uni-
the Bluegrass is for living, working, and raising a fami-                                                      versity, the University of Kentucky, the Bluegrass
ly. Our secret is out, however, and the accolades con-                                                         boasts 10 colleges and universities within 40 miles of
tinue to pour in. As recently as 2006, Lexington was                                                           Lexington. In addition, Lexington has five other pro-
rated the 48th Best City to Live In Worldwide by Mer-                                                          fessional and technical colleges. In total, over 68,000
cer Consulting. In addition, Lexington and the Blue-                                                           students are enrolled in institutions of higher learn-
grass Region have been rated highly from quality of                                                            ing in the Bluegrass, graduating close to 12,000 an-
life to business and careers and everything in be-                                                             nually.
tween.
                                                                                                               Since the announcement in 1985 that Toyota would
Boasting a robust economy, the Bluegrass is a diver-                                                          locate its largest North American manufacturing facili-
sified growth engine for health and educational ser-                                                          ty in Scott County, the Bluegrass Region has wit-
vices, government, retail trade, manufacturing, and                                                           nessed a sharp increase in the number of automotive
construction. Because of these diverse opportunities,                                                         related manufacturing and parts distribution compa-
Lexington’s unemployment rate is consistently lower                                                           nies. A partial list of the automotive parts plants
than the rest of Kentucky and the rest of the nation as                                                       which have located in the Bluegrass includes: Accu-
a whole.                                                                             romm USA, Central Motor Wheel America, International Crankshaft, Johnson
                                                                                     Controls, KI-USA, Kokoku Rubber, Montaplast, Motor Wheel, Nitto Denko, PPG
The Bluegrass is committed to growing our four Hs - horses, healthcare, high-
                                                                                     Industries, Toyota Tsusho America, Trim Masters, Webasto Roof Systems Inc.,
tech, and higher education. Long known as the epicenter of the horse industry
                                                                                     Vuteq, and YH America.
with miles upon miles of idyllic horse farms and over three-quarters of a billion
dollars in horse sales in 2008, Lexington has also created a buzz in the high-tech   The University of Kentucky, Toyota, Lexmark International, and the Lexington-
industry. The World Headquarters of Lexmark International is joined by IBM,          Fayette Urban County Government are the major employers in the area.




                                                                                                                                                          (800) 341-1100
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                                                                                           The Bluegrass Region’s (and especially Lexington’s) population is younger, on
                                                                                           average, than either Kentucky or the United States. The median age of Lexing-
The Bluegrass has 603,075 residents according to 2009 Census Bureau esti-                  ton-Fayette County is 35.3 years old and rises slightly to 35.7 years old when
mates. The region’s population, which includes the counties of Bourbon, Clark,             the rest of the MSA1 is included. Kentucky’s median age is 37.8 years old while
Fayette (Lexington), Franklin, Jessamine, Madison, Scott, and Woodford, has
                                                                                           the United States’ median age is 36.9 years old.
grown close to 15% overall since the 2000 Census.
                                                                                                   0 to 17 years                                                                      22.2%
                                                                                                        old                                                                             23.4%
                                                                                                        18 to 24                                         12.7%
                            Historic Population                       Future Projections                                                              11.2%
                             1990       2000                2009       2010       2020                                                                        14.7%
                                                                                                        25 to 34
                                                                                                                                                            14.3%
  Bluegrass Region          449,757       526,885          603,075    596,229   673,759
                                                                                                        35 to 44                                              14.9%
  Bourbon County             19,236        19,360           19,729     19,896    20,513                                                                        15.1%
  Clark County               29,496        33,144           36,159     36,336    39,472                 45 to 54                                             14.4%
                                                                                                                                                             14.4%
  Fayette County            225,366       260,512          296,545    285,731   311,067
                                                                                                        55 to 64                                    10.5%
  Franklin County            43,781        47,687           48,968     49,172    50,140                                                              10.9%
  Jessamine County           30,508        39,041           47,589     48,574    59,822                                                             10.7%
                                                                                                  65+ years old
  Madison County             57,508        70,872           83,258     84,533   100,684                                                              10.8%
  Scott County               23,867        33,061           45,841     47,215    66,167
  Woodford County            19,995        23,208           24,986     24,772    25,894                            Lexington-Fayette County (Median Age: 35.3 years old)
                                                                                                                   Lexington-Fayette MSA (Median Age: 35.7 years old)
Sources: Kentucky State Data Center, US Census Bureau: Decennial Census
                                                                                           Source: US Census Bureau American Community Survey (2008)



                                               African-                                                                                                                      Male      Female
                            Caucasian/                                      Of Hispanic
                                              American/            Other                   Overall, the Bluegrass closely mir-                   Bluegrass Region           49.1%      50.9%
                              White                                            Origin
                                                Black                                      rors the state of Kentucky
                                                                                           (49m/51f) in terms of its gender                      Bourbon County             48.7%      51.3%
  Bluegrass Region              87%               10%                4%         4%                                                               Clark County               48.4%      51.6%
                                                                                           split. Fayette County comes the
  Bourbon County                92%               7%                 1%         5%         closest to a true 50/50 split, with                   Fayette County             49.5%      50.5%
  Clark County                  94%               5%                 1%         2%                                                               Franklin County            48.6%      51.4%
                                                                                           several counties in the Bluegrass
                                                                                                                                                 Jessamine County           49.0%      51.0%
  Fayette County                81%               14%                5%         6%         displaying a more pronounced
                                                                                                                                                 Madison County             48.4%      51.6%
  Franklin County               87%               10%                3%         2%         female bias. This is most likely due
                                                                                                                                                 Scott County               48.9%      51.1%
  Jessamine County              94%               3%                 2%         2%         to a higher median age in the sur-
                                                                                                                                                 Woodford County            48.9%      51.1%
  Madison County                93%               4%                 2%         1%         rounding counties.
  Scott County                  93%               5%                 2%         3%                                                             Source: KSDC, July 2008 estimates

  Woodford County               93%               6%                 2%         6%         1
                                                                                               The US Census definition of Lexington’s MSA does not include the counties of Franklin or Madison
Sources: Kentucky State Data Center, July 2008 estimates


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Located in the heart of Central Kentucky’s Bluegrass Region, Lexington is the        spokes which intersect north and east of downtown Lexington. Interstate 75
Commonwealth’s second largest metropolitan area. Its central location and ex-        serves Lexington with six interchanges. Interstate 64 shares two of these inter-
cellent transportation system have been major factors in Lexington’s growth          changes north and northeast of downtown Lexington. The average daily traffic
and development.                                                                     count at the intersection of I-64 and I-75 is about 82,000 vehicles.

Lexington is located at the center of a 31‑state distribution area and is within a   "AAA" rated highways (80,000 pound gross load limit) serving Lexington include
600-mile radius of the majority of the nation's manufacturing employment, re-        U.S. 25, 27, 60, 68 and 421. Primary and secondary highways serving Lexington
tail sales, and population. By virtue of this geographic location and Kentucky's     are linked together by Kentucky Route 4 (New Circle Road), a four-lane beltway
integrated system of state maintained roads, interstates and parkways, the           encircling the city.
Bluegrass is within overnight range of over half of the U.S. market.
                                                                                     An abundance of trucking companies serve the Bluegrass with local terminals. RJ
In the heart of Central Kentucky, the Bluegrass is arranged like a wheel around      Corman provides main line rail service to Lexington and the surrounding area
Lexington, which serves as the cultural and economic hub. Interstate 75, a major     with Class 1 connections to CSX Transportation and the Norfolk-Southern Rail-
north south corridor, and Interstate 64, a major east west route, are the main       way System . The intermodal facility, which serves the area, is located in
                                                                                     Georgetown, along I-75 in the northern portion of the Bluegrass.




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Lexington is also the home of the largest UPS ground hub in the state, with the     The DHL Express International Sorting Hub is an hour’s drive north via I-75 from
ability to process over 25,000 packages and documents every hour. The Lexing-       Lexington. The DHL facility at CVG is a state-of-the-art, fully automated sortation
ton hub delivers to 60% of the US population in 2 days via ground, and 79% in 3     center. It has proven its high performance functionality and enables DHL Ex-
days.                                                                               press to further enhance operational effectiveness in international shipping.

UPS Worldport, the largest fully automated package handling facility in the
world, is located about an hour to the east of Lexington via I-64 at Louisville
International Airport. The UPS Worldport currently turns over 130 aircraft daily,
processing an average of 1.2 million packages a day. The proximity of the
Worldport facility provides Lexington area customers with maximum flexibility
for overnight air deliveries worldwide.




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Newly renovated Blue Grass Airport serves over one million passengers each           Customs Service Office, which services the many passengers and cargo ship-
year. The airport is conveniently located less than ten minutes away from down-      ments arriving from international points of origin.
town Lexington. Passengers enjoy all the advantages of a regional airport - no
traffic, no long lines at the security checkpoint and no long walks to your car -    Blue Grass Airport has an adjacent Fixed Base Operator, TAC Air.
with all the amenities of larger airports. The terminal building offers comforta-
                                                                                     TAC Air, a full-service FBO, provides services 24 hours a day which include:
ble waiting areas, an executive lounge, state-of-the-art meeting facilities, great
                                                                                     AVGas and Jet A, quick turn fuel service, de-icing, a pilot briefing area and
shopping venues, free wireless internet access and much more. Blue Grass Air-
                                                                                     weather information center, overnight and extended stay hangar and tie-down
port is serviced by 7 major airlines providing 14 non-stop destinations. Its
                                                                                     facilities, full service avionics and maintenance, pilot and client lounge, execu-
7,000' ILS CAT I runway handles about 90 commercial flights a day by AirTran,
                                                                                     tive conference room, corporate aircraft catering, on-site rental cars and an on-
Allegiant Air, American, Continental, Delta, Northwest, US Airways, and United.
                                                                                     site US Customs office. TAC Air is currently constructing a brand new terminal
The airport has 16 boarding gates and nearly all airline operations utilize cov-
                                                                                     that will offer two conference rooms, an exercise room, quiet room, movie the-
ered jet bridges.
                                                                                     ater, an expanded passenger lobby, and 45,000 sf of hangar space.
The weather observation equipment at the airport includes the important Low
                                                                                     Lexington is also conveniently located within about an hour’s drive to Louisville
Level Wind Shear Alert System (LLWAS). Blue Grass Airport also houses a U.S.
                                                                                     and Cincinnati-Northern Kentucky International Airports. Louisville is west of
                                                                                     Lexington via I-64, and Cincinnati is to the north via I-75.




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                                                             Nonstop Flights from Bluegrass Airport
 International Connecting Flights Out Of           Destination             Peak Daily Flights   Flights Per Week
            Blue Grass Airport
                                                   Atlanta                        10                  66
Destination                     Flights Per Week
                                                   Charlotte                       6                  38
Acapulco, Mexico                       5           Chicago                         6                  42
Aguascalientes, Mexico                 1           Cincinnati                      3                  20
Aruba                                 16           Dallas                          3                  21
Bermuda, Bermuda                      11           Detroit                         5                  32
Calgary, Canada                       21           Fort Lauderdale                 1                   3
Cancun, Mexico                        35
                                                   Houston                         1                   7
Caracus, Venezuela                     7
                                                   Memphis                         2                  14
Cozumel, Mexico                       13
                                                   New York - LaGuardia            1                   6
Dublin, Ireland                       14
                                                   New York - Newark               1                   6
Grand Cayman, Cayman Islands          12
                                                   Orlando, FL                     2                   8
Guadalajara, Mexico                   41
                                                   Tampa Bay, FL                   1                   2
Guatemala City, Guatemala              7
Leon/Guanajuato, Mexico               14           Washington DC                   1                   6
Manchester, England                    7
Mexico City, Mexico                   47
Montego Bay, Jamaica                  19
Montreal, Canada                      40
Nassau, Bahamas                       26
Ontario, Canada                       14
Ottawa, Canada                        34
Panama City, Panama                   14
Puervallarta, Mexico                  14
St. Thomas, US Virgin Islands          7
San Jose, Costa Rica                  21
San Jose Cabo, Mexico                 14
San Juan, Puerto Rico                 21
Toronto, Canada                       41
Torreon, Mexico                        6
Vancouver, Canada                     21
Winnipeg, Canada                      28



                                                                                                           (800) 341-1100
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The Bluegrass Region is a focal point in Kentucky for trade, service, and govern-
ment functions. Inside the Bluegrass, the city of Lexington is the center for fi-                 2010
nance, insurance, and real estate activities. Lexington and the surrounding com-
munities are also very successful in attracting and retaining manufacturing em-
                                                                                     13.0
ployment.
                                                                                     12.0
The largest employer in the Bluegrass Region is the University of Kentucky,          11.0
employing over 12,000 educators, administrators and support staff. Toyota is
                                                                                     10.0
the largest manufacturer and Saint Joseph Healthcare is the largest solely
                                                                                      9.0
healthcare employer in the region. The Fayette County Public School system and
                                                                                      8.0
Lexington-Fayette Urban County Government are the largest single government
organizations in the area.                                                            7.0
                                                                                      6.0
The Bluegrass Region has successfully avoided much of the high unemployment                   Jan Feb Mar Apr May Jun               Jul Aug Sep Oct Nov Dec
rates that have manifested themselves in the state of Kentucky as well as the
USA during the recent recession. A diverse economy that includes government,                        Bluegrass Region               Kentucky         USA
education, and healthcare as well as a highly educated labor force have helped
to shield the Bluegrass from seeing the worst of the worldwide economic crisis.



                           Labor Force Estimates                                                      Unemployment Rates (non-adjusted)
                                                    Yearly Averages                                                                      Yearly Averages
                           2010         2009        2008       2007     2006                                    2010        2009         2008       2007      2006
  Bluegrass Region       308,434      306,300      303,721   303,807   302,053       Bluegrass Region           8.4%        8.4%         5.2%      4.3%        4.7%
  Bourbon County          9,805        9,788        9,708     9,708     9,830        Bourbon County            9.5%         9.3%         5.8%      5.0%        5.1%
  Clark County           17,641       17,711       17,369    17,267    17,372        Clark County              10.5%        10.8%        6.3%      5.0%        5.6%
  Fayette County         152,908      151,441      150,421   150,449   148,659       Fayette County            7.9%         7.6%         4.8%      4.0%        4.4%
  Franklin County        25,045       24,845       24,840    25,137    25,349        Franklin County           8.7%         8.9%         5.8%      4.6%        4.8%
  Jessamine County       23,568       23,102       22,907    22,867    22,718        Jessamine County          8.9%         8.9%         5.5%      4.6%        4.8%
  Madison County         42,678       43,212       42,768    42,717    42,738        Madison County            8.6%         9.0%         5.5%      4.8%        4.9%
  Scott County           23,425       22,838       22,425    22,374    21,911        Scott County              9.3%         9.6%         5.5%      4.5%        4.8%
  Woodford County        13,363       13,363       13,284    13,287    13,476        Woodford County           8.0%         8.0%         4.8%      4.0%        4.3%
Source: Kentucky Office of Employment and Training LAUS                             Source: Kentucky Office of Employment and Training LAUS




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 Despite a solid base of manufacturing and automotive suppliers, the Bluegrass               25
 Region is mainly a service-based economy. By itself, manufacturing is one of the            20
 larger employers and the highest wage-payer in the Bluegrass. However, when                 15
 combined, the various service sectors easily outpace manufacturing in both em-              10
 ployment and wages. Especially strong in the areas of healthcare and educa-                   5
 tion, the service sector continues to be the main economic engine for the re-                 0
 gion.                                                                                                 2003           2004           2005          2006           2007           2008

 The Bluegrass is a greater than $20 billion economy marked by consistent, sus-
                                                                                                          Total Industry                          Private services-producing
 tainable growth. Between 2001 and 2008, the Bluegrass’ economy has grown
                                                                                                          Private goods-producing                 Government
 20% overall which translates to a real compound annual growth rate of 2.3% -
                                                                                               Source: Bureau of Economic Analysis
 higher than both the state of Kentucky and the USA. In particular, the Blue-
 grass’ goods-producing sector outpaced the USA as a whole by a factor of 2.                                          Output & Economic Growth

 In terms of median and per capita income, the Bluegrass easily trumps the state                                                 2008 GDP        Real Compound Annual Growth Rate
                                                                                                                                            1
 of Kentucky as a whole. It matches up much more favorably with the US average                                                   Lex MSA          Lex MSA1              KY            USA
 on median household, family, and personal income, as well as per capita in-           Total Industry Output        $22.7 billion                    2.3%            1.6%            2.0%
 come.                                                                                  Private Services Production $13.7 billion                    2.5%            2.2%            2.7%
                                                                                        Private Goods Production $5.8 billion                        2.1%            0.9%            1.0%
              Lexington MSA1 Private Sector Employment
                                                                                        Government                  $3.3 billion                     1.7%            1.2%            0.9%
             Selected Industries                        Employment   Payroll ($1000)   Source: Bureau of Economic Analysis (2001 to 2008)
Health care and social assistance                         31,362       $1,353,167
Manufacturing                                             31,012       $1,577,369                           Household, Family, and Personal Income
Retail trade                                              28,637        $655,806                                                           Lex MSA1                KY                USA
Accommodation & food services                             22,433        $293,531
Admin, support, waste mgt, remediation                    14,671        $305,575            Aggregate Household Income                   $12.9 billion      $94.0 billion       $8.1 trillion
                                                                                            Median Household Income                        $50,690            $41,538            $52,029
Construction                                              13,566        $577,899
Professional, scientific & technical services             13,059        $665,982
                                                                                            Aggregate Family Income                       $9.9 billion      $74.3 million       $6.3 trillion
Other services (except public admin)                      10,986        $271,298
                                                                                            Median Family Income                           $65,273            $51,729            $63,366
Wholesale trade                                            9,979        $492,435
Information                                                8,039        $282,554            Aggregate Personal Income                    $13.1 billion      $96.5 billion       $8.4 trillion
Finance & insurance                                        7,522        $371,464            Median Personal Income                         $26,809            $21,829            $26,182
Transportation & warehousing                               7,366        $285,057            Per Capita Income                              $28,887            $22,603            $27,589
Educational services                                       5,079        $99,957        Source: US Census Bureau ACS (2008)
Arts, entertainment & recreation                           3,164        $74,316
Real estate & rental & leasing                             2,870        $83,312         1
                                                                                            The US Census definition of Lexington’s MSA does not include the counties of Franklin or Madison
Utilities                                                  1,113        $76,270
Source: US Census Bureau MSA Business Patterns (2007)

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                    Bluegrass Region Major Employers                                                    Bluegrass Region Major Employers
                               Non-manufacturing                                                                     Manufacturing
               Company                    Employees       Industry       County                     Company                Employees       Industry        County
University of Kentucky                      12,096        Education      Fayette     Toyota Motor Manufacturing Kentucky      7,000     Manufacturing       Scott
Fayette Co. Public Schools                  5,300         Education      Fayette     Trane Co                                 1,300     Manufacturing      Fayette
Eastern Kentucky University                 3,700         Education      Madison     Tokico (USA) Inc                         839       Manufacturing      Madison
KY Cabinet for Health & Family Services     3,610        Government       Franklin   Osram Sylvania                           700       Manufacturing     Woodford
Lexmark International Inc.                  3,130         World HQ       Fayette     Montaplast of North America              620       Manufacturing      Franklin
Lexington-Fayette Urban County Gov't        2,973        Government      Fayette     Link-Belt Construction Equipment         529       Manufacturing      Fayette
Central Baptist Hospital                    2,500        Health Care     Fayette     Worldcolor                               504       Manufacturing     Woodford
St. Joseph Hospital                         2,300        Health Care     Fayette     Square D Company                         500       Manufacturing      Fayette
ACS, A Xerox Company                        2,050      Data Processing   Fayette     NACCO Materials Handling Group           490       Manufacturing      Madison
KY Transportation Cabinet                   2,000        Government       Franklin   G E Lighting LLC                         475       Manufacturing      Fayette
L-3 Communications Integrated Systems       1,750     Integrated Systems Fayette     CMWA                                     475       Manufacturing      Bourbon
Veterans Medical Center                     1,565        Health Care     Fayette     Johnson Controls Inc                     431       Manufacturing       Scott
Scott County Public Schools                 1,525         Education       Scott      Webasto Sunroofs Inc                     410       Manufacturing      Fayette
Wal-Mart                                    1,497           Retail       Fayette     Niles America Wintech Inc                410       Manufacturing        Clark
Madison County Public Schools               1,475         Education      Madison     Enersys Corporation                      400       Manufacturing      Madison
Jessamine County Public Schools             1,440         Education      Jessamine   Monessen Hearth Systems                  375       Manufacturing      Bourbon
U.S. Postal Service                         1,296        Mail Delivery   Fayette     Toyota Tsusho America Inc                356       Manufacturing       Scott
Kroger Co                                   1,175           Retail       Fayette     G & J Pepsi-Cola Bottlers Inc            350       Manufacturing      Fayette
Lexington Clinic                            1,017        Health Care     Fayette     Pilkington North America                 345       Manufacturing     Woodford
KY Dept for Workforce Investment            1,000        Government       Franklin   Leggett & Platt Inc                      345       Manufacturing        Clark
Amazon.com                                   950          Distributor    Fayette     Trim Masters Inc                         340       Manufacturing     Jessamine
Wal-Mart                                     900            Retail       Madison     International Processing Corp            333       Manufacturing        Clark
Clark County Public Schools                  865          Education        Clark     KI-USA Corp                              330       Manufacturing      Madison
KY General Government Cabinet                800         Government       Franklin   EnerSys                                  330       Manufacturing      Madison
Ashland Inc./Valvoline                       800        Transportation   Fayette     United L-N Glass                         325       Manufacturing     Woodford
UPS                                          780          Distributor    Fayette     Catalent Pharma Solutions                321       Manufacturing        Clark
Cardinal Hill Rehabilitation Hospital        772         Health Care     Fayette     Buffalo Trace Distillery                 318       Manufacturing      Franklin
Meijer Inc                                   675            Retail       Fayette     Creation Tech. Kentucky Inc.             315       Manufacturing      Fayette
Pattie A. Clay Hospital                      650         Health Care     Madison     Y H America Inc/Div 1                    310       Manufacturing     Woodford
Kentucky Department Education                600          Education       Franklin   Okonite Company Inc                      310       Manufacturing      Madison
Frankfort Regional Medical Center            600         Health Care      Franklin   The Okonite Company                      300       Manufacturing      Madison
Gall's, An Aramark Company                   596          Mail Order     Fayette     Alltech Inc.                             300       Manufacturing     Jessamine
Bureau of Prisons                            560         Corrections     Fayette     Ceradyne                                 280       Manufacturing      Fayette
McLane Cumberland                         526         Distributor        Jessamine   Richmond Auto Parts Technology Inc        276       Manufacturing     Madison
Sources: Commerce Lexington, KBIIS, Dunn & Bradstreet                                Sources: Commerce Lexington, KBIIS, Dunn & Bradstreet




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Building on its early reputation as the Athens of the West, Lexington continues
to excel in education. Along with some of the best public schools in the state,
Lexington also has one of the best educated labor forces in the nation. Census
data for cities over 250,000 people ranks the city as the thirteenth most highly
educated in the nation based on the 39.1% of the population 25 years or older
that has at least a Bachelor’s degree.1 Even more impressive, when education
levels all the way down to high school graduates are considered, Lexington
claims the title of second most educated workforce in the nation (Business Fa-
cilities, 2008), trailing only Seattle, Washington.

Anchored by the state’s flagship university, the University of Kentucky, the Blue-
grass boasts 10 colleges and universities within 40 miles of Lexington. In addi-
tion, Lexington has five other professional and technical colleges.2 In total, over
68,000 students are enrolled in institutions of higher learning in the Bluegrass,
graduating close to 12,000 annually.

1
    US Census Bureau ACS (2008)
2
    Indiana Wesleyan, National, Spencerian, Strayer, and Sullivan

                        Colleges and Universities Within 40 Miles of Lexington
                                                          2009        2009       Degrees    Distance from
       Institution                                                                                              Percent over age 25 with a
                                                       Enrollment   Graduates   Conferred     Lexington
                                                                                                                Bachelor's degree or higher
       University of Kentucky                            27,171       5,703     B, M, PhD      0 mi
       Eastern Kentucky University                       16,268       2,870     A, B, M        21 mi            Bourbon County1                  13.5%
       Bluegrass Community &                                                                                    Clark County                     18.4%
                                                         13,378       925       A               0 mi
       Technical College                                                                                        Fayette County                   39.4%
       Kentucky State University                          2,834       224       A, B, M        22 mi            Franklin County                  25.1%
       Georgetown College                                 1,882       488       B, M           12 mi            Jessamine County                 27.6%
       Asbury College                                     1,622       307       B, M           16 mi            Madison County                   28.2%
       Berea College                                      1,548       267       B              34 mi            Scott County                     24.3%
       Midway College                                     1,408       348       A, B           12 mi            Woodford County                  34.7%
       Centre College                                     1,216       271       B              32 mi
                                                                                                            Source: US Census Bureau ACS (2006-2008)
       Transylvania University                            1,089       256       B              0 mi
                                                                                                            1
       Total                                             68,416      11,659                                  The most recent data available for Bourbon Coun-
                                                                                                            ty is 2000 Census data.
Source: Kentucky Council for Post Secondary Education


                                                                                                                                                    (800) 341-1100
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                                                                                                       For the average sales price of $166,082 in 2009, one could expect to buy a three
                                                                                                       bedroom, free standing house. Brick exteriors are somewhat prevalent locally
Equally important to the economic growth of a region is the cost of living for its                     due to a ready supply of clay to local brick manufacturers. Persons relocating
citizens. According to the ACCRA Cost of Living Index, which compares partici-                         from the northeast and the west coast should be able to trade up substantially.
pating cities in the USA on six different categories, as well as a composite score,
Lexington is a relatively inexpensive place to live. Lexington’s composite cost of
living score consistently rates below the US average, as do most of its individual
scores.

The Bluegrass also has an impressively stable housing market. Avoiding the ma-
jority of the housing bubble, median sales prices on single family homes fell only
2% year to year during the recent housing bust.
                                Bluegrass1 Housing Data
                                                 2009                 2008              2007
New Listings                                  16,428              16,769            18,886
Median Sales Price                           $140,324            $143,000          $146,000
Total Units Sold                               7,648               7,979             9,352
Total Dollar Sales                          $1.33 billion       $1.43 billion     $1.72 billion
Single Family Homes
Residential Sales (Units)                      7,368               7,585             8,855
Residential Sales (Dollars)                 $1.23 billion       $1.31 billion     $1.57 billion
Average Sales Price                          $166,221            $171,921          $176,322
Average Days On Market                           87                  89                85
Source: Lexington-Bluegrass Association of Realtors
1
    The LBAR data covers a total of 14 counties in Central Kentucky

                  ACCRA Cost of Living Index - For 318 Participating Cities - 2010
                             Composite         Grocery                                     Transpor-   Health      Misc.
Location                                                       Housing       Utilities
                               Index            Items                                        tation     Care       Goods        105

Lexington, KY                    92.8             86.9           88.5           94.1           97.6     93.5        97.0        100

Charleston, SC                   98.2           105.7             92.3           96.8          93.9    104.2       101.5         95
Charlotte, NC                    93.2            97.1             79.3           91.4          95.7    110.1       101.4         90
Cincinnati, OH                   93.8            96.4             81.7          104.0          98.0     95.7        98.7
Columbus, OH                     91.9            91.6             86.0          100.4          99.1    107.4        90.7         85
                                                                                                                                      2000   2002    2004    2006      2008      2010
Louisville, KY                   87.6            81.5             78.5           99.4          96.9     87.0        91.9
Nashville, TN                    88.9            91.7             71.1           82.8          92.5     87.1       104.5                         Lexington          US Average
Raleigh, NC                      98.1           104.2             88.6          105.8          96.7    100.8       101.8
                                                                                                                                                                              (800) 341-1100
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                                                                                      The East Kentucky Power Cooperative also serves the needs of many local elec-
                                                                                      tricity users in the Lexington metropolitan area. It is a partnership of 18 member
Kentucky enjoys a tremendous competitive advantage in the provision of ener-          systems, including the Blue Grass, Clark, Harrison, and Fox Creek Rural Electric
gy, natural gas, and water supply. The state’s large coal reserves and their re-      Power Cooperatives. Specific rates can be provided upon request.
sulting proximity to coal burning utility plants, its direct location on the inter-
state natural gas pipeline corridor, and an abundant natural water supply keep        The cost of natural gas var-
                                                                                      ies across Kentucky, de-            Cost of Natural Gas ($ per MCF)
Kentucky’s utility costs among the very lowest in the nation.
                                                                                      pending upon the source of                               Industrial        Commercial
Investor owned electric companies and rural electric cooperatives are regulated       gas, the local distributor,
by the Kentucky Public Service Commission, including approval of rate sched-          the volume of gas used and US Average                       9.67               12.23
ules. These power distributors are allowed to negotiate lower economic incen-         the type of service contracts Kentucky                     10.41               13.25
tive rate contracts with large industrial and commercial customers. Significant       (e.g. firm vs. interruptible
                                                                                                                    Source: Energy Information Administration (2008)
discount rates can be granted for up to five years for both new and expanding         service). The majority of the
operations. As of 2008, in the industrial and commercial sectors, Kentucky’s          gas consumed in Kentucky is obtained from the interstate pipeline system be-
electricity prices were 29.4% and 29.6% below the national average, respec-           tween the Gulf states and the Northeast, which passes directly through Ken-
tively. Residential customers also paid 29.4% below the national average.             tucky, thus ensuring competitive and readily available supply of natural gas.

                                                                                      All gas distribution and intrastate gas transmission companies in Kentucky, ex-
            Lowest State Electric Costs (Cents per kWh)                               cept municipal systems, are regulated by the Kentucky Public Service Commis-
                                                                                      sion, including approval of rates charged to customers. Regulated gas compa-
                          Retail       Industrial   Commercial     Residential
                                                                                      nies can offer economic incentive rates for certain large industrial and commer-
 US Average                9.74           6.83        10.36            11.26          cial customers for up to five years, for both new and expanding operations. Gas
                                                                                      companies also can offer a discount or waiver of gas main extension costs. In-
   West Virginia           5.61           4.20         6.08            7.06
                                                                                      dustries consistently using large quantities of natural gas may negotiate for
   Wyoming                 5.67           4.47         6.71            8.21
                                                                                      transport gas service at a cost substantially below normal gas service costs. The
   Idaho                   5.69           4.48         5.72            6.99
                                                                                      company buys gas from the producer through contracts with the local gas dis-
   Kentucky                6.26           4.82         7.29            7.94
                                                                                      tributor. The minimum level of usage required for transport gas service varies
   Utah                    6.49           4.59         6.66            8.26
                                                                                      with the gas distributor.
 Source: Energy Information Administration (2008)
                                                                                      Natural gas supplies are provided by two private sources in the Bluegrass Re-
                                                                                      gion. Columbia Gas of Kentucky, the state subsidiary of the Columbia Gas Sys-
The largest electricity provider in the Lexington Metropolitan Area is Kentucky
                                                                                      tem, distributes natural gas for residential and commercial users and provides
Utilities Company, which is a subsidiary of E.On US., headquartered in Louisville.
                                                                                      transportation services to industrial users. Delta Gas Company is headquartered
Kentucky Utilities serves more than 518,000 customers in 77 counties of Ken-
                                                                                      in Clark County. It provides similar service, concentrating on serving the needs
tucky and five counties in southwestern Virginia. Kentucky Utilities’ service area
                                                                                      of customers located in the southern portions of the Bluegrass Region. Specific
is an attractive place to live and do business. Specific rates can be provided upon
                                                                                      rates can be provided upon request.
request.



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                                                                                                                                                                          15


Water service is available through local providers in each of the Bluegrass coun-
ties. Kentucky American Water, located in Lexington, is the largest, with a capac-
ity of 70 million gallons per day. Water companies are also regulated by the Ken-
tucky Public Service Commission. Specific rates can be provided upon request.                                     Waste Water Treatment
                                  Water Availability                                                                                    Existing
                                                                                                                                                   Avg Flow Avg as % of
                                        Existing                Avg Daily                                                               Capacity
                                                      Peak Day            Avg as % of                                                               (MGD)    Capacity
                                        Capacity               Production                                                                (MGD)
                                                       (MGD)               Capacity
                                         (MGD)                   (MGD)                  Bourbon County
Bourbon County                                                                            Paris                                           2.70       1.44       53%
  Paris                                   3.00          2.23      1.65        55%         Millersburg                                     0.20       0.11       57%
  Millersburg                             0.36          0.32      0.15        41%       Clark County
Clark County                                                                              Winchester                                      4.00       4.16      104%
  Winchester                              6.00          5.09      0.55        28%       Fayette County
Fayette County                                                                            Lexington-West Hickman                         33.87      20.92       62%
  Kentucky American Water                70.00         62.30     41.84        60%         Lexington-Town Branch                          30.00      18.99       63%
Franklin County                                                                         Franklin County
  Frankfort Water                        18.00         13.19      8.77        49%         Frankfort                                       9.90       6.72       68%
Jessamine County                                                                        Jessamine County
  Nicholasville                           6.00          6.44      4.02        67%         Nicholasville – E. Brown Street                 2.71       1.23       45%
  Wilmore                                 2.00          0.93      0.55        28%         Nicholasville – Jessamine Creek                 3.00       1.91       64%
Madison County                                                                            Wilmore                                         1.00       0.57       57%
  Berea Municipal                         4.00          3.37      2.67        67%       Madison County
  Richmond Utilities                     12.00          9.34      6.53        54%         Berea                                           4.30       2.74       64%
Scott County                                                                              Northern Madison SD                             1.03       0.12       11%
  Georgetown Municipal                    4.00          3.03      2.21        55%         Richmond Dreaming Creek                         3.65       2.91       80%
Woodford County                                                                           Richmond Tates Creek                            1.00       0.14       14%
  Versailles                             10.00          4.91      3.34        33%         Richmond Silver Creek                           2.99       2.21       74%
                                                                                        Scott County
Sources: Bluegrass Area Development District (2009)                                       Georgetown #1                                   4.50       2.58       57%
                                                                                          Georgetown #2                                   2.20       0.92       42%
Sewer service is available through the local city governments in each of the              Sadieville                                      0.03       0.01       47%
eight counties. Specific rates can be provided upon request. Solid waste dispos-          Stamping Ground                                 0.14       0.10       74%
                                                                                        Woodford County
al services are provided by the cities and also by private companies in each of
                                                                                          Versailles                                      3.00       1.94       65%
the counties.                                                                             Midway                                          0.75       0.22       29%
                                                                                        Sources: Bluegrass Area Development District (2008)




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                                                                                                                                                                   16


                                                                                                                         Windstream Communications, the incum-
                                                                                                                         bent Lexington telecommunications com-
Kentucky is served by one of the most extensive telecommunications networks                                              pany, is headquartered in Little Rock,
in the country, providing an important link to information-intensive businesses                                          Arkansas. Windstream offers phone,
around the world. Fiber optic, wireless radio, digital microwave, and satellite                                          broadband and digital TV services. Wind-
technologies are integrated into a sophisticated infrastructure capable of han-       stream was formed through the spinoff of Alltel's landline business and merger
dling the most demanding needs. Kentucky’s commitment to technology opens             with VALOR Telecom. Windstream has over 322 route-miles of fiber optic cable
a world of opportunities for any business with telecommunications needs.              in Lexington.
Kentucky has moved far ahead of most states in developing its telecommunica-          Insight Communications, the 8th
tions infrastructure into a statewide communications and information network          largest cable television company
known as the Kentucky Information Highway. This digital network provides for          in the country, offers high speed
high speed, high capacity delivery of voice, data and video images. Kentucky’s        internet and telephone services to all areas of Lexington. For large companies,
telecommunication infrastructure includes fiber connected central offices; fiber      dedicated bandwidth up to 1 Gb per second is available through Fiber Optic ca-
ring diversity, digital switching, dual fiber feeds, and SONET based fiber optic      ble connectivity that runs for 436 route miles throughout the area, while medi-
rings. Full statewide deployment of ATM (asynchronous transfer mode) and              um and small sized organizations can utilize Insight Business for co-axial high
Frame Relay networks has been completed. This technology provides the flexi-          speed access.
ble bandwidth required for high-speed transport of voice, data image, and video
simultaneously.                                                                                                    QX.Net is Kentucky's largest independent Internet
                                                                                                                   service provider. Locally owned and operated,
Lexington is a natural major hub in the state’s telecommunication system. Lex-                                     QX.Net is the operator of the state's largest wire-
ington’s state-of-the-art network can support any telecommunication needs,            less network. Whether a T1, DS3, or point-to-point Gigabit wireless circuit is
ranging from the basic needs of a household to the broadband, high-speed data         required, QX.Net has the resources and the expertise to deliver the solution.
transmission needs of any large business. A full range of industry-leading tele-
communications services and equipment are in place in Lexington. Voice, data,
wireless and Internet communications needs are served by cutting-edge tech-
nology. Advanced commercial telecommunication services, including dedicated
Fiber Optic, T1, and T3 services are readily available at any geographical location
in the city of Lexington. DSL and high speed Co-Axial Cable Modem is also readi-
ly available close to everywhere in the city, and it can be made available any-
where on-demand.

Currently there are several telecommunication providers in the Lexington mar-
ket that offer a full range of services to businesses and households.




                                                                                                                                                          (800) 341-1100
                                                                                                                                                                       17


                                                                                       Eligible Projects: An eligible project must create a minimum of 10 new, full-time
                                                                                       jobs for Kentucky residents and maintain an annual average of at least 10 new,
Kentucky’s General Assembly passed new legislation in 2009 combining the               full-time jobs for Kentucky residents. At least 90% of the new, full-time Kentucky
KIDA, KJDA, and KREDA incentive programs into one streamlined incentive pro-           resident employees must receive base hourly wages of at least $10.88 (150% of
gram called the Kentucky Business Investment Program or KBI. Also included is          the federal minimum wage). Kentucky resident employees must receive total
a new incentive program for existing businesses for capital expenditures, the          hourly compensation (base hourly wages plus employee benefits) of at least
Kentucky Reinvestment Act or KRA.                                                      $12.51. Also required are minimum eligible costs of at least $100,000.

The following information is meant to be a summary guide to Kentucky’s Incen-          Eligible Costs: Eligible costs will only include costs incurred after the date of
tive Programs as presented by the Kentucky Economic Development Finance                preliminary approval. For a project to be considered an “owned” project, the
Authority (KEDFA). As with all state administered tax incentive programs, any          approved company or an affiliate either owns the project in fee simple or pos-
inducement offered to an eligible company is negotiated by Cabinet for Eco-            sesses the project pursuant to a capital lease. Eligible costs for owned projects
nomic Development officials.                                                           include 100 percent of the land, building, site development and startup costs.

For more information on Kentucky’s incentives, please visit:                           For a project to be considered a “leased” project, the approved company occu-
                                                                                       pies the site of the project pursuant to an operating lease agreement with an
http://www.thinkkentucky.com
                                                                                       unrelated entity that reflects an arms’ length transaction. Eligible costs for
                                                                                       leased projects include 100 percent of the start-up costs and 50 percent of the
                                                                                       estimated annual rent payments for each year of the tax incentive agreement.
Eligible Companies: Any business entity engaged in one or more of the follow-
ing activities: Manufacturing, agribusiness, or regional and national headquar-        Start-up costs include the costs incurred to furnish and equip a facility, such as
ters (regardless of the underlying business activity).                                 computers, furnishings, office equipment, manufacturing equipment, fixtures,
                                                                                       relocation of out-of-state equipment and nonrecurring costs of fixed telecom-
Non-retail service or technology activities must be: designed to serve a multi-        munication equipment. The cost of equipment eligible for recovery as an eligible
state, national or international market; provided to a customer base that in-          cost is limited to $20,000 for each new, full-time job for Kentucky residents cre-
cludes more than 50% non-residents; and may include, but are not limited to,           ated as of the activation date.
call centers, centralized administrative or processing centers, telephone or in-
ternet sales order or processing centers, distribution or fulfillment centers, data    Incentives: Tax incentives are available for up to 10 years via tax credits up to
processing centers, research and development facilities and other similar activi-      100 percent of tax paid on corporate income or limited liability entity tax arising
ties.                                                                                  from the project. Wage assessment incentives up to four percent (including up
                                                                                       to one percent required local participation) of gross wages of each employee. If
Eligible company does not include companies where the primary activity to be           the local community does not have a local occupational fee, then an alternative
conducted within the Commonwealth is forestry, fishing, mining, coal or mineral        form of participation should be provided. The employees recoup the wage as-
processing, the provision of utilities, construction, wholesale trade, retail trade,   sessment through a state income tax credit equal to the amount of the wage
real estate, rental and leasing, educational services, accommodation and food          assessment withheld. The tax incentives remain in place until the authorized
services or public administration services.                                            recovery amount (approved cost) is realized or for the term of the tax incentive
                                                                                       agreement, whichever occurs first. Unused credits that have been authorized


                                                                                                                                                              (800) 341-1100
                                                                                                                                                                    18


for the project may be carried forward for the term of the tax incentive agree-      least $2,500,000 and maintaining 85% of the full-time employment level at the
ment, however, unused credits expire at the maturity of the agreement.               facility must be achieved in order to proceed with final approval.

For more information on the KBI program, please visit:                               Incentives: A tax incentive is available for up to 10 years from the date of final
                                                                                     approval via tax credits up to 100% of tax paid on corporate income or limited
http://www.thinkkentucky.com/kyedc/pdfs/KBIFactSheet.pdf                             liability entity tax generated by or arising from the project. The tax incentive
                                                                                     remains in place until the authorized incentive amount is realized or for the
                                                                                     term of the reinvestment agreement, however, unused credits expire at the
Eligible Companies: Any Kentucky company engaged in manufacturing and re-            maturity of the agreement.
lated functions at a location operating within the Commonwealth on a perma-
                                                                                     For more information on the KBI program, please visit:
nent basis for a reasonable period of time preceding the request for assistance.
                                                                                     http://www.thinkkentucky.com/kyedc/pdfs/KRAFactSheet.pdf
Eligible Projects: The project must involve a minimum of eligible equipment and
related costs of at least $2,500,000. Eligible equipment and related costs must
be related to a qualifying Reinvestment Project which includes the acquisition,
construction, and installation of new equipment and the construction, rehabili-      KEDFA offers a mortgage loan program to work in conjunction with private fi-
tation, and installation of improvement to facilities necessary to house the new     nancing. The program is designed to allow businesses to obtain the long term
equipment; and the development of an occupational training program to train          financing needed to encourage growth.
or retrain the full-time employees of the company to support the Reinvestment
Project. Eligible equipment and related costs does not include costs related to      Program Guidelines: Projects financed must be agribusiness, tourism, industrial
the replacement or repair of existing machinery or equipment resulting from          ventures, or service industry. No retail projects are eligible. KEDFA may partici-
normal wear and usage.                                                               pate in projects with loans ranging from $25,000 to $500,000. The amount of
                                                                                     KEDFA participation is dependant on the project fixed asset cost, based on the
Projects must also agree to maintain a full-time employment base of at least         following:
85% of employment at the facility as of the date of preliminary approval. Com-
panies cannot have been awarded incentives under the Kentucky Industrial Re-                                 Project Cost KEDFA Participation
vitalization Act (KIRA) within the previous five years.                                                           Up to $200,000 50%
                                                                                                              $200,000 to $500,000      40%
Eligible Costs: Eligible costs include eligible equipment and related costs in-                                   Above $500,000 30%
curred after the date of preliminary approval that are approved by KEDFA for
recovery and may be up to 50% of the eligible equipment and related cost and         The project owners must inject a minimum of 10% toward the fixed assets. KED-
100% of the job skills upgrade training costs incurred in connection with an oc-     FA financing may be combined with a Community Development Block Grant,
cupational training program for full-time employees specifically related to train-   however, in no case will the total involvement from both exceed 33% of the
ing or retraining employees as part of the reinvestment project. The minimum         project cost. KEDFA financing may be combined with SBA 504 financing. Projects
requirements of incurring eligible equipment and related cost expenditures of at     must create new jobs or have a significant impact on the economic growth of a
                                                                                     community.




                                                                                                                                                           (800) 341-1100
                                                                                                                                                                       19


Only fixed assets (land, building, and equipment) may be financed. No refinanc-       construction, installation, and rehabilitation of fixtures and facilities, necessary
ing will be undertaken. Term and repayments are based on that of the private          or desirable for improvement of real estate owned, used, or occupied by the
lending institution. Personal guarantees are required of the company's owners         approved company.
who control at least 20% of the stock of the company.
                                                                                      Tax Incentives: A KEIA approved company is eligible to receive a refund of sales
The borrower must provide KEDFA proof that the project is underway (invoices,         and use tax paid for construction materials and building fixtures and for equip-
etc.) within 4 months of the approval date, or the commitment will expire. KED-       ment used in research and development purchased during the life of the project
FA funds are not disbursed until the entire project, as outlined in the applica-      not to exceed the amount authorized in the memorandum of agreement. An
tion, is complete.                                                                    approved company has 18 months from the date of KEDFA approval to purchase
                                                                                      materials eligible for refund. KEDFA may grant a 12 month extension for good
Interest Rates and Fees: The interest rate is fixed, and is tied to the term of the   cause. The total tax refund incentive available for commitment by KEDFA for all
loan. Rates are as follows:                                                           projects, for each fiscal year, is limited to $20,000,000 for building and construc-
                                                                                      tion materials and $5,000,000 for equipment used for research and develop-
                               Term Interest Rate
                                                                                      ment. Sales tax paid on expenditures made prior to KEDFA approval as an
                                 3 yrs. 1.0%
                                                                                      “approved company” will not be refunded.
                                 5 yrs. 2.0%
                                 7 yrs. 3.5%                                          For more information on KEIA, please visit:
                                 10 yrs. 5.0%
                                                                                      http://www.thinkkentucky.com/kyedc/pdfs/keia.pdf
For more information on KEDFA, please visit:

http://www.thinkkentucky.com/kyedc/pdfs/kedfadcp.pdf



The Bluegrass State Skills Corporation acts as a coordinator and funding source
for job training in Kentucky.                                                         The Commonwealth Seed Capital LLC (CSC) provides early-stage seed funds to
                                                                                      facilitate the commercialization of innovative ideas and technologies developed
For more details on BSSC, please visit: http://www.thinkkentucky.com/bssc/            in Kentucky. CSC will invest state capital in Kentucky technology companies.
wftrainprog.aspx#SkillsInvestmentCredit


                                                                                      The Department of Commercialization and Innovation (DCI) has been charged
Eligible Companies: Any business entity that establishes a new or expanded ser-       with leading the commonwealth’s new economy efforts. By building and pro-
vice or technology, manufacturing, or tourism attraction activity in Kentucky.        moting technology-driven and research-intensive industries, the Cabinet for
                                                                                      Economic Development works through DCI to create high-tech job opportunities
Eligible Projects: The project must involve a minimum investment of $500,000.
                                                                                      and develop clusters of technological innovation throughout the state. DCI’s
Eligible investment costs include expenditures for research and development
                                                                                      mission includes recruiting and retaining high-tech companies that produce
equipment, acquisition of real property, building, and construction materials,


                                                                                                                                                              (800) 341-1100
                                                                                                                                                                      20


jobs, new products and services, and develop new and improved processes. DCI         grants up to $30,000 to assist businesses and individuals at the earliest stages of
recommends funding on behalf of eligible, applicant companies to the Kentucky        project feasibility and concept development, and is administered by the KSTC.
Economic Development Finance Authority (KEDFA).
                                                                                     Companies seeking capital go through a rigorous due diligence process and are
In most instances, incentives awarded through DCI are in the form of forgivable      judged in terms of industry fit, return on investment and economic develop-
loans, with the amount of the loan being determined by DCI, primarily based on       ment goals.
the applicant company’s projected high-tech job creation. Forgivable loans rec-
ommended by DCI typically range from $100,000 to $250,000 depending upon             Investments are made in small to medium-sized, innovative, technology-
the specifics of the project. The determination of the loan amount to be recom-      based companies in Kentucky that are poised for exponential growth and are:
mended is at the sole discretion of DCI. Loan forgiveness and/or payback will be     working to commercialize innovative technology in biosciences, environmental
based on the company meeting the job and salary requirements as well as main-        & energy technologies, human health & development, information technology
taining the same for the duration of the maintenance period.                         & communications, materials science & advanced manufacturing; working to
                                                                                     commercialize innovative alternative fuel/energy technology; working in collab-
For more information about DCI funds, please visit:                                  oration with Kentucky colleges and universities; and/or located in rural areas of
                                                                                     Kentucky (outside Fayette and Jefferson Counties).
http://thinkkentucky.com/dci/pdfs/DCI%20High-tech%20Pools_FACT%
20SHEET%20FINAL.pdf                                                                  For more information about ICC’s, KSTC, SBIR/STTR Matching, or the Enterprise
                                                                                     Fund, please visit: http://www.startupkentucky.com.


A Small Business Innovation Research/Small Business Technology Transfer in-
centive program will encourage small businesses to explore their technological
potential and maximize profit from commercialization. DCI will currently match
all Phase 1 and Phase 2 federal awards received by Kentucky businesses after
January 1, 2009. This would include matching awards of up to $100,000 to sup-        Kentucky corporations and foreign corporations are subject to income tax due
port Phase 1 exploration of the technical merit or feasibility of an idea or tech-   to a “doing business” standard that includes being organized under the laws of
nology. Phase II federal awards, which support full-scale research and develop-      this state; having a commercial domicile in this state; owning or leasing property
ment, can be up to $750,000, and would be matched by the Commonwealth up             in this state; having one (1) or more individuals performing services in this state;
to the first $500,000.                                                               maintaining an interest in a general partnership doing business in this state;
                                                                                     deriving income from or attributable to sources within this state, including de-
                                                                                     riving income directly or indirectly from a trust doing business in this state; or
                                                                                     directing activities at Kentucky customers for the purpose of selling them goods
The Kentucky Enterprise Fund, Rural Innovation Fund, and Kentucky New Energy
                                                                                     or services. Exempted are banks and trust companies other than bankers’ banks,
Ventures provide seed stage capital that focus on the early-stage commerciali-
                                                                                     savings and loan associations, production credit associations, insurance compa-
zation of a technology-based product or process. By encouraging the commer-
                                                                                     nies, corporations exempted from federal income tax under section 501 of the
cialization of innovative ideas, these funds foster competitive, profitable compa-
                                                                                     U.S. Internal Revenue Code, and other nonprofit religious, educational, and
nies that create high paying jobs and wealth in Kentucky. This fund provides
                                                                                     charitable corporations. *KRS 141.040, (25)+



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                                                                                                                                                                   21


Kentucky has adopted the United States Internal Revenue Code definition of
corporation *(Section 7701(a)(3)+, which includes associations, joint-stock com-
panies, and insurance companies. Kentucky has broadened the definition of           Should a corporation not contain any one or a combination of the apportion-
corporation to include LPs, LLCs, S-corps, LLPs, REITs and other legal entities.    ment factors, then the Kentucky Apportionment Formula is calculated by reduc-
“Corporation” shall not include any public traded partnership as defined by Sec-    ing the denominator by that factor’s percentage.
tion 7704(b) of the IRC that is treated as a partnership under IRC Section 7704
                                                                                    Multi-state corporations can petition the Kentucky Department of Revenue for
(c). *(KRS 141.010(24)+
                                                                                    alternate apportionment formulas, when the statutory three (3) factor formula
                                                                                    does not fairly represent the extent of the business activities in Kentucky. State
                                                                                    statutes and regulations provide for special apportionment measures for inter-
A Corporation must                                                                  state telecommunications companies, common carrier transportation compa-
pay the higher of the                   Tax Rate Schedule                           nies, pipeline companies, regulated investment companies, securities brokerage
Alternate Minimum                   Taxable Net Income                 Tax Rate     companies, and loan companies.
Tax or the corporate $0 to $50,000                                       4.0%
income tax. A Corpo- $50,001 to $100,000                                 5.0%       Affiliated corporations with 80% or greater ownership or voting rights must file
ration has the option      $100,001 +                                    6.0%       a consolidated return. This includes all corporations doing business in the state
of choosing between Source: KRS 141.040                                             in any part of a taxable year unless the corporation is: 1) Included in another
the lower of two alternative minimum taxes. The first is $0.095/$100 of Ken-        corporation’s return; 2) Exempt from corporate income tax under KRS 141.040
tucky gross receipts; defined under KRS 141.120 (8)(c).; or $0.75/$100 of Ken-      (1) (a) to (h); 3) A real estate investment trust or company as defined by the
tucky gross profits; defined as Kentucky gross receipts less Kentucky returns and   Internal Revenue Code; 4) A domestic international sales company; or 5) Any
allowances and less Kentucky cost of goods sold. There is a $175 minimum re-        corporation with a net operating loss and the property, payroll and sales factors
gardless of the method used.                                                        are zero. (KRS 141.200) Corporations with an annual state income tax liability
                                                                                    estimated to reach $5,000 or more must file a declaration of estimated tax and
Corporations and general partnerships having business income taxable both in        make installment payments. (KRS 141.200)
Kentucky and elsewhere pay Kentucky income tax on that portion of business
income earned in Kentucky as determined by the state's apportionment formu-                             Kentucky's Apportionment Formula
la. The formula is based upon the Uniform Division of Income for Tax Purpose
                                                                                            Property Factor (25%) + Payroll Factor (25%) + Sales Factor (50%)
Act (UDITPA), which has been adopted generally by the majority of states. The
                                                                                                                            4
Kentucky formula differs from the UDITPA formula in three (3) ways:
                                                                                    Note: computed to four decimal places

1.There is no throwback, sales are not recaptured to Kentucky when the sales
are made to a state where the corporation has no tax liability;
                                                                                    Gross income of corporations subject to Kentucky income tax is similar to in-
2. Certain qualified pollution control equipment owned or leased in Kentucky is     come reported for federal income tax purposes.
excluded from the property factor; and
                                                                                    Excluded from Kentucky gross income is income exempt from taxation by the
3. The sales factor is given fifty (50) percent of the total weight in Kentucky's   Kentucky Constitution and the Constitution and statutory laws of the U.S.; all
formula. (KRS 141.120, KRS 141.206)


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dividend income; income from safe harbor leases; any amount received by a              (d) amounts paid to any club, organization, or establishment that has been
tobacco producer or quota owner from the master settlement agreement, sec-             found by the courts or a government body to discriminate in its membership,
ondary settlement fund, or commodity credit corporation; and fifty (50) percent        privileges, or services on the basis of race, color, religion, national origin, or sex.
of the gross income from any disposal of coal covered by Section 631(c) of the
Internal Revenue Code, if no deduction is taken for percentage depletion; ex-          Depreciable property placed in service after December 31, 1989, is depreciated
clude any amounts received as a result of a tobacco quota buydown program;             in the same way as allowed by federal depreciation rules in effect prior to Sep-
exclude the distributive share income or loss received from a corporation sub-         tember 11, 2001. Property placed in service during the 1980s is adjusted to the
ject to the tax imposed by KRS 141.040; and exclude Phase II payments received         value used for federal income taxes, beginning in 1994. Kentucky has not adopt-
by a producer of tobacco or a tobacco quota owner.                                     ed the thirty percent (30%) federal bonus depreciation enacted by the Job Crea-
                                                                                       tion and Worker Assistance Act of 2002, or the fifty (50%) bonus depreciation
Included in Kentucky gross income is interest income from obligations of other         enacted by the Jobs and Growth Tax Relief Reconciliation Act of 2003.
states and their political subdivisions (bonds, notes, mortgages, etc.,), include in
the gross income of lessors income tax payments made by the lessees to lessors,
under the provisions of Section 110 of the IRC and exclude payments from the
                                                                                       Kentucky's state and local property tax system differs from those of most states.
gross income of lessees; and income from intercorporate transactions adjusted
                                                                                       State government taxes all property not specifically exempt by the state consti-
to an arm's length basis, when required by the Kentucky Revenue Cabinet to
                                                                                       tution, and local governments are allowed to tax only a few classes of property.
prevent the avoidance of taxes.
                                                                                       The basis of assessments for property taxes in Kentucky is 100 percent of fair
                                                                                       cash value. State and County governments split the responsibility of assessing
                                                                                       value. Assessments are based upon most property held on January 1 annually.
Net income for corporations subject to Kentucky income taxes is gross income           Taxpayers are required to report the value of all of their taxable property to the
minus essentially the same deductions from gross income as allowed for federal         local property valuation administrator (PVA) annually. Please see the following
income taxes, except for the following which are not deductible when compu-            page for detailed property tax information in Fayette County.
ting Kentucky net income:

(a) income taxes paid to other states that are computed in whole or in part, by
reference to gross or net income, U.S. territories or possessions, or any foreign
country or its political subdivisions;
                                                                                       The taxable wage base for U.I. taxes in the state is the first $8,000 of each work-
(b) any deduction directly or indirectly allocable to net income which is either       er's annual wages. An individual working 40 hours per week at the federal and
exempt from taxation or otherwise not taxed by Kentucky, or the same item to           state minimum wage exceeds the taxable wage within a calendar year. U.I. tax
be deducted more than once;                                                            rates for Kentucky's employers are set annually from statutory tables of rates.
                                                                                       An individual employer's contribution rate within the table is determined by its
(c) certain dividends received deduction by the corporation (as defined by Sec-        reserve account balance ratio (reserve account balance divided by taxable wag-
tions 243, 244, 245, and 247 of the U.S. Internal Revenue Code); and                   es for the previous three years). A new employer pays at a rate of 2.7 percent of
                                                                                       the first $8,000 of wages during the first three years of operation to establish a
                                                                                       reserve account with the state U.I. system. Thereafter it is experience rated,



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                                   Fayette County 2009 Real Property Tax Rates
   Property Tax Rate Description      District 1   District 2   District 3   District 4   District 5   District 6 District 7   District 8
   STATE                               0.1220       0.1220       0.1220       0.1220       0.1220       0.1220     0.1220       0.0150
   SCHOOL                              0.6280       0.6280       0.6280       0.6280       0.6280       0.6280     0.6280
   GENERAL SERVICE                     0.0800       0.0800       0.0800       0.0800       0.0800       0.0800     0.0800
   EXTENSION SERVICES                  0.0032       0.0032       0.0032       0.0032       0.0032       0.0032     0.0032
   SOIL & WATER CONSERVATION           0.0004       0.0004       0.0004       0.0004       0.0004       0.0004     0.0004
   HEALTH DEPARTMENT                   0.0280       0.0280       0.0280       0.0280       0.0280       0.0280     0.0280
   LEXTRAN                             0.0600       0.0600       0.0600       0.0600       0.0600       0.0600     0.0600
   REFUSE                              0.1431                    0.1431                    0.1431                  0.1431
   STREET LIGHTS                       0.0210                                 0.0210       0.0210       0.0210
   STREET CLEANING                     0.0094                                                           0.0094     0.0094
   TOTAL                               1.0951       0.9216       1.0647       0.9426       1.0857       0.9520     1.0741       0.0150


                               2009 Fayette County Tangible Personal Property Tax Rates
                                                                          GENERAL EXTENSION
LINE ITEM DESCRIPTION BY CLASS                   TOTAL    STATE   SCHOOL   SERVICE SERVICES                        HEALTH DEPT       LEXTRAN
          Aircraft Personal Property Non-
  40;41                                          0.7485   0.015    0.543    0.099   0.0035                             0.028             0.06
          Commercial (Watercraft)
          Raw Materials/Goods in
  33;34                                           0.05     0.05
          Process/Dealer
17;60;82 Tools & Fixtures                        1.1835    0.45    0.543    0.099   0.0035                             0.028             0.06
          Merchant Inventory/Manufacturers'
31;32;35 Finished Goods/Goods in Warehouse       0.7835    0.05    0.543    0.099   0.0035                             0.028             0.06
          or Distribution Center
  27;81   Manufacturing Machinery                 0.15     0.15
   36     Inventory In-Transit                    0.088                                                                0.028             0.06
   37     Tobacco Storage                         0.03    0.015             0.015
   39     Agricultural Products in Hand           0.015   0.015
   38     Agricultural Products in Storage        0.06    0.015             0.045
          Livestock/Farm Equipment & Activated
  50;70                                           0.001   0.001
          Foreign Trade Zone
   90     Recycling Machinery & Equipment         0.45     0.45
                                               2010 Motor Vehicle Tax Rates
          Motor Vehicle                           1.221    0.45    0.592    0.088    0.003                             0.028             0.06


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with a contribution rate based on its reserve ratio. Businesses become liable for      2.75% in Lexington-Fayette County. The city rates also vary from 0% in several
paying state unemployment insurance taxes by paying at least $1,500 in wages           small municipalities to 2% in Wilmore, Richmond, Berea and Midway. All shown
in a calendar quarter, or by employing at least one (1) worker in each of twenty       include a net profits tax except for the City of Winchester, which does not tax
(20) weeks during a calendar year, or by acquiring an existing liable business.        net profits, and the City of Nicholasville, which uses a gross receipts schedule to
Different rules apply for agricultural, domestic and nonprofit employment.             determine local business taxes.

                                                                                                              Individual Net Income Tax Rates
                                                                                                                   Taxable Net Income                Rate
A state sales tax of 6.0% is paid by the consumer at final sale on taxable goods
and services and when tangible personal property is leased or rented in Ken-                         First $3,000                                    2.0%
                                                                                                     Next $1,000                                     3.0%
tucky. Local sales taxes are not levied in Kentucky. Major exemptions from the
                                                                                                     Next $1,000                                     4.0%
state sales tax, important to industry in Kentucky, include: items purchased for                     Next $3,000                                     5.0%
resale; machinery for new and expanded manufacturing, raw materials, industri-                       $8,000 to $75,000                               5.8%
al supplies, tools; energy and energy producing fuels (to the extent that they                       Excess over $75,000                             6.0%
exceed 3 percent of the cost of production), certified pollution control equip-                    Source: Kentucky Revenue Cabinet (2009)
ment; manufacturing and mining machinery sold to out of state customers; con-
tainers, packaging, wrapping materials; and, motor fuels for highway use. Credit                               Local Government Payroll Taxes
is given for sales taxes paid out of state if the other state grants similar credits                                  Location           Rate
for taxes paid in Kentucky.                                                                                   Bourbon County1                  0.75%
                                                                                                                City of Paris                  1.50%
                                                                                                                City of Millersburg            1.00%
                                                                                                              Clark County                     1.50%
The income of sole proprietorship and partnerships is exempt from state corpo-
                                                                                                              Fayette County                   2.75%
ration income taxes. Instead, the owners pay state individual income taxes on                            1
                                                                                                                                  only
                                                                                                             Unincorporated areas 1
                                                                                                              Franklin County                  1.00%
their shares of the earnings of the businesses, regardless of whether they take
                                                                                                                City of Frankfort              1.75%
the income for their personal use or leave it in the business. Although general
partnerships have no state income tax liability, they must file an information                                Jessamine County1                1.00%
return annually.                                                                                                City of Nicholasville          1.50%
                                                                                                                City of Wilmore                2.00%
                                                                                                              Madison County1                  1.00%
                                                                                                                City of Richmond               2.00%
Resident individuals must pay on their entire income, while nonresidents must                                   City of Berea                  2.00%
pay tax on that portion of income derived from Kentucky sources. There does                                   Scott County                     1.00%
exist reciprocal state exemptions that apply to some nonresident incomes.
                                                                                                              Woodford County1                 1.50%
                                                                                                               City of Versailles              1.00%
                                                                                                               City of Midway                  2.00%
Payroll/Net Profits tax rates vary by geographic locale within the Lexington MSA.                        Source: Bluegrass ADD (2009)
The county rates will vary from a low of .75% in Bourbon County to a high of

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