Commonwealth of Kentucky Legislative Research Commission
General Assembly Local Mandate Fiscal Impact Estimate
2009 SPECIAL SESSION
Bill Request #: 12
Bill #: HB 3 SCS
Bill Subject/Title: Economic Development
Sponsor: Representative Tommy Thompson
Unit of Government: X City X County X Urban-County
X Charter County X Consolidated Local X Unified Local
Office(s) Impacted Chief executive officers and fiscal courts
Requirement: X Mandatory X Optional
Powers & Duties Modifies Existing X Adds New X Eliminates Existing
Purpose and Mechanics
HB 3 SCS proposes legislation to accomplish three major purposes:
1). Amend the current economic development incentive programs and create new tax
incentive programs to advance economic development in the Commonwealth;
2). Create a purse supplement and breeders incentive program for the horse racing
3). Create a Kentucky Public Transportation Infrastructure Authority, bi-state
authority and project authority to plan, finance and promote major bridge and
Economic Development Incentives
The proposed legislation amends current economic development incentive programs and
establishes limited new tax credits. The proposed legislation:
Amends current economic development incentive programs;
Establishes limited new tax credits for limited employers who pay a portion of
educational expenses for employees to replace current appropriations for this
Provides incentives for companies who purchase certain types of equipment;
Increases the cap for the historic preservation tax credit program;
Establishes a new film industry credit;
Makes changes to the Tourism Development Act;
Establishes tax incentives for legacy expansion projects;
Includes appropriations for private funding for UK;
Makes changes for local tax increment financing districts;
Establishes tax exemptions for Breeders Cup races;
Establishes small business tax incentives;
Establishes incentives for railroads,
Establishes a sales tax rebate for admissions to and tangible personal property
sold at a public facility; and
Authorizes transfer of the Glendale site for development of a lithium-ion battery
Supplement and Breeders Incentive Program
New sections of KRS Chapter 138 are created to impose a 10% surcharge on lottery
tickets and on charitable gaming. It imposes a tax on the handle at race tracks, not
already taxed, at a rate of 1.5% (simulcasting satellite fee). The tax is effective August 1,
2009. It creates a new section of KRS Chapter 230 to establish the Kentucky equine
industry enhancement fund and directs the disposition of deposits in the fund. It directs
the Personnel Cabinet to transfer $7 million from the public employee health insurance
trust fund to the Kentucky Horse Racing Authority as a loan to be used to support purses
at race tracks holding race meetings this summer.
Major Bridge and Transportation Development Authorization
HB 3 SCS establishes a new KRS Chapter 175 B to establish the Kentucky Public
Transportation Infrastructure Authority (“state authority”). The state authority’s purpose
is to facilitate the construction, financing, operation, and oversight of projects by entering
into bi-state agreements and by creating bi-state authorities and project authorities.
A “project” is a highway designated a mega-project by the Federal Highway
Administration and is a part of the federal interstate highway system or is built to the
standards of the interstate highway system. Further, a project must: comply with KRS
Chapter 45A (relating to The Kentucky Model Procurement Code), KRS Chapter 174
(relating to the Transportation Cabinet), and KRS Chapter 176 (relating to the Highway
Department); be included in the most recently enacted biennial highway construction;
and comply with all relevant requirements of the Federal Highway Administration.
The bill creates a process for the creation of bi-state authorities and project authorities.
All projects approved by the authority and ratified by the General Assembly must be
managed, constructed, and financed entirely or in part through one of these two
authorities. A bi-state authority refers to any project that connects Kentucky with Indiana.
A project authority governs a specific potential project within the Commonwealth.
The authorities are required to prepare a financial plan which specifies the parameters of
the project including among other items, a timeline for the project, the amount and
duration of per-vehicle tolls, and expected appropriations.
The state authority may participate as a developing or issuing authority in the
development and financing of a project. Other sections of the bill permit the state
authority to promulgate administrative regulations, authorize and detail the issuance of
bonds, permit use of rights of way, including for public utilities, permit agreements for
use of real estate assets, and repeal all sections of KRS Chapter 181 relating to bridge
commissions in cities of the first class.
Fiscal Explanation, Bill Provisions, and Estimated Cost
The fiscal impact of HB 3 SCS on local government is indeterminable but is expected
to have a moderate to significant long-term benefit, with some minimal short-term
costs. Provisions in the bill which expand or enhance economic development will benefit
local government indirectly. As net new employment increases, occupational license
taxes will increase, and as net new investments in real and personal property increase, the
property tax base will grow.
There is a direct benefit in the form of a sales tax rebate for certain counties and cities, in
Section 74. Eligible local governments are those counties with a population of less than
100,000, or cities in a county with less than 100,000 residents. The city or county must
have a public arena or performing facility seating 500 to 8000 people. The sales tax
rebate is effective July 1, 2010, and would provide an estimated $1,800,000 in Fiscal
Year 2011 and $2,400,000 in Fiscal Year 2012 to applicable local governments. Below
find a listing of public facilities that could be eligible.
Eligible Centers for the Sales Tax Rebate
1 Bruce Convention Center, Hopkinsville
2 Cardome Centre, Georgetown
3 Cave City Convention Center, Cave City
4 Corbin Convention Center
5 Danville Convention Center Complex, Danville
6 Eastern Kentucky Exposition Center, Pikeville
7 Elizabethtown Tourism and Convention Bureau, Elizabethtown
8 Frankfort Convention Center, Frankfort
9 Julian M. Carroll Convention Center, Paducah
10 Marquise Banquet &Conference Center, Wilder
11 Morehead Conference Center, Morehead
12 Paducah Expo Center, Paducah
13 Paroquet Springs Conference Centre, Shepherdsville
14 Prestonsburg Convention Center
15 Sloan Convention Center, Bowling Green
16 Southern Kentucky Fairgrounds, Bowling Green
17 The Centre on Main, Leitchfield
18 The Harlan Center, Harlan
19 Thomas & King Leadership Conf. Center, Georgetown
20 Wolf's Convention Center, Henderson
Many of the projects detailed in the measure are of interest to local governments. For
example, there is an increase in the cap for the historic preservation tax credit program.
There is an extension of the activation date for the tax increment financing (TIF) districts.
There is a process which allows a reduction in the minimum investment previously
authorized as a Signature TIF.
Certain measures allow local governments to support a project’s implementation, but do
not mandate involvement. For example, in regard to a bi-state project, a local government
may by resolution of its governing body, request that its chief executive officer and the
Governor appoint a group to negotiate with a similar group from Indiana. A local
government may by resolution of its governing body, request the state authority to
evaluate the establishment of a project authority for purpose of developing a project.
Concerning, a highway and bridge mega-project, local government does have a role in
structuring the projects that fall within their jurisdiction. Associated costs relate to
expenses, time, and effort for the legislative body to pass resolutions and the chief
executive to appoint members. The membership of a bi-state or project authority
includes four members appointed by the chief executive of local government and
confirmed by the governing body of the local government. The governing body must
also, by resolution, establish term lengths of no more than four years for its membership
on the bi-state authority.
While there will be costs related to putting a proposed mega-project together, it is
assumed that these costs would be incurred anyway if the local government were to seek
funding for the project from other sources.
Costs related to staffing and funding to support the work of the authorities would be the
responsibility of the authorities, not local government. Bonds and debts issued or
incurred by an authority will not be considered debt of the Commonwealth or local
government. The financial management of the state authority and retirement of the bonds
are the sole responsibility of the state authority.
Section 95 adds a new crime for any officer or employee of an authority who has a direct
interest in the sale or purchase of revenue bonds. Violations are punishable by a fine of
not more than $1000 or by imprisonment for not more than one year, or both. Prison
time for a convicted offender would be served in a local jail which would be an expense
to local government. However, the number of convictions is expected to be small.
The bill anticipates that costs incurred from the disruption of existing roads or the need to
relocate public utilities due to construction of a project would be considered a cost of the
project to be funded by the authority. Accordingly, there should be no significant
direct expenses or costs from an authority project that would be borne by a local
Finally, while the bill does allow per-vehicle tolls, there are no statutory provisions for
excluding any local government from having to pay the tolls. This would be an expense
for the local government unless a provision exempting them could be negotiated as part
of a specific project.
Data Source(s): LRC staff; Kentucky League of Cities; Kentucky Association of
Preparer: Mary C. Yaeger Reviewer: Date: