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How Kentucky is doling out economic development incentives throughout the state, in NKY

A previous version of this article stated that Gravity Diagnostics received economic development incentives from the Commonwealth of Kentucky.  It has been corrected to show they do not receive these funds.

Written by Mark Payne, LINK Media politics and government reporter

Kentucky’s Economic Development Incentives are an important subject in the state right now, as the governor and House GOP released their budgets this week. Major announcements, such as the new Ford Battery plant in Glendale, Kentucky, are showcasing the money being spent to improve the business sector in the state.

This is also the case in Northern Kentucky. Companies such as Amazon, CTI, and Atlas have all received business incentives from the State of Kentucky.

The Kentucky Business Investment (KBI) oversees these performance-based incentive agreements. As part of these agreements, companies can keep portions of the investments via wage assessments and corporate income tax credits, as long as they meet job and investment targets.

But what happens when companies don’t meet their economic development incentive targets?

Kentucky seeks to recoup $15 million from Unity Aluminum in Ashland

The Kentucky Senate Standing Committee on Appropriations and Revenue met on Jan. 12 to vote on Senate Bill 48, sponsored by the Committee Chair and Northern Kentucky Sen. Chris McDaniel (R-Taylor Mill), which seeks to recover $15 million from Unity Aluminum (formerly Braidy Industries). The scenario involving Unity is a worst-case scenario for economic development investments. It is also an unusual one.

The funding bill for Unity moved through the General Assembly quickly and with ease in 2017. In the last days of the session, it was determined that an investor would come and build an aluminum mill in Ashland, but they had a financial gap they needed to overcome. The state awarded the company $15 million on the basis it would invest $1.3 billion and create 500 full-time jobs.

The plan included a 1.8 million-square-foot facility that would produce 300,000 tons of aluminum plate and sheet each year. The project was pushed back several times throughout the past five years, and there is still no building.

“The CEO wasn’t performing, they missed deadlines, the cabinet gave them extensions,” McDaniel said.

Some publicly traded companies have interest in this deal, McDaniel said, but he also said they can’t elaborate right now.

“With any of these deals, especially when you’re dealing with publicly traded companies, you can only release information at certain times,” McDaniel said.

But, this is unlikely to happen to companies in Northern Kentucky, as this deal, which was under former Gov. Matt Bevin, happened quickly and was “frontloaded,” meaning the company was given an economic incentive before any work was completed on the project.

“Most economic deals in Kentucky are kind of backloaded,” McDaniel said. “We do economic development incentives once you’ve performed. Like Amazon has a bunch of incentives. Atlas had a bunch of incentives. CTI had incentives. But, they had to get up and running, then they earned them and were paid. This was weird. When the cabinet went forward with it, they put it all at the front end. That’s just not how we do economic development incentives in the Commonwealth.”

What goes into economic development incentives in Covington?

In Covington, Rep. Buddy Wheatley also plays a role in these projects, as does Mayor Joe Meyer. Wheatley said he looks for a few things when voting for or advocating for tax credits: the first is that there’s a maximum for the tax credit. Second, it sunsets in the legislation. Three would be that there are benchmarks in place for the tax credit to be effective—lastly, an overall cap on the incentives and reporting.

“To receive the ongoing tax credit, you would need to meet the benchmarks and then report and then certify that you have met the benchmarks,” Wheatley said. “You can’t just say you did or take aim at the benchmarks.”

None of these guardrails were in place when the incentives for Unity Aluminum and former Gov. Matt Bevin might have promised more for the project than it turned out to be, according to Wheatley.

“From what I understand, Sen. McDaniel was questioning it from the start … but he has been pretty adamant about making sure we don’t do something like that again,” Wheatley said.