Despite Millions In Public Money, Eastern Ky. Industrial Parks Still Largely Vacant
In a crowded conference room at the community center in downtown Inez, then-Kentucky Gov. Matt Bevin and Congressman Hal Rogers announced the latest infusion of public money into Martin County’s industrial park.
The two grants from the Abandoned Mine Land Pilot program totaled $3.37 million, and would be used to upgrade a largely vacant building at the Eastern Kentucky Business Park and prepare a site for a new one.
With flags flanking the podium and attendees’ tables replete with blooming flowers, Bevin proclaimed at the event last year that the funds would “transform eastern Kentucky's economy.”
The funds also would create “one of the most highly marketable industrial parks in the coalfields,” according to a press release issued by Rogers’s office.
But just five years earlier, a consultant had analyzed the Martin County industrial park and concluded the opposite: it was not marketable, and should not be a priority for investment.
In a 2014 report presented to Rogers and then-Governor Steve Beshear, the economic-development consultant found several “fatal flaws”: The site would need to triple its excess water capacity. The industrial park authority had insufficient control over mineral rights. And looming just outside the park was a high-security federal prison that limited the site’s desirability.
Over more than half a century, eastern Kentucky’s industrial parks have received tens of millions of dollars designed to attract businesses that would help create steady, well-paying jobs and build a middle class to supplant the region’s rampant poverty.
Prior to the two recent AML Pilot grants, more than $7.5 million in public money had already been spent on the Martin County industrial park since its creation in 1997. Six businesses have located there. Only three remain.
The AML Pilot program, a federal/state collaboration, has pledged nearly $26 million to four eastern Kentucky industrial parks, including Martin County’s, since 2016.
But today, nearly empty industrial parks sit in counties spanning eastern Kentucky. They’re the multi-million-dollar consequences of hollow promises to revive the region’s foundering economy, and they’re left to fight against failing infrastructure and remote locations to cobble out some success.
The Appalachian Regional Commission, a federal-state partnership created in 1965, has invested $5.5 million in eastern Kentucky industrial parks during the past 20 years. But the ARC also has acknowledged in one of its own reports that Kentucky’s Appalachian counties still trail behind the rest of the nation.
Eastern Kentucky remains home to some of the nation’s most impoverished counties, which also are bedeviled by low life expectancy and high rates of drug abuse. Median household income is 27% lower than for the state as a whole, and the region’s population has dropped by 10% since 2010.
The Kentucky Center for Investigative Reporting asked the state Cabinet for Economic Development on November 18 about the role that industrial parks play in its current job-creation strategy, and why state officials believe that continued investment in industrial parks makes financial sense.
A cabinet spokesperson said a substantive response was being drafted, and three weeks later hadn't provided one.
But industrial parks still hold allure for the state’s politicians.
Just last month, at the beginning of one of his regular coronavirus briefings, Gov. Andy Beshear, Steve Beshear’s son, lauded an industrial park investment in Pike County and the promise of 40 immediate new jobs there.
That project is one of “the good things that are going on out there,” Andy Beshear said, adding that he’s “committed to the values of promoting economic development in communities that haven’t received their share of attention and, really, results that they deserve.”
Newly announced industrial park projects like these have revived hope that this time will be different. But if history is any guide, there is reason for skepticism.
Many Industrial Parks Largely Empty
Approximately two-thirds of Kentucky’s 54 Appalachian counties have at least one industrial park, including some of regional scope, according to the Cabinet for Economic Development.
One in eastern Kentucky that has achieved some success, the Coal Fields Regional Industrial Park in Perry County, did so with the help of more than $25 million in government funds. That figure includes a $6.5 million AML Pilot program grant in 2018 that helped lure Dajcor, a Canadian aluminum manufacturer, with an equipment purchase by the county. The park has more than a half-dozen paying tenants, some of which have been there for a decade or more.
“Good local leadership and partnering with the appropriate economic-development agency has been our key to success,” said Angelia Hall, an associate director with the Kentucky River Area Development District, that includes Perry County.
But many neighboring parks have had only a few, if any, revenue-generating businesses.
An industrial park in Bell County sat idle for about two decades without ever attracting a single occupant, despite an investment of more than $10 million in public funds to buy the land and build a bridge and a three-lane, paved road to the site.
The property, in southeastern Kentucky, on the Tennessee border, ultimately was sold to a nonprofit organization that hopes to create a major tourist attraction there. That project is years behind schedule.
In Clay County, the 525-acre Elk Mountain Regional Business Park has a single tenant.
“It’s just us,” said Amy Roberts, office administrator of Speyside Cooperage KY. The company makes staves for bourbon barrels and employs about 50 people.“ No other buildings, nothing. Just us.”
Despite receiving at least $2.8 million in public money, the park has had only two tenants in its 25-year history.
About 35 miles north, in Owsley County, the Lone Oak Industrial Park houses the county’s cooperative extension office, and one for-profit company.
Owsley is one of the nation’s poorest counties, and its industrial park authority has done
what it could to lure and keep jobs. One such attempt is still on display in a parking lot across the road from the park, where a little-used concrete mixing truck sits idle next to a pile of rusting railroad tracks.
The Owsley County Industrial Authority bought the truck and related equipment in 2016 with a $246,600 Appalachian Regional Commission grant for Wolf Creek Metal, a nonprofit company the authority was operating in the park.
A new company, South Fork Metal, bought Wolf Creek Metal and opened in the Lone Oak Industrial Park late last year. South Fork Metal employs about a half-dozen people, manufacturing roof and siding panels. But it didn’t buy the truck, and the industrial authority is stuck with it.
A 26,000-square-foot “spec” building in the park, constructed in the mid-1990s in hopes that a buyer could be found, has never been occupied.
In other eastern Kentucky industrial parks, large buildings constructed years ago in hopes of attracting a business also remain vacant.
A 40,500-square-foot spec structure in Breathitt County’s Panbowl Lake Industrial Park was built more than two decades ago with $323,000 in public funds. Since then, it has served only as storage space for city and county governments.
“It’s very sad, because it involved a lot of taxpayer dollars,” Jackson Mayor Laura Thomas said in an interview.
But Thomas remains confident. She said a private, nonprofit health care clinic that opened in the park last January has been a “wonderful addition,” and she expressed hope that businesses will move into the park’s two empty buildings.
“I am a realistic optimist,” she said.
The problem of empty or minimally productive industrial parks isn’t confined to eastern Kentucky. The West Kentucky Megasite in Graves County, created in the late 1990s with about $12 million in taxpayer money to buy some 2,200 acres of land, has never drawn any industry.
“It’s a stranded asset,” said Mark Manning, chair of the Purchase Area Regional Industrial Authority board.
The industrial park, in the far southwestern tip of the state, has suffered from many of the same issues that often plague Appalachian counties: its relative remoteness; a lack of direct interstate access; challenges with utilities; and its distance from a full-service airport.
“It has intrinsic value, but not as an industrial park,” Manning said. “It’s highest and best use is farmland.”
Rogers, the Republican congressman from Pulaski County who was reelected to his 21st term in Congress last month, says continuing to invest in industrial parks is necessary — even if not sufficient.
“[N]one of our local officials believes that one project in an industrial park or an exciting new tourism project will lift their county out of poverty,” Rogers said in a statement provided by his office to KyCIR. “Our region faces exceptional challenges, but I believe our best days are ahead of us.”
But experts say that industrial parks have not proven to be a successful strategy to lift struggling areas out of rampant unemployment — particularly in Appalachia.
Continuing to funnel public funds into industrial parks is “a failed strategy,” said Ronald D. Eller, former director of the Appalachian Center at the University of Kentucky and a retired UK history professor.
“It’s a comfortable thing to do. It’s what we know how to do. It’s the easiest thing to do,” he said.
Eller said the War on Poverty began with the assumption that economic development strategies that worked in urban places would work in rural areas too — and politicians love to cut ribbons for new, big projects.
But businesses tend to gravitate to more affluent areas with better-educated, more highly skilled workforces, according to Robert Lynch, a professor of economics at Washington College in Maryland, who has studied the effectiveness of state tax incentives for industrial development.
Companies attracted to poorer locales by promises of tax breaks, free rent or ready-made buildings may stay for only a few years — until the incentives run out, Lynch said.
“If you’re an elected official looking at reelection in two or four years, does it make political sense to invest in something that may not bear fruit for 15 or 20 years?” Lynch said.
Bob Turner, an associate professor of political science and environmental studies at Skidmore College in New York, agreed that there’s far more excitement about launching projects than in evaluating their long-term impact and effectiveness.
“Part of that is the political cycle doesn’t match up well with the economic-development cycle,” Turner said. “The political cycle, the payoff for is the ribbon-cutting ceremony, the sort of symbolic equivalent of, ‘Look, I am doing something, I am attentive to the needs of the region.’
“But really, for us to know if it’s going to work, we need to look three to five years down the road — at which point it’s a forgotten event in the political world.”
Even Paul Patton, who oversaw and championed the construction of about a dozen eastern Kentucky industrial parks during his tenure as governor from 1995 to 2003, gives the results of those investments a cautious appraisal.
“If you’re looking for industry and you don’t have an industrial park, you’re not in the game,” Patton said in a recent interview. “If you do have a park, it doesn’t mean you’ll get the industry you’re looking for. But if you don’t, you won’t.”
Asked whether the money devoted to industrial parks has been well spent, Patton replied: “A lot of it has been wasted, but not all of it has been wasted.”
Eller, the former University of Kentucky professor, says the public dollars have made a difference, that housing, health care and educational opportunities are better than they otherwise would have been.
“But if we assume that money alone is going to address the underlying issues, we will fail,” he said.
'Transformative' Project Hasn't Materialized In Martin County
Martin County remains desperately poor more than a half-century after President Lyndon Johnson trumpeted the War on Poverty from the front porch of county resident Tommy Fletcher in 1964.
Nearly 40 percent of Martin Countians live in poverty. Fewer than one in 10 has a college degree. The county’s population has declined more than 13 percent during the past decade. And impure, often undrinkable, water has afflicted the county for years.
So it is understandable that local officials would eagerly grasp any opportunity for public funding, even if it was destined for the Eastern Kentucky Business Park.
Politicians’ enthusiasm for funneling still more tax dollars into the park was fueled in part by promises of two major job-creating projects nearby.
An Enerblu battery manufacturing plant in adjoining Pike County would harness a highly skilled workforce in eastern Kentucky, then-Governor Bevin said in 2017. And he predicted that creation of the Braidy Industries aluminum rolling mill, about 45 miles away in Boyd County, would be “the most singularly transformative economic development decision that has ever been made in the Commonwealth of Kentucky.”
Some officials thought the Enerblu and Braidy projects might have a ripple effect, bringing spillover business to Martin County’s industrial park. But early last year, Enerblu suspended its plans to build in Pike County, and has since filed for bankruptcy.
And Braidy Industries has struggled to raise the necessary capital to build its rolling mill, even after receiving $15 million in state funds.
That project was riddled with controversy after the state refused to name all of the company’s shareholders, and a Kentucky court ruling ultimately forced disclosure. The former CEO later was ousted, and sued the company, which has since been renamed Unity Aluminum. Gov. Beshear has said he will take steps to reclaim the state’s financial contribution if the plant is not built.
So far, no ripple effect has been detected at the Eastern Kentucky Business Park.
The more than $7.5 million in tax dollars already spent there funded engineering studies, property purchases, a wastewater treatment plant, an access road, a sign at the park’s entrance and a 44,000-square-foot, $1.2 million “speculative building” that has sat empty since its construction seven years ago.
The Logan Corporation, one of the six companies that have occupied the park since its creation, moved there in 2011 but departed five years later for a nearby county. It sold back its property to the regional industrial authority for $854,000 — less than half what the company had paid for it.
David Brown Kentucky, a company that manufactured gear boxes for underground mining and conveyor systems, signed a 15-year lease in March 2012. The county had spent about $3 million to build a customized structure, and the company had hired a few people with a promise to triple its workforce within five years. The state gave preliminary approval for up to $2 million in tax incentives.
At the ribbon-cutting ceremony, then-Governor Steve Beshear cited David Brown Kentucky’s “proven record of success.” State Rep. Hubert Collins predicted “a major boost to our economy for years to come.”
But the company essentially had no track record in Kentucky. It generated little if any job growth. And there was no “major boost” to the local economy.
Instead, in July 2014, barely two years after it arrived, David Brown Kentucky packed up and left the park. Its $19,000 monthly rent payment to the county vanished. The tax incentives were withdrawn. Later, the company filed for bankruptcy.
Two months after David Brown Kentucky went out of business, Steve Beshear, Rogers, and SOAR, the Appalachian economic-development group Rogers had helped create a year earlier, received the 377-page document on eastern Kentucky’s future and priorities.
The 2014 report brimmed with possibilities and cautious optimism. But it also included an outside consultant’s critical assessments of several industrial parks. One of them was Martin County’s.
“This currently is not a viable, marketable park that could compete on a national level for global projects,” InSite Consulting, a South Carolina-based firm, concluded. “This would not be a priority for the region to develop as an industrial park.”
Some state and local officials disagree.
Charles Sexton, president and CEO of One East Kentucky, the economic development recruiting and marketing organization for a nine-county area including Martin, defended continued investments in Appalachian Kentucky’s industrial parks, including the Eastern Kentucky Business Park.
“Unlike other regions, east Kentucky communities do not always have the resources readily available to make these strategic moves and investments, and by the time they can, the opportunities pass by,” Sexton said in an email to KyCIR. “Our organization along with many others is fighting to push this region forward at a faster pace to take advantage where we can.”
InSite Consulting’s assessment offered some suggestions to make the Martin County industrial park marketable, including creating a “global, recognizable identity,” developing a master plan, having at least one “pad-ready” site and offering a comprehensive incentive package. All of those recommendations have been fulfilled or are in the works, Sexton said.
And he provided another study that offered a more optimistic appraisal of Martin County’s industrial park. Boyette Strategic Advisors, an Arkansas consulting firm, concluded in October 2018 that new construction in the park was a “strong” concept, “and should be pursued.”
That $44,250 study was paid for by One East Kentucky.
Sexton also shared a June 2019 letter from a Canadian manufacturing company expressing interest in opening its first U.S. business operation in the park once construction there was completed.
“While it is taking longer than anyone would like, we are making strides in east Kentucky,” Sexton said in the email.
The taxpayer dollars continue to flow in.
So it was that last year, when Rogers and Bevin announced 20 new Abandoned Mine Land Pilot program grants, two of them totaling $3.37 million went to Martin County’s industrial park.
One would retrofit an existing building and provide free or reduced rent for new businesses. The other would pay for a 200,000 square-foot “build-ready site” and renovations for the park’s existing spec building.
The federal government has not distributed the funds from the two AML Pilot grants, and construction is yet to begin.
McCoy calls it “corporate welfare.”
“Officials talk about, this is going to bring us jobs. They seem to think it’s a great idea,” she said.
Last year, McCoy authored an opinion piece in the Lexington Herald-Leader that took political leaders to task for industrial park funding.
“An age-old saying warns that ‘the definition of insanity is doing the same thing over and over again, but expecting different results,’” McCoy wrote.
And problems continue to plague the industrial park, where the newest occupant, Boxvana, opened for business early this year. The tiny-home manufacturer was attracted to the park in part by tax incentives and temporary free rent in one of its two buildings, if it met certain employment goals.
But the company was late with its September rent payment of $4,297 for the other building. Then, amid the coronavirus pandemic, it terminated about a third of its roughly three dozen employees due to a lack of business. And in October, the Martin County Economic Development Authority sued Boxvana and Harrison Langley, one of the company’s owners, for allegedly removing and selling equipment that belonged to the county.
Langley told KyCIR that he was unaware of the late rent payment, and he declined to discuss the court case.
He said he didn’t know whether the company would be able to meet the hiring requirements of the lease for the building it’s renting, but that the company plans “to be there for a while.”