12-05-2010, 08:42 PM
Providing economic development and tax incentives to airports has worked in other states and could have a positive economic impact in Kentucky if done correctly, according to a study released this week by the Cabinet for Economic Development.
Lawmakers commissioned the study in the state budget at the request of Senate President Pro Tem Katie Stine, R-Southgate. She could not be reached for comment Friday.
The study outlines the economic development incentives the state already offers, looks at those offered in other states, and analyzes three new incentives proposed by the state's largest airports: Cincinnati/Northern Kentucky, Louisville and Lexington.
All three airports have lost passengers over the past several years, and CVG has lost more than two-thirds of its flights due to downsizing by Delta Airlines.
The legislative Program Review & Investigations Committee, which is chaired by Sen. John Schickel, R-Union, is also studying the airports' problems and what, if anything, the state can do to help.
Like the committee's study, the Cabinet's study confirms the airports' economic importance.
Staff economists found that in 2004, CVG had a $217 million economic impact across Kentucky, excluding Boone County. In 2009, its economic impact was $139 million.
"It's important to note that both the legislature and the Cabinet recognize the importance of airports and their economic benefit to the state," said Matt Davis, vice president of business and community advocacy at the Northern Kentucky Chamber of Commerce.
"They've identified how important airports are and that helping them would be beneficial to our economy, and we hope legislators recognize that," Davis said.
The state already offers incentive programs, but "the airline incentive environment has changed because of the airline industry's financial condition and because of generous offerings from competitor states," the study says.
CVG, Lexington and Louisville have asked officials to approve new types of economic development incentives to help them attract airlines.
They seek an expansion of the state's tax-increment financing, or TIF, program; creation of a revolving loan fund for airlines; and permission to establish special commercial operating units to outsource services like ticketing and baggage handling.
Each would likely require legislative action.
Each has drawbacks, the study says. But the third request, commercial operating units, is "the most palatable of the three because there is no state funding commitment involved on its face," it says.
The state's "challenging budgetary environment" is an obstacle to setting up a revolving loan fund, the study says, and the benefits of expanding TIF are unclear.
"Any new incentives will have some benefits, but as with any economic development incentive, the benefits must be balanced with the potential cost to the state and with other development needs," the study says.
The study does not draw any final conclusions, nor does it give any recommendations for possible action.
But CVG officials called the report a "positive step" toward possible airline/air service incentives in the future.
"The cabinet and now the legislature have a growing understanding that airline industry as a whole has changed, and that airports and communities as a whole need to rethink the business," said CVG spokeswoman Barb Schempf. "And this latest report shows the collaborative relationship we have with other airports in the state and how growing air service helps the entire commonwealth attract, retain and grow new businesses."
While the report questioned the establishment of a revolving loan fund for airlines, Schempf said that such a program could work in tandem with changes to the TIF program to provide incentives for new flights, and not just new construction.
"The whole purpose was to raise awareness and now we've taken another step toward having fruitful discussions about possible options," Schempf said.
Schickel, who has become a leading advocate for CVG, said he has not yet reviewed the Cabinet's study.
http://nky.cincinnati.com/article/AB/201...r-airports
He has, however, already asked Legislative Research Commission staff to further study the airports' three suggestions for incentives, and he expects their report soon.
"Obviously, the airport's of the utmost importance," he said. "We don't want the state to get in the business of subsidizing private businesses, but we want to make sure we're doing everything we can to help the airport."
Lawmakers commissioned the study in the state budget at the request of Senate President Pro Tem Katie Stine, R-Southgate. She could not be reached for comment Friday.
The study outlines the economic development incentives the state already offers, looks at those offered in other states, and analyzes three new incentives proposed by the state's largest airports: Cincinnati/Northern Kentucky, Louisville and Lexington.
All three airports have lost passengers over the past several years, and CVG has lost more than two-thirds of its flights due to downsizing by Delta Airlines.
The legislative Program Review & Investigations Committee, which is chaired by Sen. John Schickel, R-Union, is also studying the airports' problems and what, if anything, the state can do to help.
Like the committee's study, the Cabinet's study confirms the airports' economic importance.
Staff economists found that in 2004, CVG had a $217 million economic impact across Kentucky, excluding Boone County. In 2009, its economic impact was $139 million.
"It's important to note that both the legislature and the Cabinet recognize the importance of airports and their economic benefit to the state," said Matt Davis, vice president of business and community advocacy at the Northern Kentucky Chamber of Commerce.
"They've identified how important airports are and that helping them would be beneficial to our economy, and we hope legislators recognize that," Davis said.
The state already offers incentive programs, but "the airline incentive environment has changed because of the airline industry's financial condition and because of generous offerings from competitor states," the study says.
CVG, Lexington and Louisville have asked officials to approve new types of economic development incentives to help them attract airlines.
They seek an expansion of the state's tax-increment financing, or TIF, program; creation of a revolving loan fund for airlines; and permission to establish special commercial operating units to outsource services like ticketing and baggage handling.
Each would likely require legislative action.
Each has drawbacks, the study says. But the third request, commercial operating units, is "the most palatable of the three because there is no state funding commitment involved on its face," it says.
The state's "challenging budgetary environment" is an obstacle to setting up a revolving loan fund, the study says, and the benefits of expanding TIF are unclear.
"Any new incentives will have some benefits, but as with any economic development incentive, the benefits must be balanced with the potential cost to the state and with other development needs," the study says.
The study does not draw any final conclusions, nor does it give any recommendations for possible action.
But CVG officials called the report a "positive step" toward possible airline/air service incentives in the future.
"The cabinet and now the legislature have a growing understanding that airline industry as a whole has changed, and that airports and communities as a whole need to rethink the business," said CVG spokeswoman Barb Schempf. "And this latest report shows the collaborative relationship we have with other airports in the state and how growing air service helps the entire commonwealth attract, retain and grow new businesses."
While the report questioned the establishment of a revolving loan fund for airlines, Schempf said that such a program could work in tandem with changes to the TIF program to provide incentives for new flights, and not just new construction.
"The whole purpose was to raise awareness and now we've taken another step toward having fruitful discussions about possible options," Schempf said.
Schickel, who has become a leading advocate for CVG, said he has not yet reviewed the Cabinet's study.
http://nky.cincinnati.com/article/AB/201...r-airports
He has, however, already asked Legislative Research Commission staff to further study the airports' three suggestions for incentives, and he expects their report soon.
"Obviously, the airport's of the utmost importance," he said. "We don't want the state to get in the business of subsidizing private businesses, but we want to make sure we're doing everything we can to help the airport."