WAVE 3 Investigates: The billion dollar cost of creating Kentuck - 14 News, WFIE, Evansville, Henderson, Owensboro

WAVE 3 Investigates: The billion dollar cost of creating Kentucky jobs

Posted: Updated:
Economic Development Secretary Larry Hayes Economic Development Secretary Larry Hayes

LOUISVILLE, KY (WAVE) - The use of financial incentives comes at a price to us. It's either our tax revenue that government must give up, or it's money the state has to spend to provide the incentive. So what are we giving, and what are we getting in return?

An analysis of Kentucky's data by AEG recently calculated 55,173 jobs created between 2001 and 2010 by companies receiving economic incentives. That's a cost of $23,385 per job. How accurate is that?

The AEG study, commissioned by the state, also found the data kept by the Economic Development Cabinet was "riddled with errors" and "often inconsistently tracked." So they estimated their own numbers, and concluded it's "not possible to approximate the actual cost to the state of these programs."

In all, Kentucky spent just under $1.3 billion over the last decade in economic development incentives. Are we getting enough bang for our bucks? We went straight to the man in charge to get some answers.

"It was an eye opener for us to have someone come in and look at what we're doing," said Economic Development Secretary Larry Hayes.

Hayes says their data is not "riddled with errors."

"I think that's an old comment and we're trying our best to straighten out what is historical data, but you probably find that everywhere," he said.

How do we know job creation is for real? Firms self report how many jobs they've created with the incentive money. AEG found half weren't even close.

"The self reporting requirement is the best system we have right now. We haven't created a bureaucracy that's going to go in and count those," Hayes said.

When we analyzed the database on incentives approved in Kentucky since 2009, we found many examples like these:

  • A tax incentive up to $37 million for C20 technologies, and 60 estimated new jobs. That's $616,000 per job. 
  • $85 million for Secure Energy, and 131 estimated new jobs would be $648,000 per job. 
  • $6.5 million for Carbide Industries, estimating 9 new jobs, comes to $722,000 per job.

Hayes said it's not that simple. There are other variables involved. Some of the companies are in danger of going under, and the incentives may be saving existing jobs. 

"Each one you would have to look at the return on investment for each one of these transactions, and in one case you look at cost per job and then you're not looking at the investment the company's actually making," he said. 

The AEG study found the average wage at Kentucky companies receiving incentives was much lower than the national average in many job areas. 

"I think we've had a history in this state of wages being probably lower than much of the rest of the country and I think you'll see us increasing that," Hayes said. 

But when it came to wages paid for Hayes' position, the study noted the $250,000 annual salary is $100,000 more than the average salary of economic development heads in peer states. 

"It's very difficult to compare apples to oranges," Hayes said. "If you take me out of it, this role is a very important role and they need to have the kind of salary that will attract someone to be able to be successful and navigate these waters."  

You can read more about the information we used for our report at the following links:

Copyright 2013 WAVE News. All rights reserved.  

Powered by WorldNow