# Budget, Finance & Economic Development Committee - January 25, 2020 > Auto-transcribed civic record · Committee · January 25, 2020 - **Permalink**: https://meetings.lexingtonky.news/meeting/4935 - **Source video**: https://lfucg.granicus.com/player/clip/4935?view_id=14&redirect=true - **Date**: 2020-01-25 - **Body**: Committee - **Last revised**: February 7, 2026 - **Length**: 16,852 words > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed by OpenAI Whisper-1, with speaker labels folded in from Granicus closed-captioning. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude Sonnet. Speaker labels and verbatim wording may contain errors. See [methodology](https://meetings.lexingtonky.news/about/methodology) or [report a correction](mailto:editor@lexingtonky.news). --- ## Meeting Overview The Budget and Finance Committee held a meeting to review several key financial matters, though specific date, time, and presiding officer information was not available in the meeting records. The committee addressed three informational agenda items during the session, focusing on the city's financial status and economic development initiatives. The meeting featured three presentations that provided updates on important financial topics. Committee members received a Quarterly Financial Update covering the city's current fiscal position, followed by a CAFR (Comprehensive Annual Financial Report) Presentation detailing the annual financial reporting process. The session concluded with a Jobs Fund Update, which informed the committee about the status and performance of economic development funding programs. During the course of the meeting, the committee took four votes on various matters, though the specific nature of these votes was not detailed in the available records. No members of the public provided comments during the designated public comment period, indicating the meeting proceeded without external input from community members. All three agenda items were classified as informational, suggesting the meeting served primarily as a briefing session for committee members rather than a decision-making forum requiring formal action on policy matters. The focus on financial reporting and economic development updates reflects the committee's oversight responsibilities for the city's fiscal management and job creation initiatives. ## Attendance The following committee members were present for the meeting: • Council Member Milodi • Council Member Evans • Council Member Reynolds • Council Member Ellinger • Council Member Farmer • Council Member Lamb • Council Member Plowman • Vice Mayor Kaye All committee members were in attendance. No members were absent or arrived late to the meeting. ## Votes and Decisions The committee conducted four voice votes during the meeting, all focused on removing various items from the committee's purview. All motions passed without recorded opposition. **Motion to Remove Global Headquarters Initiative** The committee voted to remove the global headquarters initiative from the committee. The motion passed by voice vote. **Motion to Remove Budget Review Process** The committee voted to remove the budget review process from the committee. The motion passed by voice vote. **Motion to Remove Career Academy Update** The committee voted to remove the update on the career academy from the committee. The motion passed by voice vote. **Motion to Remove Economic Development Partner Updates** The committee voted to remove all economic development partner updates from the committee. The motion passed by voice vote. All four motions were conducted as voice votes with no recorded individual vote counts or member positions. No information was available regarding who made or seconded the motions, and no transcript timestamps were provided for these voting actions. The unanimous passage of these removal motions suggests the committee was streamlining its responsibilities by eliminating these items from its ongoing agenda. ## Quarterly Financial Update Directors Cook and Ms. Luker presented the quarterly financial update to the committee, providing a comprehensive overview of current economic conditions and budget performance. The presentation covered several key areas of financial analysis: • **Unemployment rates and trends** - The directors reviewed current unemployment statistics and discussed how these rates have changed over the reporting period • **Economic indicators** - Various economic metrics were presented to give committee members insight into broader economic conditions affecting the organization • **Budget comparisons** - The team provided detailed analysis comparing actual financial performance against budgeted expectations for the quarter The directors specifically highlighted changes in unemployment rates, explaining how these shifts impact the organization's operations and financial outlook. They also examined how the organization's financial performance measured against original budget projections, identifying areas where actual results differed from planned expectations. Ms. Luker and Directors Cook walked the committee through the various economic indicators that influence the organization's financial position, helping members understand the broader economic context surrounding the quarterly results. This presentation served as an informational briefing, providing committee members with essential financial data and economic context needed for informed decision-making. The quarterly update format allows for regular monitoring of financial trends and budget performance, ensuring the committee stays current on the organization's fiscal health and economic environment. The comprehensive nature of the presentation, covering unemployment data, economic indicators, and budget analysis, demonstrates the organization's commitment to transparent financial reporting and data-driven oversight. *Note: Specific transcript timestamps are not available for this agenda item.* ## CAFR Presentation Bill Meyer presented the Comprehensive Annual Financial Report (CAFR) to the committee, providing an overview of the city's financial audit results and key financial metrics. Meyer highlighted that the city received a clean audit opinion, indicating that the financial statements were prepared in accordance with generally accepted accounting principles and free from material misstatements. This clean opinion represents a positive assessment of the city's financial reporting practices. The presentation focused on several key areas: • **Audit Opinion**: Meyer emphasized the significance of receiving an unqualified audit opinion, which demonstrates the city's commitment to transparent and accurate financial reporting. • **General Fund Balances**: The presentation included a review of the city's general fund balances, showing the consistency of these financial reserves over time. Meyer noted that the fund balances have remained stable, which indicates sound financial management practices. • **Required Communications**: As part of the audit process, Meyer discussed the required communications that auditors must provide to the governing body, ensuring transparency in the audit process and any significant findings. Meyer's presentation underscored the consistency of the city's financial position, with fund balances maintaining stability throughout the reporting period. This consistency suggests effective financial planning and management by city staff. The CAFR presentation served as an informational item, providing committee members with insight into the city's overall financial health and the thoroughness of the annual audit process. The clean audit opinion and stable fund balances indicate that the city's financial management practices are meeting professional standards and maintaining fiscal responsibility. *Note: Specific transcript timestamps were not available for this agenda item.* ## Jobs Fund Update Wes Holbrook provided a comprehensive update on the Jobs Fund program, presenting key performance metrics and highlighting the program's evolution and success stories. **Program Performance Metrics** Holbrook detailed the current status of the Jobs Fund, reporting on: • Number of companies currently supported by the program • Total jobs created through fund investments • Overall payroll generated by supported businesses **Program Evolution** Holbrook emphasized a significant strategic shift in the Jobs Fund's approach, noting the program's transition towards providing loans rather than grants. This change represents a move toward more sustainable funding mechanisms that allow for capital recycling and expanded program reach. **Success Stories** Two companies were specifically highlighted as Jobs Fund success stories: • **Tech Biosciences** - Showcased as an example of the program's impact in the biotechnology sector • **Fusion Corp** - Presented as another successful investment demonstrating the fund's effectiveness **Discussion Participants** In addition to Holbrook's presentation, Taylor Bright and Michael Bayer participated in the discussion, though their specific contributions were not detailed in the available information. **Outcome** The presentation served as an informational update to committee members, providing insight into the Jobs Fund's current performance and strategic direction. The emphasis on the program's shift toward loans and the highlighting of specific success stories suggests the fund is meeting its objectives of supporting local business development and job creation while moving toward a more sustainable operational model. The update appears to have been well-received as a routine progress report on this economic development initiative. --- ## Decisions - **Motion** — passed (0-0): Remove the global headquarters initiative from the committee - **Motion** — passed (0-0): Remove the budget review process from the committee - **Motion** — passed (0-0): Remove the update on the career academy from the committee - **Motion** — passed (0-0): Remove all economic development partner updates from the committee --- ## Full transcript …………………………………………………………………… ……………………………………………………………………………………………………… ……………………………………〦……………………… The first item on our agenda is to approve the December 3rd committee summary. Do I have a motion to approve? Thank you. Any discussion? All in favor? Any opposed? All right, that motion passes. We have a very full agenda today and I appreciate everybody's willingness to tackle some really important issues at the beginning of this year. The first item on our agenda is the quarterly financial update. You'll remember, colleagues, that we tried to move from a monthly update to a quarterly update, so this is the very first quarterly update on behalf of our staff. And I hope you will find the additions that they have done in here very helpful and informative, but I would also say this is a trial run. So as we go through this, I've given the directors lots of leeway to say this is our first stab at this, and if you have thoughts, questions, concerns, things you would like to see in the next quarterly report that is not in this current one, please bring it up so that they know. With that being said, I'll welcome Directors Cook and Ms. Luker to the table. Thank you for being here. Thank you. Good afternoon, everyone. We'll try to go through it kind of slow to point out some of the changes. Some of it's just cosmetic to make it a little bit easier on you. Hopefully the presentation will look a little bit better. Starting off on this, the comparative unemployment rates slide. In the past, if you remember, it basically looked like a flat line. We've opened the graph, made it a little bit lower in the numbers on the side so that you can actually see the points a lot better and see where the unemployment rate falls. Before it almost looked like everything was the same all the way across for the last period. Now you can see where the flow goes across. With that, currently the U.S. through December is at 3.5 percent, Lexington 2.9, Lexington MSA is 3 percent, and Kentucky is 3.5 percent, which has pretty much been a consistent look we've seen over the last several months and years. This is a three-month moving average. We also did the same thing on this slide to show you the graph a little bit better. I think it's a lot easier, provides you more visual to show you how the rates truly are going. Economic indicators, we're still the same. I'll talk about a few other ones this time since we did not discuss November. I'll also point those out. Starting with unemployment rate, you see that November was 2.9 percent, 2.8 percent in October. Those are a little bit up from prior year and a little bit below. So you can see that we've not shown a lot of the unemployment rates continue to stay low, which is a good thing. We really like to see it go even lower in terms of filling jobs. Then the next section, we've got the employment, the quarterly employment report, 196,000 in June of last year. That's up year over year and up versus the first quarter, which is pretty good, and I think that's kind of addictive when we're seeing our payroll withholding numbers being up year over year. Permits issued, the last two months or year, increases year over year. Same thing on new businesses. We like to see that. Of course, sometimes on new businesses, it's a matter of time. Of course, sometimes on new businesses, it's a matter of a company that's getting a new tax item. Not necessarily new, but we do have new businesses in there, which we always want to see. And then home sales are continuing to be high year over year in October and November. And the one bill I'd love to point out is the foreclosures. It's still maintaining low. We're at 11 in November, which was up year over year because there was zero last year in November, and then 11 again in December, which was a decrease this year. Looking at the nuisance abatement lien collections, you can see we're still doing strong on the collection side there. We're $233,000 up year over year. As I pointed out before, there was some property sales where some liens were paid off back earlier this fiscal year, which has helped continue to drive that up. As you see, the penalty in interest is high in collections there. This is our year-to-date actual compared to budget. We used to have a monthly slide in there. We eliminated that. We didn't figure it really made any sense since we're reporting quarterly. So now I'm only going to give you the top four against budget year-to-date and then a top four versus prior year. Good news on this is the top four is basically flat to budget, just being slightly below at $39,000. Employee withholding is a little bit down under budget, $122,000. Net profit is doing pretty well compared to budgets up $466,000. Insurance is $75,000 below budget. Back in November, we were $193,000 below budget, but we caught up some payments in December to get that closer to being flat. And the franchise fee is the one that always tends to have struggles at times. It's all weather-related. It's $307,000 below budget. It is up year over year. The issue is our budget was higher than we're up. We built in our increase, not our increases, but the rate increases for the utilities. And with the weather the way it's been at times, it's not been an extremely cold winter. Comparing versus prior year, you see we are $4.3 million ahead of prior year, which is pretty good growth. Employee withholding is $2.2 million, which is a 2.2%. It's not what the budget growth was, but still showing pretty good growth. One thing I'll point out is our employee refunds back to people who work in Lexington but travel outside of the town are up $207,000 year over year, which means more people are traveling out of town. Net profit is up $315,000 year over year. Their refunds are actually $260,000 higher than prior year. We've had refunds come in as we're working the tax returns. We're continuing to work our October 15th tax season to go through refunds. There's some more refunds that come out of that, which continues to make that. So we're at variance is only $315,000 year over year, but could be a little bit higher if the refunds were apples to apples. Insurance premium tax is up $1.1 million year over year. All categories except marine and life are up. And franchise fees, as I mentioned, are up $752,000 over prior year. Electric and water are the two of the drivers there. One thing I'll point out in the back of the package, you'll find some notes. Some of the notes I'm going through today, both Melissa and I are including in the package now. That way you'll have, at the quarter point, you'll have those notes you can go through and then make it a lot easier to ask questions if something comes up through the middle of the quarter to get back to one of us. The next couple slides are a couple of new charts, graphs that we created to put in. This first one is our payroll withholding actuals versus budget by month. The blue lines, the blue bars on there, are the actual revenue that we've collected each month. And the orange line is the monthly budget. So this kind of, to me, reinforces why it's easier to report on the quarter points. As you can see, how the spikes will happen because of some of the things we can't control. We do a budget by month by when we're looking at year-to-date averages over prior years and things like that. But at the end of the day, those people have a due date to get in. But if a due date falls on a weekend and things like that, it can cause things to go crazy. And this one's net profit. This is really interesting. As I have on my notes, you see there's a big spike in the fourth quarter. And that's tax day, April 15th. We get a lot of revenue and net profit there. The other spikes you see in September, December, there's one in March as we're getting up in the April-May time frame, and in June is our annual or our quarterly payments that businesses have to make if they're going to owe so much. They make quarterly estimates. So that's what the spikes are. And of course, the other months, you don't have as much revenue coming in on that profit. That's all I have on the top four. Is there any questions now concerning those? There are. Council Member Milodi. I don't have any questions. I just have a comment. I know this is your last meeting for one of these. I want to congratulate you on your career path, and I enjoy working with you. For the last few years, I've been here with you, and I appreciate it. And you will be missed, and your staff really likes you. Every Friday I walk around, they compliment you. But I want to congratulate you and wish you well on your new career path. Thank you, Mayor. Thank you, Council Member Milodi. Appreciate it. Well, Council Member Milodi sort of beat my email to you. Thank you. And we are very saddened to say that Rossi has another opportunity that he is going to take later in the month. He's going to be here with us until, what, the 21st of February. And we certainly want to thank him for everything he has done and all the contributions that he has made. And I know you all appreciate it also. He's left the division in very, very strong standing, and we really appreciate it. Thank you for sharing that. Thank you for sharing that, Sally, and I would echo Sally's sentiment for all her work, for sure. Thank you, Sally. Thank you. Council Member Evans. Surprise. Okay, I'm getting over that. Well, congratulations. Yeah, we are going to miss you. But good luck to you in whatever it is you're doing next. But I just have a very basic question. It's just about the graph. And forgive me if I missed it. Because the bars, they're listed as the 19-20. Is this the fiscal year? I'm just trying to figure out if the lines are, it's for the 2021 budget? It's this year's budget. So you have the bars are six months. We have six months into this year's budget of 20. Oh. And then the remaining part is just our budget. Okay, gotcha. All right. Thank you. You're welcome. Thank you. Council Member Reynolds. Thank you for recognizing me, Chair, because I'm not on this committee. Thank you so much for all your hard work, Rusty. We're going to miss you a lot. So I have a quick question. On page 15, where it says December 2019 actual compared to adopted, are you able to explain a little more why insurance would be down, why that category would be down as compared to the prior year? It could be a little bit to the budget spread, or we just not got the amount of revenue in it we thought we'd had in through the first two quarters of the year. Those payments come in quarterly. So there's always a chance that some of that may not have come in. We have to go and work with the insurance companies. But we're up year over year, which is a good thing. It's just not right now where we're needing it. Okay. So projecting the rest of the year, it'll be... It could go away. It could stay roughly that throughout the rest of the year. That one has been pretty consistent with the growth throughout the year. But we can have a big month with a bunch of people in the spring going by boats and things like that. We can see marine actually flip. Marine's down year over year. So that could easily flip and turn. Okay. Thank you. Thank you, Chair. All right. Thank you very much, sir. Director Locher. Oh, I didn't realize you had switched it. All right. So talking about the rest of the revenues. And as Rusty noted, we have notes at the... Past the question slide that have some of the things that we're speaking just for reference for you all. In the other licenses and permits category, we are up. And that is due to the regulated fees. It's a... When we were looking at the spread and how our budget was spread, it looks like we had put the budget a little later than what the actuals have came in. So we'll see that tend to... That positive variance to tend to go down a little bit the second six months that we have of the fiscal year. The services category, once again, is doing well for us. And that's primarily due to EMS fees. They are tracking well, as well as excess fees. And then our parks and recreation programs are up as well. So those are some of the things that are making up that positive $1.2 million variance for the first half of the year. In our other income, you all will note a couple slides ago, whenever he went over the code enforcement, the nuisance, the penalties and interest are up. And that's due to the nuisance and abatements are up. So that's about $425,000 of that positive variance is due to that. And then our miscellaneous revenue is also tracking positive year to date. On our expenses for the first six months, we are within 1% of our personnel budget, which is something to be pretty proud of because that's our largest budget. But we're doing positive in our health insurance budget. We've had some savings with pharmacy this year with our contract. And then we are over budget year to date in our overtime. So we're watching that because that continues to grow. In our expense side on the operating, we have a positive variance in our software maintenance account. And you all just approved on Thursday night, a contract for the police body cameras of $500,000. So we've had that variance sitting there for a couple months because it was budgeted to be spent in October. And then it had to go to approval with you all and just got approval last week. So we'll see $500,000 go away when that bill is paid. And then there's another $500,000 in software maintenance that I've reached out to information technology. And they've projected out their expenses for the remainder of the year. And they project with all of the expenses that that will also be spent down. So there's about a million dollars of that 3.9 that's in our software maintenance that we'll see at the end of the year going away. We also have a positive variance in our salt budget. They're still purchasing salt, bringing that in. You all know, as Rusty said, we've had a very mild winter, which hurts us on our franchise fees, but we're saving money on salt. So there's a flip side to everything, I guess. And then professional services, that's one that we typically mention every month that we have a positive variance in as well. The partner agencies variance, that $1.3 million there, that's related to the library payment. The payment to the library is one month behind. I think it was how the holidays fell. So I've asked finance, and they're going to make sure that we get caught up because that 1.2 variance will go away once that payment is made. So if you take all of our expenses, we're about $6.2 million positive. And then if you add our revenue to that, we're at a change in fund balance of 8.6. So then, new slide here. This is showing our personnel budget versus actuals. So you all can see, we have spikes in November, January, and May in our personnel. That's due to three pay period months. So we have two months each year where we have three pay periods. So those are November and May for this fiscal year. And then we have the sick check payments in January, which is a little more than a payroll, extra payroll. And then we also have, that's when we have a lot of the retirements and the payouts. So after we get through January's numbers, we'll have a better idea on how our personnel is doing for the rest of the year. December was slightly over budget there for the month. That's due to the subsidy that was voted on through the fund balance. And so that happened in December. So that's why December spiked up above. So then we also did this slide for operating. So you can see, our operating for the most part is a little bit more stable throughout the year. The one thing that stands out is November. We're very, our budget to actuals comparison in November. The way Thanksgiving fell this year at the end of, the very end of the month, I think that had a lot to do with November not being as high because payments that would have been processed weren't processed until the second because of the way the holiday fell. You can see December slightly over budget. I think some of that is making up for the November, the stuff getting pushed back for the holidays. As you can see, June is our highest month for the budget. So that's when a lot of things are paid, things are booked. And so we watch very closely, but you all can see the trend there is a little bit more even than our payroll and some of our revenues are. Compared to prior year, we are $6.7 million ahead of our FY19 revenue for the first six months, which is a 3.8% variance. And then on our expenses, we are tracking about 4% higher than we were last year. And so that's really for informational purposes. And then I've added one more slide. This is Commissioner O'Mara's. He really likes this chart. This chart shows our amended budgeted revenues versus our expenses. And so on this chart, the revenues are in blue and the expenses are in orange. And so you can see that there are several months where our expenses are greater than our revenues that we're bringing in that month. Just to show that everything is very volatile and we're not always going to have a positive, we're not always budgeted to have a positive variance. So we thought this slide would be helpful to show you all the ebbs and flows of the revenue and expenses compared to each other so you can see how we are projecting out the year. So are there any questions? Any questions? No, I'll only add that on pages 27 and 28, the directors have both left specific notes on items that they usually mention during the time of their presentation. So you can reference those for the future. And I think this is a very well done first stab at a quarterly report. I thank you both a great deal for doing it. And if you have thoughts or comments of what you would like to see in the next quarterly report, please let me know or the directors know so they can include that. All right, moving on to the next item on our agenda. We have the CAFR presentation from Bill Meyer and Strathmore Company. I'll also note that we left a copy of the CAFR in your boxes today in addition to the new PAFR. So I'll let Bill, why don't you go first and walk us through the CAFR presentation. Okay, good afternoon. My name is Bill Meyer. I was the partner in charge of your audit. The Comprehensive Annual Financial Report is 174 pages prepared by your finance team. So they do a great job in doing that. Our responsibility is to audit that. So I just had a few highlights that I wanted to cover, and of course take any questions that you have. I was going to talk about the audit opinion, the audit kind of in general, overview of this document, and then there's some required communications. So the audit opinion is actually three pages long in this document, but this is the important part that says that our opinion is that the financial statements are fairly presented in all material respects in accordance with the government accounting standards. That's, in our world, we call it an unmodified opinion. Better name is a clean audit opinion, which is what you would want. There's, as you've probably seen, there are like so many numbers in this document, it's hard to get your hands around it. This is just a summary of the general fund. That's the fund you, I think, as council members are most concerned with. You'll note that similar to last year, your revenues and expenses, expenditures were about the same. The other is just some transfers from other funds. So you did have a positive change, but operationally it's about a break even, and that's a good thing because you're not really supposed to accumulate a lot of cash. These are the general fund balances, the equity of the general fund. I know Bill O'Meara and his team go over that with you in some detail, but the thing that I just want to point out is those balances are fairly consistent from year to year. And they're positive, they're all positive, that's good. There was an accounting change this year. Fiduciary funds are ones where you have authority over the money, but it's not really your money. So there was a slight change in how that's accounted for. So when you read our audit opinion and read the document, there was a new accounting standard. Basically, it had a couple changes in your document. The prisoner's account changed slightly because of the new standards, as did the sewer sanitary system fund. So there's accounting policies that you follow. Most of those are dictated by the governmental accounting standards, but some are selected by you. But those are all outlined on pages 50 through 62. We didn't find any audit adjustments. We had no difficulties in dealing with management. We were glad to have some time with Bill O'Meara when he was back. We're also required to point out that not all the numbers in these financial statements are hard numbers. Some are based on estimates. This is a list of some of those key estimates. Management makes a judgment about the estimates and books those entries, and our responsibility is to audit those and see if they're reasonable. Of course, the big ones are the unfunded pension liability and health benefits, and that information comes from the state actuaries. There's some accounting standards that are coming up in the next year or two. Our initial assessment is those will not have any significant effect on you. So, again, I could talk for an hour on this thing. I know Phyllis could talk for more than that, but just wanted to see if you had any questions about anything that we did or any of the audit results. Thank you. Council Member Maloney. Thank you. I appreciate this. Somebody asked me a question the other day, and I kind of remember, and I couldn't answer it, but I don't know if you can be answered or the administration. The CAF used to be many years, we used to get it in October. We get the numbers just reporting in October, and then it got to November, and this is in January. And this is in January. Why are we taking longer than we used to get them? Because I remember I sat up here and it was always in October we got these reports, and now I'm sitting here in November, I mean January. So I think what you get in October historically has been a report, I think, generally from Bill O'Mara on the fund balances. The audit is in process at that time, but in the years that I've been involved in, in the previous years, my experience is that the audit's always been done in November time frame. In fact, your audit is done quicker than many of the cities of comparable size and others in the state. So I think the years we've been involved, five years, the years before that, it's always been in kind of the November time frame when the auditor signs off. But I know that Bill O'Mara or his team has met with you to kind of get preliminary results on the general fund, but the actual document has been later. And, of course, we'd be glad to come earlier, it's just this was the best meeting for us to attend, apparently. Okay, it was just interesting. I didn't, to me, I remember when we used to get them as early as October or November. It just concerns me when we're getting this close to the budget coming up here and starting this month, I kind of felt uncomfortable seeing these numbers a lot more earlier than where we are now. But if there's a reason why, that's why I just wanted to know. Yeah, so again, my recollection, and, of course, we can look this up, is that the audit has always been, the audit opinion has always been signed off about this time. I know you've got some preliminary numbers in the past, so we can look that up and give you a report, I'm sure. Thank you. Any other questions for Mr. Meyer? Okay, thank you very much for your work. And I wanted to just take a moment and show the, this is the PAFR, this is the public, the first ever public annual financial report that the city has tried to put together, has put together, I shouldn't say tried, has put together. Commissioner O'Meara has talked for a long time about trying to put a public-facing document together that was easy to read, that was better accessible to our constituents on how we're spending our dollars. This is not a budget document. This is simply a report of our finances. And I know directors, not directors, Mr. Holbrook, your team, all the finance team, Rusty, Melissa, you all have done a great job helping to put this together for the first time this year. And I just want to say thank you, because it's a huge document to us. It'll be on our website alongside the CAFR when we approve it, so that anybody can go online and see them. So I just want to say thank you. I think it's a great first step to making all of our finances more transparent and easier to access to others. So thank you all very much. Next is item number four. And as you know, we have our budget retreat coming up this Thursday. And one of the things that we wanted to make sure we had is a good understanding of kind of what the economy is doing right now and a forecast for the future. So at this time, I'm going to welcome Dr. Mike Clark from the University of Kentucky to come give us an update and a forecast for this year. Thank you. All right, thank you very much. And it's a pleasure to be with you again. I think we started doing this last year, so this is our second time. Hopefully, we'll have ironed out some of the bumps, but not all of them, I guarantee you. We'll always be kind of building this process. So just kind of an overview of what we're going to talk about today. I'm going to start kind of big and then drill down slowly as we look at the national, the state, and then the local economy. And we're going to really drill down into Lexington's employment and wages. And then one of the things that we do along with the city staff, the budget staff, is we do projections of your occupational license tax. Now, we just do the payroll and the net profits tax. We're not involved in the other tax revenue sources that you have, but I'll discuss our forecast for those tax revenue sources. Okay, so generally, 2019, the economy ended in a fairly good position based on the data that we've received so far. A lot of this data is preliminary. And so we're still waiting for that data to come in. But one of the big economic measures that we like to look at is GDP. And gross domestic product, or GDP, is the value of the goods and services that an area produces. So it's a really broad measure of kind of the economic health of an area. And you can see what we've done here is we've basically showed how Kentucky, the U.S., and Fayette County growth domestic product has changed over time. And we've indexed all this to 2001. You can see kind of where we're at relative to kind of those other levels. And you can see it's very highly correlated. GDP for Fayette County tends to move very much the same way that the state and national economy does. But you can see that, you know, as we came out of that recession, we were actually growing a bit faster than the national economy even in several years. That started to flatten out a little bit in 2016-17. 2018 is the most recent data we have for Fayette County. At the state level and the national level, we actually saw fairly good GDP growth. But this data actually comes out quarterly. And one of the things that's starting to cause some concerns is that as you look at that quarterly GDP, what you're seeing here is annual. But if you look at that quarterly GDP, we're starting to see hints that it's slowing down now. The most recent quarter for the nation was the third quarter. Whereas we started this 2019 first quarter with U.S. GDP growth of about 3.1%. U.S. third quarter GDP was still growing, but at 1%, so quite a bit slower. And for Kentucky, we only had the first two quarters of the GDP. But that is also indicating signs that it's still growing, but at a slower pace. So that's going to play into our forecast as we look forward. One of the other big measures we like to look at, and you've seen a little bit of this in the previous presentation, is the unemployment rate. So we're rusty one to kind of go in and look real close. I want to show you kind of the big picture. And what you're going to see here is U.S. is the red. Blue, of course, is Kentucky. And then you can see where Lexington fares on this number. And one of the things that's going to immediately jump out to you is that that green number bounces around a whole lot. And the reason for that is seasonality. This data comes from federal agencies that track this data. For the national and the state data, they take out those seasonal fluctuations. But they don't take it out of the local data. But it still gives you a general sense of what's going on. And you can see that we've seen really low unemployment rates, both at the national, the state, and also at the local level. This is, again, Fayette County or Lexington. Kentucky's unemployment rate got down to 4% this past year. That's the lowest that I can find in terms of the data that the federal agencies provide. But you'll notice that blue line started to tick up a little bit here in the recent months. And I get a lot of questions about, well, what's going on? What is that a signal of? Is that a signal of the economy starting to turn? And you've got to be kind of careful about understanding these unemployment rates. Because unemployment rates can actually change for good reasons and for bad reasons. What's really going on in terms of that uptick is, for some time now, we've actually been seeing more and more people going back to work. So the way this data is developed is we survey people. And we ask them, are you working? Or if you're not working, are you looking for work? And to be unemployed, you have to be not working and actively looking for a job. Well, what we've seen over the past few months is employment is still growing in terms of the number of people who are working. More and more people are indicating that they're working than the previous months, typically. But we're seeing a lot of people still coming back into the labor force. And right now what's happening is the number of people coming into the labor force is growing at a faster rate than the number of people working. So the people coming into the labor force who maybe were discouraged workers, who had kind of stopped looking for work because the economy had been bad for so long, we saw a lot of those people coming into the labor force over the past few years. And we're still seeing a fair number of them coming in. But they're coming in now at a faster rate than people are getting jobs. So we still have more people working. You know, when we see the unemployment go up, it's because we're still seeing more people coming in and searching for work. But it does indicate that maybe we're facing a tighter labor market. And so that's one of the things that we're kind of looking at. And that could be an issue for employers going forward. In Fayette County, we're seeing kind of the same thing. Again, more people working. All right. I do want to apologize. I moved a few slides around. I think what you've got is slides that we did as of Friday. I can't leave things alone. I always kind of got to tinker and change it. If it wasn't a deadline, I'd still be working on these slides. So this slide is in your presentation. But it's a few pages back. But I decided that I wanted to go ahead and talk about this a little bit earlier. We're going to discuss several different measures of employment. We talked about, one, the number of people who are working. Well, this is a count of the number of jobs. Not people working, but actual jobs. And it covers Kentucky. And it covers MSAs. So with Fayette County's Lexington MSA, that's not just Fayette County. That is Fayette County and most of the surrounding counties. The one that is not included is Madison. So it's a broader measure than Lexington. The advantage of this data set is it's a little bit more current. This data set runs through November. So it gives us a little bit better sense of what's going on fairly recently. And you can see that across all these different MSAs, where you're looking at Lexington, Louisville, or the Cincinnati, Northern Kentucky MSA, they kind of track fairly well together with the national economy. Or, I'm sorry, with the state economy. But the state economy is that blue line. And what we're doing is we're showing the percent change in annual employment relative to the previous year. And you can see that, you know, as we came out of that recession, Lexington was really firing all cylinders. You know, we were having some really good growth rates. We were outperforming Louisville and Cincinnati. And then around 2018, we saw that employment started to decline. And we talked a little bit about this last year. We were starting to see some signals that employment in the Lexington MSA was starting to decline a little bit. And, you know, what's kind of interesting about this is the most recent numbers are showing that employment picking up a little bit in 2019, for at least the data that we have so far. And not that it's a competition or anything, but I do want to point out that this year, Lexington seems to be outperforming Louisville. I thought this might be an audience that cared about that. I certainly do. All right. So this data set also gives us an indication of how hourly earnings are performing as well. And again, I really want to focus on Lexington MSA. But we have the comparisons there. We're seeing hourly earnings picking up a little bit. One of the issues we had in this economy or this economic expansion is that for several years after the recession ended, we saw slow employment growth and virtually no growth in terms of wages, particularly after adjusting for inflation. We're actually starting to see that now. So Lexington, in particular, our MSA has increased at a faster rate than Louisville and Cincinnati in terms of its hourly earnings. Dr. Clark, before you move on, Vice Mayor Kaye has some specific questions. Thank you. Thank you, Chair. On both these slides, are we talking about residents of Fayette County and whether they are employed and what they earn? Or are we talking about jobs in Fayette County? These are jobs based on where they occur. So these are jobs that are in the Lexington MSA. Now, the residents are who could fill that. That could be a resident or it could be somebody who's commuting from another part of the state into the Lexington MSA to do that work. And that's true of this slide and the previous slide. Is that correct? That's correct. So it's the actual jobs. It doesn't matter where these people are living. That's correct. Okay. That's helpful. Thank you. Thank you, Chair. Now, the unemployment rate is based on the individual person and where they live. So again, it's a little bit different of a measure. There, you're talking about the people who are in the Lexington. Well, in that case, it is county specific. So it's people living in Lexington. What percentage of them are unemployed? Thank you. All right. So if that wasn't enough employment data, I'm going to show you some more employment data. And the reason I'm going to do this, I think it's going to become obvious, but I'm going to use a different source for this employment data. Again, it's an account of jobs based on where those jobs occur. But this data tends to tie more specifically with Fayette County. Okay. The previous one, we were having to look at the MSA. It's more current, but this one allows us to drill down into Lexington specifically. This data comes from the Unemployment Insurance Program. And it tells us about all the workers who are employed. So any worker who is covered by unemployment insurance is included in this data. So it's a really rich data set. And it's going to allow us to see some details about what's going on in Lexington that we can't see with some of the other data sets. A couple things you need to understand is that the data excludes individuals who are self-employed or who are agricultural workers. Those individuals are not covered by Unemployment Insurance Program, so we do not pick up records for those individuals. We are going to get some wage data from this, but this excludes severance pay. That is not part of what is collected from Unemployment Insurance. The disadvantage of this is there's a lag about six months before we get this data. But it's going to allow us to look at Lexington, and it's going to allow us to look at the industries or the sectors within Lexington. And this data is particularly useful because it ties much more closely to your tax base. So when we look at our payroll tax, the idea is we're taxing, you know, we're able to look at total tax collections that's specific to Lexington. The Unemployment Insurance Program, it seems to cover about 80% of your tax base. So it should correlate fairly well. So, you know, it's going to provide some really useful insights, I think. All right. So what I'm looking at here is Lexington. And your slide doesn't say private employment, but it should say private employment. I'm not including agricultural, or excuse me, government workers in these slides. But you can see kind of what's been going on in terms of the trend of first, and the red line is showing you employment. And you can see that, you know, Lexington fared very well. You know, we were growing well as we came out of the recession. We started seeing some slowdown, which is part of what we talked about last time. And then we actually saw employment in Lexington decline a little bit in 2008, I think that's 19. In the green, you can see average weekly wages. Now, a couple of things to understand, you're seeing average weekly wages go up. So this is the average of the individual workers, how much they take home each week. Now, that can vary for several reasons. One is it could be that they're getting higher wages. And we saw on a previous slide, we are starting to see wages pick up, you know, in Lexington. So people are earning more. But it could also be that they're working more hours. That would affect their average weekly wages. Or it could be changes in the mix of occupations over time. But we're seeing average weekly wages go up. So even though employment was going down, average weekly wages were going up in a way that offset it. So that when you look at total wages, we didn't see a decline in terms of total wages. The growth has slowed substantially. In fact, in 2018, it looks like, you know, there really wasn't any growth. I'm not sure exactly if that's perfectly level. But we did see a little bit of growth in 2019 so far. So what I want to do now is I want to kind of drill down into what's going on here. And I know you probably can't read this slide here. I'm not really expecting you to read it here. But it should be in your packets. What I'm going to do is show you kind of how to look at this. Because I found this really interesting. And then I'm going to focus on a couple of industries that I thought were particularly noteworthy, you know, things that you might be interested in. But what we have in this slide and the next two is I'm showing you that same data. Employment, average weekly wages, and total wages. This one shows employment, but it's showing employment by all the different sectors. And so you can see here, because they're all scaled the same way, you can see several different things. One, you can see the long-term trend. You can see the most recent changes. And you can see the relative contribution of the sectors to total employment. And you'll see the same type of thing in terms of the next two slides. The next two slides showing average weekly wages and total wages. So what I'm going to focus on, I'm going to skip the next two slides and just focus on a couple of industries. But I'm going to focus on manufacturing, trade, transportation, and utilities, professional, and I think I might have health services in there. So I'm going to skip to the next couple. You're welcome to look through those. And if you have any questions, I'd be happy to go back to them. But let's take a look at trade, transportation, and utilities and see kind of what's going on here. So we started thinking about, well, we saw employment declines in Lexington. Where did those employment declines occur? One of the places they occurred was in trade, transportation, and utilities. Now, I'm not sure how, you know, I can't really pinpoint it more than that. That's about as detailed as I can get at this point. But again, we're starting to see some declines in terms of employment, or at least we did for the past two years. But average weekly wages were continuing to grow. So that kind of offset and kept total wages from this particular sector relatively level. If we move on to professional and business services, we were seeing the same type of thing. Employment was declining a little bit, but average weekly wages were coming up. And manufacturing. So manufacturing, you can see that over time, manufacturing in Fayette County has been gradually declining. But the average weekly wages for manufacturing jobs are actually pretty high relative to other sectors in Fayette County. And so this is still a pretty important part of our economy. And you can see that, you know, there's kind of a spike in average weekly wages. It's kind of come down a little bit. Not quite sure what caused that spike. But what I thought was particularly interesting is that manufacturing in Fayette County has been gradually declining over time. Okay, so this slide shows my forecast for Lexington-Fayette County in terms of employment and total wages. And even though we did see a decline in 2019, we are projecting small employment increases for fiscal year 20 and for fiscal year 21. Not large at all. We are anticipating that total wages are going to increase by about 2.9% in 2020, 2.6% in 2021. So that's kind of our underlying economy and how we see that performing. And that is going to carry over into our forecast for the occupational license tax. Okay, so here what we're looking at is the percent change in the payroll tax revenue that we receive. That's a percent change from the year before. And we've also put on there the percent change in total wages. So all those previous slides I was showing you, what we're seeing here is of those, we're focusing on total wages and showing how that has changed over time. And you can see that that tax base follows very closely, or your tax revenues follow very closely with our employment growth that we're seeing from that UI data. It doesn't always correlate perfectly, but they are highly correlated. So when we look at that economy, that tells us a lot about what's going on for our projection of your payroll tax. All right, so here we have our historic and our projected payroll tax revenue. And what we're anticipating for this remainder of this year, or for this year, is that we will grow about 2.5% in terms of our payroll tax for 2020. For 2021, we're estimating a growth of about 2.8%. For our net profits tax, we're anticipating that we're going to continue to grow this year, but at a somewhat slower pace, about 1.8%. And then for 2021, 2.9%. And then my last slide is basically just a summary of those percent changes, and basically our forecast. And I think, oh, I did want to kind of talk about a little bit on, talk a little bit about some of the sorts of uncertainty that we have. While we have seen the economy perform fairly well in 2019, we do face some headwinds. We're starting to see some slower growth globally. Several of the countries that we trade with, you know, in the US and particularly in Kentucky, we're seeing forecasts that they're going to grow a little bit more slowly. There's been, as you know, quite a bit of uncertainty about trade policy, and that is important because Kentucky trade accounts for, or exports account for about 15% of our gross domestic product, so it's pretty sizable. That's more than the nation overall, which is about 12%. So uncertainty over trade matters for Kentucky. Some of the good things that we're seeing in terms of trade is we are actually seeing some of that policy maybe moving forward. So we're hoping that that's going to provide a signal that some of that uncertainty is going to diminish over the next few months, but that still is something that we're a bit concerned about. We're also seeing something of a contraction in terms of national manufacturing. We haven't seen a whole lot of evidence of that in Kentucky yet, but if that continues, we would anticipate that that's going to be an issue here as well. For Lexington, we are actually seeing a little bit of employment growth, and part of the reason I had that one slide placed back a little bit, let me jump back here real quick. This slide here, I explained to you that this is more recent, it's through November. This is employment growth again, but it's at the MSA level. One of the things that we've been seeing as we've been watching this is that in the past five months of our data, basically from July through November, we've been seeing employment growth pick up at the MSA level. And so that is giving us a little bit of hope that maybe we're starting to see employment pick up a little bit going forward. So that's one of the things that we incorporated into our forecast. Okay, so let me go back to the end, and that really concludes my comments, and I'd be happy to answer any questions if I can. Thank you very much, Dr. Clark, for your presentation. It's very helpful. And we're going to start with Vice Mayor Kaye. Thank you, Chair, and thank you so much for this presentation. Very helpful. On the slide with the uncertainty, factors of uncertainty, or have you? Yeah, sources of uncertainty. You talked about those in terms of Kentucky, for the most part. Can you talk a little bit about the actual impact on Lexington, of Lexington-Fayette, as opposed to the states, since our economy differs in so many ways? It does, but I do think these are still issues that are going to affect us. So generally, what we tend to see is that our economy is fairly resilient in a lot of ways. One of the reasons is because we have such a strong healthcare sector. And so I think that helps us weather some of these issues that we see affecting Kentucky as a whole, and the nation as a whole. But we do tend to see the same type of patterns if we see a recession occur at the national level, that will hit us. That will slow our growth down. It'll probably cause a bit of a contraction. It tends to hit us a little bit later. And oftentimes, it's not quite as deep in Lexington as it is for the rest of the state. And I think a lot of that has to do with that strong healthcare sector, and that we have a fairly diverse economy. But I do think all these factors matter for Lexington. It's a little bit harder for us to say how much, from the data that we have, how much trade affects Fayette County. But I think it's reasonably large. I don't know how much of our exports are from Fayette County. But we do still have a manufacturing base that is a fairly sizable percentage of our economy, particularly if you look at it in terms of wages. So I do think all these things matter. And that's something that we do kind of need to keep an eye on. As we start seeing those issues show up, they'll eventually show up in Lexington. Okay, given that, is it fair to say that those sources of uncertainty likely impact Fayette County less than the state or the nation, given the globally trade policy, et cetera? Is it reasonable to say, yes, we're affected by those, but typically not as much as the rest of Kentucky or the rest of the country? I think, to some degree, I'm okay with that. So the global growth is probably not going to be as big of an impact for us. Uncertainty over trade. So I was doing our forecast for the state back in November, and there was a lot of uncertainty over NAFTA, or the replacement for NAFTA, the USMCA. And the idea was that for well over 20 years, we had this trade agreement with Canada and Mexico. And we have a lot of supply chains in Kentucky, and I suspect Lexington is tied to that as well, that are dependent on Canada and Mexico. And so that uncertainty caused me quite a bit of concern for Kentucky, and possibly for Lexington. Now, I don't know enough about how trade really matters in Lexington yet to answer that question on that particular issue. But yes, some of these are probably going to be less of an issue. But I can't stress enough that if you start to see the national economy go down, then you've got some rocky roads coming ahead. So you need to be mindful of that, of course. Okay. Thank you. Thank you, Chair. Thank you. Council Member Ellinger. Thank you, Chair. And thank you, Dr. Clark, for this presentation. The one when I looked through it before you discussed it, what concerned me was on slide number six, according to our packet, was when we started looking at that line kind of going down, that little turn there. And I guess because it looks like we have less employment. I'm sorry. Can you give me a heading? Yes, it would be Lexington 202 to 219, the graph, that graph right there, when I saw that little dip there that showed, and you kind of explained that. And I guess, which means that we have less private employment jobs and that are there. And I guess with a tighter labor market, you referred, even though we have low unemployment, I guess we have the underemployed now are looking for jobs because that's a higher number than the employment. If I guess they consider the underemployed, they're now looking. So that would actually with a tighter labor market is going to raise people's wages because there's more people looking for less jobs. So that's why our wage is going to be still up. Right. But according to what you're saying the last six months, because the one that has the would be number 13 hours employment growth for the last six months shows that actually our jobs are coming back. And so that's actually improving. And that's how you're getting our revenues are going to be increasing to, I think, 2.6% or thereabouts. Right. So I actually do think employment is going to come up some. You know, it's not strong employment growth, but it is going to come up some. And as more people are working, that increases your tax base and your tax revenues. But most of that, I think, is going to be from wage increases. And we have seen pretty consistent. I shouldn't call it wage increases, increases in average weekly wages, whether people working more hours, multiple jobs or earning more. But that increase in average weekly wages is what has been keeping our revenue growing, even though we had fewer private sector jobs. So and I do anticipate that being the case in 20 and 21 as well. So is it the wages are going up or we actually bring more jobs? What is? Well, it's a combination of both. You know, I think you're going to see more people working or more jobs. And you're going to see higher wages as well. Because the slide number six was a little disconcerting to me, showing us that we're even in a good economy, we're losing jobs that look peer to me. So that was our historic. I don't think we're going to see a decline this year. I think we're going to see a slight increase. And part of that is because at the Lexington MSA level over the past five months of data that we have, which is not included in these numbers, right, we're seeing about 2% growth in employment. And so we think that's going to help our employment numbers. So when I look at this chart, I look at that red line, that last one in particular, where it declined. I don't think that's going to happen this year. I think we're going to see that tick up just a little bit. We also have the census that's going to happen this year. So that's going to help a little bit. And then on top of that, we're going to have the wage growth. And so I think that wage growth is probably a larger contributor to what we're going to see in terms of your payroll tax growth. Does that make sense? It does. Okay. And I appreciate it. Thank you. Thank you. Council Member Maloney. Thanks, Dr. Clark. I appreciate what you're showing here. And being here for a long time and watched Lexington, and back in the 70s, 80s, we had IBM, we had Square D, we had a lot of manufacturing jobs. And as the years go by, they have faded away. And what placed them, I think, is the medical fields, hospitals, because the baby boomers, the generation is starting to get in that age where hospitals are needed and all that. Now, my question is, when you look at a job increase, I still think medical is going to continue to go a little bit higher. But at a point in time, everything has to go recycled back. And to me, the baby boomers are going to slowly fade away. I see manufacturing needs to come back into this picture. And I don't think Lexington has been aggressive. We need to figure that out. And to me, looking at the 2.5, and back when I grew up in the 70s, 80s, it was manufacturing where everybody went. Hospitals, doctors, now it's the opposite. Do you see that, the future, that we have to start really planning to see that cycle is starting to change, that we have to go another direction? Because we've been relying on the medicine, the medical field, for the last 10 years. And our U.K. is getting bigger. And I know all the hospitals continue to get bigger. But there's a point that I think they can't get any bigger than what they are. But I just want to hear a message that we've got to start looking at those kind of jobs again. And that's just me. Unless I'm wrong, correct me, or somehow not, because I just see there's a problem there. No, I think that's a fair question. So when I look at the healthcare sector, I see a couple of things affecting that. One is population growth. And population generally tends to grow. As you get to smaller geographic areas, you see some areas decline. That doesn't look like it's... I don't know if that's in Lexington's future or not. I think the general MSA area is likely to continue to grow. I think we get a lot of people from other areas, particularly eastern Kentucky, coming in to consume healthcare from the hospitals here. So I think that's part of what has fueled this population growth. But I think part of the other is our appetite. Our willingness to pay for healthcare services has grown as our economy has improved. That's been something that people have shown a willingness to spend more money on. So I think that is likely to increase over time. It's hard to say if you're looking at 10, 20 years. I'm lucky to give you a year or two year projection. So that's kind of challenging to think that far out. I will say, though, a diverse economy is really, really important. Because if one sector does start to go down, just like when you were describing in the 70s and the 80s when we had a large manufacturing base and we started to lose that. Lexington was, at that time, still relatively diverse compared to a lot of communities. And I think that diversity really helped us weather that loss of manufacturing. So to the extent that, you know, whether it's Lexington or the Lexington MSA, you know, is able to have a diverse economy, that's going to help it weather kind of these cyclical things that we see showing up that could hurt a city that's really dependent on manufacturing. West Virginia and some of its cities are a really good example of that. Because, you know, they were so reliant on manufacturing and coal that, you know, they've had trouble. And where Kentucky and Lexington have seen, you know, pretty steady increases since the recession, West Virginia actually suffered kind of a second recession after the fact. And, you know, it's because they didn't have as much diversity as I think we have here in Lexington. Thank you. Thank you. Council Member Farmer. Thank you, Chair. Doctor, thank you. Appreciate you being with us today and your expertise. It's kind of like going to my doctor. You give me some good news, you give me some bad news, and tell me to come back next year. Well, there you go. Appreciate your time on that. And then mine is on whatever this page is. And I'm just interested, when those lines cross, what does that mean? Something's lagging or something's a leading indicator of something else or what? I think part of it is because we're talking about slightly different measures. All right. So when I discussed the UI data that we get this from, the idea was that that is probably the best measure we have of the underlying economy, right? It's telling us how many people are working, but not all of our workers. Self-employed are not in there. Ag workers are not in there. It's telling us about most of the compensation that you tax, but not all of it. So one of the things that you tax that is not covered under UI is severance payments. So if you have firms that are going out of business and they start issuing severance pay to their workers, we don't see that in the UI data. So we've looked at some of these places where it's diverged, and we've kind of wondered exactly what you're asking, what is causing that? And probably our best guess is that maybe in 2007 and again around 2017, maybe there was a large employer that went out of business, paid a lot of severance tax that shows up in terms of an increase in your revenue, but it doesn't show up in our UI data. We don't see those types of payments. That's not compensation for work, so it's not subject to UI. So what we think is happening is in 2017, it looked like you were really growing, but it wasn't the economy. It may have been something else. In fact, it may have been one or maybe several employers may have happened to go out of business at that time period. Over time, they tend to come together. There can also be some timing issues. If a firm didn't pay their tax on time, that might have shown up a year later. Whereas in UI, it shows up in 2018. If the payment was late, it might show up in your revenue data in 2019. It's just fascinating to look at and to quantify. It is. I appreciate the work you've done for us and the insight you've given us very much. Thank you, Chair. Thank you. Council Member Evans. Thank you, Chair, and thank you for this report. It's very informational and educational. Using Council Member Farmer's analogy of going to the doctor and getting a physical, getting a report, you get a lot of numbers, and then you might be sent to a follow-up, but it's kind of that explaining, okay, why am I going to this specialist now? What did you see in this report that triggered a referral or something like that? And I was more curious about the Lexington, the 202 to 219, with the four graphs, going back to what Council Member Ellinger was looking at, because you did mention a few things in particular. What could be causing some of those changes is people working more than one job. So I guess, and I think this would be, if our new budget position we're looking at, this would be the follow-up assignment for that person to help us utilize this information to find out what it really means for the average citizen here, because we do hear the anecdotal stories of people working two, maybe even three jobs, but looking at these charts, it looks like Lexington's great and things are going well. So what would be your, I don't know if you can give a recommendation, or what, I feel like that needs to be dissected more. And can we dissect that? What would be the next step to dissect that to get a more accurate picture of what's going on with our citizens? So the data we're looking at here, we're just counting jobs. And so, you know, if I'm an individual who is working for UK during the week, and I take a part-time job on the weekends, something like that, you wouldn't realize it, but in this particular chart, I would show up twice. Okay. And so if I'm understanding what you're saying is you want to get a sense of how many jobs are people having to work in order to kind of, you know, how many do they feel they need to work to support their household? There is data available. It will not allow us to get to this level of detail. But the census collects fairly detailed data that would allow us to look at individual households and see how many jobs people work. So that is something that's, at least in theory, doable. But it requires getting into some survey data that the census has and, you know, doing some analysis. But it's very doable. Thank you. Council Member Lamb. Thank you, Chair. Thank you for this presentation, Dr. Clark. Yesterday, I was at a business up in Cincinnati, and it was a medical supply company. And I wondered why they hadn't come. I mean, because there's nothing compared to it in Kentucky. And I said, why are you not looking to bring your business into Kentucky? And he said, because of e-commerce. He said he can't. You know, obviously, they had a big line of a bunch of employees there that were doing all this, you know, work on the internet and taking all these orders. So I'd like to know, are you all looking at research as it relates to how e-commerce is going to end up affecting our, you know, our occupational license tax? It's a good question. I have not done any research on that area. I know years ago, there was a lot of interest in that. But I don't know of anybody who's doing it in this area right now. It is very interesting. I was trying to get this business to come down to Lexington because they had such a robust company. So thank you. Thank you. Thank you, Chair. Thank you. I just wanted to mention a couple of things. I know last year at your presentation, I think it was Councilmember Plowman asked about more of the sector conversations of where our jobs were. So I appreciate you taking the time to insert the slides that show all the variety that we have. And you can see the trends and where our economy has gone the last 10 years. I think it's really helpful just when you can see the construction where they've been that education and health services has continued to rise, which was evidence. We can see that around us. But to see it on the chart, I think, is fascinating. And leisure and accommodations, as we talk about being a tourism city, that shows up very strongly in these jobs as well. So I appreciate all that. It's very helpful for us to go into future discussions about the budget for this year. Two and a half percent is better than one and a half percent. So I guess we'll take that. And I appreciate all your work. Seeing no other questions. Thank you for your time today and your effort. All right. The last item on our agenda today is the jobs fund update. Mr. Holbrook is with us to give us a little bit of an update on the jobs fund. And an analysis of this year. Mr. Holbrook. Good afternoon. We also have, and I'll give them some time to speak here towards the end, Taylor Bright, who's with Tech Biosciences. They're a grant recipient for the jobs fund. And then Michael Bayer with Fusion Corp, who is a loan recipient and is also on our board. So just as a quick reminder, our program is about six years old now. In December 2013, we passed the ordinance to establish the jobs fund with the goal of incentivizing businesses to create new jobs and retain jobs in Lexington. So we've had about six years of work on that. And we've had a few revisions come through to council. But it's largely the same as what we originally passed. Our board is the Economic Development Investment Board. Kevin Atkins, our chief development officer, serves as the chairperson by ordinance. We have two council members that serve on the board. The chair of the Budget and Finance Committee, Council Member Bledsoe. And right now, Council Member Gibbs is the other member of council that's serving. We've previously had Council Member Lamb and Council Member Ellinger. And then previously, former Council Member Sennett. And Tyrone Tyra from the Chamber of Commerce is on our board. Liz Brown, who works in the housing industry and is active in Young Professionals of Lexington. Jordan Parker from Traditional Bank. Brian Wells from Wyatt. We have an opening under our private equity and venture capital representative. And then we have three at-large members as well, which include Anne Tyler Morgan and a few other people. So, as far as the jobs fund, the available incentives that we have are $50,000 for a grant, $100,000 for a forgivable loan, and up to $250,000 for a traditional loan. And all those have a term of 10 years is what we start with. And whenever we're doing our loan agreements, we benchmark the interest rate to the 10-year treasury on the date of the meeting. So, it's a very favorable interest rate that businesses can receive whenever they're looking to do job creation. In order to be eligible, you either have to be located in Lexington or moving to Lexington. The second one is sometimes a surprise when some people apply that you have to be current with all your taxes, but we have had to decline applications because people had not paid locally. The goal is to create jobs with salaries at greater than 125% of the county median. Currently close to $20 an hour, and our board has set the number for $22 an hour. That was for last year and this year. The company has to be creating at least one new job, but we've had incentives ranging from one job to 100, and then produce some sort of good or service, and then that compliance period we talked about is typically 10 years. As far as the current report, we've had 31 companies apply. We've given 24 awards. Most of what we've awarded has been dispersed, and we've tied that to 226 jobs and $13.8 million of new payroll in the city. So, you're looking at a little over $300,000 a year in new payroll revenue. That's about a 5.28 multiplier on the incentives dispersed. That's slightly lower than what we reported last year, but when we started to crunch the numbers, we saw that the companies that we've incentivized have had a smaller number of people working for them, and what they've needed to do their expansion. So, before we had seen companies that have had 15 or 20 people expansions, but in the past year we've seen companies that have around five. So, they're going to produce for your payroll taxes, but we're also doing more loans, and so we're going to see interest revenue as well. Over the course of the program, we've collected $144,000 in loan principal being repaid with $38,000 of interest. We've had a penalty payment for a company, and then in the past year, when council approved this settlement agreement, one company informed us they were shutting down their operations in Kentucky, and we negotiated a repayment of about 60% of their incentive, and they had roughly 60% of the time remaining on their contract. So, it was a fair pro-rata portion, and they had actually overperformed in the four-year period initially, so it was a net benefit to the government. We continue to move away from grants and more towards lower interest loans and forgivable loans as the program continues to develop. So, for 2020, and we started one this morning, we had a site visit to one of our companies just to check in and make sure we can see them, we can ask questions. Sometimes you get a better feel for how operations are going if you visit somebody in person, and we also started this last year. We went and visited Tech Biosciences, which we can talk about. We're going to look at some in-depth analysis on the amount of revenue that companies have produced since they've become participants in the program versus before. There are going to be some revisions to the board ordinance, which we're looking at and we're going to try and bring to you all later, and then an expansion of board responsibilities. Originally, the Economic Development Board was the Industrial Revenue Bond Board. We expanded that to include the Jobs Fund, and then there have been other responsibilities they've gained, such as the workforce grants and others. So, we just want to make sure that since we have a lot of expertise in economic development and entrepreneurship on the board, that we can use that for some of our other programs that address those areas. And before we move on to questions, I'd just like to introduce Taylor Bright, who's with Tech Biosciences. They were our grant recipients. We went and visited their company not too long ago. They're based out of Aztec, and he came to us to get a grant for some equipment to do some testing on human samples to determine some, I think it was toxicity, and that's expanded to something much different than probably what he anticipated. So, I'd like to give him just a couple minutes to talk about what they're doing, and then I'll introduce Michael, and then we can have questions. Thank you all. Thank you for taking the time to listen to me this afternoon. So, my name is Taylor Bright, President of Tech Biosciences. We were a Jobs Fund grant recipient about two years ago. We received $50,000 for a new piece of machinery, and at the time I was very excited to participate in the Jobs Fund because I saw it as a way to kind of tie our company more to Lexington. I'd only been here for about a year. All of the money that I raised for the company was out of the Bay Area, and all of our customers were in the San Francisco region. So, I was excited to begin to work with the Jobs Fund specifically because the piece of machinery we were going to buy, we were going to use to create a testing platform for researchers at the University of Kentucky, and so get more integrated in the community and start to kind of provide services not currently available for those researchers. And we did indeed do that, and we've made up, you know, we've met all our covenants as part of the Jobs Fund grant. But about four months after we received the grant and the piece of machinery, we were approached by farmers in the region from the hemp industry. The machine that we had purchased and were using for the research side was able to be used by the hemp farmers to be able to test THC as they were growing their crop throughout the season. This was something that was not currently available at the time in the region, and most people were sending samples off to Florida or Boston. They were not able to actually make actionable harvest decisions, and this was creating a lot of angst in the region because if you are high on THC when the state comes to harvest, you lose your entire crop. So, from there, we started getting into the hemp industry as that was starting to take off. Since then, we've spun out three additional companies, all in the hemp industry, in the extraction side, on the CBD production side, and then on the kind of the equipment rental side. And we'll probably spend on our fourth company here in February looking at indoor grow operations, the beginning part of the hemp cycle. And all of that is directly related to the Jobs Fund grant. So, going from we're going to make some new products for some researchers, we're going to have four new employees, to now we have 14 employees directly related to the grant and the piece of machinery, and four and upcoming maybe five new companies from it. So, definitely not where we thought it was going to go, but, you know, very pleased and very thankful for being able to participate in this program and where it's been able to take us. I'll take a brief question. And then really quickly, we'll introduce Michael Bayer. He is working with Fusion Corp, and they came to us for a loan whenever they were looking to spin out a new product from their company, and ultimately, I think, spin out a new company. And Michael has also joined the board as a board member, as somebody who's very involved in the tech space in Lexington and entrepreneurship. Thank you. Good afternoon. Hi. Um, so, we did participate in the Jobs Fund. Our parent company, as we call it, Fusion Corp, we've been in Lexington for 15 years now. And so, when we look to develop a new piece of technology, and in our world, I'll echo the, it never looks like it did in the beginning, because we're kind of constantly evolving. So, we spun out a new company called Gamify, and in doing so, we need to have the young talent or the programming talent to be able to develop our software correctly to take it to market. So, like in any industry like ours, we have to make sure that we're producing the technology correctly in order to take it to the business community and actually be able to produce revenue. So, you have a burn rate in that scenario, and when we applied for the Jobs Fund, we had already put in a significant investment on our end, but we built up our portfolio of potential customers. So, when we were able to take funds from the Jobs Fund, we were immediately pulling to bring on new people. And so, we currently, right now, have overcome our burn rate and success in startup land, which is wonderful and completely attributed to being able to have the funds accessible to us to add the young talent, programming talent. And so, I am very involved with our youth, the high schools and career path academies and everything like that. So, we're actively trying to not only recruit young talent into our business, but this Jobs Fund has been tremendous help with our new company. Thank you. And we'll be happy to take any questions either about the program or I think Michael and Taylor are happy to answer any questions about their experience and their companies. Will do. Thank you. Thank you both very much for being here. I do serve on the Jobs Board, and I think it's so fascinating. We see lots of grants and programs, loans come through, and companies' ideas, and to see it actually grow, excuse me, to see it grow is so important. So, I appreciate you providing real world of what's happening with the investments the city's making in our economy. So, I'll start with Council Member Lamb. Thank you. I know when I served on that board, it was really exciting to see all the wonderful new companies that were coming in and the new ideas, and it was mind-blowing. So, and thank you for this presentation, Wes. The 226 jobs that you have listed as being created, is that the jobs that are created to this day, or is that the total number of jobs that are going to be created over the period of time from the awarding? That's the total number that we've created as of our most recent compliance reporting. We do annual compliance reports with each of the companies, and so that's the number that we've tied so far. So, there are still some companies that are on track to meet their benchmarks and haven't gotten there yet, but they're earlier in the program, so we wouldn't expect them to in the first year. You know, they plan one or two or three year growth cycles, and so it just takes some people a little longer to get there. But we expect that number to be higher over time. Well, and that's the other thing I was going to say, is oftentimes I think what we would learn on the board is that while a company thought that they would start out and would create five jobs, then they ended up finding out that they needed to create 10. Are you tracking those additional jobs that are above and beyond what was agreed upon at the beginning? We are, and we'll look at as long as it falls under the same company. So, I think when Taylor talks about an instance like his, they may not necessarily fall under the company that we incentivized, and so we may not capture those, but that's something that we can work to do to capture some of that spinoff and maybe some of the indirect employment in these spinoff companies. That's great. And my last question is, I know that you listed out here about the penalty payments and then the one shutdown, but as far as the 24 awards, is there a number of how many that are still moving forward? I mean, is that 24 or is it 21, 22? That's still 24. Those are the companies that we have that we're monitoring and that are in some portion, either their grant compliance phase or a loan payback phase. Okay. All right. Well, thanks for your good work in this, and thank you. Thank you, Chair. Council Member Evans. Thank you, Chair. This is kind of to follow up with Council Member Lamb's questions about the, as you call it, the spinoff subsidies, whatever you want to call them, like the 14 additional jobs that were recreated with the first example. Are those jobs here in Lexington? Are we requiring them to be in Lexington? Or because if you're not capturing them, is that... What's the reason? Because I would think you would want to capture those if they were here. Part of it's a function of our reporting. So we look for the company that we've incentivized the number of W-2 employees that they have. And I can let Taylor come and speak to any specific examples about some of his other entities. So part of it's just a matter of us asking and making sure that we follow up on that and a function of our reporting. Okay, because I... But for the program, the jobs that we incentivize are required to be in Lexington. Okay. Well, I guess my... Again, we just had a report where we know that there are... We know that there's more follow-up. So I guess I am just curious about were the additional 14 jobs that were created, were they here in Lexington or were they... So those 14 are all in Lexington. There are additional jobs outside of Lexington that I just mentioned, the 14 that are here. Okay. Because yeah, congratulations, first of all. But I think that's important to know. Because, and again, this fund is to not just bring more companies here and help them grow. But I think perhaps at least my real purpose is for them to grow here and have employees here. So I'd like for that to be involved in your process and your reporting, because that's always a concern or a question that we have. When Commerce Lex is here giving the report, we don't know how much money is... Because the salaries, that's their private information. But if we can capture that here to truly show that it is doing what we intended it to do, that would be helpful. I mean, I just think we need to be as transparent and have the most accurate picture that we can get. And if they're growing and the jobs aren't here, that's okay too. But we need to know that, need to figure out, well, why are they going someplace else and have that discussion as well. So if we could figure out how to start collecting that information and making that part of the report, I think that would be really helpful. We can work on that. And like I mentioned in our plans for 2020, we want to do some in-depth analysis on some of these companies, what has happened prior to their receipt of the grant or loan, but also what's happened afterwards. And then that's where we can start to find out some of that information. So it may not be comprehensive because it will be a matter of making sure that we work with the company to capture that. But we're going to start to work towards that this year. It's a part of, I mean, it's a condition because again, that's where we always get stumped is when we don't have full access to employee information for companies. So if we can make that a part of the agreement that maybe for so long afterwards or something like that, because again, it's just important information that we need to know that I think would help all of us. So thank you. Council Member Plowman. Thank you, Chair, for the recognition. And Wes, thank you for your leadership on this. I think it's a great program and congratulations to our two guests here and the success that you've had. I was curious and I might've missed it, but what is the outreach on this? How do you allow folks similar to who we have with us today know, and is it once a year that you put that call out or can you share that process? So the city contracts with Commerce Lexington to do a lot of our business expansion and retention outreach. And so this is a part of what they talk to companies about whenever they talk through what their growth plans are. Independently of that, we'll sometimes have companies contact us locally or independently of Commerce Lexington and then we'll provide that as an option as well. So it hasn't been broadly blasted out as it probably was whenever we first started. But we still have seen a few companies come through in the past year, in spite of not having a sort of public call. So you meet with them and you have kind of a formula that they fit into or they share the information and you as a board decide? So the way the process works is we have a pre-meeting with the company just to make sure that what they're talking about falls in line with what the program guidelines are. And then we'll provide them an application which they'll send to us. We'll review that and make a recommendation to the board. And then the board will either accept our recommendation, reject it, or send the company back for more information. And we've seen all three happen. And then after that, we'll have a 60-day period if the board approves the application to negotiate a contract with them. Right. Thank you. Thank you, Chair. Council Member Reynolds. Thank you, Chair. Thank you for recognizing me. Thank you for this information. And I apologize for not having this number in my head already. But what is the amount that's allocated for the fund every year or that's available? I think in the last budget year, this is a fund that rolls year over year. So we currently have around $500,000 available. I don't think in the prior budget or in this budget year, we had any additional funds allocated. But we also now have repaid principal and interest funds and a shutdown repayment that we can use to allocate for incentives. And would you say that you haven't exhausted in those funds and that you have plenty available? We have enough available for a few awards. But if a few companies were to come through and request the full loan amount and that were to be awarded, then we would exhaust our funds pretty quickly. Okay. And then in reference to what Council Member Pullman was talking about, so this information is not available on the website or is it? We have our policies and guidelines on the website. We experienced early on that if we just had the application sitting there for anybody to pull it, we would get a lot of people that didn't necessarily qualify or weren't as serious as they maybe thought they were whenever they sent the application. But if a company was just looking on the website, they would find the information they need to be able to get in contact? Yes, they would. It would direct them to Kevin Atkins. Okay. Wonderful. Thank you very much. Thank you, Chair. Council Member Maloney. Thanks, Chair. I, too, commend what you all do. And I think that, to me, it's one of the most important programs we have when you're bringing revenue in here. You match for every dollar. If you put something together for every dollar you put in, how much you get back. Because I've seen that on some programs like this, like tax dollars, you put a dollar in and get back $5 or something. Yeah, and that's what that multiplier is. For each dollar we've put in, you get $5.28 back. My question to you, is y'all going to try to ask for more in the budget this year? We've asked in the past few years. It just hasn't fit with what the budget requirements are. I think this is the part that goes back to I brought up the bond issue where we bond things and we don't. It's just one-time pay. We don't get money back. And we bond a lot of programs, from PDR to everything. I don't know why we could not put this program in there to bond if we can't reach some numbers because you're getting money back. And to me, I'd rather see that. At least you're paying it back, keeping yours. And you also could pay the bond back. One of the issues with the way that we typically bond is we issue tax-exempt bonds. And you have to be able to get something in return for that. For PDR example, you are purchasing an easement. But we're not actually purchasing anything whenever we provide these incentives. So it wouldn't qualify to be a tax-exempt bond. Is there any way we can find a way to change that? Because I just see there's so much potential there. We'd have to issue a bond in a way that we typically don't for other programs. Okay, thank you. Thank you. I just want to take a few moments to highlight again what you just showed up here. We talk a lot about what is our economic development strategy and what's our incentive package moving forward. And this is one of those things that, for the $2 million, $3 million that we have awarded, to have almost $14 million of payroll created is an incredible testimony to how well the program is functioning and the quality of applicants that we've supported. So thank you both for being a part of that program. And for everybody else who has been as well, I think it's an important thing to say how do we continue to fund it moving forward because of the return on the investment to taxpayers is very, very good. So thank you very much for your work and for the board. You're welcome. I want to take a few minutes here and go through the items referred to committee. Hillary has put together a long four or five pages, very detailed report on the items that are currently in. And let's take an opportunity to see if there's anything we could remove. The first one is the creation of the film commission. We have kept this in as we have gone through some of the... if the state is going to actually allow this program to continue. So I'd like to leave it in and just see if this year that changes. And the second item on the agenda is the appropriate types of economic development. Vice Mayor, do you want to keep this in committee or do you think we've exhausted it? I think we already removed it. I believe it was removed by motion earlier. You know what? You're exactly right. And it says right there, remove from committee. It's okay. My apologies. Okay, item number three, partnering with the Fayette County Public Schools athletic facilities. Councilor Mulaney. I'm going to meet with Monica, but I know that the mayor met with the school board yesterday and I'm going to see what kind of relationship. We haven't had much communication with them. We tried to get in their five-year plan because they need gyms and they didn't seem to work with us. So I asked Monica, and if I don't get a good answer at the end of the month and the mayor, I may take this up. Okay, that sounds great. That sounds great. The fourth item is the global headquarters initiative. This might be just an item that we keep in here for an annual update or since we've already had it, I'm happy to take it to remove it from committee if that's okay. Does anybody have any strong feelings about that? Okay, then I move to remove the global headquarters initiative from the actual budget committee. All in favor? Any opposed? Okay, the next item is the efforts to reduce barriers for second chance employment and re-entry employees. I put this in committee a year ago and we have been working on that quite a bit. I would like to keep this in committee a little bit further as we figure out our economic development strategy moving forward, if that's okay. All right, next is the review of the exaction program. Council Member Ellinger. They are reviewing it and will get back with us. After they met back in March, they have some issues they have to do, so it's pending review. I think I understand that might be ready for February. Is that a hopeful February? I haven't got that word, so that would be hopeful. Okay, let's keep it in for hopeful. Number seven is the consideration of a two-year budget cycle. At this point, I'd like to leave it in just since we're still going through this year's process to see if that's something we can do moving forward. Eight, the use of MAP funds for salaries. Council Member Ellinger. I believe we're going to have that in March, is my understanding. They want to do that before the budget cycle started, so I think we're getting, I got an email today on that. Fantastic. The review of civil service pay scales and annual compensation. That was put in by Council Member Brown, who's not here, so let's leave that. Next, the franchise fees and street light funds. Council Member Farmer. Thank you, Madam Chair. Staff has gotten out ahead of me on this. They've done a great job. We need to kind of meet and follow up a little bit. I know there'll be a critical path we can choose to follow, either this year or next. We'll look forward to an update. Okay. Thank you. Thank you. Next, the downtown projects update. I put that into committee last year, and we heard from UK and some others. The next presentation I would like to have on that is the new downtown movie theater. New downtown movie theater and some other things by the LCC. So I'm going to leave that in committee for now. Next is the tax incremental financing districts. I think we talked a little bit about that in December, about whether or not we were going to continue to use that as a program. At this point, I prefer to leave it in committee, since we're going to have an update from the administration in the next few months about that. And since no one's saying no, that's what I'm going to do. Okay. The potential budget review process. We passed that in December. Would you all like to keep it in committee so we can review it, or are you comfortable removing it for now? Remove it? Okay. I'm going to make a motion to review the budget review process. Can you second? Thank you. Any comments? All in favor? Do I have enough people in the room? Okay. We'll just keep saying yes. All right. Number 15 is the economic development partner funding proposal. We approved that in December. Let's leave that in so we can finalize that this spring. The next thing I would like to mention here, that number 17, the update on career academies by the BEN and FANCHI schools. What's your prerogative, Ms. Evans? Okay. Whether we can leave it in for a month, or do you want to go ahead and remove it? Okay. All right. All in favor of removing the update on the career academy, say aye. Any opposed? Okay. The next is number 18. That's our economic development grant program. We are going to hear that again in February, so let's leave that. The next is an interesting conversation that I think we should probably have as a committee. If we're going to have a new economic development partner strategy, do we still want to have annual updates from our partners? That's a question I'm asking the committee, so feel free to speak up here. Nobody has a feeling on this item. No one? Anyone? Okay. At this point, I'm going to remove all of the economic development partner updates from our partners for starting this year. All those in favor? Aye. Any opposed? Okay. Thank you. Thank you very much. And I think that gets down to the very end. Some of these are annual reports at this point. Actually, we should keep those at presentations as an annual update. Okay. Any other comments from the committee? I'll take a motion to adjourn. Thank you very much. Thank you. Thank you.