# Budget and Finance and Economic Development Committee on 2024-02-27 1:00 PM - February 27, 2024 > Auto-transcribed civic record · February 27, 2024 - **Permalink**: https://meetings.lexingtonky.news/meeting/6051 - **Source video**: https://lfucg.granicus.com/player/clip/6051?view_id=14&redirect=true - **Date**: 2024-02-27 - **Last revised**: February 27, 2024 - **Length**: 13,736 words - **Speakers**: Chair > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed with OpenAI's open-source Whisper large-v3-turbo model, run locally by The Lexington Times. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude. 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, Finance & Economic Development Committee convened on February 27, 2024, at 1:00 PM, with James Brown presiding as the meeting's presiding officer. The committee addressed four agenda items during the session, focusing primarily on financial updates and economic development matters for the city of Lexington. The committee took two votes during the meeting, approving the January 30, 2024 Committee Summary as part of their regular business. The remaining three agenda items were informational presentations that provided updates on the city's financial status and economic outlook. These included a Monthly Financial Update for February 2024, a Lexington Economic Workforce & Revenue Update, and a Lexington Economic Outlook & Occupational Tax Forecast presentation. No public comments were heard during this committee meeting, allowing the session to focus entirely on the scheduled agenda items and financial briefings. The meeting served as a regular check-in on the city's fiscal health and economic development initiatives, providing committee members with current data and projections to inform future budgetary and policy decisions. ## Attendance The following individuals were present at the meeting on February 27, 2024: • James Brown • Dan Wu • Chuck Ellinger • Hannah LeGris • Liz Sheehan • Fred Brown • Jennifer Reynolds • Kathy Plomin • Shayla Lynch • Denise Gray • Dave Sevigny All expected attendees were present. No absences or late arrivals were recorded. ## Votes and Decisions The committee took two votes during the February 27, 2024 meeting, both conducted by voice vote. **Approval of January 30, 2024 Committee Summary** [timestamp: 01:01] Chuck Ellinger made a motion to approve the January 30, 2024 Committee Summary. The motion passed by voice vote with no recorded opposition. **Motion to Adjourn** [timestamp: 02:50] A motion to adjourn the meeting was made and passed by voice vote with no recorded opposition. Both votes were conducted as voice votes rather than roll call votes, so individual member positions were not recorded. All motions passed without apparent dissent from committee members present. ## Approval of January 30, 2024 Committee Summary [timestamp: 01:01] The committee reviewed and discussed the summary of their January 30, 2024 meeting as part of their regular approval process. James Brown served as the key speaker for this agenda item, presenting the summary to the committee members for their consideration. The discussion focused on the accuracy and completeness of the meeting summary from the previous month's session. Committee members had the opportunity to review the documented proceedings and raise any concerns or corrections regarding the content of the summary. Following the presentation and discussion, the committee voted to approve the January 30, 2024 Committee Summary without any noted objections or required amendments. The approval ensures that the official record of the January meeting is finalized and can be incorporated into the committee's permanent records. This routine procedural item demonstrates the committee's commitment to maintaining accurate documentation of their proceedings and ensuring proper governance practices are followed. ## Monthly Financial Update – February 2024 [timestamp: 01:05] Commissioner Hensley presented the monthly financial update for February 2024 during this informational agenda item. The financial report showed positive results for the month, with Commissioner Hensley highlighting two key findings: • Revenues exceeded expectations for February 2024 • Expenses came in lower than anticipated This presentation was informational in nature, providing the commission with an overview of the organization's financial performance for the reporting period. Commissioner Hensley served as the primary speaker for this agenda item, delivering the financial data and analysis to fellow commissioners. The positive variance between projected and actual financial performance suggests the organization maintained strong fiscal management during February 2024. The combination of higher-than-expected revenues and lower-than-projected expenses indicates favorable budget performance for the month. No specific concerns were raised during this presentation, and the item concluded as an informational update without requiring formal action from the commission. ## Lexington Economic Workforce & Revenue Update [timestamp: 01:30] Wes Holbrook and Amy Glasscock delivered a presentation on Lexington's economic and workforce development status during this informational agenda item. The presentation highlighted positive trends in the city's economic indicators, with both speakers noting measurable growth in key areas. The presenters reported growth in Lexington's population, indicating the city continues to attract new residents. Additionally, they documented increases in employment levels, suggesting a strengthening local job market and economic expansion. This was an informational presentation with no action items or decisions required from the meeting participants. The update served to provide current data and trends regarding the city's economic health and workforce development initiatives to meeting attendees. ## Lexington Economic Outlook & Occupational Tax Forecast [timestamp: 02:00] Dr. Mike Clark presented the economic outlook and occupational tax forecast for Lexington during this informational agenda item. The presentation focused on current economic conditions and projections for the city's financial planning purposes. According to Dr. Clark's analysis, the local economy is experiencing a period of deceleration while maintaining positive growth trends. Key findings from the forecast indicated that despite the slowing economic pace, both employment levels and wage growth are expected to continue their upward trajectory in the Lexington area. The occupational tax forecast, which is crucial for the city's revenue planning and budgeting processes, was presented as part of the broader economic assessment. This tax revenue stream represents an important component of Lexington's municipal finances, making the accuracy of these projections essential for fiscal planning. Dr. Clark's presentation provided city officials with data-driven insights into the local economic landscape, helping inform future policy decisions and budget allocations. The forecast serves as a foundational tool for understanding how economic trends may impact city revenues and services. This was an informational presentation with no action items or decisions required from the governing body. The economic outlook and tax forecast will likely be referenced in future budget discussions and planning sessions as city officials work to align municipal services and spending with projected revenue streams. --- ## Decisions - **Motion** — passed (0-0): Approval of January 30, 2024 Committee Summary - **Motion** — passed (0-0): Motion to adjourn --- ## Full transcript Music Thank you. Committee at 1.01 p.m. Thank you all for joining us. There's going to be a slight change to the agenda due to a scheduling conflict. We're going to move the Lexington Economic Outlook. Well, no, my agenda has been changed. So the Lexington Economic Workforce and Revenue Update, It's going to be in front of the Lexington Economic Outlook and Occupational Tax Forecast. So we'll go straight to the agenda. The first item on today's agenda is the approval of the January 30th, 2024 Committee Summary. Is there a motion approved? Second. All right, a motion was made to approve and second it. Are there any questions or corrections? Seeing none, all those in favor, please say aye. Aye. Are there any that oppose? Hearing none, that motion passes. The next item on the agenda is the monthly financial update for February 2024. Commissioner Hensley, Director Holbrook, and Director Luca are going to go over it with us today. Go ahead, Commissioner. Sure. This is really loud. This is one of the monthly presentations as opposed to the quarterly, so we don't have all the charts that we typically have presented quarterly and that you guys saw last month. But we did want to build on one of the factors that we were showing you last month as far as this being a management tool to help you make decisions on our financial overview. So this is for the month into January 31st. As you can see, our revenues are exceeded by our expenses and transfers. So it appears, based on this report that we have shared with you all for a number of different months and years now, that we're not doing as well as we actually are. Our revenues do, however, continue to run positive variance to budget, which means we're doing better than we expected in our revenues. And we are showing a positive variance in our operating budget. So our revenues are higher than expected and our expenses are lower than expected. The piece that we brought to you all last month, and we're going to continue to bring just to keep it top of mind, is how those transfers are impacting this report. So last month we brought to you the reminder that our transfers include those large fund balance items that moved from the general fund over to the capital fund. So without those transfers, we would actually be in a positive position by about $14.3 million for the month into January 31st. The capital projects that were included are listed down there just for recollection purposes, just so you guys can have a reminder of what was in there. But then, you know, we continue to have questions about this and try and help you all understand the way that this is working. If we went and looked at it, same information, a different way, we would be like a bank account. You'd be bringing in your fund balance of $55.9 million plus your revenues, less your expenses, and then the transfers out that are going over to capital. So it's many different ways to look at the same information. Just trying to remind everybody that those transfers are going to continue to show in that first page report a running deficit. and we're going to continue to show you all what the impact would be if those were taken out. We want to be transparent with the financial information. If you were to pull our financials at any point in time, you would see what's in the blue box, but just as a reminder why it looks like that, we're going to continue to show that information. I'm not going to go into detail. I'm happy to answer any questions that you may have, but our actual revenues are running better than we expected to budget. We're also running ahead of this same time last year. And if you look at our expenses, they are running under what we expected to be to budget. Our personnel variance is extremely close, which is great. We've been really working on that year over year, trying to make sure that we're not running significant variances in personnel. And that big portion, there was $2.7 million in that first reallocation that we were able to put into projects that we needed now, overages that we had in operating like our HVAC repairs, that is now reflected. And so we're just just a little bit over 2% in our personnel variance, which is fantastic. And then year over year, we are spending quite a bit more. You'll see the significant portion that is in personnel is what we were anticipating. Those were those increases in public safety. That That is our health insurance increases that we've been seeing and carrying as well as the other non-smart increases that have come on full strength for the budget this year. That is my summary for the month and I'm happy to answer any questions you all may have. Thank you, Commissioner. Council members, if you have any questions, please log on. First we have Councilmember Fred Brown. Thank you, Chair. Excuse me. Coming up the one cash flow variance revenue, actual budget, yeah, the 270. A couple of questions there, and I think we'll get some of it explained. The 4.5 percent, do we think that's going to hold out for the rest of the year, for the other five months, or is that what we're projecting? So the big piece, and I'll ask Director Holbrook if he wants to add, but the big piece that's an end-of-the-year item that we're always kind of looking towards is our net profits collections. Those happen between April 15th and May 15th, and really, that is where we've missed the mark on the last couple of years. I think if we would have brought you all a 13 to 15% growth in that, you would have told us we were crazy, and so we've been a little more conservative in that estimate historically based on where we've actually landed. We have not been conservative based on our history before the last couple of years. So I do think that that is a big piece, but I don't anticipate short of net profits not coming in where we expect to be significantly. Well, you haven't answered my question. Is the 4.5 percent, maybe Wes can answer it, yes or no. And what number are you using going forward? Because we're usually in the budget year and using seven months as our criteria, right? Yeah, that's something we're in the middle of looking at right now, I think with, Aaron talked about net profits, and so I know you want a yes or no question, but it depends. Any of those top four, you could really see a large change, and the actual base of those revenues is so large that any sort of change over the next five months could swing it one way or another. Net profits is most likely just because we see our tax returns come in in April, and we process those through March and May. But we could have an early warm summer, a warm spring, and that could start to turn around franchise fees. So there are lots of different ways that that 4.5% could go up or down. There's always variables, but you all have got to use a number for this upcoming budget. So you haven't established that number yet? We haven't finalized a number for the FY25 revenue estimate. Okay. The other question is investment income looked like it was up quite a bit. If you just explain a little bit on that and where we're at, and is that for the whole year? Sure. So there are a couple different pieces in there. The big one that we have, one of the big ones is the interest that we earned. That's something that has been accruing over the course of the year. We've had some large cash balances in general fund. So that's driving a large piece of that. The other piece of it has to do with what's actually not a cash entry. It's adjustment cost to market. And that's basically the book value of what the impact would be if we sold our investments at the current month. How much is that of the $2 million? The current amount is $491,740, and the budget was actually negative on that. I'll ask Aaron about, is that accrual basis that you're trying to put into that number? We do take a look at our, as we reconcile our bank accounts monthly, we do make the adjustment cost to market. It is accrual basis at the end of the year. Yeah, but I mean, I'm just looking at pure dollars, and part of this is going to be the interest rate being higher. Right. The vast majority of that investment income actually is a cash transaction. Okay, okay, that's what I want to know. Okay, thank you. Thank you, Chair. Thank you, Council Member. Are there any other questions in regards to the monthly update? I'm not seeing any, so thank you, Commissioner. Thank you. Committee members, the American Rescue Plan financial update is in your packet for information only. The next item on our agenda is the Lexington Economic Workforce and Revenue Update. We have Director of Business Engagement Amy Glasscock and Revenue Director Wes Holbrook are here to present on the health of our workforce. So, Director. Sorry. Thank you, council members. This is something that we wanted to bring to you all, especially as we get ready to start talking about how we develop, how we start to look at our budget, how we look at our economy, and one of the things that we start to think about as we go into that process. And so I'll talk a little bit about our economy as a whole. We're gonna have Dr. Clark later and he'll have some more detail. And then Director Glasscock will finish up talking about workforce in this piece. So, one of the things that I wanted to hit on, and this is one of the things that we start to look at whenever we begin to look at our revenue estimates, when we think about our economy and what direction it's going, is what sort of data points can we get from larger economic sources, from something that's going to compare us maybe to some surrounding counties or some other areas that we can glean some data from. And so, one of the things that we look at is this local gross domestic product. And that's really a comprehensive measure of our economy for the county. And finding a federal data source that has such a broad measure that we're able to look at is really valuable for us because that can really help us get a good sense of what's going on with the goods and services in our county and how can we look at that compared with surrounding areas within the state, nationally, and so on. And so it's really a good way for us to be able to compare and see what's going on. So, when we have these local GDP numbers, we can look at things like how quick is our economy growing and how do we compare with those other jurisdictions. And if you ever want to pull this information yourself, and I can send the data set around, it has every county in America, which is a really neat set to look at, but you can find it at the Bureau of Economic Analysis. So, anything that I'm going to talk about is going to come from that source. And the nice thing about it is, again, it just is going to compare what we're seeing locally to other areas using the same methodology. So we have a good comparison point. And so when we want to look at how we compare and what our economy is doing, how we're growing, we really want to look at several things. And so this chart, this shows by percentage the top five growers in Kentucky for 2019 to 2022. And then it also has in there each county that is over 100,000 people. So we want to look at the top end, see what kind of growth is really happening, and then maybe look at some of our peers to really be able to dive in and see what's going on. And one of the things that you can see here is that at the top end of the economy, of economic growth that's happening, just as a percentage, you see some of the smaller counties that are growing. You see Trimble County ranked first, Union second, Meade third, Todd fourth, and Ballard fifth. They're experiencing 10 plus percent economic growth. Those are all a lot smaller counties. When you go out to the side, you can see what that actual economic growth is in dollars for their economy. And when you start to look at counties that are 100,000 population or more, you can really start to see a stark difference in what that economic growth looks like. you start to look at us compared with some of our some of more similar sized counties and you can see that we're roughly in the same ballpark that may have a lot of different reasons that happens but that's something that we want to we want to look at and see is what we're experiencing something that that is that is largely reflected by some of our peers or is it something that's that's not quite right and so you know sometimes we do look at growth especially compared with some other parts of the state and just see the percentage. And that could be a valuable exercise, but rankings and growth rates don't really fund programs or don't really create tax dollars. And so we really want to look at that right column as well so we can have everything in context. And when you look at that, you can see that even though we might have a lower ranking or a lower growth rate, our actual growth in our economy is higher than all of the top five for raw dollars. and pretty well in line with what some other counties are, 100,000 or more. So we're actually able to see that even though it might look like on the rankings or the growth rate that we're not performing as well, relative to some of our peers, we're actually doing pretty well during that time period. And so this looks at that same group and the actual total local GDP for their economies in 2022. And you can see whenever you look at it from this perspective, we really have a much larger local economy than a lot of other places around the state. As we know, we're the second largest city in the state, and so we would expect to see that we have the second largest economy. But you look at some of those others and you see maybe 20% growth rate, 13% growth rate. In order to grow on $21 billion, that's going to have a lot more economic activity that needs to happen and develop that growth rate versus an economy that might have $600 million as their local GDP. So this is something that sort of helps us put this conversation about how our economy is growing in context and think about what's happening statewide and how we can have some of those comparisons. So, one of the things that as we go through this, like I said, we want to look at more than just these rankings or percentages. That can be valuable, but again, that doesn't create tax dollars, that doesn't fund programs. You can't eat that, you know. So, we want to make sure that we're seeing what the actual economic growth is as something that really helps inform our process. And whenever you look at us compared with some other municipalities around the state, other counties, especially those that are of a similar size, you can see that our growth is actually pretty healthy. Whereas if you just looked at it by ranking your percent, you might get some other perspective. So we really want to look at the whole picture whenever we're doing this. And as you all know, over the past several years, especially through 22, 23, we've seen a large amount of growth in our payroll withholdings, in our net profits, insurance, and others. So we're seeing growth happening, and it just may not be those large percentages that you might see. If in a smaller county you've got a large employer or a large factory that opened up, that's going to have a much more outsized impact growth-wise, percentage-wise, ranking-wise, than if something like that happened here. So that's one of the things that we look at. This is a really large, comprehensive measure of what our local economy is, and employment is one piece of that, and so I want to turn it over to Director Glasscock and have her talk specifically about what we see with personnel and employment in our county and surrounding areas. Thank you, Wes. Well, good afternoon. Thank you all for having me here today. Since I've been here almost about a year now, Kevin and I have really taken the opportunity to take a deep dive into economic and workforce development here in Lexington to ensure that they are aligning. It has become very evident that workforce is a huge part of economic development, so much so that right now it's the number one issue in economic development. So we want to make sure that we are maximizing the potential of the people in our community here in Lexington. So just to kind of give you an overview, just to give you the big spectrum of our economic economic and workforce development. I just want to let you know about the population. So we had, in 2020, we had about 322,000 people here in Lexington, Fayette County, and it has grown just a little bit. But you can see that from 1990 to 2020, we grew by 97,000 people. so how are we doing in workforce since 1990 we've added just over 47 000 jobs we grew from 2020 to 2022 but just a little over 8 000 jobs so that was you know during the prime point of covid so that really goes to show how much that we are growing for good comparison we did compare to the nine counties that are in our collaborative and scott county is the next county which grew by about 17,000 people. We wanted to compare to the two largest counties in our non-county collaborative and then compare to all of the non-counties. So you can see there how much that we grew and that even in comparison Fayette County is still made up almost half of all of the non-counties for our employment growth. In this graph we went up to 2022 and it does compare us to the other two largest counties as well as all nine counties. And you can see there as well that we made up about 47% of the whole entire nine county collaboratives total. So one question that I frequently get asked is about our civilian labor force and how are we doing in workforce. And the good news is, is people do still want to work. We have grown from 2020 to 2022 by 4,100 people, which I think that's a good number considering how much COVID affected us. Since 1990, our entire region, there was an increase of about 17,000 people. But from 1990 to 2022, they grew about 48,000 in Lexington. Just as a whole, you can see over the 10-year period of how much we grew, you can see that all nine of our counties in our collaborative did grow quite a bit. So on this one, we focus a lot on unemployment rates. That's a big hot topic with workforce development. In Fayette County, as of October of 2023, we were about 3.1%, and the United States was a little bit more than that at 3.9%, and then for Kentucky it was 4.2%. So this shows that we did maintain a lower unemployment rate than Kentucky in the U.S. On average, unemployment rates during normal times stay between 3% and 5%. I did want to show you this. This is Fayette County. You can see the big spike up at the top. That was during COVID and that shows you, I mean, if you look probably at any county, it would probably be that big of a spike during COVID. And then we've gradually went down, or not really gradually, we went down to the 3.1% in 2023. This one includes all of our, includes the United States, the MSA and Kentucky as well as Lexington. It shows that our MSA and Lexington does tend to stay below Kentucky in the national average for unemployment rates. And the last slide that I really want to focus on is our sectors. This shows that we have about 200,000 jobs in Lexington Fayette County. Of course, the biggest sector is our health care and education, which doesn't surprise me as the amount of health care facilities and educational institutions that we have here. But going forward, I think it's something to think about as far as how can we help this sector as there are workforce shortages in health care and education. And then I want to focus on information technology. Previously, a few months ago, there was a presentation that reported how many positions were available in IT. We did have some questions, so we consulted with Dr. Clark and Ms. Katie Scott with UK about how many jobs were in our county. And they were able to find that there are about, in the tech sector, about 3,900 jobs, which is about 1,000 more that were previously reported in this sector. So we felt that that was good news. But I think it shows overall that Lexington is growing. Our economy is very healthy. And it does show that it's very important to invest in our people. And with economic development, having workforce as the number one issue, it's important that we all understand what's going on with our workforce and our economic development. Thank you. Thank you, Amy and Wes, for the presentation and the information. Council members, if you have any questions, please log on. First, we have Council Member Gray. Thank you, Chair. My question for you both is, we know that we have a large number of employers that are businesses that are not coming to Lexington. They are going to our surrounding counties because actually it's more hospitable locations for them. What are we doing to entice more businesses to make Lexington their home? Do you want to address that? I'll let Kevin address that. I know we're not on this. Well, I will start by disputing the first part of the comment or question. What's that? We continually compete. We compete as a region. And the basis point for some choosing some of the surrounding counties opposed to ours are the availability of sites they may need. It's an economic equation where in Lexington, for example, our property at Coldstream is about $250,000. You can cross the county line and that property goes down to the 40 range a lot of times. So if you need a large site, so we're still competitive in the 10, 15, 20 acre sites. If you have to get into the 100 acre sites for the large, let's say a large manufacturing operation, the upfront cost many times will dictate where. And then the companies we're most competitive with are the ones that really, they like the educated workforce here, but it's also the close proximity to both our universities, Transy and UK, and the workforce and the internships and those type of things. So I think you have to be careful sometimes and compare apples to apples on projects. and I'm not trying to be argumentative. I'm just saying you have to look at each individual project. I just wanted to talk about some of the things that we've seen in the Division of Revenue. Over the course of a year, there's really not a day that goes by where we don't see a new business come in and file a new business application. Some of those people may be businesses that have been operating and they have to come and get in compliance, but a lot of times it is people who are starting some new venture here. And so a big part of our local economy is some of our homegrown businesses, and that's some of the things that we really see do push our economic development and our economic growth in a positive way. And going back to Mr. Atkins, since you weren't being argumentative, I'm just curious, what incentives are we giving to businesses to make Lexington their home? I know that you say that we're going to compare apples to apples, but what are we doing? That's a great question because it really goes straight to the apples-to-apples comparison. Just like most Kentucky communities, we participate in what's called the Kentucky Business Investment Program, KBI. You've seen some of those come through. Every community across the state that I know of, it's a state incentive where the local governments, in order for the companies to get the local incentives from the state, has to participate at some level. We participate at 1%. So it's a pretty universal effort. We have done other incentives where we have combined incentives. You will, I think, back to when the Bluegrass Stockyards burned and we really wanted, that institution was such part of the historic fabric of this community. We combined several things related to property tax, payroll tax, and those kind of things, and the state was a partner there with us as well. So, you know, we do combine things, but overall, the incentive package that almost everybody uses is KBI across the state. And one last question. I know that my colleague to my right will probably have more questions, but I saw that the lowest is our IT. I think it was 3,900 positions. And the council had a presentation from a member of our IT community some months ago or maybe last month. But I'm just curious what we're doing as a city to entice more IT companies to make Lexington their headquarters or their home. It is a target industry. I think you'll hear next month a little bit more about that as well. There are jobs that we want to entice here. We work that angle or that direction on a lot of, you know, we work just as hard on healthcare as well, for example. But we're getting ready to address, I don't want to say a whole lot just yet, but your colleague to the right can probably answer some. But we're getting ready to really do a deep dive, I would say, into a plan that will help us i hope be more competitive and if not more competitive at least be more focused in exactly what the roadmap is to take us there and and i i gotta give a an appreciation to our cio who is playing an instrumental part in that effort thank you sir and thank you chair thank you council member uh next we have council member fred brown thank you chair i was looking at the the schedule in here, the unemployment rate was 3.1%. How does that fare with the surrounding counties? I don't know that I saw anything maybe in here, but I didn't see it. Yeah, I hadn't listed the surrounding counties. The counties in our MSA or the nine-county collaborative, they're all around the same between 3.1% and about 3.7%. That's good. And I'm looking at the, from 20 to 22, we grew by 4,130 people. Is that our population now at 335 or 336? Is that our current population today? Our current population is just a little bit over 322. So it would be around that. What was it? The last census was 321? It was 322,000 in 2020. So this four adds to that number then. Okay, so we do have some growth there, but it's not tremendous or anything. And I noticed, I thought that was very interesting, the labor force increase of 48,000 since 1990. So evidently what's happening in that labor force has got to do with a lot of our companies and businesses that are already here. University of Kentucky, the health hospitals, that's got to be our biggest growth, I think, that we've got going for us. Those are growing quite a bit. I mean, just in health care and education alone over the next five years, I think it's expected about 5,000 jobs are going to grow in just that. But we are bringing in some new businesses as well. We're sustaining probably Lexington's growth and revenue source almost internally because we don't have a lot of land available for people to move in here and pay those particular taxes. But we do have the opportunity for those people in the surrounding areas to come in here and work. And that's our biggest, that's the biggest thing that we have going for us, I think, is that. that. And then the last thing I wanted to comment on was we need to do more regionalism not only in economic development but everything that we do as we've come to the point in time that we just can't stand alone as a Fayette County government. We need to acknowledge our counties at least that touch us, and I think we're making that effort, but, and you know for a fact that we've been trying for some time, but I think we're making some headway. But I would urge this council to, you know, focus on that, that we are in this all together, and we need to help our neighbors in various ways, and hopefully we're all in it together. You know, you've heard me say at this podium a couple of times, I think the regional effort that's going on right now is a game changer. And you're going to learn more about it. And I think you're going to see that the other communities believe the same thing. And to your point about not doing it alone, you know, we really appreciate you all endorsing and allowing us to do the joint. Madison and Scott Fayette Industrial Park, Business Park. The state agreed with that project. And we're really looking forward in those conversations on the operations of that are ongoing and well. And we are talking about things like revenue sharing. So what benefits one benefits all. And so I think the structure and the foundation that's being put in place regionally right now is really exciting. And I think we're all going to look back in 10, 20 years and see the benefits of it. Thank you, Chair. Thank you, Council Member. And just a reminder that next month we should have Commerce Lexington here to give us an overview of the regional competitiveness plan. Next up we have Council Member Plowman. Thank you, Chair. Mr. Atkins, when we look at the employment sectors, second quarter 2023, there were 200,000 jobs. And I'm curious on the healthcare slash education. I assume, or maybe I'm not, that those reflect the Central Baptist satellite in the UK edition out there at Hamburg. They're not online yet. They're not? So that does not include those yet. Okay, so that's a pretty significant number. Right. So those are big jobs. Higher paying jobs. So that's something really to look forward to because they will come online shortly. Well, at least one of them is almost ready to open. So that's not included. And when will you add this? Is that as the jobs happen? no projections i would look back at dr clark to see what the the lag time is in a company opening and it's showing up in the numbers uh once they start by april they will start showing up and the day it could be about six months before about six months do you remember what that gross number would be the two of those added together one was two thousand and one was say that one more time i think the amount of jobs the projection on those two entities well on baptist the projection is over 600 okay on phase one which is what's under construction today and i know i've heard several numbers on the uk one and i will say it's basically in the same Okay, the second question I had had to do with agri-tech. I assume that goes in the information technology because I know we're being very aggressive on that. And I think my colleagues, that has shown a lot of potential. When you think of a place to be in the whole world for ag-tech, you think of the University of Kentucky, you think of all the horse farms, the internationally known veterinarians, and it takes very little floor space, higher paying jobs. So there's so much potential. I know the mayor is very aggressive about the chamber. I'm, let's see, Alltech. Who's the fourth partner? It's Alltech, the Kentucky Department of Agriculture, Lexington Fed, Urban County Government. Okay, that's right. I don't think I was including us. Four partners. UK, yeah. Okay, great. And then just a last comment. I'm very excited about the efforts that are being made on the regionalism. I know you, I've talked about that because other parts of countries have done it with so much success. And I know years ago when it was tried with revenue sharing, it failed very miserably. But now everybody's open to it because they realize as a region, that's going to be the only way that we can compete. So I went to that seminar that day, and I know there's some more coming up. And I encourage my colleagues to go because it really is the future of this region and our city. So thank you, Chair. And I think, you know, if Jenna Greathouse was standing here, she would tell you the same thing I'm going to say then. And one of the importance of this, and we talk a lot about workforce, because it is the number one issue, as Amy said, almost every time we meet with a company looking, they've already drawn out the one hour out circle. Because that's the workforce shed that they look at. Great. Thank you. Thank you, Chair. Thank you, Council Member. Next, we have Council Member Savigny. Thank you, Chair. Thanks for the presentation. I just have a few quick questions. I've been beat up by a few folks telling me that Lexington isn't growing. So if I understood from this we're growing our number of people, or is there some truth to the fact that we're not growing? And it looks like we're also growing our number of jobs. Right. I think, you know, thinking about our overall economy, we can see that that's growing. I think when we look at large projects like Kevin was talking about, we do have some things that are getting ready to come online. And just, you know, one of the quick things that we look at every single month, which you all see, is our payroll withholding. And that's a combination of how many people are working and how much they make. And that's gone up pretty, you know, it's had some pretty aggressive growth over the last few years. And that's not, that can't just be all wage growth, right? So we're going to see some growth in that workforce as well. Specifically, though, it looked like the number of people is growing. Correct. Okay, good. Not that we're getting heavier. Real quick for clarification, there was one estimation, one, that showed that number had backed up, but none of the other ones we have watched showed that. Yeah, I struggle with that because it's good to have the facts, so I appreciate it. And then the 200,000 people working in Fayette County, is there a net in, and there's usually like an inflow, outflow, and is there like an optimal number for a city our size? Like you have people coming in to work, like when you're counting 200,000 people, I think you're counting them, 200,000 people that are paying occupational tax in Fayette County, is that correct? The $200,000 does include the actual jobs that are in Fayette County, and it does include that commuting back and forth into Fayette County. Do you have the net in and out number? I don't. I can pull that and send it out. Yeah, I'd be curious sometimes. And I'd be kind of curious the trend of that, too. And then is the $21 billion GDP, is that our MSA? Because I didn't see, like, Scott County in there. No, that is just, and I can send the whole data set so you can see it, but that is just by county. And so you could look at all 120 counties in Kentucky separately. Like I literally didn't see Scott County on it, so I was kind of curious how they managed Toyota. And part of that was just trying to find a way to present some data that was comparable. Scott County is not a county that's over 100,000 people. And so in order to fit enough to be able to provide some information, but not so much that it didn't overwhelm the page, we had to come up with some criteria. Okay. No, but that number has grown, I think. The GDP number has gotten it grown. I remember looking at it before, and it was just a few years ago. It seemed like it was maybe 16 or something like that. I think I'd have to go back and look. But the data set that I'll pull and send to you all does have data going back to 2019. We may be able to find something prior to that as well that we can share. Thank you. That's all I have. Thank you, Chair. Thank you, Council Members. Any other questions? Council Member Plowman. One last question or comment. Is there a way to take a look at the loss of jobs? In other words, these are net numbers. Sectors by loss, you know, what's happening? on kind of the surface of the land we can ask dr clark and katie scott they can help us to pull those numbers and actually we're about to issue a report that will show you a lot of that that dr clark has you all let us put it in the budget last year so he's updated some numbers from pre-covid that will show that council member brown council member civigne you're going to see it in about two weeks as part of the our lexington economic development investment board and then after that board reviews it we intend to let immediately send it to all you all and so you can review it yeah i would think to be very helpful in terms terms efforts going forward he does it by sector so you'll really be able to to get into the pinpoint warm okay super that's thank you thank you mr atkins thank you sir thank you council member um thank you for the presentation And Amy, before you set out, one of your slides said the top skill for workforce in 2024 is adaptability. Can you elaborate on that a little bit? Right now, employers are looking for people that can adapt to jobs if they're willing to make change. That when you see a job description, it's not just these are the only jobs that you can do, or only duties that you can do, that you're willing to make that effort and do other jobs within that company. as the environment changes. Okay. Yeah, and I just bring that up to say that I think that's, and you correct me if I'm wrong, I think that's part of what you're looking for in your role is to look for and to create training opportunities and re-entry opportunities for folks to broaden that adaptability for the jobs that are coming and the jobs that we may not know that's coming in the future in our community. That's correct, yes. All right, thank you. Thank you all. All right, committee members, going back to our agenda, the next item on our agenda is the Lexington Economic, well, no, it's not, it's the Lexington Economic Outlook and Occupational Tax Forecast. We have Dr. Mike Clark, who is the Director of the Center for Business and Economic Research at the University of Kentucky. He's here to present on the annual Economic Outlook and Occupational Tax Forecast. So, Dr. Clark, thank you for being here today and rushing to get here, so we appreciate it. Thank you. It's always a pleasure to be here. I think we've been doing this, not me specifically, since 2012. And I've been doing it for the past few years. And it's always a pleasure to come and talk with you about what's going on in terms of Lexington's economy. And you've already seen a lot of this. So what I'm going to do is, you know, I cover some of the same things. I'll try to move through there fairly quickly, only kind of adding some additional thoughts. And let me make sure I know how to use this. Okay, so just to kind of give you an overview about kind of what's going on in terms of the economy. You know, oftentimes we like to think about our own little region or state as being unique. And in many ways we are. We have a lot of unique signature industries that are very important to us. But it's really important to understand that we tend to move very much along with the national economy. So as the national economy does really well, that carries over into Kentucky, and it carries over into Lexington as well. We very much are part of those larger economies. When they tend to slow down, though, we also will tend to slow down as well. Differently, we may not feel as much of the ups and downs as they do, depending on where the recession or downturn or upturn is occurring, but we will generally feel those same types of trends here in Kentucky as what we see nationally. Now, nationally, as far as the economy is doing, When I came here last year, one of the things that economists were worried about was that we might move into a recession. The idea is that we had significant inflation. You'll remember inflation rates had gotten well above 9% for a period of time. Inflation has been very high. And the number one goal of the Federal Reserve over the past couple of years has been reining in that inflation. And the way they do that is by increasing interest rates. As they increase interest rates, that makes it more expensive to fund our consumption through debt. So, when you're thinking about buying a house, it's become more expensive. When you're thinking about buying a car, it's become more expensive. Anything you were thinking about purchasing that you purchased with a credit card, it's become more expensive. That tends to slow the economy down. And the concern that a lot of economists had last year was that they may overdo it, they aggressively cut interest rates, and that could have pushed us into a recession. Well, fortunately, the economy has been very resilient over this past year. We have seen inflation slow down. We're getting very close to the Fed's target of about 2% inflation. And our concerns about employment starting to contract did not occur. We actually saw employment slow down, which was completely expected, but it didn't slow down nearly as much as many of us had feared. So where we kind of stand now is the economy is slowing, and this is really by design. The inflationary pressures that we've seen over the past couple of years have slowed. Employment is continuing to grow, fortunately, but it is growing at a slower and more sustainable pace and sustainable in terms of this is employment growth that we can sustain without having inflationary pressures. We're also seeing nationally slower wage growth. You remember over the past couple of years, there's been a significant shortage of workers available for businesses. which is aggressively competed for the workers that were available, and that pushed wages up substantially. Now we're seeing wage growth start to slow as the economy has slowed. What this means for Lexington is that what we're seeing in this past year is we have seen very strong employment growth as well. And we've seen growth in most of our major sectors in this past fiscal year. As we look to the rest of 2024 and 2025, we expect that the economy in Lexington is going to also slow very much along par with the national economy. So, you know, this large increases that we're seeing in terms of employment, large increases that we've been seeing in terms of wages, we think we're going to continue to see improvement, but they will not be on pace with what we've seen over the past couple of years. I always start off talking about a number of the labor force data. You've already covered that. The only thing I will point out is that while the unemployment rate is very low right now, we may start seeing this increase over the next year. But we are still at a very good place in terms of historically. Our unemployment rate is very, very low compared to what we've seen in the past. And even as we start to see some increases, we still are at a very good position in terms of our unemployment rate. I think you've covered the number of people in the Lexington area who are employed in the labor force, so I'm going to go ahead and move through these. If anybody wants to stop me and ask me questions about these, I'm happy to answer questions, but I'm going to go ahead and move through these. Now, I'm going to start off talking about employment as our count of jobs. So I'm not talking about people employed, I'm talking about jobs in the area. When we talk about employment numbers, there's a couple of geographic areas that you need to understand. You understand that some of the data is available for the MSA, some of it is available for the county, which we've been discussing. I'm showing you both because the data for the MSA is more current. The data for county lags by about six months. And so by looking at the MSA, we're able to see kind of the more recent trends and changes that have occurred. But we don't see the same geography. In some cases, that's going to matter. Most of the time, we're going to generally see the same type of trends in the Lexington MSA as what we're seeing in Fayette County. But just with that as kind of some background, what we're seeing in terms of total non-farm employment for Lexington MSA, we have done very well. We've done better than the nation. We've done better in terms of our other MSAs in Kentucky. We have basically seen employment grow to about 8.1% over where we were January 2020, just prior to the pandemic. So, yes, we recovered all those lost jobs, and we have done significantly better than that. Looking at a couple of different sectors, One area that the Lexington MSA has done particularly well in terms of is the financial activities sector. You'll see that we're up about 18.2% over where we were prior to the pandemic. We have outperformed Louisville, Cincinnati, and the state as a whole. Manufacturing. This is one place where, looking at the MSA and looking at the county, we're going to see some differences. The Lexington MSA saw a pretty good jump in terms of manufacturing, and the natural question for you to ask is, what was that? I don't know. We don't get to see the individual employment numbers for firms. We get to see the industry as a whole, so I can't tell you exactly what happened there. Since then, however, it's generally been flat. We have actually seen pretty good employment growth at the state level, better than what we've seen across the nation, actually. If we look at construction, and this was an area that I've been watching closely because we've been posting some really good numbers at the state level for construction, and it seems that Lexington's MSA has been experiencing the same type of growth for construction. This is significantly better than what we're seeing nationally and in our surrounding states, and it doesn't seem to be coming specifically from the housing construction market, so it suggest to us that maybe a lot of this is coming from industrial, commercial type businesses that are building new facilities. Okay, so this is the Fayette County part of the presentation. And first, let me apologize. I know I have a lot of stuff on here, and it's small, and I apologize for that. But I like presenting it this way because we can go and we can see how different industries are doing over time relative to one another, and we can kind of see where our growth is. So as we go through and we look at this, keep in mind what we're looking at is employment numbers, and I've heard the number talked about in terms of jobs. We've got about 200,000 jobs in terms of total non-farm. That's pretty close to what I have for FY 2023. And you can see the sectors here that are kind of slowing down, and many of these have been for some time. Natural resources, manufacturing, information are all sectors where we've seen employment declines as we kind of look at the long-term picture. Where we seem to be doing really good is in terms of construction. We're doing really well here the past couple of years in terms of our financial services sector. Our professional and business services sector kind of fell a little bit, but we seem to be recouping many of those jobs. And our education and health services sector is really kind of the backbone of our economy. It's one that predictably grows almost every year. We do see occasional declines, but generally what we tend to see there is good, steady, strong growth in terms of what's really mostly our health services sector. Here, what I'm showing you is the change from FY22 to FY23 for employment in Fayette County across these different sectors. And again, you can see that we only had one sector which actually declined in terms of employment during this two-year period, or this one-year period, which is natural resources. Information only added about 100 jobs. But as we go through and we look at where we were adding jobs, we were adding jobs across a lot of different sectors, mostly in terms of professional business services, leisure and hospitality. We were able to recoup a lot of jobs that were lost during the pandemic over this past year. Again, our education and health services sector has done very well. As we look towards the forecast for Lexington in terms of the revenue, one of the things I want to show you, and this is something I showed you last time, but it's good to have this historical context. We've been experiencing some really good growth in terms of our tax revenues. And of course with the payroll tax, as was mentioned earlier, that really comes down to two drivers. How is employment changing and how are wages changing? Here what I'm showing you is basically the average annual growth rate from FY22 to FY 2019. This shows you what was typical prior to the pandemic. In Lexington, on average, we grew at about 1% per year. Wages grew at about 2.4% per year. And our payroll tax revenue grew at about 3.5% per year. Now, I give you that to kind of give you a sense of what was typical prior to the pandemic, because since the pandemic years, we've had a lot of kind of things going on in the economy that have been driving employment, and we've experienced some kind of unusual growth rates. The growth rate for FY 2023 in terms of employment, we added about 4% in terms of our employment growth. Average wages grew at about 5%, and our payroll tax revenue grew at about 7%. We think about the drivers of our payroll tax. Employment seems to be accounting for about 45%, nearly half of the growth in our payroll tax. seem to be accounting for the rest of that. So given the kind of what I'm laying out in terms of how the economy is performing and how what we've seen as having been more typical in terms of revenues and where I think we're going for this next year, we expect again the economy is slowing. We expect employment starts going back to something that's a little bit more akin to what we were experiencing prior to the pandemic than what we've experienced over the past couple of years. We expect wage growth to also slow, and this is going to translate into solar growth in terms of our payroll tax revenues. We anticipate that for FY24, we'll end up at about 5.7% higher than the previous year, and we think growth will slow to about 3.5% for FY25. On the net profit side, we're also seeing slower growth in terms of corporate profits. We expect corporate profits nationally to be relatively slow, and so that's going to result in some, basically some slower growth for our net profits tax. There have also been a number of issues in terms of some one-time events that we think helped bolster our net profit tax over this past fiscal year. And we're concerned that some of those may actually go away. So for my net profit tax, I'm anticipating that we might actually see a decline of about 10% for net profits in FY 2024. After we see that year pass, we anticipate revenue starting to resume growth at about 3%. And here I'm just kind of giving you a summary of both of these together, but it's the same numbers I've just shown you on the past couple of slides. So again, kind of where we see the economy going is the economy continues to be strong. Our concerns about a recession have mostly diminished. The economy nationally for Kentucky and for the city are likely to slow compared to what we've experienced over the past couple of years, and that's going to translate into slower revenue growth for the city. And I'd be happy to answer any questions if I could. Thank you, Dr. Clark. Committee members, please log in with questions. First up is Councilmember Baxter. Thank you, Chair, and thank you, Dr. Clark, for your presentation. Always appreciate your knowledge on this subject matter. Could you expand a little bit more on why your projection is the decrease in the net profits for FY24 and why you think it's going to do that? So let me preface that with net profits. Net profits are one of the hardest things to forecast ever. They don't generally follow the economic cycle the way payroll tax does. And that's largely because of how corporations can declare profits in years that are more advantageous to their strategic plans. So they don't necessarily follow the economic pattern generally. What we're seeing nationally in terms of projections for corporate profits across the nation is that that growth is really slowing. We really don't anticipate much growth nationally in terms of corporate profits. The other thing is we have had a number of one-time situations where we think that has bolstered the FY23 revenue from corporate profits that won't be there next year. So as a result of that, we're going to see somewhat lower net profits revenues than what we had seen in the past. Basically, it's kind of shifting where that would occur and some things that simply won't occur next year. But again, that particular revenue source is incredibly difficult to forecast well. Thank you for that. Earlier in your presentation, we were talking about unemployment rates. You said you were expecting an increase in the unemployment rate. Do you feel like that's just a return to a more normal rate that we've seen pre-COVID? Yes, and part of the reason I say that is because every month when the state's unemployment rate comes out, and it's up a little bit from what it was last month, I get a lot of reporters call me very concerned that the unemployment rate went up. I was like, yes, but remember, it is still only 4% or 3.9% as a really low unemployment rate. They're reacting to the fact that it increased from one month to the next. So yes, I think the unemployment rate will increase. We're expecting that again through the national and state economies as well. We're not anticipating that those increases are going to be terribly large or that we have anything substantially to worry about in terms of the unemployment rate increasing. They will still be low. We anticipate that they will still be low in a historical context. The other thing to think about with unemployment rate is to remember the unemployment rate can be really difficult to interpret why it is increasing and is often misinterpreted. The unemployment rate can actually increase and be a good thing for the economy. Because when we see a lot of people who have stepped away from the labor force because they were discouraged or in the COVID situation, they're concerned about the health issues. They were concerned about being around individuals. One of the things that happened is as the vaccines came out, people started to come back into the labor force. As people who are not working come back into the labor force, they are initially unemployed. The unemployment rate goes up. So when the unemployment rate goes up, it can actually signal that the economy is doing well. People are anticipating that they want to come back into the labor force because they think jobs are competitive or the situation with COVID has improved. So they come back into the labor force and that actually causes the unemployment rate to increase. So we got to be really careful about interpreting those changes. We got to look at the underlying, why do we think unemployment numbers are increasing? Is it because people are losing jobs? which is I don't really anticipate much of that occurring, there's always some, but I don't generally anticipate that occurring over this next year. Or do we see people coming back into the labor force? I think we will see some of that over the next year. Thank you so much. Thank you, Chair. Thank you, Council Member. Next is Council Member Fred Brown. Thank you, Chair. Thank you, Dr. Clark, for coming and taking your time out to give us some new statistics. First question, you go through 25. Is this through fiscal year 25 that we're looking at on the information here? Do you forecast out any farther than that? Currently, we do not. There is some danger to that, but then again, it would be nice to have a three- to five-year plan for anybody that's in a budgetary part of their business, I guess. It can be helpful for long-term planning as long as you understand the level of uncertainty associated with that. And we always struggle, you know, the long-running joke in economics or in forecasting is the only thing you know for sure is that you'll be wrong. The question is how wrong will you be? If you want to go out to 26, 27, we will be wronger. Well, we've got a long history and I think we have had some rollercoaster years. But the last two or three years, I think, have kind of leveled out, and prosperity still stays with the Lexington, Urban County government, Fayette County. Do you do any other forecast for any other communities in the state? We do not. We do forecast for the unemployment insurance program for the state, but we don't do any for any of the other cities. Okay. So this, and when you're doing this, you're doing the whole county and city, but it's just our county and city. Yes, sir. You're not looking at anything or surrounding counties, any type of regional type of influence, I guess. No, I mean, there is some influence in terms of, you know, the way people typically forecast is they're looking at trends. They're looking at relationships between your revenues, which is what we're ultimately trying to forecast, and how the economy is changing. changing. So to the extent that you are seeing growth or if you are experiencing contraction or whatever kind of economic changes you're seeing in your surrounding area, those are affecting your revenue. We see those patterns and they show up in terms of your revenue forecast. But we don't explicitly go out and control for what is going on in these other counties. Well, I think you certainly realize it and a lot of other people in the economic areas is that Lexington Fayette and urban county government is unique in all aspects, revenue and expenditures. And I don't know if we're a model for others out there or not, but I think we've done a good job, you know, controlling our budgetary process. And it's good to have some backup and some analysis going forward. So thank you. My pleasure. Thank you. Thank you, Councilmember. Next is Councilmember Plowman. Thank you, Chair, and thank you, Dr. Clark. It's always nice to have you join us this time of the year and share your thoughts. I think I've asked this question before, but for the benefit of my colleagues that might not have been in office. Can you explain why we differentiate and say total non-farm employment? Is that a reporting issue? No, it's by design. The reason we exclude farm is because farm employment is really difficult to measure well. It changes by the season. Oftentimes it's difficult to determine whether or not somebody is working at particular farms. A lot of the employment numbers that we get come through the employer's submission of their unemployment records. If you're a business and you're employing individuals who are subject to unemployment insurance, you have to provide quarterly data to the state. We get really good numbers on businesses that are employing people who are on unemployment insurance. Farm workers are typically not eligible for unemployment insurance, so we don't get that. So the best measures we get in terms of farm employment are surveys that are done by the census and the USDA, where they go out every five years and they survey the farms and they ask about, well, how many people do you have working? And I should have known you were going to ask that question and had the number in my pocket, but I don't have it. But we can certainly get it to you, and I think some new numbers have come out. So there are historical numbers that was based on the census is what you're telling me? Yes, and I believe some new numbers for Lexington came out. And I can see where it's difficult in the farming, not in farming, in terms of the workers. It is. Are you aware of any organization like Kentucky, and maybe I should be aware of, Kentucky Farm Bureau or Kentucky Thoroughbred Association that captures those numbers? You know, they may do some for their particular industries, but I'm not aware of any systematic collection. And again, you know, when we look at those numbers, we've got to be careful about how the data was collected and how rigorous it was in terms of making sure that you got broad collection from the various types of farms that were involved. Generally, what we're seeing in terms of employment in farm workers is, particularly for Fayette County, it's a relatively small share of the economy, and it has been slowly declining. We have an agricultural community. Some of the workers, again, they're covered by UI, are in the numbers that we provide. They'll show up in, like, natural resources. But when we think of kind of the traditional ag worker, you know, somebody working on the farm, working crops or working with horses or livestock, the number of workers in those areas is, I have to look at the memo that I gave you, and I will update it and get it back to you and give you an exact number of what those were. But you do have the number from the last one. We do, and again, I think the most recent census numbers counting that have come out recently. So I think we may have some update numbers for you. I'll touch base and see if I can get them. Thank you. Thank you, Dr. Thank you, Council Member. Next is Council Member Ellinger. Mr. Savini was on. Is he already asked a question? Okay, thank you. One thing that used to be talked about, I don't hear much about is underemployment, unemployment, underemployment. How does that affect us and is that as big an issue as it used to be? So I haven't looked at any underemployment numbers lately, but the idea behind underemployment is you may be an individual who would like to work maybe a full-time job, but you're unable to find one. My sense is that it hasn't been as big of an issue as it used to be because the economy has done so well and there have been so few workers. It's part of why we've experienced such significant wage growth over the past couple of years. We had a lot of people leave the labor force during the pandemic. A lot of people didn't return. And at the same time, basically the supply of labor was down, firms were realizing that demand for their goods and services were very strong. And so they were trying to hire workers. They were fighting for workers. So my general sense is that if you want a full-time job, you're able to find one. We're also seeing an increase, at least at the national level. I don't have native for Lexington, in terms of multiple job holders. We're seeing a lot more people who are maybe working multiple part-time jobs, maybe working a full-time job, also holding down a part-time job. And so, you know, there seems to be strong demand for workers. So my sense is that generally that has been less of an issue than it was prior to the pandemic. Because, yeah, I guess at one point there was more jobs than there were people. And that has since, I think, has come down because as the Fed has slowly tried to, I guess it's always counterintuitive to me because their goal is to actually increase unemployment when they start raising interest rates, which I think we've hit the max of interest rates. And although the economy has been so strong, I think they've, their last meeting, they have decided that we're probably not going to raise them as soon or lower interest rates as soon as we thought we would, because I think the March one was supposed to be the first one. And they probably won't. Yeah. So everybody's trying to figure out when they will lower interest rates. And the Fed is notoriously cagey about that. They're trying to provide guidance, but they also don't want to box themselves in. They have a dual mandate. They need to maintain stable prices, but they also need to balance that with full employment. And those things can be at odds from time to time. The situation we've had is with really high inflation rates, they have had to slow down the economy to a more sustainable rate. That's why a lot of economists thought, oh, they're going to miss this. They're going to increase interest rates too much, slow the economy too much, And not only will they kill inflation, but they might actually generate a recession as well. They seem to have done a pretty good job, though, of bringing inflation down, slowing employment, but slowing employment to a more sustainable rate. So we're not seeing a lot of job losses. I'm not seeing an indication of widespread job losses. Employment is continuing to grow. It's growing at a rate that is more sustainable with our inflation targets. And so, you know, they seem to have done a good job in terms of balancing those two things. So, you know, the expectation right now is, again, that employment will continue to grow. Inflation will continue to ease. And so kind of where I put in terms of my outlook, where I think the Fed's going to be, is I don't think we're going to see them start to roll interest rates back until maybe the last half of calendar year 2024. I always got to stop and think about the FY calendar year thing. So, when they do begin lowering interest rates, I think they will be very, very cautious about that, because they don't want to see inflation pop back up. Right, yeah, I think they've done a good job on the soft landing, I guess is that term we're trying to get. Yes, sir. And I know initially they won't do three or four in this year, but that's, like you said, it's probably going to happen later. One thing that's become such a big issue, and I think NVIDIA is now the third largest market cap company in the world, or in the United States, is AI. How is AI going to affect workers going forward and for us in general here in Fayette County? Because that looks like that's kind of where things are heading here. So, you know, we've been talking about this quite a bit, you know, as economists. In fact, if you happen to go to our Outlook conference, we had two people come and talk about this very issue. One was a computer scientist who was developing AI. Another is a labor economist. And I think most economists see this as just another technology shock. The idea is that with technology shocks, you see some technology come out that allows us to increase the productivity of some workers. but it also means that it may displace some workers. What can happen in a situation like that is some workers may lose their jobs. Other workers will see that they're more productive, the wages go up, and you see new jobs being created to support the new technology. So with technology changes, there's always kind of this churning. I think the important thing is to recognize that usually these are good for the economy. They help increase productivity, which increases wages, which increases quality of life. While there is some job losses, there are usually greater job gains as a result of the technology increases. It's difficult for us to know exactly how AI may differ from this. But I think most economists are generally anticipating that this will play out very much the way past technology shocks have. So think about the cotton gin, the switchboard. You remember, you know, the old TV shows where you had people, you know, pulling plugs and connecting lines manually. Switchboard disrupted that type of job, but it created new jobs. It could increase productivity. The one thing that is really different about this is while the technology may substitute for some labor, that's always the issue. A lot of the labor in the past that was substituted tend to be low skilled workers. AI may substitute for some of the higher skilled workers in the sense that it's being used by attorneys, architects, and workers who maybe have a high level of skill are going to start seeing that many of the tasks that they do can now be done by AI. And so it's going to change that dynamic a little bit more. But again, I generally tend to think that AI will tend to be a positive productivity shock. Thank you, Dr. Kulonk. Thank you, Chair. Thank you, Council Member. Next, we have Council Member Sobigny. Thank you, Chair. And thanks for the presentation. Just a quick one. So the 2024 projected the payroll tax, that's for our fiscal year. Is that correct? Or is that for the calendar year? Correct. Those are fiscal year estimates. thing the net profits is basically for this kind of downturn you're expecting us to see in April? Like when we get people start to pay their net profits? For 2024, half of the fiscal year is already there. We have seen the downturn in the first half of the fiscal year for both of these. I think the growth rate has slowed for the payroll tax, and I believe for the net profits tax we have actually seen some of the decrease showing up. But this is the full fiscal year. Okay. And then I guess lastly it would be mostly for our team. Do we use this 2025 data? Wes? I'm sorry. Do we use this 2025 data as the baseline for when we're putting together the budget this year? Yeah, so one of the things that, and this gets to Council Member Brown's question earlier about what our overall growth rate will be. One of the pieces of data that we look at is what Dr. Clark's projection is. And then we also go through and try and pick out any type of one-time or individual-level pieces of activity or growth or even decline that might impact these numbers and then use that to make a final assessment. So this is – we go through our own process to come up with a projection as well, and this is one of the pieces of data that we look at. Thanks. Thank you. And then the last one would be then for this coming year, you're just feeling like wages that are going to kind of continue just on kind of a standard CPI kind of increase it looks like. Yeah, I think they might. I don't really look at necessarily in terms of CPI. Generally what we've seen, and this is national, this is not Lexington, because this type of number isn't available for Lexington, is this is how wages have been growing. And the green line on the left-hand side is wages and salaries. And you see that, you know, we had some really strong growth in 2022. These are calendar quarters. But that wage growth has slowed. So we're seeing employment growth slow. We're seeing wage growth slow. As you look across different industries, last year what we generally saw is that most of them saw wage growth that was above CPI, which is good, right? because that means that, you know, okay, you know, the things that you purchase are going up, but your income is going up a little bit more than that. These are probably going to slow down, but again, CPI is slowing down as well, too. In terms of what we see in terms of real growth, which means inflation adjusted, we haven't made that type of a calculation. On the net profit side of growth, like when you're thinking about the transactions that change, So basically, we've run through stimulus dollars. Is that kind of one thing that you look at? It's just like the federal government obviously put a whole bunch of money into the economy, into our economy specifically, to do projects. I mean, is that the type of thing that you would back down your net profits forecast for? That's part of it. And again, I think at the national level, we're not seeing the type of growth that we'd seen in corporate profits. and we're not seeing the people who do national forecasts aren't projecting much in the way of growth at the national level. Thank you. Thank you very much, Chair. Thank you, Council Member. Are there any other questions for Dr. Clark? Not seeing any. Dr. Clark, I just have a couple of comments. So you had mentioned the increase in construction and you said you're not seeing it in the housing market, and it may be in other sectors. When rental units get constructed, does that fall under the housing category? I mean, is there a way that that can get missed or not captured in the housing? So when I say that is we haven't really been looking at the Lexington data for that. Most of what I've been looking at is Kentucky. We're seeing substantial employment growth in construction compared to what we're seeing in the surrounding states and the nation. What could be causing that? Why are we seeing so many construction workers here relative to the rest of the country? The first thing we started looking at was housing permits. Do we see any evidence that builders are getting ready to build a lot more? We're not seeing that. when we look at housing permits, both single and multifamily, we're not seeing a lot of increases there. Unfortunately, the data that we get doesn't allow us to determine where those construction workers are employed. Are they employed on a housing site, a multifamily housing site, single family, or are they employed in other areas? What we're doing is we're basically inferring from the fact that we don't see a whole lot in terms of permits as suggesting to us that we're not seeing a lot of housing growth at the state level. which suggests that this construction work must be occurring in some other sector. So this could be industrial sites. And when I have this conversation with people, a lot of them bring up the blue oval, the battery plants. Some will mention the hospital being built in Lexington. Those are all reasonable explanations for the growth that we might be seeing. But again, it's a little bit of a puzzle as to why we are seeing such strong employment growth in this particular sector. It just doesn't seem to be in the housing sector. Okay. Okay. All right. Well, thank you for that. And then my other question, and Kevin, you might be able to answer this a little better. So the study that we put in last year's budget, the extra study, what information did we ask Dr. Clark to assist us in identifying and what all are we looking at? What we asked Dr. Clark to do originally was to take a look at all our sectors. Basically, we wanted him to go back in a period in time and show us how the Lexington economy has transcended. We really wanted to go back to the days where Lexmark came to town, IBM back then, but the Nix codes no longer matched up. So we went back. And then when he was done, because of the lag and the way the numbers come in, it had stopped before COVID. And we thought it was important to see where we were post-COVID as far as the real recovery after the pandemic had gone. and that's the numbers that we're getting ready to see. What we want to be able to do with that is obviously to take a deep dive, Amy and I and others, and really put together some thought on, okay, the things that jump out that are great, how do we sustain the things that maybe we're lagging in that are problematic? How do we put a strategy in place to try to address some of those? Okay. And that's kind of where I was leaning. and you kind of answered what I was thinking, because I think it gives us direction as a community on where we need to focus, and then it adds and ties into the conversation that we keep having around regionalism. All right, so Dr. Clark, thank you for your presentation. You don't have any other questions, and I just want to say thank you for your continued involvement and expertise and what it contributes to us in our budget process. So thank you. My pleasure. Thank you. All right, going back to our agenda, does anybody have any action or any motions in regards to items referred to committee? I don't see anybody signed in, so with that, I think that brings us to the end of our agenda. I would entertain a motion to adjourn. Second. All right, a motion was made and seconded to adjourn. Are there any that, and seconded, all those in favor, please say aye. Any opposed? That motion passes. This meeting is adjourned. Thank you.