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Lexington: Economy


Major Industries and Commercial Activity

Horses are a billion-dollar industry in the Bluegrass Country. Home to more than 450 horse farms, Lexington is surrounded by the greatest concentration of thoroughbred horse farms in the world. Rich limestone soil, lush grasses, and a moderate climate combine to create an ideal spot for the raising, breeding, and training of horses. The Bluegrass Country is the birthplace of the state's native breed—the American Saddlebred—and a center for the breeding of the Standardbred.

While horse breeding is the area's big business, horse racing is probably its claim to fame. The local economy greatly benefits from tourists who come from around the world in large numbers. Keeneland Race Course and the Red Mile attract horse-lovers, experts, and gamblers from around the world. Kentucky Horse Park, a 1,032-acre park built on a former thoroughbred stud farm, is a major attraction.

Agriculture also benefits from the mineral-rich land. Kentucky is the leading producer of burley tobacco in the United States, with Lexington-Fayette County producing the largest crop. Corn, soybeans, alfalfa hay, wheat, and barley are also produced in the area, and Lexington is a major market for beef cattle as well. The Lexington metropolitan area exports more than $2.5 billion worth of goods and services annually; in addition to agricultural products, major exports include cars and printers.

The University of Kentucky, located in Lexington, is a center for educational conferences and sports attractions and is one of the Lexington area's major employers. The University provides local businesses and corporations with a ready supply of educated manpower and its considerable resources for problem solving and research. The school was established in 1865 as a flagship for agricultural research and development, and it owns 2,400 acres of land throughout the Bluegrass Country that is still used for that purpose.

But while the city and state of Kentucky fervently protect and promote the region's strong agricultural and horse-country identity, they also are making attempts to keep pace with economic trends. In the decade covering 1995 through 2005, Lexington has emerged as one of a handful of leading American cities in economic growth. Entrepreneur magazine recently named the city one of the top five in the southeast for small-business start-ups. Forbes magazine recognized Lexington as the 14th best place for business and careers in 2003; in 2004 the magazine named Lexington as the 9th best place in America for business. This reflects a concerted effort to diversify the area's economy toward more manufacturing and high-technology ventures. More than 100 major companies have located headquarters or facilities in Lexington. Toyota's multimillion-dollar assembly plant just north of Lexington employs close to 7,500 workers. Lexmark International, a Fortune 500 company, is the city's largest employer (6,784 people).

More than two dozen national organizations—medical, research, scholarly and business—make Lexington their home base. Industry analysts forecast continued progress for Lexington, targeting the area for both population growth and economic development into the 21st century. They predict particular strides in the areas of finance, insurance, and real estate, while community leaders continue to encourage the growth of high technology industries and planning marketing strategies to capitalize on tourism.

Items and goods produced: Paper products, air conditioning heating equipment, electric typewriters and computer printers, metal products, bourbon whiskey, industrial valves, peanut butter, furniture, feed, tobacco products, equine-related products, automobiles, construction equipment

Incentive Programs—New and Existing Companies:

Local programs

State laws exempt a broad group of commercial entities from local property taxation and limit local government taxation to a few classes of property. Commerce Lexington, the local Chamber of Commerce, provides an array of assistance to businesses thinking of starting up or relocating in greater Lexington, particularly minority-owned business through its Minority Business Development Program.

State programs

The state of Kentucky offers an extensive array of incentives for business start-up and expansion. Cities or counties may issue Industrial Revenue Bonds to finance land, buildings and machinery, and equipment and pollution control equipment. Low-interest state loans for fixed assets, Small Business Administration guaranteed loans, venture capital loans, bond financing of manufacturing plants, and state community development block grants are available under various circumstances. Both state and local property tax rates on real estate and tangible personal property remain low. Businesses are eligible for credits on annual debt service costs, start-up and annual rental costs, and recycling equipment. Credits are allowed for the hiring of persons who have been unemployed for more than 60 days. Credits are allowed for using Kentucky coal for industrial heating or processing. Major exemptions on state sales tax are available for resale items, machinery for new and expanded industry, raw material that becomes part of a manufactured product, certain supplies and industrial tools, and many other items. By way of Lexington's Foreign Trade Zone, companies may be exempt from customs duties if they meet specified criteria.

Job training programs

The Mayor's Career Resource and Training Center in Lexington offers corporate participants customized testing and assessment, pre-employment skills training, on-the-job training, entry-level skills training, skills upgrade training, and reimbursement of up to 50 percent of gross wages for the hiring of older workers. The state's employment service provides recruiting, testing, and job placement of industrial workers at no cost to employers. The Kentucky Bluegrass State Skills Corporation offers custom training of industrial worked to skill levels specified by industrial employers.

Development Projects

College basketball is a certifiable passion in Kentucky in general and Lexington in particular. Rupp Arena is home to the Kentucky Wildcats, one of the most storied basketball teams in college athletics. The arena and attached Lexington Convention Center underwent $50 million in renovations in 1999 and 2000; it also hosts major concerts, exhibitions, and other events.

Valvoline recently opened a new product development lab; the 25,000-square-foot, two-story facility cost $4.5 million.

The Lexington Downtown Development Authority announced plans in 2004 for construction of a 54-unit loft/residential development on Martin Luther King Boulevard near College Town. The non-profit group (in a joint venture with the city-county government, the University of Kentucky, and major downtown employers) also seeks to attract more people to live in downtown Lexington through a unique "Live Where You Work" program, which provides up to $15,000 in forgivable loans to individuals who build or renovate homes in the downtown area. Additionally, planning has begun on some major road work in downtown Lexington. The Newtown Pike Extension will alleviate traffic problems and create a modern thoroughfare carrying up to 25,000 automobiles daily and affecting more than 1,400 residents and businesses in the downtown area. Construction was scheduled to begin around 2010. The newly renovated Lexington Center provides 66,000 square feet of convention space and an additional 40,000 square feet of meetings and ballrooms.

In 2004 the city announced that the Belcan Engineering Group would open a new Engineering Design Center for the Sikorsky Aircraft Corporation. The project could bring up to 300 high-tech jobs downtown by the end of 2005. The city's largest employer, the University of Kentucky, also announced plans for a significant expansion of its medical complex.

Completed major development projects included Hamburg Pavilion, a 950,000-square-foot shopping center anchored by a Target and a 20-screen movie theater, and Lexmark International's investment of $70 million for research and development, and a new building which added 700 jobs. The downtown area is experiencing a resurgence attributed to the location of new businesses, two new business parks, and a courthouse.

Economic Development Information: Greater Lexington Chamber of Commerce, 330 E. Main St., P.O. Box 1968, Lexington, KY 40588-1968; telephone (606)226-1600; fax (859)233-3304

Commercial Shipping

Lexington's central location within Kentucky and the United States is attractive to manufacturers, distributors, and business interests. Easy access to two major interstate systems makes motor carrier service readily available. The city is within a day's drive of 75 percent of the nation's business activity. Since Toyota Motor Manufacturing chose to locate its multi award winning Camry/Avalon/Sienna manufacturing plant just 14 miles north of Lexington, the I-75/I-64 corridors have come to be known as "America's Auto Axis," reflecting the profusion of automotive suppliers which have located near enough to meet just-in-time inventory requirements for the Toyota, Saturn, Nissan, Honda, Ford and Corvette plants located within the immediate area. Two railroads provide freight service to Lexington. Lexington Bluegrass Airport (LEX) is a major international hub; numerous air freight companies maintain facilities there as well. There are also full-service international airports in nearby Louisville and Cincinnati.

Labor Force and Employment Outlook

Analysts rate Lexington high on the scale of available, quality labor. The University of Kentucky and eleven other nearby accredited colleges produce an ample supply of management-level workers, a particular concern of corporate and high technology businesses seeking to locate in the Bluegrass Country. Analysts also describe the area as having an abundance of clerical, skilled, semi-skilled, and unskilled workers. According to executives at Toyota Manufacturing U.S.A., the "bottom line [for opening its $800 million American factory near Lexington] was the Central Kentucky work force and its ethic." The Fayette County School system is consistently rated as one of the nation's best, and of the 75 largest cities in the United States, Lexington ranks 6th in percentage of population having completed 16 years of school. The city's Partnership for Workforce Development coordinates efforts of employers, workers, educational and training facilities; offers access to testing and assessment services; and maintains a data base of area employers' needs and workers' capabilities. In 2000 Employment Review placed Lexington at number 15 on its list of the 20 best places to live and work in America; deciding factors included cost of living and job opportunities among others.

The following is a summary of data regarding the Lexington-Fayette metropolitan area labor force, 2003 annual averages.

Size of nonagricultural labor force: 275,700

Number of workers employed in . . .

construction and mining: 13,700

manufacturing: 40,700

trade, transportation, and utilities: 49,100

information: 5,900

financial activities: 11,000

professional and business services: 27,300

educational and health services: 34,800

leisure and hospitality: 27,300

other services: 10,500

government: 55,500

Average hourly earnings of production workers employed in manufacturing: $21.07

Unemployment rate: 2.8% (December 2004)

Lexington: Economy

Largest employers (Lexington MSA, 2004 Number of employees
University of Kentucky 10,668
Toyota 7,990
Fayette County Schools 4,906
Lexmark (laser printers) 4,000
University of Kentucky Hospital 3,458
Lexington Fayette Urban County Government 3,090
Central Baptist Hospital 2,400
St. Joseph Hospital 2,000
Eastern Kentucky University 1,750
Johnson Controls 1,500

Cost of Living

The following is a summary of data regarding several key cost of living factors for the Lexington area.

2004 (3rd Quarter) ACCRA Average House Price:$237,188

2004 (3rd Quarter) ACCRA Cost of Living Index: 96.6 (U.S. average = 100.0)

State income tax rate: ranges from 2.0% to 6.0%

State sales tax rate: 6.0% (food, utilities, and prescription drugs are exempt)

Local income tax rate: 2.25% on wages plus 0.5% school tax

Local sales tax rate: None

Property tax rate: ranges from $.7690 to $.845 per $100 of assessed value (2004)

Economic Information: Greater Lexington Chamber of Commerce, 330 E. Main St., P.O. Box 1968, Lexington, KY 40588-1968; telephone (606)226-1600; Commonwealth of Kentucky, Cabinet for Workforce Development, Dept. for Employment Services, Frankfort KY 40621-0001


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