The value of planned investments in new buildings and machinery from manufacturing, service and technology companies in Kentucky last year fell by 42 percent compared to 2017, and Louisville’s share of the investments fell to at least a six-year low.
Businesses in the manufacturing, service and technology sectors last year pledged to invest nearly $5.3 billion in new projects in Kentucky, down from a record $9.2 billion in 2017, which, a state official said, was a record and unusually high. Last year actually was the state’s second-best performance in investment value.
For Louisville, however, 2018 marked the second-lowest pledged investments from those sectors in six years. Businesses last year said they planned to invest about $550 million in 71 projects, down from $1.7 billion in 2017 and down from an average of $1.2 billion from 2013 to 2017.
The data, provided by the Kentucky Cabinet for Economic Development, include investments from major employers such as Ford, Brown-Forman and GE Appliances, but exclude projects from nonprofits, which include the health care sector. Last year’s biggest announcement, measured in dollar value, came from GE Appliances, which planned to invest $200 million and create 400 new jobs on its laundry and dishwasher lines.
Investment figures can swing wildly from one year to another: The Jefferson County total exceeded $2 billion in 2015, but then fell below $400 million in 2016. The 2015 figure was boosted primarily by a Ford Motor Co. pledge to spend $1.3 billion to prepare Kentucky Truck Plant for the new Super Duty.
The totals also represent intentions and may not materialize for years — or at all — and are subject to revision.
The data indicate that Jefferson County has been getting a smaller share of the investments in Kentucky, at least in the last three years.
In 2014, companies planned to invest about $3.7 billion in 353 projects in Kentucky, with Jefferson County being the location for 79 of those projects, with a value $751 million. That meant about $2 in every $10 the businesses pledged that year was to be invested in the Louisville area. In the last six years, Jefferson County’s share of the state total was as high as about $4 in $10. In 2018, however, the local share fell to about $1 in $10.
Even over a longer stretch, the data don’t look promising for Louisville: In the years from 2013 to 2015, an average of about a third of the business’ planned investment value in Kentucky was earmarked for Jefferson County. In the last three years, that share declined to an average of less than 14 percent.
The county fares better when measured by the share of jobs employers plan to add: Employers in the three sectors last year pledged to add 14,509 jobs in the state, with about 3,000 of those, or about 20 percent, being planned for Louisville. While that share was a five-year low, the three-year averages (2013 to 2015 and 2016 to 2018) had not changed much.
Jessica Wethington, spokeswoman for Louisville Forward, the city’s economic development arm, told Insider Louisville via email that the state data provide only a snapshot and that larger data sets around job creation, employment
“BLS data shows that our local economy is gaining jobs, while not at the same pace as the prior year. In 2017, we added more than 10,000 new jobs and in 2018, we added nearly 5,600 new jobs. Still, 2018 is our 3rd best year for job growth since 2012 and the highest year for total employment in the last 28 years,” Wethington said.
“There is also a shift occurring, with more business services and ‘knowledge economy’ jobs being created over the manufacturing jobs, which have largely plateaued; this shift to the office-based jobs will also mean lower total investment numbers going forward,” she said.
“Recent investments made by Chewy.com, Kindred Healthcare, Cuddle Clones, and the recent opening of Appriss’ new headquarters gives us the positive indication that our focus on growing our knowledge economy is working,” Wethington said.
Land, labor and luck
Real estate experts had told Insider recently that industrial investments may be hampered by the lack of available developable land, a sentiment echoed by Jack Mazurak, communications director for the Kentucky Cabinet for Economic Development.
Mazurak told Insider that employers these days worry primarily about cost and availability of land and labor.
The economic expansion has meant many industrial sites have been snatched up, leaving few buildings empty and few properties ready to be developed.
“If there are no sites and buildings ready, it’s a lot harder to get a project there,” Mazurak said.
And employers’ concerns about labor costs and availability have risen as the unemployment rate has declined, he said.
Mazurak said some of those challenges in Louisville have prompted businesses to make investments nearby: The bus parts maker New Flyer, for example, said in late 2017 that it would invest $40 million in a plant in
Data also show, however, that the decline in the share of investments in the Louisville area does not appear to have prompted a significant increase in investments in the Kentucky counties that border Jefferson County.
Mazurak said that a lot of the size of the investments in the Louisville area depend on existing large employers. Indeed, of the $6.1 billion that companies pledged to invest in Jefferson County between 2013 and 2017, more than half came from just five employers: Ford, GEA, UPS, Brown-Forman
Mazurak said that the state, counties and cities spend a lot of time and resources on making sure that existing employers, especially big ones, are happy.
“We recognize the health of the state’s economy depends in large part on its existing businesses,” he said. “When they make a move … that will push the needle.”
In the end, Mazurak said, states, cities and counties do not have a foolproof formula that allows them to generate a steady stream of business investments, even if they market themselves aggressively and try their hardest to provide available land, financial incentives, a capable workforce and low taxes.
Companies make decisions about investing in one county or another, or one state or another, based on complex set of factors, which means that sometimes Kentucky and Jefferson County may score a great win — but at other times they may fail.
“There’s an element of, ‘That’s where the chips fall sometimes,’ ” he said.