1

STATEWIDE POLICY POSITIONS

HOME BUILDERS ASSOCIATION OF

NORTHERN KENTUCKY

1) The Kentucky Economy………………………….... pp. 2-7

2) Government Accountability………………………… p. 8

3) Land Ownership and Private Property Rights……… p. 9

4) Environmental Regulations………………………… p. 10

Compiled by Home Builders Association of Northern Kentucky

State & Local Government Committee

2

The Kentucky Economy

The market for homebuilding and remodeling depends on healthy economic components such as:

1. Employment

2. Quality educational opportunities.

3. Population and household growth.

4. Income growth.

5. Government actions that affect the ability of people to afford new homes and remodeling.

This study of Kentucky’s economy compares the above market components to the nation and selected neighboring states.

.

JOBS

The unemployment rates of all the states bordering Kentucky are shown in

Table 1. As of October 2012 Kentucky’s unemployment rate is well above the

national average. It has the second highest unemployment rate of all the ad-

joining states. This is only a snapshot of one point in time but it is indicative

of the rate of unemployment Kentucky has experienced during the current and

continuing recession

Table 2 reveals that between Sept 2011 and Sept 2012 the Kentucky job situa-

tion improved a bit. Total nonfarm employment increased 2.65%, from

1,793,700 jobs to 1,840,700. That small increase is below the level it would

take to start the market moving again. It is above the growth in the national

workforce and our surrounding states during the same period.

State Unemploy-

ment Rate

Illinois 8.8 %

Kentucky 8.4 %

Tennessee 8.2 %

Indiana 8.0 %

US Median 7.9 %

West Vir-

ginia

7.5 %

Ohio 6.9 %

Missouri 6.9 %

Virginia 5.7 %

Table 1 Bureau of Labor Statistics Oct 2012

Table 2 shows the relative job formation in adjoining states and the national

growth rate. The time period used is September 2011 to September 2012.

This time frame Includes 13 months with only one month in which there was

a projected job number.

In terms of percentage job growth, Kentucky, Ohio and Indiana beat the na-

tional average. Ohio and Indiana has increased their manufacturing jobs by

16,300 and 19,500 respectively in the measured time frame. The economies

of Southeastern Ohio, Kentucky and West Virginia will continue to have dif-

ficulty because those areas rely heavily on the coal industry for jobs. The

federal government has stated it will impose severe penalties and regulations

on coal companies and coal fired generating plants. Kentucky ranks 10th out

of the 50 states for its proportion of total revenue that comes from severance

taxes. If federal mandates result in a loss of this revenue, the state will experi-

ence lower job formation. Such federal action will rob Kentucky of one of

it’s best economic incentives for new business, cheap energy.

State Jobs Added

or Lost

%

Change

Sep 2011

Sep 2012

Kentucky +47,000 +2.65

Indiana +65,000 +2.30

Ohio +88,000 +1.74

US Jobs +155,641,000 +1.03

Virginia +36,000 +0.98

Illinois +52,500 +0.93

Tennessee +20,400 +0.77

Missouri +11,400 +0.43

West Virginia -10,000 -1.32

Table 2

Bureau Of Labor Statistics Sep 2012

3

A comparison of Kentucky, Ohio and Indiana is

worthwhile because these three states compose an

economic area that both competes and cooperates.

Northern Kentucky is a part of the Cincinnati and

Southwest Ohio market place. What happens in one

of those areas effects the others. Table 3 displays

the jobs change by job sector for the 13 months from

September 2011 to September 2012.

Before comparing OH, KY and IN, the disparity in

population needs to be addressed. Note that Ken-

tucky’s population is about 40% of Ohio’s and 70%

of Indiana’s. Table 4 presents a better comparison

of growth because it measures the job changes per

100,000 people.

JOBS (Continued)

Employment Change by Job Sector Sep 2011-Sep 2012

Population 4.37

million

11.4

million

6.52

million

Job Sector Kentucky Ohio Indiana

Professional and Business Services 16,700 15,200 7,500

Trade, Transportation and Utilities 13,100 19,700 7,900

Leisure and Hospitality 9,900 10,500 9,500

Manufacturing 5,400 16,300 19,500

Education and Health Services 2,700 21,900 9,300

Government 800 -6,400 6,600

Financial Activities 700 3,200 -2,400

Construction -2500 1,000 6,300

Table 3 Bureau Of Labor Statistics

The chart points out the strengths and weaknesses of

each state’s economy. Unfortunately, Kentucky has

the worst construction environment of the three,

losing 2500 construction jobs during the year while

Indiana boomed in the construction and manufactur-

ing sectors. Kentucky’s Professional and Business

service sector grew the fastest, Trade Transportation

and Utilities was second while Leisure and Hospital-

ity came in third. . This shows the difference be-

tween Kentucky versus Ohio and Indiana. Ohio’s

top three sectors are Education and Health Services,

Trade Transportation and Utilities and Manufactur-

ing. Indiana’s top three are Manufacturing, Leisure

and Hospitality followed by Education and Health

Services.

Employment Change by Job Sector Sep 2011-Sep 2012

Per 1000,000 population

Population 4.37

million

11.4

million

6.52

million

Job Sector Kentucky Ohio Indiana

Professional and Business Services 382 133 115

Trade, Transportation and Utilities 300 173 121

Leisure and Hospitality 227 92 146

Manufacturing 124 143 299

Education and Health Services 62 192 143

Government 18 -56 101

Financial Activities 16 28 -37

Construction -57 9 97

Table 4 Bureau Of Labor Statistics

Employment Summary

According to the U.S. Department of Labor, the bottom of Kentucky’s employment happened in 2009. It mirrored the national drop

in employment. When national employment started to improve in 2010, Kentucky’s job growth continued to mirror the national

growth rate, with some monthly variations. Kentucky’s 2011-2012 job growth rate exceeded the national average. It is expected to

continue the trend through 2015. It will be the first time Kentucky’s employment growth out performed the national average since

the years between 1991 to 1995. Kentucky’s job growth rate should outperform Ohio’s and Indiana’s.

4

EDUCATION

In order for a state to have a good economy it needs to train its students in the skills needed to gain a job and advance. That is the

job of the state’s education establishment. Many jobs require a high level of technical expertise. Students need to learn math, sci-

ence, reading comprehension, technical vocational subjects, and advanced courses tailored to the individual student’s capabilities.

The modern job market requires a high level of education in order to succeed. When companies are looking to relocate or start new

businesses one of the main things they require is a pool of educated individuals from which to select their new employees. A state

with an effective school system will attract those new businesses.

The U.S. Department of Education does not rank the states on educational achievement. There are organizations that do rank the

states in terms of results. Those organizations are usually ones that focus on education issues and are not dependent on the educa-

tional establishment.

One of the best ranking systems is the annual American Legislative Exchange Council’s (ALEC) annual “Report Card on American

Education”. The report is free to download at www.alec.org. The report has extensive data ranking all states on K-12 education. It

ranks all states in educational progress, performance and reform. ALEC is a conservative organization. As such, it is interested in

results not in effort. ALEC was established as a resource for state legislators and employees interested in change for the better

within their state. It is a “think tank” of ideas that are purported to work. Their annual report uses information from the U.S. Depart-

ment of Education’s “National Assessment of Educational Progress” report. ALEC combs through all the data in the National As-

sessment of Educational Progress - National Center for national assessment report and puts the information together in a simple,

understandable format. That is the information that was used for this report section. This section will deal with only rankings of

Kentucky, Ohio and Indiana.

Education Performance

Kentucky Ohio Indiana

ALEC National Rank 37th 21th 17th

ALEC State Grade Card Score C B B

Money Spent Per Student $10,076 $11,982 $10,040

% 8th Graders Scoring Proficient 33%* 37% 31%

Charter Schools Allowed No Yes Yes

Delivering Well Prepared Teachers D+ D D

Exiting Ineffective Teachers

(dismissal) F D F

Charter Schools Allowed No Yes Yes Charter School Law Grade None C C

Home School Regulation Burden Low Moderate Moderate

Private School Choice Vouchers No Yes Yes

Table 5 ALEC and U.S. Department of Education

* Highly disputed Kentucky score from the National Assessment of Educational Progress 8th grade exams. Kentucky did not follow the NAEP inclusion standards for testing.

5

EDUCATION (Continued)

Education Summary

In 2012, the governor’s office issued a press release announcing that Kentucky had jumped 20 spots in national rankings from 34th

to 14th nationally in just one year as measured by “Education Week”. The truth is Kentucky education is a mixed bag. There have

been some improvements but they are minor. As Table 5 clearly shows, Kentucky is ranked lowest of the three states on education

performance. According to ALEC, it has lowered the state academic standards. There is some evidence that achievement tests are

not accurate. Despite what the education community claims, there is little evidence of improvement in academic standards and per-

formance in Kentucky. Kentucky’s approach to educations leaves little room for competition. Home schooling is legal but charter

schools are not. The state offers no vouchers for private schools. Education is in the hands of the teacher unions and bureaucrats.

There is a reluctance for change. When asked why Kentucky has no charter schools, the former state Education Commissioner, life-

long teacher, state legislator and school administrator answered “Because charter schools are unfair to regular schools.” No mention

was made about the children who would benefit from charter schools. His only concern was for the schools not the students. That

statement about sums up the state of education in Kentucky.

While Kentucky follows the status quo, Indiana and Ohio are reforming their systems. In addition to charter schools, they have im-

plemented public school choice, new standards and accountability, magnet schools, open enrollment plans that allow low-income

city kids to attend suburban public schools and participate in various curriculum-based experiments and private school vouchers.

This puts Kentucky at a competitive disadvantage for attracting new businesses.

POPULATION AND HOUSEHOLDS

Population

Kentucky Ohio Indiana

2011 Population Estimate 4.37 million 11.4 million 6.52 million

2010 Actual Population 4,339,367 11,536,504 6,483,802

2000 Actual Population 4,041,769 11,353,140 6,080,485

Change 297,598 183,364 403,317

% Change 7.36 1.62 6.63

Table 6 U.S. Census

During the decade between 2000 and 2012,

Kentucky had the highest growth rate while

Indiana had the highest actual growth. The

actual national growth rate for that same pe-

riod was 9.7 percent. Kentucky, Ohio and

Indiana had a lower population growth than

the national average.

Throughout the last decade, Kentucky gained

households at a higher rate than did Ohio and

Indiana. While they added more households

than Kentucky, their rate of growth was

lower. The number and rate of household

growth, by definition, mirrors the growth of

housing. Those states that have a high rate of

household growth have a faster rate of hous-

ing stock growth

Households

Kentucky Ohio Indiana

2011 Household Estimate 1,672,134 4,538,555 2,467,111

2010 Actual Households 1,719,965 4,603,435 2,502,154

2000 Actual Households 1,590,647 4,445,773 2,336,306

Change 129,319 157,662 165,848

% Change 8.13 3.55 7.10

Table 7 U.S. Census

6

HOUSEHOLD INCOME

Median household income is an indicator of the ability to buy new homes. The higher the median household income the more resi-

dents can purchase a new home. Table 8 below traces the growth in household income for the previous decade in Kentucky, Ohio

and Indiana. Between 2000 and 2010 the Kentucky median household income increased by a strong 19%. This was the strongest

growth among the three states.

Kentucky has the lowest median household income of the three states. Over the last decade the gap between Kentucky and the other

states has narrowed but Indiana median household income is $5,297 more than Kentucky. Ohio median household income is $4,608

higher than Kentucky. This disparity among state incomes will hinder Kentucky home sales. The state needs to implement meas-

ures to raise median household income. This means bringing more high paid jobs to the state.

In 2010 national household income was $50,046 which was $8,052 higher than national household income in 2000. This was an

increase of 19.17 %. None of the subject states exceeded the national growth rate. Only Kentucky came close at 19%. The increase

in Kentucky’s median income just barely kept pace with the national increase. The state is still behind the other two states in overall

median income.

Household Income

Kentucky Ohio Indiana

2011 Median HH Income $41,141 $45,749 $46,438

2010 Median HH Income $40,062 $45,090 $44,613

2000 Median HH Income $33,672 $40,956 $41,567

Change $6,390 $4,134 $3,046

% Change 19 10.1 7.33

Table 8 U.S. Census

GOVERNMENT ACTIONS

Kentucky’s elected officials need to realize they are competing with surrounding states. They need to look to the other 50 states for

ways to increase prosperity in the Commonwealth. One glaring issue is the “Right to Work” movement. The Bureau of Labor Sta-

tistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known

as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.

The household survey tells us the right to work states gained 3.6 million jobs over the last decade while the union states lost 900,000

jobs, The payroll survey states that right to work states gained 1.6 million jobs but the union states lost 2 million jobs over the last

decade. The conclusion of both surveys is union states are losing jobs and right to work states are gaining jobs. Loss of manufactur-

ing jobs is one of the reasons Michigan and Indiana recently became right to work states. Much of the jobs growth has been in the

southern states all of which are right to work states with the exception of Kentucky. See map below.

Another issue that needs to be addressed is the “Prevailing Wage” law. State and local governments could save the Kentucky tax-

payers tens of millions of dollars each year. Public buildings and structures could be erected at a fraction of the cost while providing

employment for local businesses in the construction of these facilities. This would open up the bidding process and reduce costs.

Right to Work State Union State

7

GOVERNMENT ACTIONS (Continued)

Education in Kentucky needs serious reform. Other states are implementing reforms that are lowering the cost of education and im-

proving the results. States are now grading schools on the A thru F report card system. Some are hiring private companies for

schools with a five-year or longer record of academic failures. Charter schools are improving academic performance for students.

Some allow parents to create charter schools for poorly performing district schools. Some reformers are implementing digital learn-

ing and eliminating the cap on the number of students that can attend. School vouchers would empower poor families to send their

kids to private schools if their students are trapped in bad public schools. All of this creates competition between private and public

schools which raises academic achievement in all schools. These are just some of the ways states are fighting the educational bu-

reaucracies across the nation. Kentucky has implemented none of these reforms.

Kentucky’s tax system is very inefficient and counter productive. It is modeled after the federal tax system. Many states have sim-

plified their tax system so taxes can be paid on a one or two page return. Kentucky has a very regressive tax system.

Each year a number of bills are introduced and passed in the legislature. Many of those bills have adverse effects on business and

job creation. The legislature should devise a procedure to consider the costs and benefits to business for any new legislation that has

some effect on business and jobs.

8

GOVERNMENT ACCOUNTABILITY

Each and every government agency should be accountable to the public which it was established to serve. This includes not wast-

ing tax funds paid by the citizens, and not introducing unreasonable and overbearing regulations. It includes all of the special dis-

tricts which have been established. Some of the independent taxing authorities need to be eliminated or reformed. According to the

State Auditor’s office there are over 1,200 special taxing districts in Kentucky. They account for $2.6 billion in taxes annually. This

is a layer of government taxation that has very little taxpayer control. The controlling boards are not elected by the people to serve

on those boards. They have the power to raise taxes without the vote of the people as long as the tax increase does not exceed 4% per

year. If a district imposes a 4% tax per year that represents about a 50% tax hike over 10 years. A list of these authorities follows.

Sometimes the taxes are higher than the government agency which established the district. However the voting process or appoint-

ment process for board members to these districts is political, secretive, confusing, and sometimes all of the above. If any special

district is created, have the board or trustee members be selected by voters rather than the current process. The budgets for each of

these special districts should be made readily available to the public including on their web site, and should be subject to regular au-

dit by the City, County, or State. All taxes and special fees enacted by these special districts should be included in the computation

for the 4% annual cap. Laws should be passed which restrict every government agency and district from encumbering taxpayers

and their descendants with unreasonable taxes, unaffordable projects, outrageous pension and retirement benefits, etc. Governments

need to be restructured and reorganized to reduce inefficiencies and waste. The number of government employees needs to be re-

duced since there is a tremendous amount of waste as it now exists. There is no reason for fire stations, libraries, courthouses, city

buildings, and other government buildings from being overbuilt for the purposes intended. There are hundreds of examples of this in

Northern Kentucky and thousands in the State. The legislature should consider introducing legislation that mirrors the Wastewater

legislation championed by Senator Damon Thayer. This legislation should create a system that any increases in taxes by special tax-

ing districts should require a vote of the County Fiscal Courts that are in the districts’ service area.

Agricultural Extension Drainage and Levee Mental Health

Air Board Fire Protection Public Health

Air Pollution Control Flood Control Rescue Squad

Ambulance Hospital River Port Authority

Area Development Housing Authority Road District

Area Planning Commission Industrial Development Authority Sanitation District

Community Action Corporation Library Sewer District

Community Improvement Mass Transit Authority Soil and Water Conservation

9

LAND OWNERSHIP AND PRIVATE PROPERTY RIGHTS

Land is a finite resource and its availability, unencumbered use and re-use of, and ability to transfer title to, is the necessary “a pri-

ori” resource for housing and the built environment. Any legislation, regulation, restriction, tax, fee or lien placed upon real property

should be approached with the utmost caution. These “shadows” could ultimately weaken the private property rights that we all as-

pire to hold and enjoy.

Since our country’s founding this unique experiment of capitalism and private property rights has produced, privacy, sanctuary,

pride, care, husbandry and a source of wealth and security for millions of our citizens. These rights are the bedrock upon which the

foundation of our government and way of life are anchored.

Conservation easements, which are created to hold land in perpetuity from one generation to the next and beyond, can place unneces-

sary burdens and denial of ownership and loss of tax revenue on future generations. In light of national, state and local set asides,

thoughtful consideration as to the right to define forever for land that is available for private ownership should involve a long na-

tional and statewide debate.

Property owners must be justly compensated for reductions in value of their property caused by actions of any level of government,

taxing district, or quasi-governmental agencies. Citizens should have faster, easier and lower cost access to federal court review on

takings issues. Local and state government planning efforts should take into consideration and publish that determination, on any

adverse impact that proposed land and transportation planning decisions may have on private property ownership.

Examples: The new Mt. Zion Road interchange design will deny the opportunity for adjacent landowners’ potential use of this land

for commercial enterprises. The North Bend Road redesign has caused undo hardship on property owners to the west of North Bend

Road as access to potential and existing commercial operations has been reduced as a result of the road design. The exit design for

the potential new bridge to span the Ohio River may cause an economic difficulty for the city of Covington.

Solution: Any planning effort on a state funded basis or managed by the state should include a feasibility study as well as an eco-

nomic impact model. These reports should be backed by sound science as well as rationalized by harsh economic criticism.

10

ENVIRONMENTAL REGULATIONS

Environmental agencies, their regulations and their scope of authority have increased at an accelerated pace over the last decade.

Although several Supreme Court cases have ruled against the Environmental Protection Agency and the Army Corps of Engineers,

these agencies have tried new procedures that circumvent their traditional rulemaking process. They have begun using “guidance

documents” that they declare carry the same weight as a regulation born of the formal rulemaking process. This is a new develop-

ment and is just now beginning to be tested in the courts. Additionally, the state offices of these agencies have different and at times

disparate interpretations of regulations from state to state. These agencies also include the Fish and Wildlife Service. Many of the

mandates of these agencies are unattainable and entirely unfunded and fall upon the responsibility of local municipalities to fund and

create. This puts an undue burden on our local economy and stifles growth in our region. Agencies have recently become involved

in inter-agency partnerships which they believe have afforded themselves regulation of areas they previously had not held. Over the

last three years the EPA, HUD and DOT have partnered in a “Sustainable Communities Partnership”. Their work can be seen at

www.sustainablecommunities.gov.

In an interview in the recent past Ray LaHood, DOT Secretary was asked a question on what he believed this all meant. He said the

following: “a community where if people don’t want an automobile, they don’t have to have one. A community where you can walk

to work, your doctor’s appointment, pharmacy or grocery store. Or you could take light rail, a bus or ride a bike.” The important

question to be asked is if the EPA, DOT and HUD decide that vehicle miles traveled is to be taxed, suburban expansion is causing

global warming, and that Americans should walk and bicycle through life then are we loosing our traditional American way of life?

Are we loosing our growth? Are we loosing the exact system that created the greatest economic expansion that this world has ever

seen? The offshoots of this expansion resulted in medical miracles come to life, technology advancement and a lifestyle and lifespan

that Americans have been able to point to as the greatest citizenry and country this world has known. During the period that this

partnership was drafting their plans they considered, Americans moving from rural communities to rural cities, suburban residents

moving to urban centers, and the accusation that “sprawl” can mean whatever they wish it to mean. Moreover, there are city and

county governments in our state and surrounding states, including Frankfort, Berea, Lexington and Cincinnati, who are members of

Local Governments for Sustainability (ICLEI). Their website can be found at www.iclei.org. Legislators from Kentucky need to

realize the cost and largely unintended consequences that is associated with the desired results of these initiatives. Walking paths

alone cost $1MM per mile to create and then there will be maintenance costs associate with the upkeep of these systems. We agree

that citizens should be given a choice as to how they want to live. We do not see the sustainability initiative as the answer to choice

but the market as the answer. Builders and developers will deliver to market that which their customers desire.

The costs associated with storm-water water quality systems has become a hindrance to growth. This has caused lot yield to de-

crease for residential projects and useable land area per parcel to decrease for commercial and industrial uses. Additionally the ap-

proval, engineering, installation and maintenance for these systems have added additional costs to all development and growth. This

has slowed our economy. All of these systems add time to the process which additionally drives up costs. Ultimately these costs are

delivered to the customer; making all housing, and commercial and industrial operations far more expensive than they once were.

Couple these regulations with the added regulations mandated upon water and sewer districts and the citizen continues to suffer.

While state legislators cannot completely change federal agencies they should exercise their influence upon state offices of these

agencies to improve timeliness, responsiveness and regularly definable and universal interpretations from state to state. This would

lower the cost of living and operating any business in the Commonwealth. At the same time our statewide elected leaders should

work to minimize the impacts upon our coal and construction industries. We should work to defund sustainable initiatives paid for

by state taxpayers and focus on getting the market back on track so that people are free to decide how they want to live.