Community Executive Summary

2008 Annual Report Executive Summary

Kentucky Highlands Empowerment Zone
During the period ended December 31, 2008, the Kentucky Highlands Empowerment Zone continued the implementation of its Strategic Plan. All of the original Benchmarks have been completed. The benchmarks that remain are those that were added in Jackson County through the 2007 amendment process to reallocate the funds previously earmarked for a reservoir. The most important activity that occurred in the KHEZ during 2008 was the implementation of projects that had received funding from the reallocation of funds from the Jackson County Reservoir (Benchmark 19). During 2007, the Jackson County EZ Community, Inc. elected to amend the Strategic Plan so that the $3.8 million in EZ funds remaining from the reservoir project could benefit the community elsewhere. The Empowerment Zone grant award was earmarked for job creation efforts, and in this area, the KHEZ continues to be judged a success even during the current economic downturn. Through December 31, 2008, the KHEZ had approved 97 loans and investments in 56 business ventures. These enterprises have created 3,087 jobs in the KHEZ, which is more than the original goal of the Zone. The Development Venture Fund has closed over $39.5 million in loans to area businesses, which includes more than $27 million in repaid loan funds. The fund has leveraged more than $130 million in private investment. Total employment at the companies which have received financing from the Developmental Venture Fund stood at 3,087 at December 31, 2008. This is a decrease of 90 for the year. Delinquencies remain low, although the beginning of 2009 finds the local economy beginning to weaken noticeably. Positive impacts can be seen in the population increase over the last decade. According to the 2000 U.S. Census, the population of the three KHEZ counties stood at 43,052, an increase of 4,494 residents or 11.7% during the 1990's. This compares to a growth rate of 9.7% for Kentucky during the same period and a decline in population in the Appalachian counties of the Commonwealth, of which the KHEZ is part. Since designation, the percentage of persons living in poverty in the Kentucky Highlands Empowerment Zone has declined from 37.9% to 26.1% according to the 2000 Census.

The KHEZ was also successful in expanding its existing partnership with federal agencies, particularly USDA - Rural Development. The lead entity for the KHEZ, Kentucky Highlands Investment Corporation (KHIC) was awarded a $199,000 Rural Business Enterprise Grant (RBEG) in June 2008 to assist with the expansion of Certacare Pharmacies, LLC. The company, a home infusion and retail pharmacy business, proposes to create twenty jobs over the next two years. The other major lending initiative within the KHEZ involves small farmers. The Alternative Crop Fund (Benchmark 6) continues to be a valuable resource, closing 7 new loans during 2008. The entire $300,000 original loan fund has completely turned over almost 2.5 times. Losses have totaled $22,724, or 3.2%, which is considered excellent considering the experimental nature of the program. During the period ended December 31, 2008, one new Production Loan Funds was made and several were renewed. The amount invested with Zone farmers through this Benchmark is now $907,070. The reason few new production loans were made in 2008 was that the Lead Entity, Kentucky Highlands Investment Corporation, has replicated this program in its service area using Small Business Administration (SBA) and the tobacco settlement funds. The farm lending programs are very popular.

In September 2007, the Board of Directors of the Clinton County EZ Community, Inc. dissolved the corporation and operations were moved to the Clinton County Industrial Development Authority. The staff from the EZ is now employed by the industrial development authority. A similar arrangement was completed in Wayne County in 2005. Through the period ended December 31, 2008, the KHEZ has invested $38,615,000, or 96.5 %, of the SSBG award. All remaining funds are allocated in Jackson County and will be invested prior to the December 31, 2009 project deadline. In addition to this amount, $27,303,473 of loan payments has been relent within the Zone. This brings the total amount invested by the Kentucky Highlands Empowerment Zone in Clinton, Jackson and Wayne Counties to $65,918,473. This is far more than the $40 million original award, validating the sustainability of the KHEZ Strategic Plan approach.