Kentucky just upped its incentives ante

Like big spenders in a high-stakes poker game, Southeastern states are looking for more aggressive incentives to attract auto industry investment in the next wave of plant projects.

Kentucky is beefing up its ability to grant incentives to compete with its neighbors, while showcasing its more natural attractions to auto companies. This summer, the state passed a bill that was signed into law expanding eligibility for auto companies, among others, to receive special incentives if they meet certain investment or employment thresholds.

Kentucky already has attracted its share of big projects. It is home to Toyota, Ford and General Motors plants, all of which have undergone major investment projects. But now state officials are getting more aggressive.

"The overarching goal here is to allow Kentucky to be more competitive on bigger projects with our neighbor states, and to attract more automotive manufacturers into our state," Erran Persley, commissioner of business development at Think Kentucky, the state's Cabinet for Economic Development, told Automotive News.

Previously, only companies that invested in enhanced counties received special incentives under the Kentucky Business Investment Program. Enhanced counties are those that meet certain thresholds for high unemployment, low educational attainment and low road quality.

Under the new law, any company that invests at least $200 million in a project in Kentucky will be eligible for special business investment incentives.

The law also expanded the Kentucky Job Retention Act, which previously included auto manufacturers. The job retention act now includes a broader set of industries and expands to include service and technology companies to retain a variety of auto-related investment. Because the focus is on retention, companies must have operated in Kentucky for at least five years, invest at least $100 million in the state and employ 1,000 or more people to receive incentives.

A Think Kentucky spokesman says there is no set range for incentives, since they are unique to individual projects. He added that no special incentives have been awarded to auto companies since the law took effect, but the economic development group is working on investment projects that may include the incentives.

But Persley added that simply trying to outbid other states for every new industry investment — especially during the bidding frenzy that often surrounds a major site-search announcement — isn't a sustainable model for Kentucky. That's why the state instead opted to beef up existing incentives that require high levels of investment in the state.

And besides, he said: All of its tax and industrial development incentives are amplified by what Kentucky already offers.

He said Kentucky's automotive sector is itself part of the draw for new industry investment. In addition to the presence of major automakers, the state includes locations for 519 auto suppliers.

There also are over 450 steel and iron production plants, aluminum-related sites and rubber and plastic sites in Kentucky, which make for fast and inexpensive material sourcing.

In 2018, auto-related investment in the state reached $281 million, consisting of numerous new projects and expansions valued at less than $25 million. But put in perspective, that 12-month tally is a fraction of the $1.6 billion single investment that a greenfield Mazda-Toyota assembly plant represented to Alabama last year. That project came with nearly $700 million in incentives from state and local authorities.

"We don't want to put ourselves in this position where we try to outbid our neighbors," Persley said. "But we do want to be competitive with their incentive package while also offering some of the things that Kentucky can offer you that no one else can."