While preparing to deliver his first full-year State of the Merged Government address at the Lexington Opera House on the evening of January 28, Mayor Jim Newberry took time to discuss with Business Lexington's Tom Martin some of the many issues, from water supply to the local impact of cutting the UK budget, confronting the city and region in 2008 and beyond. Edited here to accommodate space, you can hear the entire interview by clicking on the related Podcast below.
TM: Mayor, you're getting ready to deliver your first full-year overview, the state of things in Lexington and Fayette County. What's your assessment of how things have gone so far?†
JN: We've had a productive year. It's been challenging in many respects, but the council has been great to work with. About a year ago, we sat down and identified six major areas that we wanted to try to work on. I think we've done a really good job of making progress on those six areas. But, having said that, I will tell you that I have been astounded by the depth of some of the problems, core problems, inside Urban County Government, and we've got a lot of work to do in order to make that organization as functional as it really needs to be for the benefit of the community.
TM: What are some of those problems?
JN: We have substantial infrastructure problems. Everybody knows about our sewer system problems and the enforcement action the EPA has brought. Everybody's probably heard about some of the information systems problems that we've had. We're still wrestling with those, although we're getting close to the end of that. We have literally had some of our facilities crumbling as a result of just a lack of attention over the years. I don't think I have to draw a picture to explain some of the problems we've had with our streets and roads in Lexington. So we've just got an awful lot of core government services and facilities that need a lot more attention in the future than what they've been given in the past.
†
TM: Was the extent of these problems more broad than you had been led to believe before taking office?
JN: I regret to say I didn't have a clue. I had no clue. Even after I got there, it took several months to really begin to see the depth of the problems that existed. And our management audit, which is just about complete, has helped to identify those. When we release that in February, I expect the comprehensive nature of their recommendations will speak to the scope of the problems that have existed in Urban County Government. There's just been fundamental lack of attention for a long period of time.
†
TM: Given the financial challenges faced by the city, you must feel some degree of empathy and sympathy with Governor Beshear and what he's discovered since entering office.
JN: I sure do. Governor Beshear is confronted by some of the same revenue issues that are confronting Lexington right now. We see the same softening of the economy here that Governor Beshear has described on the state level. And we have a hiring freeze in place, just as the state is trying to find ways to reduce its workforce and conserve its expenses. So I understand exactly where he is, and I wish him well in trying to grapple with those issues.
†
TM: The warning signs about the state of things on the state level have been out there for a couple of years, but what's happened with our national economy could not have been anticipated. That's delivered a blow to the state's ability to maneuver. We're hearing about pretty draconian cuts in education. What is the impact for Lexington?
JN: It's sort of akin to eating your seed corn. Any community has to invest constantly in its future and its young people. Lexington's no different. In fact, Lexington may be an even stronger example of a community that needs to invest in its future, because if we're going to develop the kind of economy that I've talked about a lot, one based on horses, health care and high-tech opportunities, we've got to have an exceptionally well-trained workforce. And that means we've got to invest in education. Certainly the elementary and secondary education is the core, but we also have to invest in Bluegrass Community and Technical College and UK and in Transy and our other postsecondary institutions in the area, so that we can have the kind of workforce we need to build our economy in the future.
†
TM: All of this, whether on the state level or the local level, always comes down to money. And it comes down to the availability of those resources which are becoming limited. What's the answer? How do we claw our way out of this?
JN: There are two ways, maybe three ways, to claw our way out of it. One is you've got to increase revenue, second is you decrease expenses, and the third is find some combination of those two things to make it work. In Lexington, we've got to build a more vibrant economy. Our payroll tax and other economy-driven taxes slow down when our economy's not working well, so we have got to take steps to make sure our economy is as robust in the future as it possibly can be.
On the expense side, we've got to watch every nickel. We imposed a hiring freeze back in April that continues. I'm trying to be even more strident with that now because we see our revenue softening, and therefore we've got to find ways to reign in our expenses. And it's no secret that about two-thirds of our general fund dollars are tied to personnel expenses, so if we're going to make substantial headway on the expense side, we've got to use the attrition process to keep our head count as low as we can. And incidentally, since the first of last year through, I think, November 6, we have reduced about 106 employees at Urban County Government through the attrition process, and that saves a lot of dollars for us. So that's the expense side.
And then you've got to try to find ways to increase revenue and minimize expenses in tandem to try to "claw our way out of it," as you put it, and that's what we'll continue to do as we go through the budget process in preparation of next year's budget.
†
TM: Are you satisfied with Lexington's economic development efforts?
JN: Given where we are right now, I think the answer to that question is yes. Last year, the council and my administration made a decision to really ramp up Lexington's economic development efforts. I clearly was not satisfied with those efforts prior to our having made some investments in the last year, but beginning in July of last year, we have been working in tandem with Commerce Lexington and the University of Kentucky to try to maximize our economic development resources. I'm confident that in due time we will begin to see the results of those efforts. To a degree, some of those results are already showing up. The expansion at the UK Medical Center, for instance, is very encouraging. I think there are going to be some announcements at Coldstream in the not-too-distant future that will help spur the high-tech component of our economy. So I'm beginning to see signs that the strategy is working, but it is a long-term process and we've only had a very short term with the kind of investment that I think is appropriate, and I think as time goes on we'll see more and more returns on the investment we have made.
†
TM: How does culture play a role in economic development?
JN: It plays a huge role. As a matter of fact, last year in the budget address, when I talked about our economic development efforts, one of the things I talked about was our need to support LexArts, our arts and cultural organization here. And as I told folks who were present when I delivered that speech last April, you've got to factor in the kinds of arts and cultural opportunities to the overall mix of things in the community if you want to have the kind of place where people want to come. It's just that simple, which is why last year I created a challenge grant for LexArts, which they have successfully met, and so we have devoted substantially more resources to LexArts this year. And that's just one component of it.
I mean, you have to have the entire arts, entertainment, cultural component working vigorously, because different people like different things. Some people want to go to a play, some people want to go to an art gallery, some people want to go to dinner, some people want to hear a jazz trio, and some people want to have other sorts of entertainment options available to them. So we have to have a diverse range of those kinds of options available in our community in order to appeal to the broad range of interest that exists.
†
TM: Your administration has established infill redevelopment as a priority. Are you satisfied with the progress that's been made so far in '07, and what would you like to accomplish in the coming year?
JN: About a year ago, the planning commission made a decision not to expand the urban service boundary, and that set in motion a series of decisions by the private sector about how we were going to try to take greater advantage of our real estate assets within the urban service area. As a result of that, I think you see a lot of attention being paid to trying to find vacant, underdeveloped areas of town, and I think that's going to continue. We've tried to spur that on by creating an infill and redevelopment fund. The council and our administration are still working on the details about how most effectively to make that work, but generally speaking, we want the infill and redevelopment fund to help spur redevelopment activities inside the urban service area much as the PDR Fund, the Purchase and Development Rights Fund, has helped to preserve farmland outside the urban service area. So between the two, I hope in the future we'll see that nice combination of preservation and redevelopment that can make Lexington a very, very special place.
†
TM: †What do you think of the idea of levying a special tax on vacant buildings and storefronts as a way of encouraging commercial development?
JN: We have had some conversations about invigorating the vacant properties commission that was created several years ago by Urban County Government,†with the idea of doing generally what you are talking about ó finding ways to take some of those vacant properties in our community and putting them to higher and better use than that which they are presently devoted to. So I hope, through creating perhaps a land bank type of operation here as has been used effectively in Louisville, we'll be able to get some of those vacant properties used in a fashion that will be more productive.
†
TM: Possible Tax Increment Financing districts, TIF districts, have entered into the discussion. Of course, one major study is underway encompassing Rupp Arena and the Manchester Street corridor. What progress in this area would you like to see in the coming year?
JN: The legislature made a number of changes in the TIF legislation about a year ago, which has made tax increment financing now available to many of the projects that we're working on in Lexington. So I hope developers will become more familiar with that option and that they will work with us to establish multiple tax increment financing districts in our community, so that we can fully access that financing mechanism for the benefit of Lexington. Generally speaking, it enables us to do a lot of the public infrastructure at a much lower cost in these districts, and we've got a lot of public infrastructure that needs to be overhauled, particularly in some of the older areas of town, and I hope we will have a lot of TIF districts approved over the course of the next year or so.
†
TM: What is your position on what we ought to do to resolve our water situation?
JN: For months, I have thought the Public Service Commission needs to resolve that issue. They're the entity that the General Assembly has said has responsibility for doing so. They have substantial staff resources, substantial expertise in dealing with it, and they had a thorough, and I thought a very fair, hearing back in November to address that issue. However, in December they came forward with an order which suggested they wanted to hear from Urban County Government, and in response to that, I told the council in early January that I supported the proposal to create the water plant on Pool 3 of the Kentucky River, with some conditions that the Attorney General's expert, Scott Rubin, proposed. So generally I support our going ahead and supporting our water shortage with the Pool 3 option.
†
TM: The PSC came back with a suggestion of entering into a public/private partnership. What is your response to that suggestion?
JN: That is an idea that has received no serious consideration over the last six or seven years that this whole issue of Central Kentucky's water shortage has been under debate. For one thing, for it to have the kind of financial liability that the commission was suggesting, Lexington would have to own the vast majority of it to obtain the tax-exempt financing that the commission suggested might be appealing. Kentucky American has given no indication that they're interested in owning anything less than a substantial majority themselves. So the tax-exempt option with regard to this particular proposal is not viable. And beyond that, going back to a point I made a few minutes ago, we have some really, really core problems that we need to get addressed at Urban County Government. Right now is not the time for us to be undertaking a massive new initiative for Urban County Government. We've got to take care of our core problems first. Once we get those in place, then maybe we'll have the capacity to do some other things. But right now, Urban County Government is not in a position to pursue that kind of an endeavor.
†
TM: The Kentucky American Plant from Pool 3 involves a pipeline and would entail some condemnation of properties. What're your feelings about that?
JN: First of all, all of the proposals that have been put on the table involved some sort of pipeline. And so, the issue isn't whether there is going to be a pipeline or not, it's just a question of where the pipeline is going to run and through whose property. You would hope, once a definitive proposal is approved, that property owners would be able to negotiate a satisfactory settlement, but if not, then we've got to move forward with getting the water to Lexington that it needs, and if that would entail the condemnation of some property where an owner is not negotiating reasonably, then that would be necessary.
†
TM: One of the successes of your first year has been the development of improved relations with council as compared to the past. Do you foresee any issues in the upcoming year that may pose a challenge in terms of that cooperation and how will you work to maintain those relations?
JN: I don't foresee issues that are going to challenge that. I mean we're certainly going to have disagreements on any one of a number of different things. But over the course of the last year, I've had a chance to get to know all 15 of these folks, and I'm convinced they are all very well intentioned. I'm personally convinced that, regardless of what the issues are and regardless what disagreements we may have, those disagreements will be done in an agreeable fashion, and we'll continue to move forward to address the issues that challenge Lexington. So I'm not concerned about other issues popping up. I know we will have disagreements, but I'm convinced that we'll work through those quite effectively. There are some very, very fine people that serve on the council, and it's been a pleasure to work with them.†
†
TM: In the background of all the challenges that you face and our city faces is an interesting event that's coming into clearer and clearer focus the closer we get to it. That, of course, would be the Alltech FEI World Equestrian Games coming in 2010. Here we are in 2008; it's coming. And now Alltech recently has announced another considerable, even more significant investment in preparation for the World Equestrian Games and beyond in the form of what it's calling its Fortnight Festival. Are you satisfied with the role and the level of preparation the city has taken for the games in 2010?†
JN: I'm very satisfied with where we are at the moment. It's an event unlike anything that Kentucky, let alone Lexington, has ever seen. And it requires an enormous amount of planning. I feel very comfortable with the talent level that has been brought to the table by the organizing committee. I think (World Games 2010 Foundation CEO) Jack Kelly has done a superb job. We've got a lot more work to do, but I think it's manageable over the course of the next 980-plus days. So I'm very comfortable with where we are.
†TM: The addition of the two-week music festival going on here and elsewhere around the state adds a new layer of challenges to such items as security, crowd control, accommodations and all that. Have you and your staff begun to think about the implications of it?
JN: Only in a very general way, because the particulars about that festival are still very much up in the air. What has been proposed with the Fortnight Festival is really an exciting thing to contemplate because, if that festival goes off as planned and I have no reason to think it won't, ó
Lexington will be the entertainment capital of the world as well as the horse capital of the world for a couple of weeks. And it will bring a whole new level of attention to our community far beyond ó far beyond ó that which is going to be associated with just the World Equestrian Games. And it's sort of odd for me to be using "just and "World Equestrian Games" in the same sentence