The Paducah Sun
The Paducah Sun
Paducah, Kentucky
Saturday, August 02, 2003

Area must create climate for growth

The news that USEC Inc. is accelerating its timetable for building a new uranium processing plant should give added urgency to economic development efforts in western Kentucky.

USEC officials will decide in the next few months whether to build a gas centrifuge facility in Portsmouth, Ohio, where the company is preparing to open a small demonstration plant; or to locate the permanent plant on the site of the Paducah Gaseous Diffusion Plant. USEC now plans to begin construction on the commercial plant in 2006 instead of 2007.

Officials in the Purchase region are still hoping to land the centrifuge plant, which will enrich uranium much more efficiently than the 50-year-old gaseous diffusion facility.

However, Portsmouth has a definite edge in the competition. USEC's decision to locate the test facility there is an indication the company is leaning toward building the permanent plant on the site where the federal government launched but later abandoned a gas centrifuge project in the 1980s.

Paducah has the disadvantage of being located in an earthquake zone. Making the centrifuge building earthquake-resistant would add millions of dollars to the cost of the project.

Local economic development officials believe they can overcome these obstacles. Undoubtedly, it's worth making the effort to win the competition for the gas centrifuge.

Even so, a realistic assessment of the area's long-term economic outlook should guide the planning of local leaders. The challenge is to prepare for a future that either does not include the uranium enrichment industry or that does include a much smaller USEC operation with 500 jobs instead of 1,200.

Within a few years the Paducah area is going to lose hundreds of good industrial jobs, regardless of which city lands the centrifuge project. And if the area does not grow over the next five-to-seven years, those losses will be added to the 4,000 jobs that have disappeared from western Kentucky over the past four years.

To prepare for the struggle to revive the region, economic development leaders and elected officials must ask themselves the question posed by Bill Poole, the chairman of the Federal Reserve Bank of St. Louis: "What do we need to do to create a good business environment?"

Poole, who visited Paducah recently, said this region has "larger, longer-running (economic) challenges" than other areas in the seven-state Federal Reserve district.

In order to meet those challenges, Poole suggested that local leaders remove barriers to business growth such as excessive government regulations.

A good business environment is the key to economic development. Government-financed incentives such as the Purchase Area Regional Industrial Park play an important role in industrial recruiting, but those incentives should be offered as the icing on the cake of a healthy business environment.

No matter how hard industrial recruiters work, it's difficult for them to sell the icing without the cake. The Paducah area has the economic development "icing," but it needs more cake.

As Poole said, local officials must work to reduce the burden government places on businesses. Part of that burden takes the form of regulations, but a large part of it is imposed through taxes.

The fact is, Kentucky taxes businesses more heavily than most of the states it competes with in the Southeast and the Midwest. It's no coincidence that these states have grown faster than Kentucky over the past 15 years.

When state and local officials hold the line on taxes, they encourage entrepreneurship and invite businesses to migrate to their jurisdictions. When public officials raise taxes and expand government which frequently means expanding regulations they send a signal that they value government more than they do the private sector.

The journey to growth and prosperity begins with this question: What do we need to do to create a better business environment?