Category Archives: Strategic Targets

Education for Kentucky’s Aerospace Workforce

Kentucky’s aerospace industry is taking flight! At $7.7 billion, aerospace parts and products were Kentucky’s largest export category in 2014 and Kentucky exported more aerospace and aviation products that every other state, except California and Washington.

Lexington and the Bluegrass Region are particularly appealing to the aerospace industry because of the area’s extensive network of colleges, universities, and other educational institutions with aerospace and aviation programs working to develop the region’s workforce.

NASA Kentucky is located in downtown Lexington on the University of Kentucky campus and operates the Space Grant Consortium and EPSCoR program. The Space Grant is a higher education program funding students and supporting research and workforce development in STEM areas, as well as expanding access to other educational resources through networking. The NASA Exprimental Program to Stimulate Competitive Research (EPSCoR) award programs support research and partnership with NASA and offer improved access to workshops, conferences, and seminars through grants.

The Aviation Museum of Kentucky (AMK)located in Lexington’s Bluegrass Airport, houses 20,000 square feet of restored historic airplanes and modern aircraft. Visitors learn about how aviation came to Kentucky and about the science of flight. The Museum strives to introduce young people to aviation and encourage aviation as a career. With the Learning through Aviation program, the AMK helps teachers bring aviation into the classroom and shows how STEM subjects build a foundation for successful aerospace and aviation careers. During the summer, the AMK’s Summer Camp introduces 10 to 15 year olds to aviation, teaching them the history of aviation, the principles of flight, aircraft and engine design, about aviation careers, and gives them hands on experience with a flight simulator and actual flights with instructors. Besides the primary Lexington location, camps are also held in Hazard, Bowling Green, Louisville, and Pikeville, and nearly one third of the campers attend for free through the Museum’s scholarship program.

Nearby, Eastern Kentucky University’s Aviation program offers the nation’s first FAA-approved 1,000-hour power aviation degree program. Students graduate with a concentration in Professional Flight, Aerospace Management, or Aerospace Technology, with supporting courses in mathematics, physics, and business management. Graduates are prepared for an array of aerospace and aviation careers, including piloting, aviation/aerospace management, military, and aerospace technology.

The National Air & Space Institute/Air & Space Academy is a four-year program operating in high schools throughout Kentucky, including several in the Bluegrass Region, that teach high school students aerospace concepts and skills through a STEM curriculum designed to prepare them for college and the aerospace industry. Students engage in online  course study, flight training, and competitions that apply knowledge and skill to create functioning aviation products, such as high performance wings or nanosatellites. Students can receive college credit for participation in the program, giving them a boost into their future careers.

How important is Kentucky’s specialized training and growing aerospace workforce? The Kentucky Legislature has directed the Cabinet for Economic Development, the Transportation Cabinet, and the Commission on Military Affairs to conduct a study on the aerospace and aviation industry in Kentucky. The report will look at where aviation/aerospace parts manufacturing facilities are located, their workforce needs, tactics to grow the industry and create more jobs, an understanding of the industry’s economic impact, and will provide an overall better understanding of how the aerospace/aviation industry affects Kentucky’s economy. Stay tuned!

Kentucky’s Aerospace Industry is Taking Flight!

Kentucky’s aerospace industry is taking flight! According to the U.S. Census Bureau, Kentucky exported $27.6 billion in 2014, an increase of 9% from 2013. Although Kentucky is traditionally known for horses and bourbon, aerospace parts and products were the largest export category in 2014 at $7.7 billion, while other transportation (i.e., motor vehicles, parts, bodies, and trailers) totaled almost $6 billion. Furthermore, Kentucky exported more aerospace and aviation products than every other state in the country, except California and Washington. Clearly, aerospace is Kentucky’s up-and-coming industry.

Three notable aerospace companies in Lexington are Belcan Corporation, Space Tango, and Lockheed Martin. Each has made significant or unique contributions to aerospace and aviation.

Belcan Corporation is a leading engineering services, design center, and technical staffing company for the aerospace industry that opened its Lexington office in 2005. Today, Belcan serves over 600 clients in the automotive, aviation, energy, marine, and medical industries. Belcan’s engineering services include automation design and build, engineering analysis, project management, and software and systems engineering. Last month, the company announced it will be expanding in downtown Lexington with an investment of $1.2 million, creating 100 new engineering jobs and growing by an additional 15,000 square feet in the Vine Center, a necessary increase for Belcan’s expanding customer base.

Lexington is also home to Space Tango, the first business accelerator for space startups. Through a 12-week program, Space Tango gives entrepreneurs the opportunity to access advisors, sales and marketing professionals, investors, experienced mentor expertise, clean room facilities, and test equipment to help innovative businesses create novel applications and successfully access diverse markets.

Lockheed Martin is an international leader in the aerospace and defense industries. As a global security and aerospace company, Lockheed Martin specializes in aeronautics, information systems and global solutions (IS&GS), mission systems and training, and space systems, among others, with facilities and employees worldwide. Lexington’s Lockheed Martin office is a contractor and logistics support services facility, offering repair, maintenance, and modification of equipment, such as helicopters damaged in service. Lockheed Martin is also one of the Bluegrass Region’s major employers with over 1,000 employees.

As with other industries, Lexington is able to provide the aerospace industry with a skilled and well-educated workforce and a central location. However, Lexington and the Bluegrass Region are particularly appealing to the aerospace industry because of the extensive network of colleges, universities, and other educational institutions with aerospace and aviation programs working to develop the region’s workforce. More about educational opportunities for the Bluegrass Region’s developing aerospace workforce next week!

Kentucky’s Automotive Industry, Part 2: Economic Contribution

The Kentucky Automotive Industry Association‘s report discussed last week also examined the contribution of Kentucky’s automotive industry to the state and regional economies through direct, indirect, and induced effects.

Direct effects created by automotive industry companies themselves, such as automotive jobs, production, exports, and payrolls. Indirect effects are caused by inter-industry activities, or business-to-business spending on goods or services used to create automobiles such as trim and engine parts. induced effects are caused by auto industry employees’ household spending. In other words, auto businesses spend money at other businesses (indirect effects) and auto employees spend money (wages) in the regional economy (induced effects). Both create jobs and tax revenue.

To estimate direct, indirect, and induced effects, the researchers used a model of Kentucky’s economy containing data on 536 industries, imports, output, employment, payroll, and other variables specific to Kentucky.

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Kentucky’s automotive industry supports over 136,000 jobs with a total payroll of $6.13 billion. However, the automotive industry is a hierarchy and it is more informative to analyze the levels separately.

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Kentucky’s four auto assembly plants employ over 16,000 people, with an average annual pay of $84,000. The Lexington Region has the highest concentration (49%) of automotive assembly plant jobs, but the Louisville Region is a close second with only 380 fewer jobs than the Lexington Region. Not surprisingly, the automotive industry supports mostly (28%) wholesale trade jobs (9,194 jobs) and jobs in eight motor vehicle manufacturing industries (3,609 jobs), such as engine parts manufacturing. The researchers found that assembly plants get most of their inputs (i.e., parts) from outside of Kentucky and that Kentucky parts manufacturers export between 10% and 70% of their products out of state.

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Unlike auto assembly jobs, employment in automotive body and parts manufacturing is not concentrated in only a few regions of the state. Regardless, the Lexington Region has the second-highest concentration of automotive body and parts manufacturing jobs (23%) behind Louisville. The average pay of automotive body and parts manufacturing is just below $48,000 per year, much lower than average annual wages at auto assembly plants, primarily due to the level of expertise and sophistication required in those positions. The largest share (14%) of jobs supported by these facilities are in wholesale trade (3,148 jobs).

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The researchers used country-level effective tax rates over the past three years to estimate Kentucky income and sales tax receipts from the automotive industry and associated revenue.

The automotive industry and all jobs supported by it contributed $488 million in state tax revenue in 2013. That’s $1 of every $14 in state taxes. The Lexington Region contributed 38% of direct state income tax revenue, 33% of all state income tax revenue, 36% of direct state sales tax revenue, and 31% of all state sales tax revenue associated with the automotive industry in 2013.

Almost 40% of all direct local occupational tax revenue derived from the auto industry went to the Lexington Region, totaling almost $20 million.  When tax revenue from indirect and induced jobs are included, the total local occupational tax revenue received by Lexington jumps to $41.6 million.

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Biotech is Booming in Lexington!

Last week was the annual Biotechnology Industry Organization (BIO) International Convention. Every year BIO brings biotechnology leaders and innovators together to showcase cutting edge technologies and to offer a week-long opportunity for participants to network and create partnerships. Attendee’s at last year’s convention included over 15,000 people from more than 60 countries, 300+ academic institutions, top 25 pharma companies, top 20 CROs and CMOs, and 1,800 exhibitors.

This year’s convention was held in Philadelphia, and members of the Bluegrass Business Development Partnership (BBDP) were in attendance. The BBDP includes representatives from Commerce Lexington Inc., the University of Kentucky, and the City of Lexington. The BBDP delegation traveled to BIO to advocate for Lexington and Kentucky, to meet with current prospects, and to develop new leads to bring businesses to the Bluegrass.

Lexington is an ideal location for innovative and high-tech companies, largely for its human assets. In fact, 40.1% of Lexingtonians have a bachelor’s degree or higher, which is considerably more than the national average of 28.8%. Lexington consistently earns high praise for its educated citizens. In 2014, Lexington was ranked the 23rd Most Educated City by Wallet Hub and the World’s 24th Smartest City by National Geographic. Lexington has also ranked #7 Best City in Terms of Business Cost (2014), #7 Best Midsized City for Jobs (2013), and #17 America’s Top 25 High-Tech Hotspots (2013).

Over 50 biotech companies have chosen to locate in Lexington, but two have recently made the news: AntiOp Inc. and Transposagen Biopharmaceuticals.

AntiOp Inc. founder Daniel Wermeling created an anti-overdose nasal spray to help save lives from heroin overdoses and has sold the life-saving product to the biotech firm Indivior, PLC. Depending on FDA approval, it may be on the market within six months. The FDA has fast-tracked the spray because there is an unmet medical need for heroin overdose treatment and the spray offers an innovative response with several advantages over existing injection-based anti-overdose methods. By removing the need for a needle, Wermeling’s invention can be used quickly, safely, and successfully by pre-hospital responders (i.e., on-the-scene law enforcement, paramedics, or even family members), and reduces the recipient’s risk of contracting hepatitis or HIV.

AntiOp, Inc. received approximately $4.5 million in SBIR/STTR funds to create the overdose antidote ($650,000 was returned because Indivior is not based in Kentucky). Wermeling, a University of Kentucky College of Pharmacy professor, created the life-saving nasal spray with support from the University of Kentucky and over $5 million in federal and state tax workers.

UK’s College of Pharmacy is the 5th Best Pharmacy Program in the nation and is an asset to Lexington. The cutting-edge medical research on disease and drug development performed by the grad students, faculty, and staff has benefited the area and the nation. Graduates enrich the workforce and faculty members have created 25 startup companies since 1989, including Wermeling’s AntiOp.

Another excellent example is Transposagen Biopharmaceuticals, a Lexington-based biotech company that has been honored with the Tibbetts Award. The Tibbetts Award is granted for exemplary technological innovation and SBIR achievement. This year the U.S. Small Business Administration granted the Tibbett Award to six individuals, three supporting organizations, and 23 small businesses, one of which was Transposagen.

Transposagen Biopharmaceuticals is a privately held biotechnology company that specializes in genetic manipulation technologies, stem cell engineering services, and creating genetically modified laboratory rats. Altering the genetic code of rat models allows scientists and researchers to compare modified organisms with normal organisms to better understand gene functions and advance medical research on disease and drug discovery.

“We at Transposagen are dedicated to providing improvements to the nation and to the world through application of our industry-leading genome engineering technologies. Receiving the Tibbetts Award is a great honor and further fuels our drive to produce high-quality, versatile gene editing tools that play a significant role in improving the quality of human life,” said Eric Ostertag, M.D., Ph.D., founder and CEO of Transposagen, reported by Globe Newswire

Last year, Transposagen entered into a multi-million dollar research collaboration and worldwide license agreement with Janssen Biotech, Inc. to develop allogenic cells that may one day be “on the shelf” cancer treatments that will not require a donor-recipient match. Transposagen’s genome editing technologies will be used to create allogenic Chimeric Antigen Receptor T-cells (CAR-T) therapies, and Janssen will pay up to $292 million per CAR-T therapy.

AntiOp, UK’s College of Pharmacy, and Transposagen are only a few examples of Lexington’s thriving business industry and the success that entrepreneurs and small businesses can have here in Lexington.

Clusters and Regional Strategy

Q: What drives high-wage growth, higher patenting rates, and economic resiliency?

A: Industry clusters.

Clusters are a regional concentration of related industries in a particular location.  It isn’t just proximity that make clusters special, it’s that an entire value chain exists within a cluster: suppliers, manufacturers, distributors, academic institutions, researchers, and workforce training – which results in tight linkages, better market insights, larger spools of specialized talent, and faster deployment of new knowledge.

Clusters act as a catalyst for economic growth, enhancing productivity and spurring innovation. Consider the clusters that have blossomed around automobile factories in Kentucky. According to the Kentucky Cabinet for Economic Development (PDF), more than 460 “motor vehicle-related” facilities are now located in the state, employing more than 82,000 workers.

Recently launched, the U.S. Cluster Mapping Project is a national economic initiative that provides over 50 million open data records on industry clusters and regional business environments in the United States to promote economic growth and national competitiveness. The project is led by Harvard Business School’s Institute for Strategy and Competitiveness in partnership with the U.S. Economic Development Administration.

The U.S. Cluster Mapping tool provide a powerful understanding of the industry dynamics shaping a regional economy and highlights opportunities for coordination and join action.  It can also offer insights into new and emerging clusters in different regions. Charts and maps from the tool illustrate, for example, that the Lexington-Fayette MSA, generally regarded as the “Horse Capital of the World”, is also major center of biopharmaceutical development and printing services.

Lexington-Fayette MSA Traded Industry Clusters
Lexington-Fayette MSA Traded Clusters

Rather than chasing investment in generically “attractive” industries, Commerce Lexington has long worked to strengthen the region’s distinctive competitive position in light of its location, existing strengths and industry mix, and business environment qualities. With one of the nation’s most educated populations, a low cost of living, ideal location and infrastructure, and a rich entrepreneurial history, it’s not hard to identify the Bluegrass Region’s unique value proposition. Click here to learn more about our strategic industry sector targets.

– CLX Economic Development Team

Commerce Lexington Update

  • Commerce Lexington Inc. and Lexington Mayor Jim Gray announced that hydra, a manufacturer of aromatherapy and bath products to more than 2,000 retailers around the world, has moved its company headquarters from San Francisco to Lexington. Click here to read the press release.
  • The U.S. Small Business Administration has awarded a State Trade Export Promotion (STEP) Grant to the Commonwealth of Kentucky, which is designed to encourage and boost international trade among small businesses in the Commonwealth. The STEP program has two objectives: 1) increase the number of small businesses that begin to export and 2) increase the value of exports for small businesses that currently export.
  • Commerce Lexington will host Kentucky Secretary of State, Alison Lundergan Grimes for a Public Policy Breakfast on Wednesday, Oct. 15.