Whitesburg KY
Mostly clear
Mostly clear

Economic development: Old, new issues for region

One old issue: despite the declining trend in the percentage of jobs provided by coal mining in Appalachia, both current and historic coal production will continue to influence economic development in the region.

While overall numbers of direct employment are small, but vary from county to county, the continued production of coal affects economic development in the entire region in a number of ways. Take for example coal truck traffic. Eastern Kentucky will experience relatively higher levels of coal truck traffic than nearby regions in Kentucky, Tennessee, and much of Virginia.

Issues like this matter because one of the well recognized conclusions from research on rural development is that a region’s natural amenities and environmental quality are important determinants of economic growth and perceived well-being. Migration decisions into and out of an area are influenced by a host of factors including environmental quality, safety, and natural amenities such as scenery.

In this regard, the environmental effects of mountain top removal will continue to have lasting effects. Regardless of one’s opinion on the history of mountain top removal, economic development will rely on private-public efforts to improve the ecological integrity and uses of former mining sites. The land (surface and subsurface) held by companies affiliated with mining is just one more reason why the region’s future will remain heavily influenced by miningrelated decisions.

Lastly, since the 1970’s the coal severance tax has provided Kentucky with tax revenue. This tax will continue to be an important part of government financing. Opportunities for innovations around severance tax rates and distribution to counties should remain an ongoing aspect of a regional economic development strategy.

While coal-related issues will remain important, there is still the need to enhance ongoing economic development efforts and experiment with new approaches. For general discussion, economists often view economic development efforts in two broad categories: (1) place-based development efforts and (2) people-based approaches.

Place-based approaches focus on investments that are tied to the region, such as industry recruitment (e.g., tax breaks for industry location) as well as small business development, road building and improvements, investment in housing, water and sewer infrastructure, etc.

My own efforts in Letcher County between 1995-1997 working with local, city and county leaders to establish the Letcher County Water and Sewer District is an example of a place-based economic development initiative.

People-based economic development efforts include projects like continuing education, specific work training, child care, re-location assistance, health care (e.g., dental assistance for children), and Individual Development Accounts (IDAs) that provide matching money to enhance individual efforts to save. Because peoplebased approaches enhance the well-being and options available for individuals, these approaches have the unique advantage of strengthening an individual’s desire and capacity to stay, come to, or leave the region.

While the list of potential economic development initiatives is a long one, I believe there is a need to initiate projects to address two land-related issues. These are place-based approaches tailored to Letcher County.

The first involves land-in-heirs or heirs’ property. Heirs’ property describes property owned by many individuals, usually related, who each hold a partial, undivided interest to the property. More formally this form of ownership is called tenancy in common. The death of a property owner, without a will, often triggers heir property situations. In some cases the surviving heirs are not well documented and the current resident who lives on the land may be only one, of many, co-owners.

Problems emerge when co- owners disagree on how to use the property. These disagreements may result in difficulties in using or improving the property. This effectively constrains the use of land in the region and affects economic development broadly. The legal remedies to this situation (i.e., typically a partition by sale) are costly in terms of money and family relationships.

Local banks do not allow heirs to use their partial interests in property to be leveraged for loans, and some non-profit programs designed to help low-income households build better homes are often unable to extend benefits to individuals who lack “clear title.”

A pilot project that provides information and legal support to families dealing with heirs’ property issues is much needed.

The second suggestion is to find ways to avoid the needless transfer of wealth from Letcher County residents to companies outside the region collecting delinquent taxes. On July 28, 2010, I sat in the Letcher County Courthouse and watched two company representatives purchase more than 200 delinquent tax bills. (The delinquent bills were for the year 2009.)

This isn’t such a large number when you consider there were slightly over 1,300 delinquent tax bills in Letcher County — about 11% of all collectable bills in 2009. The penalties can be severe. An unpaid tax bill of $100 could easily end up costing over $440 after just one year.

Kentucky state law guarantees the right to make these purchases, the right to a return on their investment — i.e., a 12% return as well as additional legal fees — and assigns the county government with the duty to comply. Hence, the issues surrounding delinquent tax bills are the result of state policies, not the county. (See House Bill 262 for more details on the law.)

That said, many of the companies who buy these delinquent taxes are from outside the state. I believe this is a needless transfer of money outside the region.

One economic development initiative that might be undertaken is an all-out effort to inform the public of the high-cost of delinquent tax bills. Such an effort might also seek to better understand the reasons why there are so many delinquent taxes in the county. One concrete measure of the success of such a project would be the change in delinquent taxes from one year to the next.

Ultimately the most prominent economic development efforts are the result of the uncoordinated efforts of individuals, households, companies, and other organizations seeking out opportunities that they privately believe will enhance their well-being. Admittedly, the economic development issues I identify above are on the margin of those efforts.

Brady Deaton Jr. is an Associate Professor of Food, Agricultural and Resource Economics at the University of Guelph in Canada. He coordinated the North Fork Clean Water Project in Letcher County from 1995-1997 and worked closely with community leaders to help form the Letcher County Water and Sewer District 14 years ago. He currently examines issues related to resource use and economic development.

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