HIGHLIGHTING THE NEED FOR INVESTMENT IN APPALACHIA

July 5, 1999

TODAY, PRESIDENT CLINTON KICKED OFF HIS NEW MARKETS TRIP BY VISITING EASTERN KENTUCKY IN APPALACHIA. President Clinton launched his New Markets tour today by visiting Eastern Kentucky to highlight the economic distress in Appalachia. Despite a growing economy, Appalachia has not shared fully in the Nation's prosperity. President Clinton's New Markets trip builds on his strong community empowerment record by mobilizing corporate America to recognize the untapped economic potential of areas such as Appalachia.

APPALACHIA HAS NOT SHARED FULLY IN THE NATION'S ECONOMIC PROSPERITY. While Appalachia has seen its poverty rate drop and its per capita income rise since 1993, there are still 32 counties in Appalachia with poverty rates higher than 30% (the most recent year data are available).

  • Lower Incomes. The per capita income of the entire Appalachian region is just 71% of the national average.
  • Higher Poverty Rates. The situation is particularly difficult in the Kentucky Highlands Empowerment Zone, consisting of Clinton, Jackson and Wayne Counties. The poverty rate was 33.3% in 1995 - more than twice the national average.
  • Education. In the Kentucky Highlands Empowerment Zone, 57% of those people over 25 years old do not have a high school diploma.

HOWEVER, THE KENTUCKY HIGHLANDS HAS BENEFITTED FROM PUBLIC AND PRIVATE SECTOR EFFORTS. The Kentucky Highlands Empowerment Zone (EZ) and the Kentucky Highlands Investment Corporation (KHIC), a venture capital fund and CDFI, have helped to bring investment and capital to the Kentucky Highlands.

  • In December, 1994, the Kentucky Highlands EZ was designated as part of the Clinton Administration's first round of EZs/ECs. Since then, the EZ has focused on encouraging private-sector investment. New businesses financed in part through the EZ have created 1,902 new jobs and are committed to hire an additional 1,300 positions.
  • KHIC provides much-needed capital to create jobs and businesses in the region. In 1997, it was awarded a CDFI grant of $450,000 to enhance its investment capacity.
    • KHIC's risk capital investments have generated 5,200 jobs - accounting for 40% of all manufacturing jobs in the region and 6% of the area's total labor force.
    • Businesses such as Mid-South Electric, which President Clinton is visiting today, have received assistance from KHIC.
    • In 1994, President Clinton created the CDFI Fund, and it is helping to create a network of CDFIs like KHIC in distressed areas across the country through grants, loans, and equity investments.

PRESIDENT CLINTON WAS JOINED BY A NUMBER OF CEOS AND ECONOMIC DEVELOPMENT LEADERS TO HIGHLIGHT THE POTENTIAL FOR NEW INVESTMENTS IN APPALACHIA. To focus attention on the investment potential of Appalachia, President Clinton was joined today by Richard Huber (CEO, Aetna), Duane Ackerman (CEO, BellSouth), Kip Stolen (President, Bank One of Central Kentucky). Also, joining the President were Rev. Jesse Jackson, Jesse White (Pres., Appalachian Regional Commission), Al From, Sara Gould, (Exec. VP, Ms. Foundation for Women), and David Wilhelm (Wilhelm & Conlon).

TODAY, AS PART OF PRESIDENT CLINTON'S NEW MARKETS TRIP, CORPORATE AND ECONOMIC DEVELOPMENT LEADERS ANNOUNCED THE FOLLOWING COMMITMENTS, AMONG OTHERS:

  • First Union National Bank has pledged to provide at least $5 million for small business equity, micro-loans, and economic development programs in 1999 and 2000 in the Appalachia region.
  • Bank One anticipates investing $1 million in the new Appalachian Ohio Development Fund that will provide equity financing and technical assistance to small businesses in Southern Ohio.
  • Bell South will announce a partnership with the Kentucky Community and Technical College System to place 100 successful participants into service technician and customer contact representative positions within Bell South, or within other companies in the state.
  • Deutsche Bank/BankersTrust has committed to make an investment of $2.9 million to the Kentucky Highlands Investment Corporation over time.
  • Sykes Enterprises, a high-tech company, has announced that it will build two new technical support centers in Eastern Kentucky. The new 42,500 square foot state-of-the-art call centers are expected to be fully operational in the fourth quarter of 1999, bringing jobs to Eastern Kentucky.
  • Ms. Foundation for Women will launch the third round of their Collaborative Fund for Women's Economic Development through which grantmakers will capitalize funds of at least $4 million. The Fund has supported groups such as ACEnet (Appalachia Center for Economic Networks), a leader among non-profits for creating business opportunities in rural Ohio.
  • Appalachian Regional Commission is committing over $1 million for economic development purposes in Appalachian Kentucky, West Virginia, and Tennessee.

THROUGHOUT THE WEEK, PRESIDENT CLINTON WILL MAKE ADDITIONAL ANNOUNCEMENTS ABOUT INVESTMENT COMMITMENTS THAT WILL BENEFIT UNDERSERVED COMMUNITIES, INCLUDING:

  • New CDFI Commitments. New commitments to 14 CDFIs around the country.
  • Major New Fund for Underserved Communities. An announcement by a major financial institution about the creation of a new venture capital fund that will be targeted to underserved markets and that will make available several hundred million dollars in equity capital to small businesses.
  • Private Effort for Young People. Commitments from dozens of companies to hire thousands of out-of-school youth and disadvantaged young people throughout the nation.

Background Information on Appalachia and the Kentucky Highlands

GEOGRAPHY AND DEMOGRAPHY OF APPALACHIA

  • With a total population of 22.2 million, the region includes 406 counties, comprising all of West Virginia and parts of 12 other states. Appalachia extends more than a thousand miles from the southwestern part of New York state to northeast Mississippi, as the attached map shows. States that comprise Appalachia include: West Virginia (all), New York (southwest) Pennsylvania (most of state), Ohio (southeast), Maryland (northwest), Kentucky (east), Virginia (southwest), North Carolina (western), South Carolina (northwest), Tennessee (eastern), Georgia (north), Alabama (north, central), Mississippi (northeast). (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999). More than 90 % of the population is white across the region, compared to 82.7% nationally; 8.1 % is African-American compared to 12.7 % nationally, and 1 % Hispanic, compared to 11% nationally. (US Census Bureau).

STATISTICAL OVERVIEW OF APPALACHIA

  • Real Progress Has Been Achieved in Appalachia. According to the Appalachian Regional Commission, 58 of the 152 counties that were designated as distressed (defined as having unemployment rates and poverty that are 1 times the national rate) in 1970, have moved out and stayed out of distress. (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999).
    • Unemployment Dropped in Some Counties. For example, the unemployment rate in Bath County, KY dropped form 11.9% to 5.5%, Clay County, AL dropped from 10.9 % to 3.5%; Montgomery County, KY, dropped from 10.5% to 4.2%; Raleigh County, WV, dropped from 13.2% to 7.5%; Jackson County, KY dropped from 9.3% to 4.5%, between 1993 and 1998. (Bureau of Labor Statistics).
    • Per Capita Income Rose. While per capita income is only 71 % of the national average, it rose 17% between 1993 and 1997 to $17,972, just slightly slower than the 19% increase nationally. (US Census Bureau).
    • Educational Attainment Has Improved For the Younger Generation. Appalachian youth age 18-24 now have high school degree at a slightly higher rate than the nation as a whole -- 77 % for Appalachia compared to 76 % for the nation. (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999).
  • But There Remain Significant Pockets of Poverty and Distress. In FY99, 108 counties (27%) of the Appalachian Region's are distressed (defined as having unemployment rates and poverty and that are 1 times the national rate). (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999).
    • Unemployment Rates are Very High in Many Counties. 40 counties have unemployment rates of more than 10%. For example, Russel County, KY faces an unemployment rate of 26.3%; Green County, KY, 17.3%; Adair County, KY, 15.9%; Buchanan County, VA; 14.1%; Harlan County, KY, 12.3%. (Bureau of Labor Statistics).
    • Per Capita Income is Still Low. 71 counties have average per capita incomes less than 60% of the US average in 1997 that is less than $15,173 per capita. Per capita income for the entire region is $17,972, 71% of the national average of $25,288 in 1997. (US Census Bureau).
    • Poverty in 32 Appalachian Counties is Higher than 30%. Some of these counties include: Hale County, AL (30.8%); Macon County, AL (34.4%); Clay County, KY (37.3%); Owsley County, KY (46.6%); Wolf, KY (38.9%); Noxubee County, MS (33.9 %); Hankcock County, TN (32.9%); Lincoln County, WV (30.1%); Webster County, WV (35.6%); McCreary County (41.4%). (US Census Bureau).
    • Historical Job Growth is Slower than Nation. Job growth between 1969 and 1998 was almost 51 %, lagging the national rate of 69 %. (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999).
    • Population is Declining. 71 counties lost population between 1990 and 1997, an increase over 1996 when only 58 counties registered population declines since 1990. (Appalachian Regional Commission, "Appalachian Regional Socioeconomic Trends", 1999).
    • Basic Infrastructure is Inadequate in Many Counties. For example, in 27 counties across the region, 20% or more of the homes have no telephone. Nationally, just 5.2% of homes did not have a telephone. (US Census Bureau).

ECONOMIC TRENDS
Economic Transformation. Appalachia's economy has evolved over the last three decades from one which was dependent on heavy industry, agriculture and resource extraction, to one which is more diversified and increasingly reliant on service sector employment. The economic transformation of the region has created large-scale restructuring and adjustment challenges in the wake of long-term reductions in employment in former backbone sectors. Employment in coal mining, for example, dropped from 250,000 in 1979 to 100,000 in 1999 due primarily to technological innovations.

Employment Trends. Similar to the national economy, there has been a large increase in service sector jobs. Compared to the national economy, the region has seen strong employment growth in transportation and utilities, but has generated far fewer jobs in finance insurance and real estate. Appalachia's historic reliance on manufacturing, mining and farm employment continues to pose challenges, as these sectors have declined. Despite these declines, Appalachia remains far more dependent on manufacturing than the rest of the nation. Moreover, the quality of manufacturing in Appalachia is, on average, lower wage and lower productivity, compared to the nation.

Regional Diversity. Once a region of almost uniform poverty, it is now a region of contrasts, ranging from dynamic communities that have successfully developed diversified economies to areas still adjusting to structural changes. Northern Appalachia, with its mature industrial base, is working to enhance the global competitiveness of its existing firms and stimulate new business creation. Central Appalachia, once dominated by coal mining and tobacco farming, is working to diversify. Southern Appalachia, influenced by its nearby urban centers, in striving to link its development to these engines of growth.

Continued progress is needed in many of the areas that are important in the creation of a highly favorable investment climate, including education, physical infrastructure such as highways, and financial sector development.

KENTUCKY HIGHLANDS
Kentucky Highlands is a rural Empowerment Zone consisting of Clinton, Jackson, and Wayne Counties. The population was estimated to be 41,000 in 1996. The most recent data available indicate that the Kentucky Highlands was 98.7 % white. (US Census Bureau)

Statistical Overview

  • The unemployment rate in Wayne County was 11.1% in 1998.
  • Per capita income was $13,394, just 53% of the national average of $25,288 in 1997. (US Census Bureau).
  • The poverty rate was estimated to be 33.3% in 1995 down from 37.8% in 1989, according to the most recent data available. (US Census Bureau).
  • Across the Kentucky Highlands Empowerment Zone, as many as 57.3 % of those people over 25 years old do not have a high school diploma. (Department of Housing and Urban Development).

Economic Successes of Kentucky Highlands

  • The Kentucky Highlands Empowerment Zone (EZ), designated in December 1994 as part of President Clinton's and Vice President Gore's first round of EZs and ECs , has focused on encouraging private-sector investment. New businesses financed in part through the EZ have created 1,902 new jobs and are committed to hire an additional 1,300 positions. (USDA)
    • In Jackson County alone, one of the poorest counties in the EZ, five new manufacturers have opened since the EZ designation. (USDA)
  • The Kentucky Highlands Investment Corporation (KHIC) is a venture capital fund and CDFI which provides much-needed capital to create jobs and businesses in the region. KHIC is also the lead entity for the EZ. In 1997, it was awarded a Department of Treasury CDFI grant of $450,000 to enhance its investment capacity.
    • KHIC's risk capital investments have generated 5,200 jobs - accounting for 40% of all manufacturing jobs in the region and 6% of the area's total labor force.
    • President Clinton proposed and created the CDFI Fund in 1994, which is helping to create a network of CDFIs like KHIC in distressed areas across the country through grants, loans, and equity investments.