ADVANCE LEXINGTON MARKET ASSESSMENT

Prepared for:

Prepared by:

August 2010 Table of Contents

Introduction………………………………………………..... 1 Executive Summary……………………………………….. 5 SWOT Analysis…………………………………………….. 9 The Economic Downturn………………………………….. 11 Regional Connections……………………………………... 12 Market Assessment………………………………………... 15 How is Lexington Growing? ……………………………. 15 What Drives the Lexington Economy? ……………….. 24 How Compe titive is Lit’Lexington’s BiBusiness Clit?Climate?..… 30 How Well Does Lexington Support Innovation? ...……. 36 What is Life Like in Lexington?....………………………. 42 How Strong is Lexington’s Real Estate Market? ...... 48 Workforce Assessment……………………………………. 51 Project Next Steps: Target Industry Recommendations... 54 Appendix………………………………………………….... 56

Advance Lexington Market Assessment | 0 Introduction Strategic Considerations

The research in this report will support the product improvement and strategic recommendations in future reports. The analysis is primarily focused on addressing In the years since the last economic development planning work was done in 2000, the following questions important to economic significant changes have occurred both organizationally and in the marketplace. To advance development: their efforts to the next level, leaders in the Bluegrass Region must ensure that the region’s growth is strategic, coordinated, and targeted with its overall economic development goals. 1. How is Lexington Growing? Additionally, there must be an understanding of the value of the various facets of economic 2. What Drives the Lexington Economy? development, as well as identification and communication of roles and responsibilities. 3. How Comppgetitive is Lexington’s Business Climate? Creating an economic development strategic plan begins with a critical analysis of assets and 4. How Well Does Lexington Support challenges. With strong information as a foundation, a community can pinpoint its Innovation? competitive strengths, recognize and correct weaknesses, and more narrowly define its target 5. What is Life Like in Lexington? audiences for marketing. 6. How Strong is Lexington’s Real Estate Mkt?Market? This report is the first of four that will be delivered to Commerce Lexington and the Lexington- Fayette Urban County Government. It provides background information to the consulting team and the community and will be used as the research base for the economic development strategic plan.

It is comprised of both qualitative and quantitative information. The qualitative – information gathered through surveys, focus groups and interviews – tells the story of what residents and businesses think about the community in which they live or work. The quantitative – what the statistics show – is often the perspective seen by external businesses and site selection consultants.

Advance Lexington Market Assessment | 1 Project Objectives

Communities today are operating in an increasingly global and knowledge-based economy. Transnati ona l corpora tions an d area en trepreneurs are dr iv ing econom ic grow th, w hic h is fueled by skilled and highly educated employees and innovators. Local economic prosperity is dependent on the extent to which communities can position themselves to compete on this global stage to attract and cultivate both investment and talent.

More and more communities are learning that competitive advantages in this advanced and integrated economy are gained through a “regional” and collaborative approach that transcends city and county boundaries. Communities need to look beyond their local borders to build relationships and combine resources in order to more effectively expand recognition in the marketplace.

Advance Lexington is further cementing collaboration already in existence. This project will build upon existing efforts, identify the economic, infrastructure and workforce assets of Lexington and devise specific strategies that capitalize on these strengths – all through a vision for building the long-term talent pipeline and economic assets, spurring innovation resulting in high quality job creation.

The ggggggreater Lexington region brings together a multitude of im portant assets that ,g, if leveraged appropriately, can position the area for enhanced economic growth. The University of Kentucky (UK), with over 26,000 students, over $330 million of R&D annually and Coldstream Campus which is focused on enhancing life science research and regional entrepreneurship, will continue to be a major driver of innovation in the region.

Advance Lexington Market Assessment | 2 The region also has a network of additional 2- and 4-year public and private institutions spread throughout with state-of-the art facilities and a multitude of academic program offerings. Bluegrass Community and Technical College, which services the entire Bluegrass Region across six campuses (and recently announced Newtown Pike Campus), is, in many ways, the regional “common thread” or workforce development connection point.

There are a number of major corporate operations; Lexmark, Toyota, Lockheed Martin, IBM, HP and ACS - a Xerox Company, as well a myriad of smaller high growth firms, all of which employ a significant number of people and engage in important research and testing of new technologies.

However, several underlying economic issues are found in Lexington. The network of entrepreneurshi p, men tors hip, cap itlital, an d other resources nee ds to be fthfurther deve lope d in a way that will help the region elevate predominant industry sectors like healthcare, equine, education, and advanced manufacturing, while building a more supportive foundation for emerging value added sectors such as renewable energy and life sciences. Community stakeholders must understand the various facets of economic development and collaboration between economic development partners must be strengthened.

*Throughout the report “Lexington” is used to refer to the consolidated Lexington-Fayette Urban County. Data is presented on this level unless otherwise noted. ** The Lexington MSA includes the following 6 counties: Bourbon, Clark, Fayette, Jessamine, Scott, and Woodford. ***The Bluegrass Region includes the following 8 counties: Bourbon, Clark, Fayette, Franklin, Jessamine, Madison, Scott, and Woodford. Advance Lexington Market Assessment | 3 BENCHMARKS

In order to gauge where Lexington stands relative to other competitor communities, this report assesses its performance against a number of benchmark communities including Tucson, AZ, Knoxville, TN and Boulder, CO. The benchmark communities were chosen because they share certain key features with Lexington such as being areas of high growth with a strong technology foundation; they are all mid-sized cities that are home to a university. Additionally, the study benchmarks Lexington against the Bluegrass Region, the State of Kentucky and the U.S. AT A GLANCE

Lexington, Bluegrass Tucson, Knoxville, Boulder, Kentucky USA KY Region AZ TN CO

Population (2009 Estimate) 296,545 603,075 529,106 189,081 96,754 4,314,113 307,006,550

Population Growth (’90-’09) 31.6% 34.1% 27.6% 10.1% 11.4% 17.1% 23.4%

Unemployment Rate, Apr 2010* 7.7 8.2 9.0 9.5 6.9 10.2 9.9

Labor Force Growth (’ 90-’09) 19. 1% 24. 2% 46. 0% 15. 2% 21. 0% 19. 0% 22. 5%

Median Household Income (2009) $52,173 $51,084 $39,171 $34,436 $55,201 $43,083 $53,684

% Bachelor’s Degree + (2009) 40.5% 32.3% 26.2% 29.8% 69.1% 20.2% 28.0%

% in 25-44 Age Group (2009) 30.0% 29.2% 28.0% 26.7% 28.5% 27.0% 27.1%

* Not Seasonally Adjusted Source: U.S. Census Bureau, Bureau of Labor Statistics, Decision Data Resources

Advance Lexington Market Assessment | 4 Executive Summary

• More and more communities are learning that competitive advantages are gained “The region, at least the contiguous through a “regional” approach that transcends city and county boundaries. counties to Fayette, must be involved Currently, in the Bluegrass Region there is a scarcity of trust and collaboration. Some with this process for a new plan to be progress is being made through the Bluegrass Alliance and their regional marketing successful.” initiatives. Many stakeholders recognized the importance of regional collaboration, however, by and large, stakeholders across the region noted that public sector officials still - Business Survey Response need a significant amount of convincing that regionalism is a worthwhile concept that generates a return on investment.

• There must be a common understanding of the value of the various facets of economic development, active support of a shared, regional strategic vision as well as identification and communication of roles and responsibilities. “Silos” within the various facets of economic development was a common term heard throughout the public engagement process. Collaboration is a critical factor in achieving economic development success, in any type of economic environment. Many stakeholders expressed a scarcity of trust, understanding and communication between economic development partners and frequently noted the need for a collective vision.

• Need to improve the minority business development program. Commerce Lexington and the Urban League’s recent Economic Inclusion report found a significant gap between minority business owners’ economic activity versus minorities’ percentage of the overall population. Stakeholders interviewed described a significant challenge in finding appropria te resources and mentors when stttiarting or expanding a bbiusiness.

Advance Lexington Market Assessment | 5 • Need for a more organized and resourced effort focused on regional external marketing. Commerce Lexington, Bluegrass Alliance and other economic development partners have made improvements in external marketing. However, for a region the size of the Bluegrass, much more needs to occur, requiring additional resources to spread the word about Lexington and the Bluegrass Region.

• Commercial redevelopment and additional cultural amenities should be considered as a means to create a dynamic environment to draw and retain young professionals. Redevelopment and revitalization of older commercial areas is an important component of the city’s economic development efforts, especially as a tool to promote small businesses and attract and retain young professionals. As Lexington continues to support and promote Downtown’s transition to a destination for the region, other arts and cultural amenities can also ultimately be an important part of the Lexington’s economic development efforts. Additional promotion of these factors – especially tying them to more mixed-use development, will be important to draw additional outside visitors as well as ensure that a more dynamic work/live/play quality emerges.

• High innovation indicators...need to further strengthen programs to capture spin off opportunities. Although Lexington has a strong technology foundation, availability of capital and other resources for emerging start-ups are limited but growing. Like many areas that are seeking to build a stronger economic base, there is a critical need for better support for developing “home grown” entrepreneurs – including stronger training programs, more robus t networ ks, earlly stage venture capital ffdiunding, and more focus from the public sector on building support for existing small businesses.

Advance Lexington Market Assessment | 6 • Need to create a culture of entrepreneurship that celebrates successes and accepts failure. Many stakeholders described Lexington’s undeveloped entrepreneurship culture as a significant barrier to enterprise development and innovation in Lexington. In spite of this challenge, several crucial “innovation drivers” are emerging that will position Lexington and the greater Bluegrass Region to improve entrepreneurship acceptance.

• Opportunity to drive/connect innovation – if it is targeted to specific industries and accessible to the greater region. The UK Coldstream campus presents a great opportunity to encourage private entrepreneurs to work with research faculty and expand economic development throughout the region. This strategic plan will identify economic development targets (in the next phase) that are likely to be synergistic with core UK research competencies, such as life sciences. In addition, as the Coldstream campus and other UK research facilities develop, there may be an opportunity to more robustly tie to counties outside of Fayette. During interviews, outlying counties expressed a disconnect with UK from an economic development perspective. This was most often characterized as a lack of awareness of innovations emerging from the university that may have applications for regional firms. As R&D and technology transfer becomes more of a focal point for the university, outlying counties will benefit from gaining a more clear understanding of the match between regional business’ core competencies and innovations that are available for licensing or other collaborations.

Advance Lexington Market Assessment | 7 • Responsive community college system but limited capacity for generating awareness of customized training services. The Bluegrass Community and Technical College (BCTC) system has an exceptional reputation for meeting technical training needs in the region but needs to do more to reach directly to the regional business community and early education providers to understand customized training needs and to articulate BCTC’s existing training capabilities. BCTC customized training programs appear well linked to dominant and/or growing indusindustriestries regionally such as health care. However, BCTC does not currently have the resources to conduct additional and targeted outreach.

• University of Kentucky – all major university components are located in Lexington. The University of Kentucky (UK), with over 26,000 students, over $330 million of R&D annually and Coldstream Campus which is focused on enhancing life science research and regional entrepreneurship, will continue to be a major driver of innovation in the region.

• Transportation (ease of access and commute times) was identified by stakeholders as one of the most pressing quality of life issues for the city. Many stakeholders cited a growing concern about traffic congestion and the limited public transportation options within Lexington.

Advance Lexington Market Assessment | 8 SWOT Analysis

STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS

This section of the report highlights the strengths, weaknesses, opportunities, and threats for Lexington, as collected through stakeholder discussions, survey information, and quantitative databases. We do not intend for this analysis of issues to be all-inclusive. Rather, we focus on those areas that will have the most direct impact on future economic development efforts of Lexington.

We define the four aspects of “SWOT” in these terms:

•Strengths: Issues or characteristics that can be built upon to advance current and future economic growth opportunities in Lexington.

•Weaknesses: Issues or characteristics that, if not addressed effectively, could limit current or future growth opportunities.

•Opportunities: Assets, events, or trends that offer Lexington the potential for economic growth and attraction of new industry.

•Threats: Obstacles, events or trends that, if not addressed effectively, could threaten the city’s economic potential and its ability to attract, expand and start up new employers.

Advance Lexington Market Assessment | 9 STRENGTHS WEAKNESSES • Highly educated workforce • Need for a common understanding of the value of the various facets of regional • Significant healthcare and life science assets economic development • Rural landscape surrounding Lexington – unique natural beauty • Limited startup capital – start-ups look for funding outside of Lexington

ss • Significant education cluster • Lack of developable and affordable land in Lexington • Horse industry center and related services • Mismatch between talent and job opportunities – losing talent to other cities • Transportation access to national interstate infrastructure • Small pool of upper management talent • Strong regional airport with additional regional flight options • Permitting process – not streamlined, multiple agencies involved

nalysi • Connections between education and employers (ex: healthcare) • Low level of trust between the surrounding counties and Lexington-Fayette county

AA • Major tourism events related to equine industry • Need more science / math teachers • Unique industry base (thoroughbred, bourbon, etc) Issue Area• XYZNot enough engineers being produced statewide to meet demand • Excellent quality of life • Manufacturing workforce – younger generation is not interested, older generation is • Strong public schools retiring • Vibrant artistic/creative community • Limited community programs to re-train older workers – need transition support • Lack broad based approach to education – more than just 4-year schools, educate

SWOT SWOT • Engaged private sector about options – kids and parents see 4-year only option • Family oriented community • Need for improvements to the minority business development program • Central location close to major U.S. population centers • Transportation within the city – need more road connectivity and additional public • Low unemployment compared to state and nation transportation options

OPPORTUNITIES THREATS • Enhancing entrepreneurship and innovation support programs (capital, networking and • Poor perception of state of Kentucky by site selection professionals mentorship programs) • Limited air connectivity and potential expansion of low cost airlines in competing • Leveraging Lexington’s significant cross-cutting industry opportunities in high growth markets industry sectors • Many of the major roads in Lexington are managed by the state Department of • Better communication of what kinds of jobs are available throughout the region Transportation • Improved development review process • Intra-regional distrust • Common understanding and vision for economic development • Continued off-shoring of manufacturing • Expanded technical and vocational training programs • Numerous public sector entities in the region make collaboration a challenge • Leveraging the region’s significant healthcare and life science assets for continued job • Tax structure inhibits regionalism on economic development projects creation • Expanded air connections aligned to target markets (especially low-cost carriers) • Elevate the collaborative approach to marketing the entire region • Improved regional, external marketing with additional resources • Improved talent retention / attraction • Career tracking / training - help students identify what they’re good at • Educate gggjraduates about the available resources for finding local jobs

Advance Lexington Market Assessment | 10 Major Layoffs in Lexington-Fayette County, 2008-Present Layygoffs affecting 25+ workers

Company Workers Affected

Dawahare's of Lexington, LLC 450 The Economic Downturn Verizon, Inc. 241 Dillard's Inc. 121

Komatsu Reman North America 117

Trane Climate Solutions 70

LEXINGTON AND THE RECENT ECONOMIC DOWNTURN Ceradyne 65

While this report is designed to assess longer-term underlying economic, demographic, and CHA-Humana 54 labor market trends, it is important to analyze the information within the context of the current ASC 40 national economic crisis and how Lexington has been affected from a labor perspective. Bruce Wholesale Flooring 30 The current economic slowdown has had a definite impact on the Lexington economy, reversing previous years of job and business establishment growth and further diminishing Intranasal Therapeutics 30 the area’s base of manufacturing opportunities following national trends. However, Source: Kentucky Office of Training and Employment Lexington has fared well compared to many other cities, experiencing relatively low levels of unemployment. A large base of jobs in both education and health care have been a stabilizing force in the local economy. Bolstered by these industries, Lexington was ranked UNEMPLOYMENT RATE #13 in BiBusiness Wk’Week’s “Bes t Cities for Riding Ou t a Recess ion ” list in 2008. MONTHLY UNEMPLOYMENT RATE, JAN 2008-MAY 2010

Unemployment rates in Lexington have followed national trends during the recession, Lex ington, KY Bluegrass Region U.S. 11 reaching peak highs in June of 2009 and February of 2010. However, Lexington has 10 maintained much lower rates of unemployment than the larger Bluegrass Region, the State 9 of Kentucky, and the U.S. 8

Many jobs have been lost in Lexington and the greater region during the downturn, across 7 various sectors such as manufacturing and retail. Layoffs in Fayette County include 6 Dawahare’s of Lexington, LLC, Verizon, Inc., and Dillard’s Inc. Surrounding counties have 5 4 also experienced significant layoffs such as Kuhlman Electric, Wintech, Ainak, Inc., and 3 Jackson Plastics. Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Source: BLS Local Area Unemployment Statistics

Advance Lexington Market Assessment | 11 Evidence of a Regional Economy Regional Connections Evidence of a Regional Economy

ƒ Nearly 50% of those working in Lexington live outside of Fayette County. ƒ 25% of the workforce in Fayette County LEXINGTON AND THE BLUEGRASS REGION resides in the other seven counties of the Bluegrass Region. While this study focuses on the Lexington-Fayette Urban County, evidence of intertwined regional economies is revealed by an analysis of Lexington’s labor shed – the counties ƒ Of employed Lexington residents, 67% where those who work in Lexington are coming from – and the commute shed – the counties work in Fayette County meaning that over where Lexington residents are working. 30% commute to jobs that are located in other counties. Fayette County is part of both the Lexington MSA (6 counties) and the Bluegrass Region (8 counties). Regional cooperation in any area is a major component to success in economic ƒ 7.3% of employed Lexingtonians development. More and more communities are learning that competitive advantages in this commute to Jefferson County (part of the advanced and integrated economy are gained through a “regional” approach that transcends Louisville MSA) for work. county boundaries. Communities need to look beyond their local borders to build rela tions hips an d combi ne resources in ord er to more eff ecti vely l expand recogniti on in the marketplace. Regions, not individual cities, are the locus of competitive advantage in the new economy – an economy where human capital plays a much more important role in company and community prosperity.

Advance Lexington Market Assessment | 12 Advance Lexington Labor Shed WHERE LEXINGTON WORKERS LIVE LEXINGTON - A ET AO SHED LABOR FAYETTE Source: U.S. Census LEHD Market Assessment | 13 | Market Assessment Advance Lexington Commute Shed WHERE LEXINGTON RESIDENTS WORK LEXINGTON - FAYETTE COMMUTE SHED Source: U.S. Census LEHD Market Assessment | 14 | Market Assessment How is Lexington Growing? Lexington Demographics

ƒ ‘09 City/County Population: 296,545 ƒ Population Growth 1990-2009: 31.6%

KEY FINDINGS: DEMOGRAPHIC TRENDS ƒ ‘09 MSA Population: 470,849 ƒ ‘09 Bluegrass Region Population: 603,075 Lexington has experienced rapid growth over the past 20 years. Unlike Knoxville, one of the benchmark communities, which experienced a boom in population during the ‘90s, or ƒ ‘09 Median Age: 35.8 Boulder which didn’t experience much growth until after 2000, Lexington and the entire ƒ ‘09 Median Income: $52,173 Bluegrass Area has had sustained growth over the past two decades. This growth both spurs development, in terms of real estate as well as business creation, and creates ƒ ‘09 Population Ages 25-44: 30.0% challenges, such as added traffic congestion. ƒ ‘08-‘09 Fayette County School District Lexington is a diverse city in many ways. This diversity is one of the city’s strongest assets. Graduation Rate: 83.6% Not only is the city racially and ethnically diverse, it is also home to residents of various ƒ ‘08- ‘09 Fayette County School District ACT income levels and ages. Score: 22.3 In terms of age, race and income, Lexington’s trends are nearly equivalent to those of the ƒ ‘09 University of Kentucky Student U.S. However, when it comes to education, Lexington is set far apart from the rest of the Population: 26,054 nation because of its exceptional rates of educational attainment, especially in terms of bachelors, masters and other post-secondary degrees. This area is home to many premier Note: All sources cited in the following section. institutions such as the Universityyyy of Kentucky and Transylvania Universit y. The Universit y of Eastern Kentucky in Richmond is less than 25 miles away.

Lexington also has a number of two-year technical schools such as Bluegrass Community and Technical College and the College for Technical Education.

Advance Lexington Market Assessment | 15 Advance Lexington Population Growth COMPONENTS OF POPULATION 2001-2009 CHANGE, COMPONENTS POPULATION GROWTH POPULATION POPULATION GROWTH, 1990-2009 POPULATION -3,000 -2,000 - 10% 15% 20% 25% 1,000 2,000 000 1 3,000 4,000 5% 0% , 000 0 e ntn YBluegrass ington, KY Lex 56% 15 . 6% -1 3.% 3.% 2.% 1.% 1.% (71) (2 (17.1%) (10.1%) (11.4%) (27.6%) (34.1%) (31.6%) 13741 1,705 01 02 03 04 20 06 07 200 2007 2006 2005 2004 2003 2002 2001 , , 374 531 13.8% CHANGE IN LEXINGTON - 13731 1,695 18991 17.2% , , 373 899 Region 14.5% 13531 1,514 385 , 353 16.2% % change ('90-'00) % change usn ZKo le NBudr OKnuk U.S. Kentucky CO Boulder, TN ille, v Knox AZ Tucson, Natural 9.8% - 13051 1,647 20752 , , 305 075 (% Change 90-09)(% Change Net International Net - FAYETTE COUNTY 8.7% -1,402 1 1,910 , 095 % change ('00-'09) % change 2.5% Net Domestic Net 1.1% 1,249 2,056 -499 8.9% 10411 1,766 307 , 041 9.7% 6.7% 1,987 912 Source: U.S. Census Bureau Source: U.S. Census Bureau 862 8 2009 8 13.2% 3.4%) 1,342 1,903 1,072 9.1% • • • and thenation. outpacing boththestate years, recent Lexin migration. trend for the area:positive net domestic exper has been Lexington Since 2007, prior to2007. growth inLexington migration werethecausesofpopulation international Natural birthratesand since 1990. rapid growth Region haveexperiencedsustainedand and thelarger Both Lexington Bluegrass ggggpy ton has been ton has i d i d iii enc i n g a

new

g an rowin d encoura g Market Assessment | 16 | Market Assessment ra p gi idl n y g in Advance Lexington Age 100% AGE DISTRIBUTION 2009 20% 40% 60% 80% MEDIAN AGE 2009 U.S. Kentucky Bluegrass Region Lexington, KY Knoxville, TN Tucson, AZ Boulder, CO 0% e ntn YBugasTco,A Kn AZ Tucson, Bluegrass ington, KY Lex 11.2% 00% 25.3% 30 25.3% 18.8% 14.7% . Source: Decision Data Resources 0% 11.6% Region 14.7% 2% 29 19.4% 37.1 37.9 35.8 35.8 35.3 33.6 31.5 . 2% 0 TO 14 0 TO 22.2% 16.4% 80% 28 13.3% 6.4% Blue Grass Region Blue Grass . 0% AGING POPULATION AGING GROWTH IN PERSONS AGE 25-44 AND AGE 55+ AS A % OF POP., 1990-2009 IN AGE25-44 PERSONS POP., AND AGE55+ ASA%OF GROWTH 15 TO 24 15 TO Lexington, KY Lexington, Knoxville, TN Knoxville, BldB CO Tucson, AZ ou Kentucky ld er, xvil,T ole,C etcyU.S. Kentucky CO Boulder, TN ille, v ox 15.3% 18.0% 26.7% 23.2% 17.0% U.S. CO 25 TO 44 25 TO 2%-5 1%-%0 %1%1%20% 15% 10% 5% 0% -5% -10% -15% -20% -8.50% 24.7% 24.7% 85% 28 12.6% 45 TO 64 TO 45 9.8% -6.20% -6.00% -5.40% . -4.80% 5% -4.50% -4.30% 65+ 13.5% 13.3% 26.5% 19.6% 27.0% Source: Decision Data Resources Age 55+ 1.9% 26%2 3.5% . 4.0% Source: Bureau of Labor Statistics 6% 4.4% 4.7% 7.2% 14.0% 25.9% 27.1% 13.1% 20.0% Age 25-44 population thanKentu Lexington hasseenless growth inthe55+ implications. workforce development challenge withsignificant economic and • U.S. over ayearundert than thebenchmarkcommunities,butstill • any than of thisgroup group, Lexingtonhas With inthis age 30% of thepopulation age rangethantheU.S of greater percentage creation and innovation. Lexington has a 44, is an importantgroupfor business • nation. largely inlinewith th The a An aging population is An agingpopulationanation is higher age forLexington The median professionals cohort,ages25- The young ggg e distribution ofLexin e he median age for he median the peopleinthe25-44 ofthebenchmarks. a greaterproportion cky or the U.S. at of the state and at ofthestate and Kentucky. Market Assessment | 17 | Market Assessment g - ton is wide Advance Lexington Race and Ethnicity 100% POPULATION BREAKDOWN 2009 60% 80% 20% 40% % POPULATION HISPANIC 0% 50% 10% 20% 30% 40% 0% e ntn YBugasTco,A Kn AZ Tucson, Bluegrass ington, KY Lex e ington, Lex 74.7% 14.9% 7.6% 2.8% 6% KY Bluegrass Region 4% 83.3% 10.2% Region 1.7% 4.8% Tucson, 40% AZ White 27.0% 64.9% 4.9% 3.2% nxville, v Knox 3% TN Black xvil,T ole,C etcyU.S. Kentucky CO Boulder, TN ille, v ox Boulder, Asian/Pacific 76.3% 16.8% 4.8% 2.2% 11% CO Source: Bureau of Labor Statistics etcyU.S. Kentucky 2% 96 88.5% 89.6% 5.4% Other 4.7% 16% 2.5% 8.0% Source: Decision Data Resources 73.9% 12.4% 4.6% 9.1% • • • • city. as a diversity serves Lexin many otherareasinthestate. proportion ofHispanicresidents than has ahigher 2% HispanicsoLexington the country. However,Kentucky isonly population whencompared to the rest of Lexington hasavery small Hispanic population distribution. of racial independently be examined For thisreason,Hispanicethnicitymust person reportingtobeawhiteHispanic. suchasa ethnicity race and claim both both race and ethnicity race. This allowssurveyto respondents ethnicity a descent tobean rather than Census considersHispanic The US workforce. attractive to aninnovativeandcreative homogenous communities are less that found Businesses have people. locations withpoolsofdiverse,creative innovative firmsincreasinglyseekout as creative and competitive advantage a provide Workforce diversitycan ggy; ton is a diverse cit a diverse ton is great assetforthe y; this Market Assessment | 18 | Market Assessment , suchasa Advance Lexington Minority-Owned Businesses 10% 20% 30% 40% 50% 60% 70% MINORITY ENTREPRENEURSHIP 0% % OF TOTAL NUMBER OF FIRMS, 2002 MINORITY BUSINESSES IN LEXINGTON estimates for race andethnicity are not*% minority available population annually figure taken at the fromcity 2000 level. U.S. Census because annual 22.3% e ntn YTco,A nxv Knox AZ Tucson, KY ington, Lex 7.8% 92 2% of total total 2% of 92 firms 21,217 White Non-Hispanic 0.9% . 2% of total 65.8% 20.4% 3.3% 21.8% 6.0% le NBudr OKnuk U.S. Kentucky CO Boulder, TN ille, 0.5% , 2002 19.8% 6.5% Source: U.S. Census Bureau Economic Census 4.6% of total of 4.6% firms 1,061 Black Source: U.S. Census Bureau Economic Census 1.4% % minority firms sales receipts sales firms minority % firms minority % population % minority 11.5% Asian 2.2% of total of 2.2% 505 firms 4.8% 1.0% of total of 1.0% 232 firms Hispanic 1.2% 37.5% 17.9% 3.0% *The 2002 Economic Census is the most current the most Census is *The 2002 Economic • • • • entrepreneurial disparity. economy but there isstill a greatdealof important part oftheLexington Minorit been released on the local level. local the been releasedon yet not Census datahas data. 2007 Economic owned businesses. tackle thisinequit region itselfto needs the but challenge, nationwide This isa from minoritybusinesses. came which of 1% sales receipts,lessof t i E t th f the disparity. of smallbusinessesreveals percentage which minoritiesup22%,tothe made Comparing thegeneral minority were 7.8% ofbusinessesinLexington ven

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amoun Market Assessment | 19 | Market Assessment t o f y - Advance Lexington Education HIGH SCHOOL SCORES HIGH ACT 100% 2008-2009 ACT SCORES BY SCHOOL DISTRICT SCHOOL BY SCORES ACT 2008-2009 2009 ATTAINMENT EDUCATIONAL 2008-2009 GRADUATION RATE BY SCHOOL DISTRICT SCHOOL BY RATE GRADUATION 2008-2009 HIGH SCHOOL GRADUATION RATES 20% 40% 60% 80% Jessamine C.S.D. 0% Woodford C.S.D. AZ School Districts *Scores not available forTucson, Madison C.S.D. T Uifid SD Bourbon C.S.D. Bourbon ole alyS.D. Valley Boulder Franklin C.S.D. Franklin Fayette C.S.D. o e u p uao,oaeatetodct se p uao, ducato o t e t epa essee e , ducato o t e t epa a o , ducato o t e t epa y tuc e ces Sou ucson Boulder Valley Boulder Jessamine C.S.D. Clark C.S.D. nxC.S.D. Knox Woodford C.S.D. Woodford SttS CSD Madison C.S.D. Madison r Bourbon C.S.D. Bourbon Franklin C.S.D. Franklin ces co Fayette C.S.D. e ntn YBluegrass KY ington, Lex Kentucky : K Clark C.S.D. C.S.D. Knox U tt C tt Scott C.S.D. 40.5% 19.8% 22.1% 10.0% e 7.7% n n Kentucky . tuc ifi U.S. S No High School No e . k d S D y D . U.S. epa . 21 43 36 30 24 18 12 6 0 D r . t m %2%5%7%100% 75% 50% 25% 0% e n t

o 32.3% 19.6% 28.0% 34 13.7% Region 13.4% f E 6.8% Sources: National Center for Education Statistics, ACT, Kentucky Department of Education, Tennessee Department of Education, Boulder Valley School District ducat i Colorado Department of Education, Nationalo Center for Education Statistics High School GraduateHigh School n , Ariz o n usn ZKo le NBudr OKnuk U.S. Kentucky CO Boulder, TN ille, v Knox AZ Tucson, a D 26.2 24.2% 26.2% 15.3% epa 8.2% r t m % e n t

o f E ducat 20.8 20.9 09 20 21.1 i 14 21 21.3 o 21.6 21.8 29.8% 19.8% 30.2% n 22.1 22.0 22.2 6.5% Some College Some . 22.3 , 9 . T 4 e nn essee D epa 77.1% 08% 80 81.4% r t m 83.2% 83.6% 83.9% 69.1% 12.9% 84.7% . 85.6% e 3.6% 97%9 4.7% 85.9% 8% 86.7% n . 88.4% t 7% 89.2%

Associate's o Source: U.S. Census Bureau Decision Data Resources f E 92.5% ducat i o n ,

94% 19 35.9% 2% 20 18.4% 6.2% . . Higher or Bachelor's 4% 2% 19.4% 15.0% 28.0% 30.0% 7.5% • • • • educational attainment. Lexin the workforce. prepare secondarystudents forentryinto two applied technologycenters that help programs inFayetteCounty,including There are than bothstateand their average compositescore is higher the benchmarkcommunities. At 22.3, the highest ACTscores of anydistrict in District Fayette CountySchool boasts area. in the of technicalcolleges are alsoanumber four-year schools,there to outstanding listed on thefollowingpage.Inaddition institutions numerous highereducation sgreatestworkforceassets. area but also Transylvania University and the presence oftheUniversity of Kentucky, only bythe possible not are made High levelsofpost-secondaryeducation here is educated population one of the degree orhigher.bachelor’s The highly Over have a 40% ofLexingtonians ggpy ’ s greatestworkforceassets. ton has exem ton has a number p national averages. of magnet school of magnet lar y levels of Market Assessment | 20 | Market Assessment Advance Lexington Higher Education *Note: Schools listed are within a25 mile radius of Lexington. Eastern Kentucky University Richmond, KY 4-year, Public 4-year, KY Richmond, University Eastern Kentucky ereonCleeGogtw,K -er rvt ahlrs ere atrs ere1,856 1,550 1,602 degree Associate's Master's Bachelor'sdegree; degree; 4-year, Private Wilmore, KY degree degree Master's certificate; Master's degree; Bachelor's Postbaccalaureate 4-year, Private 4-year, Private KY Georgetown, Wilmore, KY Asbury College Asbury Seminary Theological College Georgetown University Sullivan alysBre olg eigo,K rvt etfct odata no 89 Certificate Private 1,158 KY Lexington, Bailey’s Barber College Americanof Barbering College Master's degree Campus College–Lexington MedTech 1,283 4-year, Private Hair Design of SchoolCompany and Barrett Lexington, KY degree Associate's Master's Bachelor'sdegree; degree; Lexington Seminary Theological Bachelor's degree Private < 2-year, Academy 4-year, Private Professional SalonThe KY Lexington, 2-year, Private 4-year, Private Education Technicalfor College Midway, KY Lexington, KY Lexington, KY College-Lexington Spencerian Transylvania University Midway College Lexington, KY National College-Lexington d i C Technical College 4-year, Public Bl Lexington, KY Universityof Kentucky ue g rass C nttto oainTp wrsofrdStudent population Awards offered Type Location Institution ommun i t y an d Lexington, KY Louisville, KY) Louisville, in campus (main eigo KY Lexington Lexington, KY 2-year, 2-year, Private Lexington, KY 2-year, Private KY Nicholasville, 2-year, Private Lexington, KY 2-year, Public Lexington, KY , KY LEXINGTON EDUCATIONAREA HIGHER INSTITUTIONS associate's, Private primarily4-year, Private associate's, Private 4 - erprimarily year , primarily primarily etfct 26,054 certificate etfct;Mse' ere otmse' etfct 16,031 certificate; Master's degree; certificate Post-master's Postbaccalaureate degree; Bachelor'sdegree; One years Associate's than two certificate;but less er etfct;Ascaes ere12,143 ifi years degree certificate;Associate's L h Certificate 2,723 degree years Bachelor's degree; certificate;Associate's Less than one year certificate ere atrsdge;Doctor's degree Master's degree; degree; Bachelor's degree; Associate'syears certificate; than two One but less Less than one year certificate; er criiae109 no data 87 degree; 4 years than certificate Two but less One years Associate's than two certificate;but less yearscertificate but less certificate;than 4 yearsTwo Less than two One than one but year lesscertificate; certificate 4 years butlessthan One Two years two than certificate; but less er etfct 214 605 years certificate Less than two One than one but year lesscertificate; years degree certificate;Associate's Less than two One than one but year lesscertificate; Bachelor's de ess

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cert ifi cate; ; One O g ree; Post-master'sree; ne

but less than two than two but less h b l ut l Source: National Center for Education Statistics; AngelouEconomics ess

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two

(all campuses) Market Assessment | 21 | Market Assessment no 5,652 data Advance Lexington Income 100% INCOME DISTRIBUTION 2009 60% 80% 20% 40% $20,000 $40,000 $60,000 MEDIAN HOUSEHOLD (%GROWTH INCOME 2000), SINCE 2009 MEDIAN MEDIAN HOUSEHOLD INCOME 0% $0 e ntn YBugasTco,A Kn AZ Tucson, Bluegrass ington, KY Lex 20.6% 14.0% 31.2% 12.5% 21.7% e ntn YBluegrass KY ington, Lex $52,173 31.0% 14.5% 19.0% 31.9% 12.9% Region 21.6% $0 to $14K $51,084 Region 29.3% $15K to 34K 10.4% 27.2% 16.9% 28.3% 17.3% usn ZKo le NBudr OKnuk U.S. Kentucky CO Boulder, TN ille, v Knox AZ Tucson, $39,171 Median HouseholdMedian Income 25.7% xvil,T ole,C etcyU.S. Kentucky CO Boulder, TN ille, v ox $35K to $49K 10.5% 22.8% 27.8% 14.9% 23.9% $34,436 23.4% 13.4% 13.6% 19.1% 26.6% 27.4% $50K to$50K $99K rwth00-09 % Grow $55,201 23.2% 24.5% 14.0% 29.3% 17.3% 50% 15 $43,083 27.3% . Source: Decision Data Resources $100K+ 0% Source: Decision Data Resources 21.2% 20.2% 32.1% 14.5% 11.9% $53,684 27.0% 0% 10% 20% 30% 40% • • • • averages. however, theyare inlinewith U.S. among thehighestinstate; in theLexin Income levels benchmarks, the stat benchmarks, the from 2000 to 2009 thanany of the has experienced higherincomegrowth indicator for the area. At 31%, Lexington Strong incomegrowthis a positive state. more than themedianincomefor the $9K about income forthecity is $52K the median available inLexington, Reflective ofthehigh-qualityjobs $42K. lowest - andMadisonCountyhasthe $62.5K- income County hashighestmedian the eightcountiesin disparity within theBluegrassRegion.Of There is, however,a certainlevelof among thetop25count MSAof six counties intheLexington are income, four In termsofhighestmedian theregion,Scott e or the nation. ies inKentucky. g , about$9K ton MSA are Market Assessment | 22 | Market Assessment - Advance Lexington Migration Detroit, MI Seattle, WA CA San Jose, CA Los Angeles, Huntington-Ashland, WV-KY-OH MSA Louisv 2008 MIGRATION: LARGEST GAINS/LOSSES ille, KY ille, San Jose Net Migration: Out-migration: In Area Metro Seattle L.A. - LEXINGTON migration: Source: InternalRevenue Service Net MigrationNet 4365 14 -161 14,526 , 365 LEXINGTON-FAYETTE MIGRATION, 2007-2008 -228 128 -52 -49 56 63 • • relocating here. Many peopleareleaving the Lexingt quality oflife in the immediate area,manypeople is low.are leaving for While people family. trend maybepa This general Lexingtonians whohaveleft thearea focus interviews and Concern over retention ofyoung only Net migrationfor2007-2008 Louisville . g roups. Stakeholders also reportedthat roups. Stakeholders Detroit Lexington talent wasexpressedinmany amounted to aloss people. of 161 amounted Huntington-Ashland Source:Internal Revenue Service job opportunities thatmaynotexist are returning because ofthehigh on area, but nearly asmanyare often returnbeforestarting a rt ofthereason t hat netmigration y oun g

Market Assessment | 23 | Market Assessment What Drives the Lexington Economy? Lexington’s Economy ƒ ‘09 Labor Force: 151,722 ƒ May ‘10 Unemployment: 7.7

KEY FINDINGS: ECONOMIC TRENDS ƒ ‘01-’09 Job Growth: 1.51% ƒ ’01-’09 Business Growth: 5.36% Lexington has a well-diversified economy with a large number of jobs in stable sectors such as government and education, as well as in growing industries such as health services and ƒ ‘09 Average Weekly Wage: $793 business & professional services. The economy is also bolstered by the horse industry and ƒ Largest Industry: Education & Healthcare related agricultural and animal sciences businesses. Manufacturing, an industry which is shrinking nationally and has been dealt an especiallyespecially hard blow during the current recession, ƒ Largest Employers: University of Kentucky is also a large part of the Lexington economy and accounts for 8% of jobs in the city. and Fayette County Public Schools

Overall, the Lexington economy has proven itself to be quite stable even during the downturn. Unemployment rates, which have historically always been much lower in Note: All sources cited in the following section. Lexington than the U.S., have remained relatively low when compared to the state and the nation. Job growth and bus iness es ta blish ment growth have both been reversed duri ng the economic slowdown, but the pace has not been as severe as in many other parts of the country.

Lexington’s largest employer is the University of Kentucky, with over 12,000 employees. Toyygyggppyota Motor Manufacturing Kentucky is the region’s largest private sector employer and counts about 7,000 employees.

In 2010, Lexington was ranked #9 by Forbes in their list of “Best Places for Business and Careers” based on factors such as educational attainment, income growth and cost of doing business.

Advance Lexington Market Assessment | 24 Advance Lexington Employment and Unemployment EMPLOYMENT IN LEXI IN EMPLOYMENT UNEMPLOYMENT RATE 1990 RATE UNEMPLOYMENT EMPLOYMENT 10 11 12 0 1 2 3 4 5 6 7 8 9 1990 150,000 200,000 100,000 50,000 0 0120 0320 0520 0720 2009 2008 2007 2006 2005 2004 2003 2002 2001 167,714 Boulder, CO Boulder, KY Lexington, NGTON, 2001-2009 , 1990 1995 - 2009 Kentucky Region Bluegrass 2000 169,126 U.S. AZ Tucson, Source: BLS Local Area Unemployment Statistics Source: Bureau of Labor Statistics 2005 Knoxville, TN Knoxville, 170,246 2009 • • • • around. to turn growth as thenationaleconomybegins of economic to return toahighlevel economic downturn and shouldexpect well during the has faredcomparatively up, Lexington unemployment ratesare While some February of thesameyear 2010 is 7.7, downfrom Lexington’srate forMay unemployment the country.the stateand any ofthebenchmarks, lower than been has historically unemployment rate of rise during therecession, Lexington’s to continued has While unemployment were lost. however,jobs 5,800 to 2009, from2008 steadily since2003; growing been had of jobsinLexington The number 2009. in jobs inLexington There were170,246 j obs havebeenlost and apeakof8.6in . Market Assessment | 25 | Market Assessment Advance Lexington Industry Supersector Employment *Finance, Insurance, and Real Estate *Finance, Insurance, and Real Estate Transportation &Warehousing 3.1% Transportation % OF TOTAL JOBS IN THE U.S. THE 2009 BYSECTOR, IN JOBS TOTAL % OF NATIONAL INDUSTRY EMPLOYMENT LEXINGTON 2009 BYSECTOR, IN JOBS TOTAL % OF INDUSTRY EMPLOYMENT Transportation &Warehousing Transportation Government 5.8% Government Manufacturing 8.0% Manufacturing 4.3% Construction Wholesale Trade 3.4% Trade Wholesale Leisure & Hospitality 11.8% &Hospitality Leisure Manufacturing 9.2% Manufacturing Wholesale Trade 4.3% Trade Wholesale Construction 4.6% Construction F.I.R.E.* 5.9% Government 4.2% Government F.I.R.E.* 4.7% F.I.R.E.* Leisure & Hospitality 10.1% &Hospitality Leisure Information 2.7% Information Information 2.2% Information 3.1% Other 7.4% Other Other 9.0% Other Retail Trade 11.8% Trade Retail Retail Trade 11.3% Trade Retail Education & Health Services 23.3% &Health Education Business &Professional 12.9% Svcs. Business Business &Professional 12.8% Svcs. Business Education & Healthcare 24.1% &Healthcare Education Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics • • • any singleindustry. diversified anddoesnot rely heavilyon Lexin 13% ofjobs accounts forover where manufacturing much higherinthe for 8%ofjobs.Howe Fayette County,accounts manufacturing an Manufacturing hasthehighestwagesof the threelargestindustries. retail tradeare professional services, and education &healthservices, business & S and theU ington Both inLe similar to thatof theU.S. is very The industrymixinLexington y t i t i L Wh li gggy sec ton’sis hi economicbase t or x i ington andthe U n . L ex i n gt greater 6-countyMSA on. ver, this figure is Wh en . Market Assessment | 26 | Market Assessment S .,

ana

g hl ly y z

i n g BUSINESS AND JOB GROWTH CHANGE IN NUMBER OF LEXINGTON BUSINESSES AND JOBS, 2001-2009 Local U.S. 2001 2005 2009 % Change % Change (’00-’09) (’00-’09) Followingg, a nationwide trend, business nn establishment growth is outpacing Number of Businesses 8,798 8,734 9,270 5.36% 12.96% employment growth in Lexington. Number of Jobs 167,714 169,126 170,246 1.51% -2.16% • There are 472 more business

Source: Bureau of Labor Statistics establishments in Lexington today than

Creatio there were in 2001. NEW JOBS IN LEXINGTON, 2001-2009 Lexington U.S. NEW JOBS BY INDUSTRY SUPERSECTOR Growth Growth • Jobs in business & professional services Rate Rate grew by nearly 12% in Lexington Education & Healthcare 4,971 12.6% 17.3% Business & Professional Services 2,295 11.7% 1.0% between 2001 and 2009 compared to Leisure & Hospitality 1,316 7.0% 9.4% only 1% industry job growth in the U.S. siness Natural Resources and Mining 64 29%2.9% 46%4.6%

uu • Nearly l 5, 000 jo bs were crea te d in Government -54 -0.8% 6.2% Transportation & Warehousing -124 -2.3% -3.7% education & healthcare in Lexington Wholesale Trade -183 -3.1% -2.9% between 2001 and 2009. However, local Information -273 -5.7% -21.8% growth in this sector was not as great as F.I.R.E. -293 -3.6% -1.2% national growth.

and B Retail Trade -1,098 -5.2% -4.2% -2,359 bb Construction -24.5% -12.2% • Both construction and manufacturing Manufacturing -2,364 -14.8% -27.9% experienced significant job loss in

Jo -3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 Lexington during this time period. Source: BLS Quarterly Census of Employment and Wages • Business establishment growth was

NEW BUSINESSES IN LEXINGTON, 2001-2009 Lexington U.S. highest in education & health services NEW BUSINESS ESTABLISHMENTS BY INDUSTRY SUPERSECTOR Growth Growth and business & professional services. Rate Rate Education & Healthcare 154 17.5% 25.3% However, in both industries, growth was Business & Professional Services 141 8.5% 21.3% not as strong as in the national economy. Leisure & Hospitality 114 15.4% 16.4% Wholesale Trade 76 13.6% 7.6% F.I.R.E. 74 7.4% 16.1% Natural Resources and Mining 30 21.0% -1.4% Government 19 23.2% 6.3% Information 7 4.7% -4.2% Manufacturing -22 -7.6% -11.5% Transportation & Warehousing -33 -16.5% 4.3% Retail Trade -45 -3.6% -1.1% Construction-90 -11.7% 7.4%

-100 -50 0 50 100 150 200 Source: BLS Quarterly Census of Employment and Wages Advance Lexington Market Assessment | 27 Advance Lexington Major Employers rgrC ,7 ealFayette Fayette Fayette Fayette Retail Manufacturing 1,175 Delivery Mail Madison 1,300 1,296 l Scott Retail h S bli P t Fayette k C 1,497 Cl Franklin Education Integrated System Fayette Education 1,475 Fayette CliiLit L 1,750 1,525 Kroger Co Government Fayette Data Processing Service US Postal Trane Co 2,000 Schools blic Health Care P 2,050 Madison nt Jessamine Co Fayette Fayette Schools Madison County Public 2,500 HQ World Wal-Mart Schools Scott County Public 3,130 Center Veterans Medical Education Scott Government Martin Lockheed Education KY Transportation Cabinet 3,700 2,973 Company Xerox ACS, A 5,300 Joseph Hospital St Manufacturing CentralHospital Baptist Lexington-Fayette Urban County Government 7,000 Lexmark International, Inc KY Cabinet for Health and Services Family University Kentucky Eastern Schools Public Fayette Co. Manufacturing Kentucky Toyota Motor University of Kentucky a-at90Rti Madison Fayette Retail Distributer 900 Franklin 950 Government 1,000 Wal-Mart Amazon.com KY Dept for Workforce Development ex ar . Joseph Hospital i n k C gt on oun Cli ty P n i u c u nty P bli c S u blic Schools c h aeEpoesType Name Employees of County Business oo l s LARGEST BLUEGRASS EMPLOYERS 2096 12 610 3 017 1 440 1 565 1 300 2 865 , , , , , 610 , 017 440 565 300 096 Government Education dti Ed HlthH C cation Ed Health Care Health Care ea uca u cation lth C ti on are Source:Lexington Commerce Jessamine Fayette Fayette Franklin Fayette lk Cl FttF a ar y e k tt e Market Assessment | 28 | Market Assessment Advance Lexington Lexington’s Horse Industry $100 $120 GROSS PURSES ($MILLIONS), 2001-2009 PURSES GROSS GROSS PURSES IN KENTUCKY THOROUGHBRED SALES($MILLIONS),TOTAL 2000-2009 KEENELAND AUCTION SALES $80 $20 $40 $60 $0 600 700 800 900 100 200 300 400 500 0 $82.6 0120 0320 0520 0720 2009 2008 2007 2006 2005 2004 2003 2002 2001 $688.5 0020 0220 0420 0620 082009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $83.7 $556.6 $494.5 $80.3 $562.8 $87.1 $676.0 $80.1 $744.4 $103.6 $804.4 $81.7 $815.4 Source: Association Keeneland Source: The Jockey Club $76.1 $600.3 $67.8 $396.2 • • • • • • recession. has beensignificantlyimpactedbythe of the Lexingtoneconomy. However,it The horseindustr 2009. were ata Keeneland Thoroughbred auction sales at global market. provide the regionwithexposureto a games Equestrian World 2010 Alltech Industry events suchasthe upcoming tt dS in 2010, andbettin tt to 265 counties are up,from199in2009 F Horse farmlistings in thefourhorse b counties forthehorseindustry. B d Counties arethefour df W gaming. tourism and animal sciences pharmaceuticals to and from – local economy niches ofthe The horseindustrycontributestomany have a$4billionimpactinKentucky. In theindustry 2007, was estimatedto oo df or d , B our b yypp on, isanim g is down nationall F mostimportant ten-year lowin a y e tt e, p Market Assessment | 29 | Market Assessment ortant

an d S co p art y tt . How Competitive is Lexington’s Business Climate?

KEY FINDINGS: BUSINESS CLIMATE AND INFRASTRUCTURE

Lexington has many competitive advantages for attracting and retaining business. Throughout Kentucky, utility costs are competitive, in terms of both electricity and natural gas. Wages are slightly higher than some of the benchmark communities but are not so high as to be a deterrent for any business seeking a Lexington location.

Telecommunications, including broadband, are readily available throughout the Bluegrass Region, with redundancy capability throughout Fayette County and many surrounding counties.

As revealed through survey responses, community members believe taxes to be a possible barrier to business. However, when compared nationally, Kentucky has a very low tax burden compared to other states. In a national ranking by the Tax Foundation, where No. 1 has the highest tax burden and No. 50, the lowest, Kentucky was No. 41.

Being located on major interstates, Lexington is well positioned for companies’ transport ati on an d dis tr ibu tion nee ds. The Blue Grass Airpor t, serve d bby seven major airlines, averages over 501,000 enplaned passengers annually.

A survey of the Lexington business community was conducted in conjunction with this study. When members of the Lexington business community were asked the ppyrimary reason for locatin g in Lexin g,gton, the No. 1 res ponse was “close proximit y to customer base and/or suppliers.” A full listing of survey results can be found in the appendix.

Advance Lexington Market Assessment | 30 Advance Lexington Utilities Knox v ille, TN ille, v Knox e ington, KY Lex AVERAGE ELECTRICITY RATE (PER ELECTRICITY KILOWATTAVERAGE HOUR), 2008 UTILITIES ..1.91.39.67 10.41 12.23 13.25 13.89 13.84 U.S. Kentucky Boulder, CO Boulder, usnAZ Tucson Kentucky U.S. , AZ 0 AUA GAS ($ perMCF) PRICES, 2008 NATURAL Residential 4.22 5 5.32 6.38 6.56 6.62 6.75 6.82 6.84 7.13 7.58 8.71 8.90 Commercial 9.11 10 9.51 9.87 008 10 10.24 . 08 11.03 Residential Commercial Industrial Source: EIA Industrial 15 Source: EIA • • • advantage forLexington. Low utilit Region. the Bluegrass water capacitythroughout and thereis sufficient water andwaste water supply The areahasanabundant Company. of Kentucky andtheDeltaGas Gas natural gasprovidersareColumbia The major S average cost in theU in theU to the compared competitive when Natural gaspricesarealsovery service provider. Power Cooperativeis another area in the dataonleft). EastKentucky Company (whoseprices are represented Lexington is the KentuckyUtilities The largestelectricity provider in yyp costs areacom . S . The major The p etitive Market Assessment | 31 | Market Assessment Advance Lexington Telecommunications Source: Commerce Lexington; Connect Kentucky • • telecommunications network. sophisticated andintegrated The Lexin fiber optic cable in Lexington. fiber opticcable miles of over 322 Windstream whichhas including area the providers in in thearea There areseveraltelecommunications most areas. in city; DSLis available the throughout businesses. T1 and T3 areavailable speed datarequirementsoflarge to supportthehigh- extensive enough is network inLexington The broadband ggy ton area is served b is served ton area , including Market Assessment | 32 | Market Assessment y a Advance Lexington Tax Structure etcy2 23 619 36 7 32 42 20 Kentucky od nTast$.00------the rank,more favorable the systemstate’s taxforbusiness. is a economic performance.lower The affect laws each state'stax how measure of a The indexis - - $0.5920 - - - $0.0912 $0.0010 - - - $0.0880 $0.0500 $0.4500 $0.0500 - Transit Goods in $0.0500 Registered Motor Vehicles, Dealer Inventory $0.1500 Process Goods in Raw Materials Manufacturing Machinery Real Estate A AE NSLCE LSE FPOET 2008 OF PROPERTY CLASSES ON SELECTED TAX RATES RATES ON SELECTED CLASSESOF PROPERTY Index Rank OllO vera STATE BUSINESS TAX CLIMATE INDEX, 2010 INDEX, TAX CLIMATE STATE BUSINESS ll Kentucky CtC $0.1240 orpora Tax t e

Urban County Income Tax Sales Tax U.I. Tax U.I. Sales Tax Income Tax Ranking on Five Major Subindices RankingFive Major on IdI n Source: Commerce Lexington; Lexington-Fayette County PVA Lexington-Fayette Lexington;County Source: Commerce d $0.0800 .

Lexington-Fayette County Full Services ititCounty Schools District $0.2809 , 2008 Source: The Tax Foundation Tax Source: The $0.5940 PtP roper Tax ty • • • of thenation. the rest Taxes in Kentuck local salestax. The statesalestaxis including real estate andmotorvehicles. of propertytypes, only alimitednumber to tax local areallowed governments is the main entity for propertytax and states. state in most The Kentucky than The propertytaxstructure is different in burden, No.50havingthelowest). country (No. 1havingthehighest earning theranking burden percapitainKentuckyis $3,243, to TheTaxAccording tax the Foundation, yyp are low com of No. 41 inthe of No. 6.0%; thereis no Market Assessment | 33 | Market Assessment p ared to Advance Lexington Wages AVERAGE WEEKLY WAGE, 2009 WEEKLY AVERAGE AVERAGE WEEKLY WAGES WAGE, 2001-2009 WEEKLY AVERAGE GROWTH WAGE $1,000 $1,100 $500 $600 $700 $800 $900 Lex ington-Fay ette County , KY , County ette ington-Fay Lex the citythe level. Note: Wage data is only available at the county and MSA level, not at the citythe level. Note: Wage data is only available at the county and MSA level, not at 0120 0320 0520 0720 2009 2008 2007 2006 2005 2004 2003 2002 2001 Knox v ille, TN MSA TN ille, v Knox Boulder, CO MSA CO Boulder, Bluegrass Region Bluegrass Tucson, AZ MSA US Boulder, CO MSA Tucson, AZ MSA KY County, Lexington-Fayette Kentucky U.S. 0$0 40$0 80$,0 $1,200 $1,000 $800 $600 $400 $200 $0 Kentucky Knoxville, TNMSA Bluegrass Region Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics $731 $760 $760 $770 $793 $876 $1,008 • • • • the State of Kentucky asawhole. Wa $3 h i f i ft df i higher wages thanLexington. diff th f has Of the benchmarks,onlyBoulder ti surrounding counties. fl industry mix Lexington andthe between i Thi $33 b by $33 overall average for the BluegrassRegion Lexington wagesarehigherthanthe U.S. wagesgrewby 25.7%. 27.9% between 2001and2009,whereas ages Weekl Weekly in ington Le b gre has widened. the gap in with U.S.wages Wageswere nearing parity in Lexington gggg es inLexin . Thi w ages in Le s i s g

re ton are hi ton are fl ec 2004, butsince then x ti ington gre ve

o g f th her than in Market Assessment | 34 | Market Assessment e diff w by er i n g Advance Lexington Transportation & Market Access INTERSTATELEXINGTONIN ACCESS -10% -30% -20% YEAR TO YEAR CHANGE IN ENPLANE CHANGE YEAR DPASSENGERS, TO YEAR 2003-2009 MAJOR KENTUCKY AREA AIRPORTS 10% 20% 30% 0% 0.1% 0-0 0-0 0-0 0-0 0-0 '08-'09 '07-'08 '06-'07 '05-'06 '04-'05 '03-'04 4.0% 3.8% - 80%8 . 0% 3.8% 8.2% -5.8% -29.2% -1.4% oivilleInternationa Louisv International Kentucky Cincinnati/Northern Airport Blue Grass 3.2% -3.2% 4.2% -4.7% l-Standiford Field -14.0% -3.5% - 93%9 . 3% -21.9% -12.1% TOTAL ENPLANED PASSENGERS, ENPLANED TOTAL 2000-2009 BLUE GRASS AIRPORT 200,000 000 400 600,000 • • • Kentucky.business hubforCentralandEastern outside ofKentuck metro areas many well as of thestateas the rest to Lexington has excellentairandinterstateaccess • • , 000 Many ofthemajorcorridor major are concentric ringsand Kentucky Route 4andMan- of I-64 andI-75is vehicles. about 82,000 75. The avera Knoxville is north onI-75and by drivingwe reached can be Lexington hasexcellent interstate access; Louisville 09 h 5 0 ld d l 000 450 trend inrecentyears. downward Other airportsservingK in declinesince2003. has been Enplanement th 2009 and handlesabout90commercial Grass The Blue airport is served by7majorairlines address and planfortransportationimprovements. trying challenge this presents when to strategically td k DOT thbby th th t tkhld K 0 0020 0220 0420 0620 082009 2008 2007 2006 2005 2004 2003 2002 2001 2000 507,334 e , th K ere en t uc

were ky DOT ggy e dail 477,173

over yyy . Thecit y ; 450

traffic count atthe intersection s entucky haveseenasimilar, t a k , s are managed in Lexington e 000 582,328 y of-Warform Blvd. h 3hourssouth,alsoonI- is a healthcare and isahealthcare st on I-64, Cincinnatiis st on o ld corridors within thecity. enp ers flights per day. In l

ane no 504,787 Source: Federal Aviation Administration t e d d th passen Market Assessment | 35 | Market Assessment e

g ers. 5 464 450 ,

464 Case Study: Big Ass Fans How Well Does Lexington Big Ass Fans is a one of Lexington’s great entrepreneurial success stories. Once a tiny Support Innovation? start-up, the company now employs 120 people. About one quarter of new hires come from the University of Kentucky. Based in Lexington, Big Ass Fans KEY FINDINGS: ENTREPRENEURSHIP & INNOVATION headqqp,quarters occupies 240,000 SqFt. of manufacturing, design, and office space in the Lexington has many outstanding resources in place to cultivate local entrepreneurship and Bluegrass Business Park. The company innovation. However, there is room for improvement. Certainly the prestige of the University moved to this location in 2007 as part of a of Kentucky’s (UK) numerous research centers attracts top talent both nationally and $17.3 million expansion. Their facility is now internationally. The research & development expenditures at the university place it at #55 LEED Gold Certified. nationally for R&D funding; nearly three quarters of all R&D at UK is devoted to life sciences, making it the school’s strongest cluster. The UK Coldstream Research Campus is home to Though started in 1999 as HVLS (High Volume companies conducting a wide range of research activities, from pharmaceuticals to software. Low Speed), the company adopted the “Big Ass Fans” name 3 years later in a bold and Also, Lexington is home to a number of successful start-ups, such as Big Ass Fans, that highly successful marketing move. have flourished. This year, the city hosted the 2010 Creative Cities Summit. The company designs and manufactures Despite these positive features, some innovation indicators are rather low for Lexington. enormous ceiling fans, from 6 to 24 feet in Patent activity is not nearly as high as it should be for a city with a university the size of UK. diameter. Their fans have been installed During focus groups and interviews, community members repeatedly identified a large gap worldwide in all kinds of venues such as between talent and opportunities. The proper connection between the university and airports, zoos, equestrian centers, and entreppyqgygreneurs is one of many factors required for Lexington to truly leverage local innovation. restaurants. Big Ass Fans won the 2006 Other components include improved access to capital and expanding upon existing Kentucky Manufacturer of the Year and 2006 networking and mentorship opportunities, including In2Lex, Awesome Inc, Collexion, the World Trade Success Awards. Lexington Venture Club, and others.

Seed and venture capital is highly limited in Lexington, often forcing entrepreneurs to look for investors outside the area. Local entrepreneurs expressedexpressed many concerns over the environment for entrepreneurship; these concerns included a lack of mentorship for younger entrepreneurs and a local culture that does not put a value on creative culture. Advance Lexington Market Assessment | 36 Advance Lexington Entrepreneurship & Innovation Assets annual Tinkerhigh eventswhich Collexion – Bluegrass Angels special events. other Night Out,and In2Lex – Lexington VentureClub – Other Assets: Lexin The University of Kentucky’s ResearchCa Campus Coldstream Research experienced entrepreneurs, inv colleges cont schools and mobiletech. Internsfromlocal high creative individuals. space to Lexi performance spaceindowntown on as a in 2009 AwesomeInc wasfounded Awesome Inc labs, imaging facilities, and centers for ecological and agricultural research. cen engineering, andpharmaceutic UK is one ofthefewuniversities to hav Research Centers at the and anEmbassySuitesHotel. total. CurrentColdstr people about 1,000 of indus represent arange making itanideallocationforbusinesse is the majorthrust of researchonthe it dt t i t d t i t dditi I l h t d ti i lt dtdt h t f d T t l i dbi ti d l i t t b li t t t Th ld fi th d nnova thi dt t d iliti df t ers g ton’s downtown and en and ton’s downtown

an Consortium of about 60local entrepr ti d f on A collaborativeworkspacefo ac

an iliti d t – es ec Seed fundingfor small business start d h evo no l o t A networking groupfor entrepreneurs with tries frompharmaceutical University of Kentucky e gy d t . Mentorship is central tothe Mentorship In Awesome j I o o light individual creativity. al programtogetheron entors, and programmers. programmers. entors, and y thi n s convenient access to both I-64 and I-75,

a s dditi

an ngton, Awesome Inc rents work rents Inc ngton, Awesome UK campusandtherear d e atopmedicalcenter, agricultural, on r entrepreneurs andinnovators s. The companies at thiscampus s. companies The multi-purpose spacewithafocus o eam businessesincludeColdstreamLaborator t th mpus is located in close proximityto in is located mpus o er

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d are regular luncheons and5Across gatherings. t c seed stage acceleratorconcept,whichhas a c seed oo with regularget-togethersand

numerous . t o li ies, IBM, Exstream Software by HP,Exstream Software ies, IBM, s s whilelearningfrommore t b regular meetings,including Geeks u t i nc l u d e g ene ti cs

an d bi ome Market Assessment | 37 | Market Assessment di ca l Advance Lexington Venture Capital $300 $350 $400 $450 $100 $150 $200 $250 LEXINGTON AREA FUNDING VC ($MILLIONS), 1999-2009LEXINGTON • • 2003-2009 ($MILLIONS), FUNDING VC VENTURE CAPITAL FUNDING VENTURE CAPITAL FUNDING There has beenno VC activity in the TucsonData represents area for the Congressional 2003-2009. District(s) encapsulating the city. $50 $0 $10 $15 $20 $25 $30 $35 $40 * Data* represents Kentucky Congressional District 6. $0 $5 0320 0520 0720 2009 2008 2007 2006 2005 2004 2003 9920 0120 0320 0520 0720 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Boulder, CO Boulder, ington, KY Lex Kentucky TN ille, v Knox Source: PWC Money Tree Source: PWC Money Tree • • • • • available in Lexington. V enture Ca Knoxville both have a have Knoxville both activity most VCbyfar.and Lexington has the Of the benchmarks,Boulder Congressional District 6. deal peryear inKentucky one VC From therehas only 2006-2009, been well. locally as nationwide andthis issue was expressed made VCevenless accessible has The currenteconomicdownturn entrepreneurship. lack expressed the also members ventures. Community invest in high-risk or non-traditional investors are hesitantto in Lexington According tosomestakeholders, entrepreneurial talent. Lexington strugglestoretainlocal as constraint isaseriouschallenge area. available intheLexington This limited am over the business communityexpressedconcern and Many entrepreneurs n alVCdeals ann u al VCdeals ( y pp() ital ( VC . ) ount of VC funding of aculture isnotreadil very low number of number very low members ofthe Market Assessment | 38 | Market Assessment y

Advance Lexington Research & Development PER CAPITA R&D EXPENDITURES R&D BYAREA ACADEMIC CAPITA PER INSTITUTIONS, 2008 FY ACADEMIC R&D EXPENDITURES ACADEMIC BYAREA EXPENDITURES INSTITUTIONSR&D (MILLIONS), FY 2008 ACADEMIC R&D EXPENDITURES Bluegrass Area Bluegrass Bluegrass Area Bluegrass LitL A e ington Area Lex nxvilleArea v Knox nxvilleArea v Knox ex Tucson Area Tucson Boulder Area Tucson Area Tucson Boulder Area i ng t on A rea $0 0$,0 200$,0 $4,000 $3,000 $2,000 $1,000 $0 $100 $566 $1,001 $1,152 $200 1313 $1 , 313 $242.4 $261.1 $300 367 $336 $337.2 $400 . 7 $2,625 Source: National Science Foundation Source: National Science Foundation $500 $545.9 $600 • • • • investment intheLexingtonarea. and development(R&D) research There isasi Boulder andKnoxville R&D fundingpercapita than both However, theLexingtonareahasless Tennessee. Colorado at Boulder andtheUniversity of both theUniversity the schoolabove of placing funding, R&D receiving federal a ranked #55among the University In 2008, of Kentuckywas dollars. federal R&D receive Eastern KentuckyUniversity the University the of Kentuckyand Two institutions in the commercialmarket. often incubatedbefor where newtechnologiesaretestedand universities, through primarily flows development for researchand Funding g nificant amountof the BluegrassRegion, ll U.S. schools ll U.S. e theyemergeon . , Market Assessment | 39 | Market Assessment receive Advance Lexington Research & Development 1 000 $10 $20,000 $30,000 R&D EXPENDITURES BYBLUEGRASS EXPENDITURES INSTITUTION AREA R&D (THOUSANDS), 2008 FY ACADEMIC R&D EXPENDITURES % OF TOTAL EXPENDITURES BYSCIENCE EXPENDITURES 2008 FIELD, FY &ENGINEERING TOTAL % OF R&D EXPENDITURES AT THE UNIVERSITY OF KENTUCKY , 000 $0 Engineering 14.5% Engineering Social Sciences 2.8% Sciences Social Physical Sciences 2.6% Physical Eastern KY U. Kentucky U. KY Eastern $540 Math & Computer Sciences 1.9% & Computer Math Psychology 2.6% Psychology Source: National Science Foundation Other Sciences 1.7% Sciences Other Environmental Sciences 1.2%Environmental $336,669 Source: National Science Foundation Life Sciences 72.6% Sciences Life • • • sciences. in thelife spending majority ofitsR&D The Universit cam and scopeofprojects taking placeon and constraining,asit talent, attract top and achieve recognition specialization helps theuniversity to as positive both sciences positive is is both This concentration ofspendinginlife R&D dollars. other fieldreceives more than3%ofthe No spent inthefieldofengineering. are 5% 14 the fieldoflifesciences the University of K Over expenditures at 72% oftheR&D $540K on R&D. 2008. EasternKentuckyUniversity spent in expenditures million inR&D over $336 preeminent research The University of Kentuckyis the state’s p us. yyy of Kentuck entucky arespentin institution and had institution and limitsdiversity the . 14 , as y focuses the . Market Assessment | 40 | Market Assessment 5% are Advance Lexington Patents NUMBER OF PATENTS OF PER 10,000 ISSUED POPULATION, 2009 NUMBER PATENTS PATENTS UBRO AET SUD2005 PATENTS PATENTS OF OF ISSUED ISSUED NUMBER Knox v ille, TN ille, v Knox ington, KY Lex NOTE: Patent data is only available at the city level. 100 200 300 400 500 600 Boulder, CO Boulder, Tucson, AZ NOTE: Patent data is only available at the city level. 0 0520 0720 2009 2008 2007 2006 2005 Kentucky U.S. Lexington, KY Lexington, 01 02 30 25 20 15 10 5 0 1.1 , 2005 6.3 6.7 Tucson, AZ Tucson, - 2009 10.5 13.1 Knoxville, TN Source: US Patent andTrademark Office Source: US Patent andTrademark Office Boulder, CO 29.7 • • • communities. compared to the benchmark Patent activit commercialization. as abridgefromacademicresearchto including entrepreneurswhomayserve the largercommunity,Kentucky and e a lackresearch of connectivity between activity indicates patent level of This low benchmarks. has far fewerpatentsthanany ofthe ington Le per capita per capita When compared based inventors in 2009. 198 patentswereissuedtoLexington- ft i tt Uii f it i U tth i t ff or t s g o i n g yyg on inLexin

a t th e U g ton islow n i vers , Le Market Assessment | 41 | Market Assessment ity x ington o f What is Life Like in Lexington?

KEY FINDINGS: QUALITY OF LIFE “I have lived in Lexington my entire life. I love this town. I beli eve that we Lexington is regarded by residents as an excellent place to live. In addition to a low cost of need to update downtown and let the living, housing is affordable and commute times are short when compared to the nation, outside world know that Lexington is a despite residents’ concern over traffic congestion. The natural beauty of the surrounding great town to visit.” landscape can be enjoyed through hike-and-bike trails and there are on-going efforts to continue the revitalizationrevitalization of the downtown area, such as the Downtown Streetscapes - Community Survey Response project.

The city has a vibrant arts scene with a number of museums and performance venues. With the University of Kentucky’s men’s basketball team playing at Rupp Arena, sports fans will not be disappointed. There are also a number of great culinary offerings in the area.

In the heart of horse country, Lexington is home to Keeneland racetrack and sales complex where races are held in April and October. Lexington also hosts many special events and will host the 2010 Alltech World Equestrian Games.

One challenge for Lexington is the need for improved provision of public transportation. This issue was c itdited repea tdltedly in the community it survey as a barr ier to bthboth econom ic prospec ts and personal lifestyle preferences. City government is aware of the challenge and LexTran invested $5.4 million of stimulus funds in 2009 for buses, shelters, scheduling software and more.

Advance Lexington Market Assessment | 42 Advance Lexington Cost of Living COST OF LIVING BY EXPENSE, 2010(Q1) BYEXPENSE, LIVING OF COST COST OF LIVING OVERALL COST OF LIVING, 2010 OF (Q1) COST OVERALL COST OF LIVING 100 130 Note: 100is the national average cost of living e ington MSA Lex Knox v ille MSA ille v Knox 70 Tucson MSA oe 0 stentoa vrg oto iig*Boulder MSA Data Unavailable Note: 100is the national average cost of living Combined Cost fLving of Liv Lex ington-Fay ette KY Metro KY ette ington-Fay Lex 55 510125 100 75 50 25 0 rcre osn tlte Trans Utilities Housing Groceries *Boulder MSA Data Unavailable Tucson AZMetro 89.0 91.5 otto elhCr Misc. Health Care portation 96.8 Knox v ille TN Metro illeTN v Knox Source: ACCRA od/evices Goods/Serv Source: ACCR A • • • Lexin category is below the national average national the category isbelow Lexington’s indexfor each individual Lexington ranks in themiddle. benchmarks for which datais available, 100 is the national average.Of the where 5 cost oflivingis 91 The indexed average. living in theareais index of95indicates other costs. As an housing, utilities, transportation, and averages ingrocery,compare tonational they urban areasbyexamininghow composit identifies the The ACCRACost ofLivingIndex yy ggy ton is a ver ton is y affordablecit example, a composite 95% ofthenational that thecost of e costofliving in Market Assessment | 43 | Market Assessment . 5 where y . . Advance Lexington Housing & Rent $100,000 10000 $150 $200,000 $250,000 MEDIAN EXISTING SALES SINGLE-FAMILY PRICE, MEDIAN HOMES, 2010(Q1) MEDIAN EXISTING SALES EXISTING SINGLE-FAMILY PRICE, MEDIAN HOMES, 2007-2009 HISTORIC HOUSING PRICES HOUSING $50,000 Lex ington, KY MSA KY ington, Lex MSA TN ille, v Knox Boulder, COMSA Tucson, AZMSA , 000 $0 $147,500 South US $178,800 $0 0720 2009 2008 2007 $217,900 e ington,MSA KY Lex 10000 $100 , 000 $144,300 135,400 135,100 148,200 20000 $200 166,100 166,800 $169,400 , 000 South $196,600 30000 $300 , U.S. 000 $141,400 335,800 Source: NAR 40000 $400 $155,000 , 000 $172,100 Source: NAR • • • • for theU.S. and for theSouth than boththeaverage Housin t h ’ t i declined durin L Housing prices in Lexingtonhave U.S. th t the and South the prices forboth median housing prices have remainedbelow th O prices. housing affordableKnoxville hasmore Of the benchmarkcommunities,only MSA. in theLexington home was$135,400 a whole.From‘ as as steeplyintheU.S. not dropped where asU.S.pric 2.2% only by down sales priceswere existing salespriceforasingle-family For the first quarter of2010,themedian ver th pg ggp

e p

rices in Lexin pas t th g therecession, but have ree 08 to‘09,Lexington es fell by 12.5%. es fell y ears, g ton are lower ton are L ex Market Assessment | 44 | Market Assessment i n gt on ’ s

Advance Lexington Rent & Commute Times RENTAL RATES MEDIAN CONTRACT RENT, 2008 RENT, CONTRACT MEDIAN AVERAGE TRAVEL TIMES (IN MINUTES), 2008 TRAVEL AVERAGE TO WORK TIME TRAVEL AVERAGE Bluegrass Region Bluegrass Lex ington, KY ington, Lex TN ille, v Knox Boulder, CO Boulder, Tucson e ington, KY Lex Knox v ille, Tn ille, v Knox BldB CO Kentucky Tucson, AZ Tucson, ou Kentucky ld , er, AZ US CO US $ 0 01 02 30 25 20 15 10 5 0 $ 200 $ 400 $453 $519 $ 600 $578 $ 584 Source: American Community Survey $676 Source: American Community Survey 18 18 20 $ 20 800 22 22 $896 25 $ 1,000 • • • life. contribute toLexington’shigh qualityof A ffordable rentsandfastcommutes Lexington aregenerallyquite times in commute suggests that traffic members about congestion, data Despite concernsvoicedbycommunity 20 minutes. Lexingtonians’ averagedrive time is only minutes, is 25 U.S. work inthe time to While the average travel reasonable more affordable thanin Tucson affordable thanin Boulder andslightly are muchmore Rents inLexington average. it is much lowerthanthenational rent forKentucky,the median higher than Whilethisrateis per month. was $578 in 2008 rent forLexington The median . While the averagetravel Market Assessment | 45 | Market Assessment . Advance Lexington Crime 100 200 300 400 500 CRIME (RATE PER (RATE 100,000 RESIDENTS), 2008 CRIME VIOLENT CRIMES PER (RATE 100,000 RESIDENTS), 2008 CRIME CRIME RATE Note: Property Crime Data unavailable for Tucson, AZ 0 U.S Cities (Pop. 250K-500K) (Pop. Cities U.S manslaughter ratemanslaughter 4.3 nonnegligent Murder and Knox v ille, TN ille, v Knox KY ington, Lex Boulder, CO Boulder, Tucson, AZ 20 12 Kentucky . 0 e ington Lex ocberp ae obr rt Aga atedassault Aggrav rate Robbery rate rape Forcible 48.7 ,0 ,0 ,0 ,0 ,0 ,0 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2,584 Crime Property U.S. Cities (Pop. 250K-500K) (Pop. Cities U.S. 804 3,119 3,455 44.9 4,587 6,603 296 187.9 215 Violent Crime 632 3 6 334 Source: FBI Uniform Crime Report . 6 884 Source: FBI Uniform Crime Report 391.5 1,079 rate 472.3 • • • • • U.S. citiesof a si Crime ratesarelowerinLexin offense werenot followed. national guidelinesforreporting an not includedintheFBI’sbecause data Tucson statistics for propertycrimeare Crime statistics are have hi to sizes; largercities tend population throughout thereporthavevarying The benchmarksusedhereand population size and demographics. are cities comparisons between Crime rate than inthestat property crimearehi Both theratesofviolentcrimeand in mostcategoriesofviolentcrime. and 500,000, Lexingtonhas lower rates 250,000 between population cities with to ratesforallU.S. When compared li t d d t li b h t f comp g her ratesofcrime. li ca t e d byf e and the nation. e and milar sizeonaverage. self-reported and the self-reported and ac gher inLexington t ors

suc Market Assessment | 46 | Market Assessment g h ton than as

Advance Lexington Lifestyle & Cultural Amenities the Legacy Trailthe Legacy Construction of Lyric Theatre & Cultural Cultural Arts Center (opening October 2010) Lyric Theatre & SAMPLE OF LEXINGTON AREA MUSEUMS University of Kentucky Museum of Anthropology ofKentuckyMuseum University h t H Th University of Kentucky Art Museum ofKentuckyArt University International Museum of the Horse the of International Museum etcyMilitary History Museum Kentucky mrcnSdl os Museum American Saddle Horse e h ede-hte Museum The Headley-Whitney rnyvnasMra Gallery Transylvania’s Morlan Lexington Children’s Museum Lexington Children’s H Bluegrass Heritage Museum African American Museum Td il dd Li T M un ar t Hopewell Museum - y T M Ciil or o dd Li g an Ci nco v il l n W M H ar ouse M useum • • • • • athletic teams. numerous museumsandprestigious horse-racing, including premiere cultural amenities lifestyle and Lexin • April and October April and The track has tworacing seasons, in sales in 1935. complex thatwasfounded Keeneland is a thoroughbred racing and Broadway musicals. to comedyand ballet andopera and hosts a variety of productions,from Opera houseseats1,000 The Lexington downtown. Kentucky’s basketball teams,is located and thehomeofUniversity of Rupp sear sportscenter a 23,000 Arena, courses. 9 aquaticfacilities and twodisc golf Gorge and thecity features 25trails, and Lexington enjoysproximity River to Red Games. 2010 host the Alltech World Equestrian including equestrianevents. The city will Lexington hostsmanyspecial events September of 2010. in will open and this plan part of roadways. The nine-mileLegacy Trail is develops anetwork of“shared-use” Lexington’s GreenwayMaster Plan ggyg ton boasts man ton boasts . y outstandin Market Assessment | 47 | Market Assessment g

How Strong is Lexington’s Real Estate Market?

KEY FINDINGS: REAL ESTATE “I fully support downtown revita liza tion, and hope ththtat we can As a result of the national economic downturn, real estate development has significantly focus on ‘up not out’ in Lexington, but slowed in Lexington over the past three years. In terms of construction valuation, total a grocery store is critical to making projects dropped by over 37% between 2007 and 2009 and single family residential that happen.” construction was down over 51%. Office construction has also declined. - Community Survey Response The development review process itself was identified as problematic during focus groups and interviews. Streamlining the process would help push new development forward.

More evidence of slowed activity can be seen in the commercial vacancy rates which are up from previous years in both the suburban and CBD markets. However, slowed construction will contribute to increased occupancy as thethe national economy begins to turn around.

Vacant land is scarce in Lexington meaning that redevelopment and adaptive re-use will have to become the city’s dominant development modes.

Advance Lexington Market Assessment | 48 Advance Lexington Commercial Real Estate ukWrhue 30 $.0 40 14.80% Nei $4.00 Downtown $10.00 $4.50 $20.00 $15.00 $3.00 25.40% Bulk Warehouse 40.00% $19.00 $22.00 $18.00 New Construction(AAA) einlMls 3.0 7.0 5.0 0.00% $50.00 9.40% $75.00 $21.00 $30.00 $28.00 9.40% $15.00 Regional Malls Community PowerCenter $11.50 $15.00 $8.00 11.80% 16.30% R&D High Tech/ MftiM $16.00 $18.00 $17.00 $20.00 $16.00 $17.00 8.60% 10.50% (Secondary) Class B (Prime) Class A $15.00 $18.50 $16.00 $20.00 $13.50 $17.00 (Secondary) Class B (Prime) Class A New Construction(AAA) anu g hborhood Svc. Centers Svc. hborhood f ac t ur LEXINGTON REAL ESTATE – DOWNTOWN OFFICE SPACE 2009 DOWNTOWN OFFICESPACE ESTATE – REAL LEXINGTON LEXINGTON REAL ESTATE – SUBURBAN OFFICE SPACE 2009 OFFICE SPACE SUBURBAN ESTATE – REAL LEXINGTON i n Rn/FY)LowHigh Effective (Rent/SF/YR) Avg. Vacancy LowHigh Effective (Rent/SF/YR) Avg. Vacancy LowHigh Effective (Rent/SF/YR) Avg. Vacancy LowHigh Effective (Rent/SF/YR) Avg. Vacancy g LEXINGTON REAL ESTATE – INDUSTRIAL SPACE2009 INDUSTRIAL REAL ESTATE – LEXINGTON LEXINGTON

1.0$10 $17.00 11.70% $11.00 $21.00 REAL ESTATE 375 $3 N/A . 75 475 $4 – N/A RETAIL SPACE 2009 RETAIL SPACE . 75 425 $4 N/A . 25 ore NAI Source: ore NAI Source: NAI Source: NAI Source: 50% 7 . N/A 50% Market Assessment | 49 | Market Assessment Advance Lexington Developable Land & Building Permits adi nutilPrs 1500 $140,000 $850,000 $125,000 $425,000 Parks Industrial Land in Land Parks in Office qt(ilos . . . -44.42% 1.5 -51.41% 1.6 $71.9 -27.11% 2.6 $94.1 $148.1 7.7 -37.24% SqFt (millions) Construction ($mil) 8.3 $385.9 10.5 $461.3 $614.9 SqFt (millions) Construction ($mil) $1,200,000 Permits $500,000 $575,000 $125,000 Residential $40,000 Land Retail/Commercial Non-park Land - Office/Industrial $135,000 emt 7 5 5 -43.38% 552 559 975 Permits LEXINGTON EIGO ULIGPRIS–SINGLE FAMILY RESIDENTIAL – BUILDING PERMITS LEXINGTON REAL ESTATE PieAr)LowHigh (Price/Acre) EIGO ULIGPRIS–TOTAL – BUILDINGPERMITS LEXINGTON 605 6 0720 09‘07-'09 Change 2009 2008 2007 ‘07-'09Change 2009 2008 2007 , 605 – DEVELOPMENT LAND 2009 DEVELOPMENT LAND 234 5 , 234 Source: LFUCG LFUCG Division of BuildingInspection Source: LFUCG Division of BuildingInspection Source: 070 5 , 070 Source: NAI - 324% 23 . 24% Market Assessment | 50 | Market Assessment Workforce Assessment

KEY FINDINGS: WORKFORCE ASSESSMENT

Effective workforce development programs at both the K-12 and post-secondary level are a key components of a solid regional economy. Regions with an established pipeline of workers with both advanced degrees in science, technology, engineering and math programs, as well as technical training in specific trades provide a deep talent base upon which to recruit and nurture high-impact and competitive industries.

Fayette County Public Schools’ two applied technology center magnet programs, which offer training in technology, graphics, and electronics to secondary students are an excellent local example of strong K-12 workforce development programs which educate future generations and create awareness of the variety of occupational opportunities that exitist.

The majority of employers who responded to the business survey conducted for this report were “very satisfied” or “satisfied” with all workforce factors in the area, including training and skills. However, a significant number of employers expressed dissatisfaction with facets of workforce qqyuality.

The charts on the following page show the top occupations in the Lexington MSA in terms of both total employment as well as regional cluster concentration as compared to the U.S.

The next report will explore in more depth the specific occupational opportunities and gaps that aligggn with the recommended target industries to be included in the re port. It will also identify existing workforce development and education programs and possible training gaps in the Lexington area.

Advance Lexington Market Assessment | 51 Advance Lexington Top Occupations fiecek,gnrl30005 2,2 2,3 0. $26,830 $26,820 0.56 3,050 and medical, Secretaries, exceptlegal, general Office clerks, Janitors and and cleaners, except maids euiygad ,2 .4$100$580-22.9% $25,840 12.8% $21,020 -21.4% 1.34 Moderate-term on-the-job training $42,340 10.3% 2,620 $34,870 $28,280 -11.1% $30,920 Moderate-term on-the-job training Short-term on-the-job training 1.14 $33,800 0.67 1.11 0.0% Short-term on-the-job training -0.8% $30,430 3,180 2,790 3.5% 8.6% 2,710 -4.7% Security guards 0.99 general Maintenanceworkers, andrepair $27,630 -6.8% $24,690 degree Associate representatives Customer service 3,420 $30,220 $23,590 execu $18,880 Short-term on-the-job training $17,680 22.2% 1.89 - 0.94 $39, assistants $23, 8.4% Executive secretaries and administrative -2.1% $19,580 0.85 4,000 housekeeping cleaners $23,460 4,100 1.17 -3.9% $17,390 $65,130 $17, 5,650 Generaland operations managers 1.33 $25,050 3,650 $63,800 $15,580 clerks 1.36 andauditing accounting Bookkeeping $24,120 4,650 heavy and tractor-trailer Truck drivers, 1.39 1.24 6,030 Team assemblers 0.99 movers, hand 6,590 6,250 material and Laborersstock, andfreight, 8,160 and order Stock clerks fillers Cashiers Waiters and waitresses food fast workers, including serving Combinedpreparation food and Registered nurses Retail salespersons ti ve , accounting Occupation , andauditing Employed (2008) 790 2 3,190 ,0 .4$730$0,7 2.%-0.1% -23.6% $107,970 $87,340 1.04 3,300 , 790 # TOP OCCUPATIONS TOTAL IN LEXINGTON BY EMPLOYMENT MSA Concentration Occupational in MSA 0800 0.80 . 80 Mean Wa 2 740 $26 $20,990 in MSA , 0 3,2 .%1.%Short-term on-the-job training 13.0% 2.2% $38,720 600 740 g e Mean Wa 3,3 1.%1.%Moderate-term on-the-job training Moderate-term on-the-job training 10.9% 17.7% -15.2% -12.4% $35,630 $31,790 2 990 $29 $23,500 in U.S. , 4 .%72 Short-term on-the-job training 7.2% Short-term on-the-job training 1.4% 14.6% 140 -11.7% 400 990 g e Wa Differential - - 26 .%Short-term on-the-job training 6.4% 12.6% 12.0% 22% 12 %1.%Short-term on-the-job training 11.9% 0% . 2% g e 10-YR U.S. Projection Growth 42 Short-term on-the-job training 14.2% 4.4% 46%4 . 6% dt Md M Bachelor’s or higher degree, plus o Short Work experience in a related a Work experience in d era Source: BLSOccu Education & Training Education & - t term on e- work experience Market Assessment | 52 | Market Assessment t erm occupation

on- pppy - ational ational Em the th - job training e- jbj ii t o p lo b t y ment Statistics ment ra i n i n g Advance Lexington Most Concentrated Occupations ilrgt 2 .5$760$0001.%14 Long-term on-the-job training 1.4% Moderate-term on-the-job training 13.2% -4.4% $50,030 -21.1% Bachelor’s degree $57,660 $29,270 $24,180 2.55 17.6% 2.53 -32.9% 220 degree Associate degree Associate Long-term on-the-job training $40,900 degree Bachelor’s 690 -8.0% $30,770 13.3% 35.8% and tenders -3.7% 20.3% operators, setters, Paper goodsmachine -20.0% 2.67 -21.0% Moderate-term on-the-job training setters, operators, tenders and Short-term on-the-job training $48,180 -15.8% machine Molding, coremaking, andcasting $42,910 $29,850 12.5% Millwrights 360 $46,440 20.7% $72,900 $35,760 5.9% $24,670 -32.6% $62,970 -5.0% 3.00 -31.1% 2.77 $56,120 2.85 $21,550 3.05 $62,400 il i Mt M $42,320 480 300 $20,530 Biological technicians 420 $47,580 technicians science and social Life, physical, 660 4.06 $30, and technicians Veterinary technologists 3.63 10.99 products farm Purchasing agents &buyers &buyers 150 ticke attendants, and lobby Ushers, 3.31 860 70 makers Tool anddie Database administrators 270 photogrammetrists and Cartographers other workers, all workers andplastic Metal caretakers Nonfarm animal other workers, all equipment Media andcommunication managers Farm, ranch, and other agricultural Chemical engineers 150 2.59 $86,660 $88,760 -2.4% -2.1% Bachelor’s degree Bachelor’s Firstprofessional degree 33.0% -2.1% -1.5% -2.4% $89,450 $88,760 $88,110 $86,660 2.62 2.59 260 150 a Pesticide handlers, sprayers, and Chemical engineers Veterinarians Anthropologists and archeologists 50 5.12 $49,440 $57,300 -15.9% 28.1% Master’s degree Master’s 28.1% -15.9% $57,300 $49,440 5.12 50 Anthropologists and archeologists pg pp a t licators, ve er i a l s

en gi neers g tto 2 .6$240$12038 77 Moderate-term on-the- 17.7% 3.8% $31,210 $32,430 2.56 120 etation OtiO ccupa ti on , farmproducts t takers 580 2.91 $19,180 $19,100 0.4% 13.7% Short-term Short-term on-the-job training 13.7% 0.4% $19,100 $19,180 2.91 580 t takers ldEl E MOST CONCENTRATEDMOST OCCUPATIONS IN mp (2008) 480 120 70 70 # l o y e d CttiC Occupational oncen in MSA 2472 2662 2882 3213 . . . . 47 66 88 21 t ra ti on

Mean Wage 3 650 $32 450 $73 610 $44 in MSA N/A , , , 8 3,7 1.%-.%Moderate-term on-the-job training -7.4% -14.8% $35,570 980 650 450 610 THE LEXINGTON MSA VERSUSU.S. Mean Wage 3 010 $34 200 $84 760 $58 980 $57 in U.S. , , , , 010 200 760 980 Differential - - Wage - 46% 14 0% 30 42%4 N/A . . . 2% 6% 0% 10-YR U.S. Projection GthG - 68% 26 - 15% 21 93%9 row 11%1 . . 3% . 1% . 8% 5% th Moderate Bachelor’s or higher, work plus Long Source: BLS Occupational Employment Statistics Employment Source: BLS Occupational dt &Tii i T & ti Ed - Bhl’B d sdegree Bachelor term on term uca ac - Market Assessment | 53 | Market Assessment term on term experience h ti e on l or - & T & the ’ ’ s s degree - d the - e job training ra g - jjg job training ree i ob trainin n i n g g Project Next Steps

2010 LEXINGTON INDUSTRY CONCENTRATION: TEN TRANSITION TO TARGET INDUSTRY OPPORTUNITIES STRONGEST INDUSTRIES (BY LOCATION QUOTIENT) Industry clusters are highly integrated groups of businesses with strong vertical and horizontal Industry Employees Businesses LQ linkages. “Vertical linkages include the suppliers and customers in a region that combine to create a Computer Equipment 7,439 13 27.10 competitive business model, whereas “horizontal” linkages include the relationships between Higher Ed. & Research 9,172 149 2.68 competing companies-which often recruit from the same labor pool of talent-and supporting public institutions. Clusters often mature when businesses expand their relationships with existing supplier Eat/Drink 14,029 546 1.65 firms in a region. As the clusters grow, addiadditionaltional supplier firms araree attracted to the region, Energy & Nat. Resources 956 40 1431.43 eventually creating a well-diversified “critical mass” of production, labor, and information. Agriculture 4,050 581 1.28 Health Services 18,401 1,157 1.25 AngelouEconomics has defined 35 standard industry clusters to categorize businesses according to their final product and how these products are related to each other and integrated along the vertical Consumer Goods 1,378 52 1.20 supply chain. To access the strength of a cluster in a regional economy, AngelouEconomics has Chemicals & Plastics 2,177 56 1.19 calculated location factors (or quotients) to each cluster. These factors are calculated by comparing General Services 9,583 1,114 1.14 the cluster’s share of total local employment to the cluster’s national share. This location quotient will Retail 20,891 1,624 1.10 yield a value generally between 0 and 2, where a result of “1” demonstrates that the cluster Source: Duns & Bradstreet commands an average (expected) share of the local economy. Cluster location factors greater than 2 indicate a strong cluster agglomeration, while those less than .5 indicate extremely weak clusters. Location QQ(Q)uotient (LQ) What industries are currently strong in the Lexington-Fayette? A calculated ratio between the local economy and the national economy that indicates The chart to the right shows the top ten clusters in Lexington while the chart on the following page industry concentration. lists the top fifteen industries compared with cluster strength in the Bluegrass Region and Kentucky. LQ =1.0 indicates average concentration Importantly, the following analysis is intended only to provide an industry baseline for which LQ > 2.0 indicates a strong cluster competitiv eness can be measu rreded in the regional and global economies. In the next report – the LQ < 0.5 indicates a weak cluster Target Industry Report – the project team will compare these industry clusters to regional and national cluster trends – thus making them potential economic development targets. Advance Lexington Market Assessment | 54 Advance Lexington Industry Cluster Strengths TOP 15 LEXINGTON 15TOP Mass Media (2,297) Mass Media (4,237) Enterprises Civic (874) Electronics (10,437) Construction & Housing (1,423) Biotechnology Retail (9,583) General Services (2,177) Plastics & Chemicals 378) (1 Goods Consumer Goods (1 (18,401) Services Health (4,050) Agriculture (956) Resources Nat. & Energy (14,029) Eat/Drink (9,172) Research & Ed. Higher (7,439) Equipment Computer (Lexington-Fayette Employment) (Lexington-Fayette ( 20,981 ) Cluster , 378) - FAYETTE INDUSTRY CLUSTERS, 2010 (Q3) Lexington- Fayette 27.10 1.14 1.19 1201 1.25 1.28 0.88 0.97 0.98 1.01 1.01 1.10 1.43 1.65 2.68 . 20 Bluegrass Bluegrass Region 15.18 1.00 1.38 1761 0.97 1.43 0.69 0.97 0.63 0.92 1.07 1.04 0.94 1.34 2.41 . 76 Kentucky 2.28 1.17 1.00 2.84 0.98 1.04 0.48 0.94 0.57 1.13 0.98 1.75 0990 1.09 1.07 . 99 .010 .03.00 2.00 1.00 0.00 Cluster LocationQuotient Weak 0.00 Cluster Strength etucky Kent Bluegrass Region Lexin Average 1.00 ggy ton-Fa Source: Dun andBradstreet Market Assessment | 55 | Market Assessment y tt et St 2.00 e ron g Appendix A

APPROACH AND METHODOLOGY

The Market Assessment evaluates the current state of affairs in Lexington in areas that are most critical to business and industry growth and job creation. Using data that was provided by the Commerce Lexington, regional partners, or collected independently by AngelouEconomics, this report allows us to take a step back and evaluate trends, data, and businesses’ and residents’ perceptions of the community.

This report assesses the city’it ’s current economi c situati on and the trend s ththtat have shaped it. Specifically, we evaluate its readiness to attract and direct future economic development. We analyze the community in a range of economic and demographic variables by comparing it against a group of national benchmark communities.

AnggyqqelouEconomics used a variety of sources to collect the quantitative and qualitative information used in our analysis. To begin, the consulting team collected previous studies and plans developed for Lexington.

Quantitative data was collected from national and state sources, including the U.S. Bureau of Labor Statistics, the U.S. Census, Decision Data Resources, the National Science Foundation, the Internal Revenue Service and numerous private sector soursourcesces. AngelouEconomics also gathered qualitative data through numerous focus groups, one-on-one interviews, and community tours.

Two surveys were conducted to provide further insight into the economy of Lexington; one survey was aimed at area employers, the other was intended for community residents.

In order to gauge where Lexington stands relative to other nationally competitive communities, this report assesses its performance against a number of benchmark communities selected based on similar size or economic characteristics. Advance Lexington Market Assessment | 56 Appendix B

REGIONAL BENCHMARK DATA

In addition to the national benchmarks originally chosen for this report, certain regional benchmarks were identified by the Steering Committee as being of particular interest. These regional benchmarks are Louisville, KY MSA, Cincinnati, OH MSA, and Nashville, TN MSA. Because the data on the following pages is at the MSA level (unless otherwise noted), it will differ from data presented in the earlier sections of the report which are at the city level.

Advance Lexington Market Assessment | 57 Advance Lexington Regional Benchmark Data einAe3. 733. 683. 37.1 13.1% 37.9 25.9% 27.1% 13.5% 14.0% 36.8 26.5% 11.2% 27.0% 13.3% 26.5% 28.7% 38.5 13.3% 7.5% 13.0% 28.0% 19.4% 27.7% 26.6% 6.2% 12.7% 15.0% 12.5% 37.3 20.2% 18.4% 26.6% 6.3% 26.5% 19.4% 29.5% 14.1% 19.3% 11.4% 36.1 13.6% 25.7% 29.3% 7.4% 24.3% 14.3% 20.8% 9.9 12.5% 29.9% 22.5% 7.1% 18.5% Median Age 10.2 65+ 11.9% 19.0% 64 45 to 23.4% 44 25 to 33.3% 7.1% 24 15 to 9.2 19.9% 0 to14 42.9% 17.1% 12.7% Source: DDR Age Distribution, 2009 51.0% 9.9 15.9% U.S. Higher Bachelor or 19.2% 20.0% Associate Degree 10.2 Some College Kentucky GraduateHigh School Diploma No HS Nashville, TN MSA 17.7% KY MSA Louisville, 24.2% 2, Cincinnati, OH MSA Lexington, 8.1 KY MSA Source: DDR Educational Attainment,2009 470,849 35.1% MedianHousehold Income Growth('90-'09) Labor Force 2010)* (Apr. Unemployment Rate DDR BLS Estimate) Population(2009 BLS PopulationGrowth('90-'09) Census/DDR Census Source(s) AAt D n2-4AeGop(09 93 65 66 87 70 27.1% 28.0% 27.0% 20.2% 28.7% 29.5% 26.6% 24.3% 26.5% 29.9% 29.3% 33.3% % in25-44 Age Group (2009) % Bachelor’sDegree + (2009) DDR DDR t -A- A GGlance l a n ce eigo,K S icnai HMALusil,K S ahil,T S etcyU.S. Kentucky Nashville, TN MSA KY MSA Louisville, Cincinnati, OH MSA Lexington, KY MSA eigo,K S icnai HMALusil,K S ahil,T S etcyU.S. Kentucky Nashville, TN MSA KY MSA Louisville, Cincinnati, OH MSA Lexington, KY MSA 19.3% ( 2009 ) 71% 27 . 1% 20.3% $ 52,880 27% 32 . 7% 20.0% $ 7,9 ,5,7 ,8,6 ,1,1 307,006,550 4,314,113 1,582,264 1,258,577 171,896 57,738 51% 35 . 1% 20.3% $ 52,415 14% 31 19.6% . 4% $ 55,965 59% 35 20.0% . 9% 4,8 $53,684 $43,083 Market Assessment | 58 | Market Assessment 00% 30 . 0% Advance Lexington Regional Benchmark Data etcy37415549457 99 469 112 191,933 92 559 185,244 505 117 182,928 90 558 25.7% 471 196,437 135 157,741 588 102 26.7% 377 139 $876 615 68 121 29.9% $876 $731 25.6% 514 $855 $720 $818 $702 $843 $790 $782 $677 $845 $781 $757 $653 $822 $772 $726 21.2% $638 $789 $744 U.S. $707 $613 $745 14.0% Kentucky 32.1% $714 Nashville, TN 14.5% $697 $26,485 $594 $719 20.2% Louisville, KY 11.9% 29.3% $701 $53,684 Cincinnati, OH 20.7% $693 $21,557 15.0% $577 KY Lexington 24.5% $666 $43,083 17.3% CITY (not MSA) $669 34.9% $25,664 $645 15.0% Source: Patents andTrademark Office U.S. $649 $55,965 18.9% U.S. Patents 10.5% 19.1% $629 $24,318 33.3% 14.9% $52,415 U.S. 20.8% 22.7% 11.9% Kentucky Nashville, TN MSA $26,249 Louisville, KY MSA 34.1% MSA OH Cincinnati $57,738 14.2% 18.7% 10.3% 20.3% $26,788 Source: BLS 32.1% $52,880 Average Weekly Wages 14.2% 21.2% 12.2% Per Capita Income Income Median HH $100K+ $99K $50K to $49K $35K to 34K $15K to $14K $0 to Source: DDR Income Distribution, 2009 eigo,K S 61$4 65$9 75$2 76$7 7725.1% $777 $770 $756 $729 $705 $693 $665 $645 $621 MSA Lexington, KY , , KY OH MSA OH eigo,K S icnai HMALusil,K S ahil,T S etcyU.S. Kentucky Nashville, TN MSA KY MSA Louisville, Cincinnati, OH MSA Lexington, KY MSA $683 0120 0320 0520 0720 09wage growth‘01-’09 2009 2008 2007 2006 2005 2004 2003 2002 2001 $703 0520 0720 2009 2008 2007 2006 2005 157 $722 195 $753 $776 232 $797 229 $826 198 $842 $846 Market Assessment | 59 | Market Assessment 39% 23 . 9% Advance Lexington Regional Benchmark Data elhae(.7)9. 128. 91.5 80.9 70.4 92.7 103.1 87.3 101.7 76.9 98.2 92.0 91.2 106.6 83.3 102.8 95.2 91.7 90.5 96.2 90.9 93.2 100,000 per Inhabitants Offenses Number of Rate= Source: FBI Uniform Crime Report Crime Rates, 2008 Lexington-Fayette, KY Misc. Goods and (31.99%) Services Healthcare (4.07%) Transportation (11.98%) Utilites (10.02%) Housing (28.99%) 95%) Grocery(12 Items MSA Source: ACCRA CtC f Lii opst ne 10)9. 378. 88.3 87.7 TN Nashville-Franklin, 93.7 KY Louisville, OH Cincinnati, 91.5 KY Lexington, Composite Index(100%) Urban Area Murder andnonnegligent os Aggravated assault Motor vehicle theft Motor vehicle t o Property crime manslaughter Forcible rape Larceny-theft Violent crime f Li Robbery Burglary v i n g . 95%) fofne nw 8 ,0 ,1 ,5 ,6 026956,846 90,226 314.7 6,588,873 643.6 7,667 2,222,196 401,075 151,765 2,167.0 730.8 834,885 2,257 179.6 9,767,915 73,808 89,000 2,860.8 441,855 274.6 66,208 28,839 1,082.5 643,066 3,212.5 2,619 46,912 6,289 145.3 29.3 374.8 23,764 472.3 1,728.8 6,326 4,586.9 110,314 675.5 7,036 334.6 1,606 19,523 44.9 415.9 4,004 3,946.3 1,408 32,347 7,278 164.8 2,583.9 1,050.5 5,643 12,328 3,100.5 482.9 587 93.8 2,384 301 29,420 6,330 33.0 5,371.6 115.8 937.1 2,253 3,706.5 6,878 1,762 20,264 Rate 208.5 395.9 4,672.2 220 offenses of known # 1,903.1 2,259 50.0 357.8 1,443 Rate 244.3 offenses of known # 6,092.5 2,419 9,724 279.8 Rate 802.6 433.8 269 34.9 offenses of known # 1,102 Rate 3,454.7 727.3 529 offenses of known # Rate 391.5 80.9 137 offenses of known # Rate 187.9 offenses of known # Rate 48.7 offenses of known # fofne nw 27 17 9 ,8 16,272 1,681 5.4 198 12.0 1,382,012 121,090 454.5 76 4.6 863.7 12,646 71 12.6 8,404 296.2 73 4,306 11.3 1,395.6 4,204 683.8 21.9 12 1,264.0 1,780 Rate 4.3 offenses of known # Rate 632.4 offenses of known # eigo,K icnai H oivle Y ahil,T Knuk Pp20-0K U.S. 250K-500K) (Pop Kentucky TN Nashville, KY Louisville, OH Cincinnati, Lexington, KY 50 85 . 0 Cincinnati-Middletown, OH-KY-IN Louisville, KY-IN 60 96 . 0 08 80 . 8 Nashville-Davidson- Murfreesboro, TN 25 92 U.S. Cities . 5 Market Assessment | 60 | Market Assessment Advance Lexington Regional Benchmark Data & xedtrsPrCpt 76$7 19$304 1,556,368 $119 1,249,739 $172 2,158,643 464,042 $726 336,669,000 Nashville, TN MSA KY MSA Louisville, Cincinnati, OH MSA Capita R&D Expenditures Per Lexington, KY MSA Population 2008 MSA R&D Expenditures R&D Expenditures (in Thousands) Foundation,Bureau Census U.S. Science Source: National DevelopmentResearch & Lexington, KY MSA Lexington, KY 3,6 7,5 4,3 473,305 148,936 370,757 336,669 Cincinnati, OH MSA Cincinnati, OH 7,5,0 4,3,0 473,305,000 148,936,000 370,757,000 Louisville, KY MSA Nashville, TN MSA Market Assessment | 61 | Market Assessment Appendix C

SURVEY RESULTS

As part of the data collection process, two surveys were posted on the project’s website to glean insight from Lexington community members on topics related to economic development One survey was direct to community members, the other was for employers. The following pages present the survey responses of the community and business surveys. The community survey had 752 responses and the business survey had 278.

Advance Lexington Market Assessment | 62 Advance Lexington Community Survey Results Market Assessment | 63 | Market Assessment Advance Lexington Community Survey Results Cost of living (i.e. housing, transportation, food) Cost of living transportation, (i.e. housing, Image of Lexington as a place forbusiness Image ofLexington Image of Lexington as a placetolive Image ofLexington Community colleges / universities High speed internetconnectivity Educational systemsEducational (K-12) High paying job options job High paying Entertainment / Entertainment events Public transportation Drive time to work to Drive time Highway access Job availability Arts / culture Arts / Recreation Healthcare Crime rate Climate Market Assessment | 64 | Market Assessment Advance Lexington Community Survey Results Transportation access Transportation (close to highways, easeof getting Higher Education ( Higher Education Close proximity to recreational opportunities recreational to Close proximity Community Educational systemsEducational (K-12) Other (pleasespecify) College / Universities) Entrepreneurial talent Business leadership rmpaet place) to place from Community pride Skilled workforce Skilled

Employer base place Natural beauty Quality of life Affordability

to Climate

place) Market Assessment | 65 | Market Assessment Advance Lexington Community Survey Results Improved transportation system (public (public system transportation Improved programs transportation, roads, highways, rail rail highways, roads, transportation, Community Colleges/university entertainment options entertainment Availability of of Availability retail / restaurant / restaurant and air) Market Assessment | 66 | Market Assessment Advance Lexington Business Survey Results Wholesale / transportation / warehousing / transportation Wholesale / Legal / accounting / engineering services accounting / / Legal Media / processing / computer systems design) Information technologydata (software/ ppg Arts / entertainment / recreation entertainment / Arts / ublishin Scientific / technical services Scientific / g Other / telecommunications / Aviation / aerospace Aviation / Finance / insurance Finance / Renewable energy ppy) p (p Health services Manufacturing lease s Construction Government Retail trade Real estate Agriculture Education Non-profit Utilities Equine p ecif y) Market Assessment | 67 | Market Assessment Advance Lexington Business Survey Results Market Assessment | 68 | Market Assessment Advance Lexington Business Survey Results Cost of doing business (spec doing business Cost of Overall qualityregion's transportation r of (e.g. Availability of specialized facilities andla Availability facilities specialized of QualityR&D of collaborati Effectiveness of local loan / grant taxin Effectiveness help of programsto st ifically the cost of real estate, Greater LexingtonGreater overallpl asa Availab on between businesses and college businesses and on between Availab ility of capita ility of i i tldt t ) iti t l ti d l lt ( lif f lit Q ua oads, air transport, public transportation and railroads) f ift t t t th f ti Eff lit ility wi workers of y o ec f ti

veness o lif boratories for product testing and development testing product boratories for e l from venture capital firms or angel investors angel investors or firms capital venture l from Quality colleges andof four-year universities Qualityand technicalcollegescommunity of ( centives (for new or new centives (for e.g. cu insurance, wages, ut insurance, wages, Qualitycommunications of infrastructure f programs artup businesses small businesses / lt ura th the skills skills the th yourbusiness requires ace for yourbusiness to succeed l an d recrea th a expanding businesses) t / university researchers i K f lit Q suppor ua ilities, and permitting) ilities, and ti lit ona y o Level of taxationLevel of t l en f oppor

K Cost of living Cost of - t repreneurs 2hl h 12 sc t un h iti oo es l s ) *The lowerrating, the the average

higher the level of satisfaction Market Assessment | 69 | Market Assessment Advance Lexington Business Survey Results Market Assessment | 70 | Market Assessment Advance Lexington Business Survey Results Market Assessment | 71 | Market Assessment Appendix D

PHOTO CREDITS

Cover Page – Lexington, KY Convention & Visitors Bureau website Table of Contents – Pixdaus website Introduction – Commerce Lexington website Executive Summary – Commerce Lexington website SWOT Analysis – Lexington, KY Convention & Visitors Bureau website The Economic Downturn – TruckTruth website Regional Connections – Kentucky Horse Farms and Equestrian Real Estate Blog Market Assessment 1 – Big Ass Fans corporate website Market Assessment 2 – Lexington, KY Convention & Visitors Bureau website Market Assessment 3 – Commerce Lexington website Market Assessment 4 – Coldstream UK Research Campus website Market Assessment 5 – Commerce Lexington website Lifestyle & Cultural Amenities – Lexington Herald Leader website Market Assessment 6 – Lexington Kentucky Travel website Workforce Assessment – Bluegrass Community & Technical College website Project Next Steps – Commerce Lexington website Appendix – Commerce Lexington website

Advance Lexington Market Assessment | 72 Project Team

AngelouEconomics Angelos Angelou Principal Executive Officer

Steve Vierck, CEcD President, Economic Development

AngelouEconomics partners with client communities and regions across the United States Chris Carucci and abroad to candidly assess current economic development realities and identify PjProject Manager opportunities. Our goal is to leverage the unique strengths of each region to provide new, strategic direction for economic development. As a result, AngelouEconomics’ clients are Meredith Bossin able to diversify their economies, expand job opportunities and investment, foster Associate Project Manager entrepreneurial growth, better prepare their workforce, and attract ‘new economy’ companies.

Advance Lexington Market Assessment | 73