August 16, 2017
AggMan understands that the aggregates business is comprised of local businesses throughout the nation. As such, we are focused on providing insights into these local markets, as well as national markets, in print and online.
We contacted Nicholas S. Rodgers, executive director of the Kentucky Crushed Stone Association (KyCSA), who was kind enough to give us his accounting of what’s happening with the aggregates industry in the state of Kentucky.
1) How would you characterize the state of the aggregates market in Kentucky?
2) How is Kentucky addressing transportation funding?
Rodgers: Revenues to maintain, enhance, improve, and build Kentucky’s roads and bridges come from a variety of sources. However, the largest contributor to Kentucky’s Road Fund is the revenue derived from the motor fuels tax. Kentucky’s motor fuels tax is variable, meaning it rises, falls, or remains at the same level based on the average wholesale price of fuel. The national decline in the average wholesale gas price of motor fuels resulted in a $200 million recurring annual loss for Kentucky’s Road Fund. With more fuel efficient vehicles on the road buying less gasoline, without a substantial funding increase, the chances of Kentucky continuing to see revenue declines is pretty good.In late June, Kentucky’s Speaker of the House, Jeff Hoover (R-Jamestown, KY) announced a Working Group on Kentucky’s Transportation Infrastructure consisting of nine members from the Kentucky House of Representatives. The bipartisan group is charged with ensuring Kentucky’s transportation infrastructure is safe, effective, and able to support the state’s business and jobs growth, particularly in the fast-growing manufacturing sector.
The Kentucky Crushed Stone Association has partnered with nearly 24 other organizations to form the Kentucky Infrastructure Coalition (KIC). KIC’s partners include manufacturers, farmers, engineers, local leaders, and more than 40,000 transportation workers who understand that safe, reliable, efficient transportation is essential to Kentucky’s economy. The Coalition supports long-term, sustainable funding that provides adequate revenues for all modes of transportation so Kentucky can maintain the infrastructure we have today and build what we need for our future. The coalition is working with the Kentucky General Assembly and Kentucky Transportation Cabinet to ensure the Commonwealth of Kentucky has adequate transportation funding
3) What are the big opportunities for producers in Kentucky (state projects, commercial construction, etc.)?
Rodgers: The Kentucky Transportation Cabinet, through its new prioritization formula (similar to other state models), Strategic Highway Investment Formula for Tomorrow (SHIFT), identifies 70 projects of statewide significance that need $7.8 billion in funding. This is in addition to the list of 1,100 other regional projects identified as needed. Both the significant statewide and regional projects would have to compete for the current $2.6 billion in funds — leaving thousands of unmet needs across the state unless something long term and sustainable occurs. Without adequate funding, a large portion of these state projects will be on hold until the funding is available. One of the largest projects facing the Kentucky Transportation Cabinet is the replacement of the Brent Spence Bridge in Northern Kentucky/Cincinnati. This 50 year-old bridge is functionally obsolete and carries more than twice the volume of traffic, including 4 percent of the nations gross domestic product for which it was designed.Auto manufacturers like Toyota, Ford, and General Motors continue to reinvest and expand their infrastructure, which helps support the aggregate industry.
Two major corporations announced major investments in Kentucky. Amazon announced earlier this year that they would be investing $1.5 billion in another hub near the Cincinnati/Northern Kentucky airport in Hebron. This new plant will add 2,700 jobs to that area of the state. Braidy Industries announced in April that they were going to invest $1.3 billion to build an auto body sheet and aerospace plate aluminum rolling mill in Green County. This new plant will create 550 jobs for this area. Both of these announcements were positive for the Kentucky aggregate industry.Kentucky’s signature industry, bourbon, continues to expand as the demand continues to increase for these products. Many of these distilleries continue to make infrastructure improvements by expanding warehouses for their products as they plan for future growth. The stone industry stands ready to support both the state of Kentucky and the private sector in making these improvements.
4) What are the big obstacles for producers in Kentucky (legislation, neighborhood groups, etc.)Rodgers: We are very similar to other states in regard to our challenges with funding being the number one issue. Kentucky faces a significant shortage in available funds to maintain our current infrastructure. Kentucky’s Transportation Cabinet Secretary has stated that there is a maintenance backlog of more than $1 billion, and that number grows each year. Additionally, there are more than 1,100 structurally deficient bridges in the state that require significant maintenance to meet safety standards, and there are currently 70 closed bridges around the state. Mounting maintenance needs combined with ever-growing construction needs requires significant investment. However, the decrease in revenues available in Kentucky’s Road Fund has limited the amount of maintenance and state construction that can take place each year.
Just this year, we have watched both the Indiana and Tennessee General Assembly’s address this issue. They have successfully passed infrastructure legislation which increases their infrastructure spending to repair roads, bridges, airport, river ports, etc. right now and adds additional revenue in the coming years, which truly benefits their economies. Our Kentucky Infrastructure Coalition is challenging our elected officials to take the same initiative and act on this bipartisan issue to support the need to maintain, improve, replace, or build new infrastructure to move our state forwardOther challenges that our producer members are facing are the environmental regulations that have put us at a competitive disadvantage. We are currently working with the environmental agencies both at the State and Federal level to address these challenges.
5) What would you like your peers to know about aggregates production in Kentucky?Rodgers: Kentucky is very blessed to have good quality limestone below our feet. If you are not familiar with the landscape in Kentucky, aggregate producers own and operate a lot of pits and underground mines. Kentucky has the most underground mines in the nation, 23 active to be exact, which is almost double any other state.
So how good is the limestone in Kentucky? Some would argue it is so good and that’s why the grass is so rich in nutrients and good for the thoroughbred horse racing industry, as well as the water for the bourbon industry.Kentucky’s aggregate production has ranked in the top 10 in the country for decades. As a rural state with more bourbon barrels than people (just over 4 million to be exact), we are well positioned to continue to meet the production demands wherever the aggregate is needed. This could be locally within 50 miles from where it is mined or transporting it by truck, rail, or on the river to another destination outside our state. Our industry stands ready to help Kentucky move forward!