Welcome to the March 11 edition of the top-secret, always confidential Monday Business Briefing.
These are biz tips Insider Louisville staff and contributors have collected during the past few days, a few of which are NOT double-verified as with our daily reporting.
But this is the news about business and trends you’ll be reading about next week or even next month in the conventional media.
If you’re wondering why we called you all together today….
• Everyone paying attention tells us they’re concerned about the future of Louisville. We can’t count the number of conversations – most not instigated by us – we’ve had on the same theme. To paraphrase, a lot of insiders believe Louisville is at a crossroads … will we become the next Austin? Or will we become Flint, Mich., which consistently turns up on lists of America’s failed cities because it never saw the auto industry bust coming. If you’re a regular Insider Louisville reader, you know we’ve been covering issues such as corporate flight to the suburbs years before the other media noticed. And we will continue to cover KFC Yum! Center financial issues. But there are other troubling developments including the increasing amount of transactional business Louisville is losing to larger cities, such as Chicago. Sources have told us that when we broke the news JPMorgan Chase is closing their Louisville wholesale loan operation, we didn’t explain that the Wall Street financial giant sent a lot of loan syndication business to Chicago. Unreported is that PNC Bank did the same thing. That was a blow to both big local businesses in need of reasonably priced capital, and to M&A attorneys and other dealmakers. True, last year we reported JPMorgan Chase’s Government Tax Processing operation, as well as processing for charge cards the company operates for the U.S. government General Services Agency and departments, moved here from Charlotte, N.C. But those jobs didn’t go downtown, where office vacancies are creeping up. As a result, several downtown property owners are contemplating converting their downtown office buildings into residential as – ironically – more people want to live in urban areas. Just not work there, apparently.
As our sources point out, Louisville has advantages the Flints can only dream of – the UPS WorldPort freight hub and new investments here by Ford and General Electric. Which would be great if it were still 1950. But in 2013, one of our greatest failings is in intellectual capital. Insiders tell us we are about to lose another promising high profile tech start-up, this one to a Silicon Valley start-up incubator. This comes after Impulcity and Backupify left for larger cities. Once Ford sells a car, that’s it, say our sources. But intellectual-properties companies create content and technology with the Disney-like promise of yielding revenue for decades. That includes the Louisville music scene.”What GLI and economic development types don’t get is, one 20-year-old with a great idea can transform the world. And there’s no money in that model for them,” noted a source. Another private effort is the transformation of the Molee Building into a center for self-sustaining, social-impact business based on the concepts of social entrepreneurism. Yet another insider wants to push U of L to update the Speed Engineering School to reflect changing needs in the real world.
But our insiders say efforts to optimize Louisville’s potential will take decades, not years. It won’t be 25-year vision plans that save the day, either, though the city can help. “City officials need to make a company’s decision to move to the suburbs as painful as possible tax-wise,” said one. What more than one insider is proposing privately is to form a group of CEOs, investors and commercial real estate experts into an independent group that would use its influence to prod elected officials into not making the same mistakes, generation after generation.
• In a related issue, city officials tell Insider Louisville they’re increasingly “concerned” about the downtown game of musical chairs, where large firms are moving into buildings in untaxed Tax Increment Financing districts, depriving the city of needed tax revenue. Those officials point to Stites & Harbison law firm potentially moving 300 attorneys into the Nucleus Innovation Park building under construction at Market and Floyd streets, which has a TIF district, and out of the Aegon Center at Fourth and Market, which doesn’t. What those officials told us, and we didn’t know, is that University of Louisville Physicians Group administrative office is moving to Nucleus from the Landmark Building at 300 Market St. downtown. Our city gov source said U of L execs told city government officials that Nucleus was going to bring bio-med research companies to Louisville, not Hoover existing businesses from the central business district: “That’s not what Nucleus was supposed to be.” To remind us of the original mission, one econ-dev official sent us a copy of the 2010 U of L President’s Report which quoted Gov. Steve Beshear: “Nucleus epitomizes what we’re trying to do in Kentucky in terms of attracting and incubating biotech and life science discoveries and companies.” How did that effort go so wrong? That’s a future post.
• Speaking of U of L, the University’s new partner, KentuckyOne, may be in the first stages of plans to move Kentucky headquarters employees and most clinical services out of the downtown buildings to DuPont in East Louisville. KentuckyOne, which is wholly owned by Denver-based Catholic Health Initiatives, inherited the downtown complex when they absorbed Jewish Hospital & St. Mary’s HealthCare back in January 2012. Now, sources say KentuckyOne is buying up property around the Jewish Hospital Medical Center East on Dutchmans Lane in DuPont. With the purchase of JHSMH, KentuckyOne picked up two hospital licenses, licenses they could take to DuPont or to Jewish Hospital Medical Center Northeast in far eastern Jefferson County at the Gene Snyder Freeway and Old Henry Road. Those sources say U of L already has agreed to fill the downtown spaces.
• In yet another related development, legal insiders tell us Meidinger Tower is scheduled to be auctioned in April at the Jefferson Circuit Court foreclosure auctions. Or not. Those insiders tell us there’s a lot more going on behind the scenes. Sources say that a short-sale is in the works, and might involve one of the building’s remaining tenants getting the 27-story, 350,000-square foot building for a very large discount. (Chicago-based Arthur Goldner & Associates bought the building for $27.6 million in 2004.) A short sale would be good news. The bad news is, Northwestern Mutual executives are planning to move their Louisville headquarters out of the Meidinger to – you guessed it – the suburbs. Will the last company out of downtown please turn off the lights.
• Some good news at last … we hear the Bourbon Classic is looking like a sell-out. The Bourbon Classic is scheduled for the Kentucky Center for the Performing Arts March 22 and 22. The event, sponsored by Bourbon Review magazine in Lexington, is a bourbon forum, covering everything from distilling to recipes. Our tourism sources tell us the VIP sessions are sold out.
• Some cool news … a source sent us a glowing email after a visit to Fort Knox. Ft. Knox Garrison commander, Col. Bruce Jenkins, outlined an energy technology program currently being implemented at the post. There, the Department of Defense is installing a field of solar panels and tapping natural gas wells in an effort to make the sprawling Army base completely energy independent. Army officials are already eliminating peak energy spikes on the way to taking all post utilities off the grid within two years. This will increase security of the on-site utilities and save taxpayers $8 million annually, Jenkins told our insider. We’ve assigned this story, so look for a detailed follow-up post. In addition to being pretty good at killing the enemies of freedom, the Army is turning out to be a Green pioneer. All we can say is, “Hoo-ah!”
• Multiple sources confirm Scott Roussell is out at Bluegrass Brewing Co. (This is the brewery/consumer distribution business at 636 E. Main St.,, which has a different investor group than Bluegrass Brewing Co. restaurants in St. Matthews and on Theater Square.) Roussell had been managing partner since 2005, when he and a group of partners bought Pipkin Brewing, then changed it to BBC. Before that, he’d been involved in tech startups including Telemics, which monitored street lights. BBC investors confirmed Roussell’s left the company, but declined to discuss the situation. Over the years, BBC has gone from limited local distribution to being on the beer lists of hundreds of restaurants and bars, and on the shelves at dozens of liquor outlets and supermarkets including Costco. The brand has prospered where so many other efforts failed including Browning’s Restaurant and Brewery. Now what?
• This is interesting: We hear state officials are getting ready to reconstruct and redefine the Kentucky Proud branding effort. The program was supposed to certify locally grown products, but had become something of a joke when – due to myriad loopholes – coffee started showing up marked “Kentucky Proud.” (Everyone knows Appalachian monkey infestations keep wiping out Kentucky’s coffee crop. Come on ….) So, now, state ag officials will unveil a new label, “100-percent Kentucky Proud,” for products actually grown in the state, and not just processed here.