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Kentucky City Debates Spending $3.4M to Lure Remote Workers

Lexington, Ky., is considering a proposal that would use $3.4 million in city money to lure up to 200 high-wage remote workers to the area over two years, with each worker receiving $10,000 in moving allowances.

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(TNS) — Lexington is considering a proposal that would use $3.4 million in city money to lure up to 200 high-wage remote workers to the area over two years.

Under the proposal, each worker would receive $10,000 in moving allowances.

Of the $3.4 million, $2 million would be set aside for workers.

The remaining $1.4 million would go to overhead, such as staff, remote worker shared office space, a website and other marketing.

The idea is based off a similar program in Tulsa, Okla. Paducah also recently announced a remote worker incentive program. A proposal for a statewide remote worker incentive program was passed by the legislature earlier this year but was vetoed by Gov. Andy Beshear over concerns there was not enough vetting or information about the incentive.

As many cities and states sour on economic incentives paid to companies, many are looking at a new way to increase tax revenues — pay money to get remote workers to move.

Fueled by an uptick in the number of people who worked from home during the pandemic, other states have also started economic development packages aimed at workers. West Virginia will pay up to $12,000 for workers to relocate there.

More than 50 percent of the city’s annual budget comes from payroll withholding taxes or a tax on wages. Those who support the program say it would help bolster the city’s coffers by generating more payroll taxes.

Can Tulsa’s program be duplicated?

The program is being pushed by technology entrepreneurs Lincoln Brown, Brian Raney and Hannah Conover through Kentucky Remote.

During a Tuesday Lexington-Fayette Urban County Council Budget, Finance and Economic Development Committee meeting, the group showed statistics from a Harvard Business School study of Tulsa’s program, which launched in 2018.

To date, the program has had 1,000 participants. The average annual salary of remote workers who have moved to Tulsa was $100,000. Those workers have added approximately $1.4 million in income taxes in 2020.

Tulsa’s program was not paid for with tax dollars.

It was funded by the George Kaiser Family Foundation, a Tulsa-based philanthropy.

Brown said, “95 percent of the people who moved stayed in the first year.” Over five years, more than 88 percent have stayed in Tulsa.

Lexington has a high quality of life and low cost of living, two key drivers getting remote workers to move, Brown said.

It will also help Lexington augment its tech workforce, Brown argued.

“It will hopefully attract more tech companies,” Brown said.

Conover said they spent more than a year looking at other remote-worker incentive programs, including those in Vermont.

There is typically an application process and a Zoom interview. The $10,000 is paid out over the year.

Most of the recruits bring spouses and partners who also add to the tax base, Conover said. Most candidates are in high-demand sectors, such as science, technology and engineering, Rainey said.

Two hundred new employees making more than $100,000 would generate roughly $450,000 in local taxes, Rainey said.

If the city pays for the first $3.4 million for two years, there is a possibility private funding and state economic development dollars could be used for other years, said Rainey, of Awesome Inc. and Apex Software.

A percentage of the payroll tax generated from the program could help fund the program in the next three years.

Conover said they would have to do little marketing for the program.

West Virginia launched a program in April and got 7,000 applications, she said.

Awesome Inc. would host the co-working space, which is part of the $1.4 million overhead. Awesome Inc. would also have networking events that would help foster community, Rainey said. There would also be other volunteer opportunities.

How would the program work?

Many council members questioned how the program would work and how it would be overseen.

“Do they have to show a requirement of x amount of income?” said Councilman Chuck Ellinger Jr. “How long do they have to stay?”

Some programs have income requirements, Conover said. Most of the applications are vetted through a volunteer committee.

Most programs pay the $10,000 over 12 months. If relocated workers leave, they don’t have to pay the money back, but they won’t get all the payments if they leave early, Conover said.

Vice Mayor Steve Kay also questioned if only high-earners would be selected.

Conover said that wages would be a factor, but not the only one in a weighted system for selecting applicants. Conover said the program would want people who want to be here.

Kay said the city wants a diverse population and stressed there should be points for diversity.

Councilman Richard Moloney said the program would have to be competitively bid because the amount was more than $20,000, the threshold for city government projects to be bid. That means if the city moved forward with the program, there was no guarantee the Remote Kentucky group would get the contract.

Councilwoman Susan Lamb also recommended the group approach the city’s economic investment board, which oversees the city’s economic development programs. That board also has a lot of local business leaders who may have private funding that could help, Lamb said.

The council made no decisions on moving the initiative forward during Tuesday’s meeting.

© 2021 the Lexington Herald-Leader (Lexington, Ky.). Distributed by Tribune Content Agency, LLC.