By Brenna R. Kelly
The Cincinnati Enquirer

BURLINGTON - FedEx Ground will get to keep a portion of the taxes its employees pay to state and local governments as part of an incentive package that lured the small-package ground carrier to Northern Kentucky.

Employees, in turn, get tax credits. Boone County Fiscal Court approved first reading Tuesday of an ordinance giving new FedEx employees the payroll tax credit.

It's part of the state's $1.6 million tax-incentive package.

"The company is able to use a portion of the employee withholding tax to local and state government to pay a portion of the cost of relocating to the area," said Boone County Administrator James Parsons.

Last month, FedEx Ground, the country's second largest small-package ground carrier, announced it would build a 335,500-square-foot, $65 million hub off Mount Zion Road. The hub will employ about 480 people when it opens in 2005. In about four years it could employ as many as 2,400 people.

Under the Kentucky Jobs Development Act, a company can keep up to 5 percent of total payroll withheld from employees' paychecks that normally would go to pay state income and local occupational taxes.

In return, the employees get a credit on their Kentucky state income taxes and local payroll taxes.

FedEx will keep 2 percent of employees' tax withholding. In return, Boone County will give employees a 0.4 percent credit on their payroll taxes. The state will give employees a 1.6 percent credit on personal income taxes.

The tax incentives will mean $1.6 million for FedEx over 10 years. The state gave preliminary approval for the deal last December.

"This is the beginning of that process to get the incentives in place," said Boone Judge-executive Gary Moore.

The company also received a 60-percent tax abatement from Boone County, and the county agreed to issue $65 million in industrial revenue bonds for the project.

FedEx Ground plans to start construction this month.

"This is a great project for us. It's a major capital investment," Parsons said. "As well as a project that will mean good job growth for the community."

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E-mail bkelly@enquirer.com