Lexington council meets partner in proposed distillery

bfortune@herald-leader.comDecember 2, 2009 

Urban County Council members on Tuesday met the man who is putting together financing for a bourbon distillery in the Lexington Distillery District.

Scott Pugh of Lexington is one of three business partners who want to open Frontier Brands, a distillery and bottling facility, in the old James E. Pepper Distillery on Manchester St., part of the Distillery District arts and entertainment corridor being developed by Barry McNees.

Pugh said his group has a verbal agreement from a hedge fund to provide financing. If that source falters, the partnership has other alternatives it can pursue, he said.

Pugh identified his partners in Frontier Brands as Bob Syner of Fort Lauderdale, Fla., and Kay Olsen of Hartford, Conn. Pugh said the three became acquainted while working in the liquor industry.

Developer McNees, along with 25 or so supporters, came to the work session to urge council members to add a $3.2 million bond for McNees' arts and entertainment district to a long list of potential city bond projects. McNees brought Pugh to add support to his presentation.

The Budget and Finance Committee will meet Thursday to decide which projects the city will include in a bond package scheduled for sale Jan. 14, and which ones will have to wait for a later bond issue.

It is a matter of timing, not one of approval, said Kevin Stinnett, committee chairman.

Ninth District Councilman Jay McChord said the criteria for approval Thursday is "can you expend that money between now and April? Can you get things moving by April?"

McNees said after the meeting that bond money from the city could be put to work immediately in the blighted Manchester Street area. "We've got streetscape designs ready to bid out. Aspects of Town Branch Trail and the trail head are ready to go. We're ready," McNees said.

Finances for the distillery "are still being negotiated," McNees said. "But including us in the January sale would show Scott's group and the investors that the city supports this project."

In its first year, the distillery, together with Buster's Billiards & Backroom, Scream Park, Dogtown and Pure Blue Vodka — all in the Distillery District — could generate $7.7 million in sales taxes over five years, according to financial analysis by John Farris, president of Commonwealth Economics.

Over five years, the city would recover $6.2 million of that through a tax-increment financing arrangement approved by the state, Farris said.

McNees said his projections show there is "more than enough recoverable tax revenue" to pay debt service on the proposed $3.2 million allocation for infrastructure improvements in the Distillery District.

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