Distillers pour jobs, taxes into Louisville, study finds

jpatton1@herald-leader.comSeptember 20, 2013 

Kentucky's bourbon boom has poured millions into Louisville in the form of jobs and taxes, according to a new economic study that will be used to lobby the General Assembly for tax relief for the distilleries.

When support industries are included, the distilling industry accounts for an estimated 4,200 jobs with an annual payroll of $263 million in Jefferson County, according to the study.

University of Louisville economists Barry Kornstein and Janet M. Kelly found that Louisville serves as a hub of Kentucky's bourbon industry, with seven major distilling establishments in Jefferson County, as well as two major cooperages and other whiskey-related businesses.

The results were released Friday at Brown-Forman's Louisville headquarters by the Kentucky Distillers' Association, which commissioned the study.

"We were surprised," said KDA president Eric Gregory. "We knew bourbon in Louisville was growing, but I don't think any of us realized just how much it's grown in just the past five years."

Beyond making bourbon, warehousing and bottling it, the distilling companies — including Brown-Forman, Beam, Heaven Hill, Sazerac and Diageo — have centered business headquarters in Jefferson County.

That brings enormous economic benefits, the study found. For instance, in July, Jim Beam opened a Global Business Services Center in downtown Louisville that will bring 60 professional jobs to the city.

About 37 percent of all Kentucky distilling, warehouse, bottling and office jobs — about 1,360 in all — are in Jefferson County, with payroll of about $154 million, excluding fringe benefits.

About half of those jobs are office jobs, which pay much better and draw talented and highly educated workers to company headquarters, as well as corporate and family foundations that make $10 million in philanthropic contributions annually.

The distilling industry generated an estimated $31.6 million in state and local taxes, according to the study, with the Louisville Metro government receiving $4.7 million a year and Jefferson County Public Schools receiving about $3.9 million annually.

The tax revenue has been growing in recent years as the distilling industry expands. While other manufacturers lost about 10 percent of their jobs during the economic downturn, the distilling industry counterbalanced that by increasing employment by 10 percent, the study found.

Taxes on barrels of bourbon aging in warehouses have gone up 128 percent as the number of barrels has increased.

Last year, distillers throughout Kentucky filled more than 1 million barrels for the first time since 1973, with total inventory growing to about 5 million barrels, levels the industry has not seen in decades.

Kentucky distillers on Friday renewed a call for the General Assembly to address the "barrel tax," a levy on aging spirits — which they contend is inhibiting growth, particularly of small craft distillers.

"Kentucky is the only place in the world that levies a tax on aging barrels, which discriminates against our homegrown bourbon industry, puts our distilleries at a competitive disadvantage in the global marketplace and restricts further growth in the Bluegrass," the KDA said in a news release with the study.

"With other states actively competing for distilleries, we need every tool available to maintain Kentucky's rightful place of the one true, authentic home for bourbon," Gregory said. "And one of those tools is relief from the ad valorem tax."

But the taxes have not cut off all investment: According to the study, distillers — including craft operations Angel's Envy, Michter's and Peerless — have announced or completed more than $50 million in capital projects in Jefferson County, much of it geared to the increased in tourism tied to the Kentucky Bourbon Trail.

The Bourbon Trail, which drew more than 500,000 visitors to Kentucky last year to see at least one distillery, could generate an estimated $2.5 million a year from bourbon tourism spending with increased sites in Louisville, the economists said.

The full study will be available at the KDA's website, Kybourbon.com.

Janet Patton: (859) 231-3264. Twitter: janetpattonhl

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