Lexington council tables resolution to dissolve Distillery District tax-increment financing

bmusgrave@herald-leader.comDecember 5, 2013 

The Barrel House Distilling Co., foreground, and the old Pepper Distillery are two of the major structures of Lexington's Distillery District along Manchester Street on Lexington's west side.

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Lexington's Urban County Council voted Thursday to table a resolution that would dissolve an economic incentive for the Distillery District, a proposed entertainment district along Manchester Street.

Mayor Jim Gray's administration opted to pull the Distillery District tax-increment financing plan, or TIF, on Oct. 30 because of concerns that the district would not generate enough new taxes to reimburse developers for public infrastructure improvements.

When the city applied for the financing plan and the state approved it in 2009, the Distillery District was envisioned as a $190 million development including a hotel. Most of the plan has not materialized.

Tax-increment financing uses taxes generated by a project to pay off public infrastructure projects. To start receiving the tax dollars, the developer would have to spend $20 million by Dec. 31, 2016. About $10 million has been spent so far.

Several council members during Thursday's meeting questioned whether Gray had the legal authority to send a letter to the Kentucky Economic Development Finance Authority withdrawing the TIF plan. Several council members also asked why city officials did not tell council members during several meetings about the Distillery District before Oct. 30 that the TIF plan was going to be withdrawn.

Council member Jennifer Scutchfield, a lawyer, said she does not believe the administration had the authority to withdraw the plan without council approval.

But Janet Graham, the city's law commissioner, said that when council approved the application for TIF in 2009, it gave the administration the authority to manage that agreement, including whether the agreement was in compliance.

Planning Commissioner Derek Paulsen told council that the city felt it was a better idea to withdraw the TIF application, get an agreement with Distillery District developers, and then re-apply for the TIF.

Bruce Simpson, a lawyer for Barry McNees, one of the Distillery District developers, asked that council table the resolution dissolving the TIF and pass a resolution asking the Kentucky Economic Development Finance Authority to reinstate it. However, state officials told the city and Simpson that they needed "substantial" new information in order to reinstate the tax increment financing.

Simpson said the city will lose no money if the developer does not reach the threshold of $20 million by Dec. 31, 2016. Simpson urged council to keep the tax-increment financing plan alive.

Jaime Emmons, chief of staff for Gray, said the administration was willing to talk to state economic development officials and Distillery District developers to try to work out an agreement.

Simpson agreed to talk with city and state economic development officials before the council's next meeting, on Tuesday. The issue will likely be addressed again then.

Beth Musgrave: (859) 231-3205. Twitter: @HLCityhall.

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