Distillery District has until March to resurrect tax-increment financing, state officials say

bmusgrave@herald-leader.comDecember 10, 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.


State economic officials have agreed to wait until March to decide whether a state incentive for the Distillery District, a proposed entertainment district along Manchester Street, should go forward.

Last week, the Urban County Council questioned whether Mayor Jim Gray’s administration could withdraw the application for tax-increment financing for the district Oct. 30 without the council’s knowledge or approval. Tax-increment financing uses tax dollars generated from the project to pay for 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.

Distillery District developers asked that the council ask state economic officials to ignore Gray’s request and reinstate the incentive. But Kentucky Economic Development Finance Authority said that in order to reverse the decision to withdraw the incentive, there had to be a “substantial change” in the status of the project.

A Dec. 9 letter from officials with the Kentucky Cabinet for Economic Development said the cabinet would like to see how much money the district has generated since it was created as a tax-increment financing district. The state also wanted to see how much money had been spent on improvements in the district through July 13, 2013. In addition, it wanted a development plan. If the developers meet all of these conditions, the state would allow the project to go forward.

In 2009, the Kentucky Economic Development Finance Authority approved a TIF to help finance $45.8 million in public infrastructure improvements for the Distillery District, including construction of the Town Branch Trail.

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