One of Kentucky’s biggest bourbon counties wants to stop industry expansion, for now
One of Kentucky’s biggest bourbon producing counties is looking to turn off the whiskey spigot, at least for now, and others are having similar thoughts.
Nelson County Fiscal Court took the first step Friday to put in place a moratorium on new bourbon warehouses and other distillery construction.
The 90-day moratorium on any action by planning and zoning, the board of adjustment and the planning office, if approved, will allow the county to review existing ordinances dealing with bourbon, according to the Nelson County Gazette, which reported the approved first reading 4-1 vote came after a contentious meeting packed with bourbon industry representatives.
The issue could come up before the fiscal court May 9.
“We want to work with the bourbon industry, but we got to make sure it’s done ... there’s a reason why we have planning and zoning, and the reason why is to have smart growth and structured growth,” Nelson County Judge Executive Tim Hutchins said, according to WAVE TV.
Hutchins said Friday evening that his goal is to make sure Nelson County citizens have a voice.
“I didn’t get elected by the distilleries or by big business. I got elected by the citizens of Nelson County and I will do everything in my power to make sure anything that goes in this community won’t impact the citizens in a negative way,” he told the Herald-Leader.
The moratorium will direct the planning commission to review and adopt changes to protect prime agricultural land and public health, saying the “increase in distilleries and distilled spirits storage facilities have resulted in a loss of prime agricultural land, (and) has detrimental effects on public health, safety and welfare of our citizens.”
A halt could have an impact on construction projects planned in Nelson County with Bardstown right in the heart of the Kentucky Bourbon Trail. Hutchins said that the moratorium wouldn’t impact projects on land zoned industrial or those tied to industrial revenue bonds issued by the county. New projects, however, could be impacted, he said.
Heaven Hill, Jim Beam, Log Still Distilling, Kentucky Owl and Bardstown Bourbon Co. are all in the midst of multimillion expansions, according to the Kentucky Economic Development Finance Authority.
The move to stop new projects came after the Kentucky General Assembly in March approved a phase-out of the bourbon barrel tax that generates millions for county budgets.
A Heaven Hill representative at the meeting told WAVE that the move is retaliation for the tax break. “If you’re a county that doesn’t want us, there are other counties that are more than happy to have that business,” said Jessica Pendergrass, Heaven Hill Distillery general counsel.
But county officials with other major bourbon counties aren’t so sure. They say without the barrel tax revenue their counties won’t be able to fund firefighters, repair roads or water and sewer systems or pay for other services.
Bourbon distilleries paid $40 million in state taxes for aging barrels in warehouses in more than two dozen Kentucky counties. The Kentucky Distillers’ Association, lobbying on behalf of the distillers, argued that the tax was unfair and hurt growth, although the bourbon industry reported record growth and new investment in recent years.
Kentucky lawmakers voted, over the objections of county leaders, to end the tax by 2043. Gov. Andy Beshear signed the bill into law on March 31. The tax will begin to sunset with the 2026 tax year.
It isn’t clear what the total impact of the tax break for bourbon will be for the counties or for the state.
According to one version of a fiscal note prepared for the bill, the reduction in state and local tax receipts is an estimated $249 million; the bill also allows distilleries to claw back another $192 million in taxes from the state, according to the fiscal note.
And the state will have to pay millions to shore up school budgets once the barrel tax sunsets completely.
Bullitt Co. won’t consider new bourbon construction, unless...
Bullitt County Judge Executive Jerry Summers, who also is a former Beam executive, said that his county, home to Jim Beam and Four Roses, plans to honor existing permits but won’t consider new bourbon construction until the industry agrees to bear the associated costs.
“We have three warehouses left to be constructed and that will probably be the end of them,” Summers said.
Under the previous judge executive, Summers said, Bullitt County granted Beam $300 million in tax breaks for a 15-warehouse complex. One 58,000-barrel warehouse is left to be built, he said. Four Roses has two 24,000-barrel warehouses left to build.
The warehouses now will become net losses to the county budget, he said.
“Nobody in this county has an appetite for them. Not right now. And we’re not alone in this. When you look at the five major counties that hold most of the world’s bourbon, it’s the same,” Summers said of Franklin, Woodford, Marion, Nelson and Bullitt counties in Kentucky.
Going forward, Summers said, Bullitt may add additional fees to barrels to make up the costs of extra water and sewer lines, fire protection and other costs.
“It’s a hazardous industrial facility and you have to have the right safeguards in place. There’s no revenue stream to do that and it’s expensive,” he said.
Regrets in Marion County over Bulleit, Pernod Ricard bourbon warehouses
Marion County, home to Maker’s Mark, Diageo’s Bulleit and, soon, Pernod Ricard’s Jefferson’s bourbons, feels burned too, according to Judge Executive David Daugherty.
His county doesn’t have any zoning to fight new bourbon warehouses but he’s pushing for it, he said.
“With no zoning they could put in warehouses anywhere. And they don’t bring in a lot of jobs. Typically the reason we done it was for the barrel tax,” Daugherty said. “It’s kind of a bad deal, to be honest with you.”
He said that the Kentucky Distillers’ Association, which lobbied for the tax break, has argued the distillers will go to other states.
“If you’re not going to pay the barrel tax, honestly, so what?” Daugherty said.
The city of Lebanon, which does have zoning, annexed property to allow Pernod Ricard to build a $181 million distillery, its first in Kentucky.
Daugherty said people were not happy about that because of concerns about whiskey fungus, the black mold-like growth on buildings, trees and surfaces surrounding warehouses.
The city did it, he said, for the tax revenue.
His county also was counting on revenue from the Bulleit complex of 18 55,000-barrel warehouses to begin flowing in soon. He regrets that they couldn’t offer that to an automotive plant instead.
“If we would have known Diageo wouldn’t have paid a penny ... We used one of our better facilities for that, with water and infrastructure,” he said. “They didn’t care and it’s terrible. If we knew they were not going to pay this tax, I’d say it the outcome would have been different.”
This story was originally published April 14, 2023 at 6:44 PM.
