Fayette County

Lexington's Distillery District upgrades could cost as much as $23 million

Town Branch runs underneath Manchester Street. A feasibility study has put the Distillery District's city funding in question.
Town Branch runs underneath Manchester Street. A feasibility study has put the Distillery District's city funding in question. Herald-Leader

A preliminary report indicates that it could cost between $14 million and $23 million in infrastructure upgrades to make the Lexington Distillery District project move forward.

Mike Woolum, vice president of Strand Associates, hired to conduct a feasibility study on needed infrastructure improvements in the proposed arts and entertainment district, gave an update this week to members of the Urban County Council's Environmental Quality Committee.

He identified five critical infrastructure challenges that have to be addressed in the Distillery District, which runs along Manchester Street from Oliver Lewis Way to Forbes Road.

"We're looking at a comprehensive strategy for improved utility service, sanitary sewer service, stream revitalization, a FEMA floodplain map and development of a street and trail plan," Woolum said.

Council member and committee chairman Kevin Stinnett said the council will soon have to weigh whether it wants to continue to support the Distillery District.

If the council stays with the project, "We're going to need a developer's agreement as to what role developers are going to play and what improvements they're going to make if we move forward with the TIF (tax increment financing) and the infrastructure improvements," Stinnett said.

"Because if we make infrastructure improvements and nothing happens down there, we've invested money that is competing for other projects in the city right now — I can think of several — or we won't get a return on our investment.

"And how does this play into the Rupp District?" Stinnett asked. "There may be some connection there. So there are several things we are going to have to discuss."

Distillery developer Barry McNeese said he is frustrated because it has been five years since the project was proposed, but no infrastructure improvements have been made.

"Entrepreneurs and developers need to see something. They want to see the city demonstrate its commitment with something visible," McNeese said.

Two economic feasibility studies in 2007 said infrastructure improvements were crucial to the success of the proposed arts and entertainment district.

At some point, McNeese said, "someone has to step up and lead." He said he sees that as the city's role. "Private money is hesitant to go into a wasteland. Unless there's a visible demonstration of city support, it's difficult to move forward," he said.

The work session was the first time council members had heard preliminary figures of the cost to build and upgrade infrastructure in the historic — but long-neglected — industrial corridor where there are few sidewalks and no curbs, gutters or streetlights. Utilities are outdated. Portions of the area don't have sanitary sewers.

Vice Mayor Linda Gorton said later of the construction costs, "It's a lot of money. We have to put it in perspective with everything else going on in the city that needs funding."

The final feasibility report is expected to be presented to the council in the next several weeks.

The city approved a $2.2 million bond for the Distillery District in 2009 to build a trail and make streetscape improvements. Strand Associates received a $500,000 contract to conduct the feasibility study, leaving $1.7 million in the bond fund.

That's another decision facing council in the near future, Stinnett said: whether to use the remaining bond money in the Distillery District for additional design work — such as for sanitary sewer and stream restoration plans — or allocate the money to other projects in the city.

The Distillery District was proposed in 2007 by McNeese as an arts and entertainment district west of downtown. Manchester Street was historically the bourbon distilling corridor of Lexington, beginning in the 1860s. Distillers were attracted to the area because of Town Branch Creek and the abundance of springs that provide the fresh water needed for making bourbon.

The district was approved by the city for one of its first two tax increment financing projects. The state approved the Distillery District as its first mixed-use redevelopment of a blighted-area TIF for $191 million in 2009.

In TIF districts, the idea is that redevelopment of a blighted area will generate more revenue from property, sales and income taxes than if the development did not occur. That additional new tax revenue is used to pay for public amenities including sewers, floodplain protection and stream restoration.

But Stinnett said a crucial concern was whether there will be enough development in the Distillery District to generate the money needed to repay the TIF.

"We don't know yet. But in order for there to be benefits from the TIF, the developers have to do certain things and make improvements on their property," he said.

The city has agreed to pay for some of the infrastructure in the Distillery District such as street improvements.

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