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Millions of dollars in state money made available to help Kentucky’s bourbon industry grow, expand

Special to KyForward

As the popularity of Kentucky bourbon has grown, distillery production has increased and more tourists are interested in visiting the state’s distilleries. In response, state government is making millions of dollars available to distilleries to help build and expand to increase production and provide visitors’ centers at the distilleries, according to the Ethics Reporter, a publication of the Kentucky Legislative Ethics Commission

A year ago, a report titled The Economic and Fiscal Impacts of the Distilling Industry in Kentucky estimated that gross revenues to Kentucky distillers from U.S. sales of bourbon were around $1.25 billion in 2013. Kentucky’s whiskey exports topped $300 million in 2012 and 2013, and have grown in dollar terms by 55 percent since 2010. Production has risen 150 percent in the last 15 years, and the number of distilleries has increased more than 200 percent since 2012.

(KyForward file photo)

(KyForward file photo)

With the growth in the production and sale of bourbon, the Kentucky Economic Development Finance Authority has approved millions of dollars in incentives to help distilleries build and expand their facilities with corporate tax credits and wage assessments, which allow the businesses to keep money they would otherwise send to Frankfort.

Likewise, Kentucky’s Tourism Development Finance Authority is giving significant financial support to distilleries for the development of bourbon-related tourist centers.

Starting in 2008 with a $3.73 million tourism tax incentive for the Jim Beam Distillery Visitors’ Experience in Clermont, and including $1 million for Beam’s Urban Stillhouse in downtown Louisville, state government has approved about $9 million in tax incentives to distilleries to open or expand visitors’ centers.

Since 2012, in addition to the tourism incentives, KEDFA has approved Beam for more than $8.5 million in incentives to expand distilleries in Frankfort and in Nelson County, and open a business service center in Louisville. Beam is owned by Suntory Holdings Ltd., a Japanese brewing and distilling company group.

Maker’s Mark, another Kentucky distiller owned by Suntory, has received $5.5 million in economic development and tourism tax incentives in the last two years, and has preliminary approval for another $1 million toward a $4 million visitors’ center in Loretto.

Sazerac North America Inc., a Louisiana-based company, is the largest distilling company in the United States, and it appears to be the second largest distillery recipient of financial assistance from Kentucky taxpayers. In the last five years, the state has approved at least $12.2 million in economic development and tourism incentives for the company.

Sazerac’s facilities that have qualified for tax incentives are the Barton 1792 Distillery in Bardstown, Buffalo Trace Distillery in Frankfort, the former Glenmore Distillery (now a bottling plant in Owensboro), and an office in Louisville.

Louisville-based Brown-Forman Corp. has qualified for at least $4.9 million in tax incentives in the last two years. Most of that money is the result of the company’s production and visitors’ center expansion at the Labrot & Graham Woodford Reserve Distillery near Versailles.

The largest bourbon-related tourism project is Rabbit Hole Distilling’s $16.8 million dollar distillery and coffee-tasting facility on East Jefferson Street in Louisville. In June, KTDFA gave preliminary approval to incentives that could be worth up to $4.2 million to Rabbit Hole. The company has also received approval for $650,000 in state economic development incentives.

Diageo plc, based in London, England, owns Bulleit Bourbon Distillery, which is building a distillery in Shelby County, and Stitzel-Weller Distillery in Louisville. The company has been approved for $4 million in state tax benefits, including recouping Kentucky sales and use tax on construction costs, building fixtures, and equipment used in research and development.

Until its new distillery is producing, Diageo has said Bulleit Bourbon is distilled at the Four Roses Distillery in Lawrenceburg, which is owned by the Kirin Brewery Co. of Japan. In the last seven months, Four Roses has received KEDFA approval for $1.95 million in tax incentives for its distillery and its Bullitt County warehouse and bottling facility.

Also in Lawrenceburg, Wild Turkey Distillery, owned by Italy-based Gruppo Campari, is approved for $3.35 million in state money for a packaging facility project and a new visitors’ center.

A locally owned company, Peristyle LLC, is renovating the Old Taylor Distillery in Woodford County, and has qualified for $1.95 million in state money, mostly for its work on the 125 year-old distillery buildings and grounds.

In 2014, Terressentia, a Charleston, South Carolina, company doing business under the name of TerrePure, purchased the Charles Medley Distillery in Owensboro, and has qualified for $1.3 million in KEDFA incentives to help renovate and equip the distillery. The company says it uses the “patented TerrePURE technology to create award-winning spirits for retailers and brand owners.”

Bardstown Bourbon Co. LLC, owned by Virginia-based Clarion Spirits, plans to open a distillery in the Nelson County Industrial park. KEDFA has approved the company for tax incentives of up to $1.3 million.

Kentucky has offered locally-owned Heaven Hill Distilleries $2.04 million in tax incentives for expansion of its Nelson County facilities, including a visitors’ center, and renovation of its Louisville office building to create a working distillery, tourism attraction, and retail shop.

In addition to the tax incentive help which Kentucky gives these companies, the businesses are also eligible to receive resources from the Kentucky Skills Network. Through the Kentucky Skills Network, companies are eligible to receive no-cost recruitment and job placement services, reduced-cost customized training, and job training incentives. Last year, the Kentucky Skills Network trained more than 84,000 employees from more than 4,100 Kentucky companies.

This report from the Ethics Reporter is reprinted with permission.

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