LEXINGTON, KY - Supporters of a developer's plan to transform one of Fayette County's most blighted corridors into an arts & entertainment oriented Lexington Distillery District are watching closely for a pivotal decision by the Urban County Council.
The deliberations by council's Budget & Finance Committee come at a time when the Lexington Fayette Urban County Government is, like many cities across the nation, being forced by a wilted economy to consider deep cuts in its $114-million portfolio of bonded capital projects. All bonded capital projects are on the table, including those now underway. Among them are the renovation of the Lyric Theatre and downtown streetscape improvements.
Barry McNees, leader of the development team proposing a Lexington Distillery District on Manchester Street, has informed council members that a bourbon distiller has expressed serious interest in making a multi-million dollar investment to locate in a National Historic Registry building that once warehoused the products of the Pepper Distillery, at one time the world's largest bourbon producer.
McNees said as a condition of an agreement to locate a boutique distillery, restaurant and visitors' center in the structure the undisclosed distiller has stipulated that the streetscape must be improved to make the corridor more attractive to retail commerce.
The Distillery District concept recently was approved for the state's first Tax Increment Financing (TIF) package geared specifically for the improvement of a blighted zone.
The Kentucky Economic Development Finance Authority pledged up to $45.8 million in state reimbursement to support economic development in the largely neglected corridor.
A TIF establishes a baseline on taxes generated by economic activity in a designated area and redirects any additional local or state tax dollars credited to the new development to the improvement of such public infrastructure as sidewalks, street lighting, landscaping and sewers.
McNees is appealing to the city to bond a $3.2 million investment in the project. "The $3.2 million is a critical down payment with monumental leverage," he said, noting that the city's investment would trigger the distiller's initial $10 million investment, driving capital investment in the project past the $20 million threshold required to trigger Tax Increment Financing of infrastructural improvements.
Council's Budget & Finance committee may report its recommendations as soon as December 3.
Looming large in the background is a warning that with its revenue stream in decline, Lexington is in danger of falling behind in servicing bonded indebtedness, risking the city's Aa2 bond rating. In fact, Budget and Finance committee chair Kevin Stinnett acknowledged that the bond market's interest in Lexington has waned with only two firms indicating willingness to purchase LFUCG bonds. The city typically hears from as many as eight, he said.
Even as they struggle, however, with difficult and challenging budget decisions in the face of an estimated $12- $13 million revenue shortfall in the current fiscal year, council members seem cautiously receptive of the Distillery District idea.
Some have stated that they view the project as an important driver of local and regional economic development. Others are intrigued by the potentials of historic preservation and city branding. Advocates of infill and redevelopment and sustainability believe it addresses their issues.
The question now before council is whether in these times, the proposed Lexington Distillery District is worthy of a somewhat calculated risk.
Stinnett indicated that an early decision to bond the project will depend on how soon the developer can assure the city that work will commence and whether the various city departments that would be involved are in a position to take on another project of such magnitude.
Stinnett added that in the event that the requested Distillery District bond is not approved in the current round of deliberations, the proposal can be revisited at any time.