Developers say TIF essential to Distillery District

By Jim Jordan
Lexington Herald-Leader

Incentives known as tax increment financing will be essential for the Distillery District project, developers told the Urban County Council on Tuesday.

”Without TIF, this project is not going to happen,“ said Brooke Asbell, a partner in the project to create an entertainment district.

The reason is that the streets west of Lexington Center must be improved, electric lines will have to be buried and drainage problems must be solved for redevelopment to happen.

”The cost to do that … is where the economics end up not working for us,“ Asbell told the council.

Tax increment financing would allow developers to recover money spent for such public improvements from the new tax revenue generated over time by their project.

The size of the public commitment to the project isn’t known because the data is incomplete, Asbell said. Once feasibility studies are finished, developers will return to the council with a TIF request.

For that reason, he wanted to prepare the council by presenting an overview of the project Tuesday.

TIF, which has never been used in Lexington, first came to public notice earlier this year when developers of the proposed $250 million CentrePointe project said they might need as much as $70 million in TIF incentives.

Later estimates put the TIF total closer to $35 million, but that total might not be final.

The Distillery District, first announced last year by majority partner Barry McNees, would be along Manchester Street roughly between Cox Street and Forbes Road.

Two former distilleries, bourbon warehouses and new buildings likely to be built in the area would contain restaurants, entertainment venues, loft apartments, businesses and offices.

The area might have a bourbon museum, a working distillery and other attractions that would qualify it to be added to Kentucky’s Bourbon Trail, a network of seven distilleries that have become tourist attractions.

Asbell described the Manchester area today as ”blighted,“ ”scary“ and ”not very appealing or attractive, but the elements are there for a reclamation project.“

The former distilleries are just west of the planned Newtown Pike Extension and could become a new gateway to the city with the planned improvements, he said.

One goal would be to get the area closest to the Newtown Pike Extension redeveloped in time for the Alltech FEI World Equestrian Games at the Kentucky Horse Park in 2010.

Stan Harvey, a principal in the urban planning firm of Urban Collage Inc., said the effect of the Distillery District would be to extend downtown Lexington to the west.

The project would be anchored by the former Old Tarr Distillery on the east and the former James E. Pepper Distillery on the west. New development could occur around and between those bookends.

Harvey said the developers envision the district as ”a pretty unique and dynamic … 24-hour place“ that would have ”one of the best restaurant sites in the city“ along the Town Branch, which flows near the former distilleries.

Asbell said the developers expect to hold a Distillery District community forum in late July or early August that would explain the project.

”If you can tell people what you are doing and take the mystery out of it,“ you are more likely to get their cooperation, he said.

This post comes from and the Lexington Herald-Leader

Can downtown’s west side be vibrant again?

Columnist Tom Eblen, Lexington Herald-Leader

Aug. 16-

Along the creek where Lexington began and the street that was once its industrial heart, Barry McNees and a dozen partners hope to write a new chapter for downtown’s west side.
As they plan for the future, they’re spending a lot of time sifting through the past. It began more than three years ago when McNees bought an old industrial building on Manchester Street because he saw potential for redevelopment. A local historian of Kentucky’s bourbon industry stopped by one day.

“He asked what we were going to do with the Old Tarr Distillery,” McNees said. “And I said, ‘The old what?'”
NcNees learned that the circa 1866 building next door had been the warehouse for one of Kentucky’s first post-Civil War bourbon distilleries. Later, McNees and his partners bought the abandoned James E. Pepper Distillery down the street. Those two properties provide bookends and a theme for the Distillery District, an ambitious redevelopment project that the partners hope will someday house restaurants, clubs, art studios, a small distillery, a coffee shop, indoor recreation facilities, a farmer’s market, offices and condos. McNees, 39, who grew up on a tobacco farm near Winchester, hopes to preserve and reuse most of the old distillery buildings.
“That way, we’ll get both a modern development and one that celebrates Lexington’s past and its culture,” he said. “It gives you the romance of history and creates a destination where people will want to go.”
It also will make the development eligible for state and federal historic tax credits that could cover as much as 40 percent of renovation costs.

Another key will be seeking tax increment financing, known as TIF. It allows a portion of state and local taxes created by new development in a blighted area to be used for up to 30 years to pay for the public infrastructure — utilities, sewers, streets and sidewalks — needed to make the development possible.
Currently, the district’s properties generate $137,000 a year in state and local taxes, McNees said. Once the redevelopment is complete, he estimates the taxes will be a hundred times that amount.
McNees said city officials and the Downtown Development Authority have offered support and encouragement. The developers have conducted design workshops with students from the University of Kentucky’s College of Design to generate ideas for how the old buildings might be reused. And they have met with nearby neighborhoods and businesses to get them comfortable with the project. More public meetings are planned soon.
The Distillery District, along with the Newtown Pike extension, could literally reshape a large area west of Rupp Arena. State and local officials are soon expected to unveil the design for a “signature” bridge that will carry Newtown Pike across the railroad yard near Manchester Street. The double-span bridge is expected to include decorative lighting.

Eventually, others hope to restore Town Branch Creek through the neighborhood, creating an eight-mile greenway trail into downtown. McNees and his partners are designing their projects to take advantage of Town Branch, which flows virtually hidden along Manchester Street and is funneled underground once it gets to downtown.

The Town Branch Trail proposal also envisions restoring one of Central Kentucky’s oldest buildings, the 1790 James McConnell house. It now sits vacant beside a railroad track just across Manchester Street from the Pepper Distillery. It’s not far from McConnell Springs, where Lexington was founded.
“It’s totally neglected,” McNees said of the dry-stone house as he looked at it from the distillery’s roof. “Can you imagine letting the home of one of Lexington’s founders just sit there deteriorating like that?” McNees said he and his partners have invested almost $9 million so far acquiring and renovating the collection of industrial buildings on 25 acres along Manchester Street. The Old Tarr warehouse, an 11,500-square-foot structure that once housed 8,000 barrels of bourbon, was later used as a tobacco warehouse and as a machine shop, making parts for the IBM (NYSE:IBM) Selectric typewriters that were manufactured at what is now Lexmark.
The warehouse sat empty for years before McNees began converting it into an events hall that can hold 2,000 people. Its first test came in April 2007, when it was the site of the Beaux Arts Ball. Eventually, McNees wants to use adjacent buildings for restaurants and clubs, which would open in the back onto Town Branch Trail.
While the developers refine their plans, prepare a TIF application, seek financing and try to pull all the pieces together, they’re renting out some of the buildings they own for industrial storage and artists’ studios.
The most ambitious — and costly — piece of the project will be renovating the Pepper Distillery, which claimed to be the nation’s largest when it opened in the late 1800s. Most of the buildings there now date from the 1930s. The distillery’s largest structure is a concrete and block warehouse that once held 100,000 barrels of aging bourbon. Each of the five floors has tall ceilings and an acre of floor space. It is built like a fortress, so future uses are almost unlimited.

Unlike Old Tarr, where only the warehouse survives, the Pepper site still has almost all of the buildings that were there when it was a working distillery.
Last week, McNees took me on a tour of the Pepper site. It was like stepping back in history, because most of the equipment was left in place to gather dust when bourbon-making stopped in the early 1970s.
“This whole thing has been like a significant archaeological dig,” McNees said as we walked through each building, stepping around junk, broken glass and pigeon droppings. The old mash tubs were still there, along with the brick kilns used to dry used mash for cattle feed. Huge gears and light fixtures sit on shelves in the machine shop. There are stacks of production records from the 1960s sitting on shelves near a box with cans of grain samples from the early 1950s. McNees dipped his hand into an old grain sifter and scooped out hulls.
The developers began going through the Pepper property earlier this year, making basic repairs, cleaning up and deciding which machinery to keep and which to sell for scrap. AM talk radio plays non-stop in the main building to scare away critters. McNees hopes to restore the distillery’s smokestack, which used to spell out “Pepper” but is now a few letters short because the top was removed. The old water tower seems to be in good shape, and it has become the Distillery District’s logo symbol.

A large lot beside the Pepper Distillery — familiar to most Lexingtonians as the place they used to go to claim a towed car — has been cleared. McNees hopes to have outdoor concerts there in a few months. The first Pepper building likely to see reuse is the timber-frame barrel house. A local group plans to put a small “craft” distillery and tasting room there by next spring and has ordered a 200-gallon copper still from Portugal.
McNees and his partners have a big, expensive job ahead of them. But if they can find the money to match their imagination, the Distillery District could become an economic engine for downtown and a place that leverages Lexington’s rich past for a more prosperous future.

This post comes from and the Lexington Herald-Leader