Underscoring the ongoing bourbon boom — and the government’s taxpayer support for it — a proposed renovation and expansion at Buffalo Trace Distillery received preliminary approval Wednesday for up to approximately $550,000 in incentives.
The decision, by the Kentucky Tourism Development Finance Authority, was unanimous. The incentives are related to a roughly $2.2 million expansion of the distillery’s touring, tasting, retail, meeting and event facilities.
That proposed expansion is separate from Buffalo Trace’s distribution warehouse expansion, for which the Frankfort City Commission is likely to approve de-annexation this month.
That expansion would currently cross from Franklin County’s jurisdiction into the city. In exchange for a tax-sharing agreement with the county, the city is moving to de-annex in order to remove regulatory confusion.
Buffalo Trace isn’t the only local distillery expanding. On Jan. 30, Fiscal Court unanimously approved a $200,000 economic incentive for Beam to locate its proposed $20-$25 million, 600,000-square-foot distribution center in Franklin County.
Less than an hour after that incentive was approved, Beam — which had also been considering building in Woodford County — announced it had chosen to construct on Leestown Road.
Bourbon production has increased by more than 50 percent in the last decade and 120 percent since 1999 — and Kentucky accounts for 95 percent of worldwide bourbon production — according to a 2012 report by the Kentucky Distillers’ Association.
At Wednesday’s meeting on Buffalo Trace’s new expansion, Meredith M. Moody, marketing services manager for the distillery, said the number of visitors seeking tours increased more than 30 percent last year. The influx is limiting how many events the distillery can host simultaneously, she said.
If members of the tourism authority grant final approval for the incentives, Buffalo Trace will be able to recoup over a 10-year period sales tax payments totaling up to 25 percent of the project’s cost, said Gil Lawson, a spokesman for the Tourism, Arts and Heritage Cabinet.
That would be a maximum of $50,000 a year, but could be less depending on the distillery’s sales.
“We don’t write ‘em a check until they build the project, open the doors and start selling stuff, generating income for them and for the state, because we get tax revenue from that,” Lawson said.
Lawson said there will now be a study of the distillery’s application for incentives to make sure it meets the requirements — including showing a net positive fiscal impact for the state that exceeds the possible incentive amount.
Such studies generally take six to eight weeks, and final approval can occur after the results are presented.
A project must exceed $1 million to qualify for incentives.
Lawson said the expansion will be 11,200 square feet and will include an expanded tasting area and enlarged gift shop.
Moody said the project will include renovating the visitors center’s second floor — currently used as storage and part of the bottling operation — and the first phase of expanding the Dickel Building, which has been empty for several years but is planned to host meetings and events.
She said the distillery aims to finish the visitors center expansion this year, but she didn’t have a timeframe for the Dickel Building expansion. She said the visitor’s center was built in the late 19th century, and Buffalo Trace will endeavor to complete the renovations without endangering the distillery’s status as a National Historic Landmark.