For decades, whiskey and bourbon makers in Tennessee and Kentucky have been beloved by their communities. The distilleries where the liquor is made and the barrelhouses where it is aged add to the rural character of their neighborhoods, while providing jobs and pride in a successful home industry.
Today, the growing popularity of the industry around the world is increasing conflicts at home.
In Kentucky, where 95% of the world’s bourbon is produced, counties revolted after the legislature voted to eliminate a barrel tax they rely on to fund schools, roads and utilities. Local officials who donated land and spent millions on infrastructure to help bourbon makers now say those investments may never be recouped.
Neighbors in both states have fought the industry’s expansion, even suing distillers. Complaints include a destructive black “whiskey fungus,” the loss of prime farmland and liquor-themed tourist developments that are more Disneyland than distillery tours.
The love affair, it seems, is over.
“We were their biggest advocate and they threw us under the bus,” said Jerry Summers, a former executive with Jim Beam and the judge-executive for Bullitt County, which is essentially the county’s mayor.
Bullitt County has long relied on an annual barrel tax on aged whiskey, which will bring in $3.8 million in 2021, Summers said. Most goes to schools but the money is also used for services that support Jim Beam and Four Roses plants in the county, including a full-time fire department.
Many of the new barrelhouses were built with industrial revenue bonds that exempt them from property taxes for years or decades. Counties support property tax breaks because they hope to keep collecting the barrel tax. When the state legislature voted to abolish it earlier this year, after intense lobbying by the Kentucky Distillers’ Association, county officials felt betrayed.
“Our industry has always been a handshake agreement,” Summers said. Now, those agreements are being broken.
When the barrel tax expires in 2043, distillers will not pay the tax to Bullitt at some warehouses. The county still needs to provide them with services, protect them and protect the surrounding community from them if anything goes wrong, Summers said.
“Where you have an alcohol-based plant that produces a hazardous material, you need emergency management, EMS, a sheriff’s department,” he said.
Democratic Gov. Andy Beshear, who signed the bill after it passed Kentucky’s Republican-controlled legislature, said several industry compromises were key to his support, while the bill would encourage investment.
“I know it’s hard. You have an industry that supports many jobs and calls Kentucky home. At the same time, you have communities that have helped build the industry. I know there are, right now, maybe some hard feelings,” Beshear said at a news conference.
Kentucky Distillers’ Association President Eric Gregory noted that the compromise bill creates a new excise tax to help fund school districts. Another tax helps with fire and emergency management services, although it doesn’t apply to all counties.
“Even with this relief, distilling remains the highest taxing industry in Kentucky, paying $286 million in taxes annually,” Gregory said in an email.
As tax changes take place, whiskey thrives.
As a former Beam executive, Summers remembers a time when whiskey was a cheap, “bottom shelf” drink. With small batch products, the drink slowly becomes cold. American whiskey revenues have nearly quadrupled since 2003, reaching $5.1 billion last year, according to the Distilled Spirits Council of the United States. During the same period, the super premium segment increased more than 20 times to $1.3 billion.
Today many of the most recognized brands are part of international beverage conglomerates. Jim Beam is owned by Japan-based Beam Suntory. Britain’s Diageo owns Bulleit. Italy’s Campari Group owns Wild Turkey.
In lobbying for an end to the tax, the group of distillers suggested that the industry could leave Kentucky. Officials like Summers call that a bluff. He said Bullitt County doesn’t want any new barrelhouses unless things change, and he’s not alone.
Nelson County, home to Heaven Hill, Log Still and other Kentucky communities involved in the industry, recently approved a moratorium on new bourbon warehouse construction while the county update zoning and permitting rules. Soon, any new projects will have to seek citizen input and zoning board approval, Judge Executive Timothy Hutchins said.
“That got their attention, let’s put it that way,” Hutchins said. “Now, we’re trying to kiss and make up.”
The county receives about $8.6 million annually from the barrel tax, he said.
In Tennessee’s Lincoln County, Jack Daniel’s was recently slapped with a stop-work order after neighbors sued over a massive unauthorized expansion. As of 2018, the company has built six 86,000-square-foot (7,989-square-meter) warehouses with 66,000 barrels each on a 120-acre (48-hectare) property, according to the lawsuit.
Jack Daniel’s has since retroactively received the proper approvals, but neighbors say their biggest complaint hasn’t been addressed: A black fungus that eats the ethanol released as the whiskey ages.
“Whiskey fungus” has been a nuisance around liquor facilities for centuries, but the size and scale of new barrelhouse complexes means that more ethanol is released in a concentrated area. The fungus covers nearby houses and cars in a sooty black film, choking trees and shrubs.
When Pam Butler moved to Lincoln County 30 years ago, there were only two barrelhouses nearby, and she “had no issues.”
“I had a white car and it stayed white. I had a white horse trailer and it stayed white. Then about five years ago, everything started looking grungy,” Butler said. .
Butler owns a small farm where he keeps horses adjacent to Jack Daniel’s property. He said that his pasture is not growing as it should, many of his trees are dying and he is suffering from asthma. He didn’t know if his illness was related to the fungus, but said he only started having symptoms a few years ago.
Butler and other neighbors want Jack Daniel’s to capture ethanol emissions instead of releasing them into the neighborhood. The company would not comment on the fungus but spokesman Svend Jansen issued a statement saying it “will continue to work hard to be a good partner to all members of our community.”
“We recognize that there are, at times, a small number of people who do not value or appreciate the growth of Tennessee Whiskey production in the areas where we operate,” the statement said.
Back in Kentucky, the famous author and agriculturalist Wendell Berry had another concern: local food security and the destruction of prime agricultural land.
“I’ve been working, going on for 30 years, to develop a regional food economy for Louisville,” Berry said.
“Cities like Louisville and Nashville are surrounded by fertile land that’s well-watered,” but they import a lot of their food from California’s Central Valley, he said. “I’ve spent my life arguing that this land should be for people who want to eat.”
Berry recently lost a battle with Louisville distiller Angel’s Envy over the development of a 1,200-acre (485-hectare) property adjacent to the farm where he grew up. Henry County approved the company’s plans for a bourbon tourism complex there, complete with cabins, amphitheater and helipad.
Angel’s Envy declined to comment.
Fred Minnick, who writes books on bourbon and judges world whiskey competitions, said it’s an interesting time for the industry because bourbon has never been this popular.
“Bourbon is a good man. Bourbon is loved in the state,” he said of Kentucky. “It will be interesting to see if bourbon remains a hero.”
Top photo: Landowners near Jack Daniels expanding barrelhouse complex in Mulberry, Tennessee, complained about the spread of a black growth known as whiskey fungus. (AP Photo/John Amis)
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