MULBERRY, Tenn. (AP) — For decades, Tennessee and Kentucky whiskey and bourbon makers have been beloved in their communities. The distilleries where the liquor is produced and the barrel houses where it is aged complement the rural character of their surroundings, providing employment and taking pride in a successful local industry.
Now the growing popularity of the industry around the world is exacerbating conflicts at home.
In Kentucky, where 95 percent of the world’s bourbon is produced, counties are rebelling after the Legislature voted to end the 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 say those investments may never be recouped.
The two states’ neighbors have long fought industrialization, even suing distillers. Complaints include the destructive black “whiskey fungus”, the loss of prime farmland and more alcohol-oriented tourist developments than distillery tours.
Looks like the romance is over.
“We were their biggest advocate and they threw us under the bus,” said Jim Beam’s former executive and Bullet County judge executive, essentially the county’s mayor, Jerry Summers.
Bullitt County depends on an annual barrel tax on aging whiskey that brings in $3.8 million by 2021, Summers said. Most of it goes to schools, but the money goes toward services that support the county’s Gym Beam and Four Rose plants, including a full-time fire department.
Many of the new barrel homes are being built with industrial revenue bonds that exempt them from property taxes for years or decades. The counties supported property tax relief because they expected to continue collecting barrel taxes. County officials felt betrayed when the state Legislature voted to repeal it earlier this year, after intense lobbying by the Kentucky Distillers Association.
“Our industry has always been a handshake deal,” Summers said. Now those agreements are being violated.
After the barrel tax sunsets in 2043, some warehouses will pay no tax on bullets. The county still has to service them, protect them and protect the surrounding community from them if something happens, Summers said.
“Where you have a plant that produces something dangerous based on alcohol, you need emergency management, EMS, the sheriff’s department,” he said.
Democratic Gov. Andy Bescher, who signed the bill after it passed Kentucky’s Republican-controlled Legislature, said the bill would encourage investment, while several industry lobbying was necessary for its support.
“I know it was hard. You had an industry that supported many jobs and called Kentucky home. At the same time, you have the communities that helped build that industry. I know there are probably some hard feelings right now,” Beshear said at a news conference.
Eric Gregory, president of the Kentucky Distillers Association, said the compromise bill would create a new excise tax to help fund school districts. Another levy helps fire and emergency management services, although not applicable in all counties.
“Even with this relief, refining will continue to be Kentucky’s top taxed industry, generating $286 million in taxes annually,” Gregory said in an email.
While tax changes are underway, whiskey is increasing.
As a former Beam executive, Summers remembers a time when whiskey was a cheap, “bottom shelf” drink. In small batch products, the liquor is cooled slowly. U.S. whiskey revenue has nearly quadrupled since 2003, reaching $5.1 billion last year, according to the Distilled Spirits Council of the United States. At the same time, the super premium segment grew more than 20-fold to $1.3 billion.
Now many of the most well-known brands are part of international pubs. Jim Beam is owned by Japan-based Beam Suntory. Britain’s Diageo owns Bulleit. Italian group Campari owns Wild Turkey.
While campaigning for the end of the tax, a group of activists suggested the industry could leave Kentucky. Officials like Summers call that bluff. If things don’t change, Bullitt County won’t need any new barrel houses, he said, and he’s not alone.
Nelson County, home to Heaven Hill, Log Still and other Kentucky communities involved with the industry, recently approved a moratorium on the construction of new bourbon warehouses while the county revises zoning and permitting laws. Soon, any new projects will be required to get citizen input and Zoning Board approval, Judge 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 gets about $8.6 million a year from the barrel tax, he said.
In Lincoln County, Tennessee, a Jack Daniel’s was recently slapped with a cease-and-desist order after neighbors accused it of illegal expansion. As of 2018, the company has built six 86,000-square-foot (7,989 square meter) warehouses on a 120-hectare (48-acre) property, each holding 66,000 barrels.
Jack Daniel’s has since received the proper approval, but neighbors say their biggest complaint hasn’t been addressed: a black fungus that feeds on ethanol in the whiskey era.
“Whiskey fungus” has been a concern around distilleries for centuries, but the size and scope of new barrel buildings means more ethanol is being released into the storage area. The fungus strangles trees and shrubs and covers nearby houses and cars in a black film.
When Pam Butler moved to Lincoln County 30 years ago, there were only two barrel houses nearby, and she “had no problem.
“I had a white car and it stayed white. I had a white horse trailer and it stayed white. Then, about five years ago, it all started to go haywire,” Butler said.
Butler owns a small farm near Jack Daniel’s property where she keeps horses. She said her pastures are not growing as well as they should be, many of her trees are dying, and she has asthma. She didn’t know if her illness was related to the fungus, but said she only started showing symptoms in the past few years.
Butler and several other neighbors want Jack Daniel’s to contain ethanol emissions instead of releasing them into the neighborhood. The company wouldn’t comment on the outbreak, but spokesman Svend Jansson said in a statement: “We work hard to be a good partner to all members of our community.”
“We recognize that there have at times been a minority of people in the areas where we operate who have not appreciated or valued the growth of Tennessee whiskey production,” the statement said.
Back in Kentucky, renowned author and agriculturist Wendell Berry has another concern: local food security and the loss of prime farmland.
“For 30 years, I’ve worked to develop the Louisville regional food economy,” Berry said.
“Cities like Louisville and Nashville are surrounded by fertile land,” he says, but import most of their food from California’s Central Valley. “I have spent my life arguing that this land needs people who want something to eat.
Berry recently lost a battle with distiller Angel Envy in Louisville 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, with cabins, an amphitheater and a helipad.
Angel’s Envy declined to comment.
Fred Minnick, who has written books on bourbon and judges the World Whiskeys Competition, said it was an exciting time for the industry because bourbon had never been this popular.
“Bourbon was a good man. Bourbon was beloved by the state,” he said of Kentucky. “It will be exciting to see bourbon continue to be the hero.”