Rezoning denial puts O.Z. Tyler, county at odds

Jan. 24--A major expansion at O.Z. Tyler Distillery hit a snag this month when the Owensboro Metropolitan Planning Commission denied a request to rezone property where the distillery planned to build new bourbon barrel storage facilities called rickhouses.

Now officials with the distillery and its business partner, Crown Investment Group LLC, say they plan to take their case before Daviess Fiscal Court. Meanwhile, other counties could be interested in stealing some of those rickhouses, and the tax revenue that come with them, out from under the Daviess County line.

The planning commission on Jan. 10 voted down a Crown Investment proposal to rezone 32 acres of farmland northwest of the U.S. 60 Parrish Avenue exit from "light industrial" and "rural agriculture" to "heavy industrial," because local zoning laws consider bourbon a potentially hazardous substance that falls under some of the strictest local government controls.

According to the city-county Comprehensive Plan, however, heavy industrial zones, typically known as industrial parks, must be contiguous or at least abut the same streets, and there are no other pieces of property zoned that way anywhere near the 32 acres where O.Z. Tyler wants to build new rickhouses.

Master Distiller Jacob Call says he and his investment company have appealed that decision to Fiscal Court, but the process takes time, and the distillery, he said, is running out of it.

"Timing is very important to us," he said. "We need to have our first new warehouse up and running by mid-summer because we are simply running out of space here. All of our warehouses are already full."

The distillery, which began making whiskey here in 2016, has been ramping up production to meet wholesale demands every year since. Current expansion plans call for the renovation of a collapsed rickhouse and the construction of a new one at O.Z. Tyler's existing property on Distillery Road, plus six new rickhouses the distillery had planned for 3515 Parrish Avenue west of Owensboro, which would support a 35 percent total increase in production by April 2020.

By that time, Call said, the distillery will be making roughly 300 barrels of bourbon a day, or 95,000 barrels per year, making it the fourth largest independent distillery on the planet.

That much liquor generates a lot of tax revenue.

According to Call, the six new rickhouses on West Parrish Avenue are expected to bring Daviess County $400,000 in additional distilled spirits (or barrel) tax revenue. By 2020, when the expansion is complete, O.Z. Tyler could be paying the county $1.1 million in tax revenue, a number that is expected to double in just three years' time.

A portion of those future barrels will store older bourbon that meets the definition of Kentucky straight bourbon whiskey the distillery will sell retail, and according to O.Z. Tyler Plant Controller J.D. Edwards, the older bourbon gets in a barrel, the more tax revenue it generates.

"Speed and timing are very important to us, and it seems like we've had a few delays here already," Call said. "We are being approached by neighboring counties that would love to have the tax revenue. We, of course, are citizens of Daviess County. We live in Daviess County. My kids go to Daviess County Public Schools, and I would love to keep some of this tax revenue for the Daviess County school system, but, again, we've had other counties reach out who are bending over backward to help us."

Daviess County Judge-Executive Al Mattingly said he disputes the kinds of numbers the distillery is quoting, and he doesn't take well to what seem like threats.

"Most of that barrel tax goes to the state and the federal government," he said. "... My understanding, certainly, is that I would not want to see anyone take business out of Daviess County, but, at the same time, I would hate to see businesses holding that over the head of local governments, trying to get them around the comprehensive plan and zoning laws that were decided on by the citizens themselves. I'm going to do what I think is correct and right, and I'm not going to respond to threats."

A quick review of the local barrel taxes O.Z. Tyler paid in 2018, however, reveal that $1 million might not be that far from reality, especially as older bourbon generate more money.

Daviess County Sheriff's Department records show that the distillery paid $104,000 in distilled spirit taxes last year, and while the county government saw just $17,000 or so of it, the vast majority, or about $73,000, went to the Daviess County school system. None of that money went to the state or federal governments.

Crown Investment President Michael King said he is frustrated with delays the distillery has faced already with this project, and the appeal he's taking to Fiscal Court also includes another option he described as a change to distillery zoning rules altogether.

A light industrial zone, which is what most of the property on W. Parrish Avenue already is, can support a distillery under the current zoning ordinance but not the warehouses their products are stored in. That seems like an oversight in zoning language, so he wants commissioners to consider rewording the law so that rickhouses wouldn't have to be zoned "heavy industrial" in Daviess County at all.

When the rezoning proposal came before the planning commission earlier this month, several dozen local residents from that area testified against it, not because of the distillery's plans, but of what they could bring with them.

"The biggest concern most of the residents around the property had wasn't necessarily the barrel houses themselves, but that they required a heavy industrial zone which would become a base that other heavy industrial zones could be created that would be in compliance with the comprehensive plan," King said. "It wasn't the barrel houses themselves, it was what those barrel houses might bring with them. What we're proposing would be a happy middle ground. We've reached out to Daviess County Fiscal Court about the possibility of simply changing the zoning ordinance. Instead of making us build in a heavy industrial zone, change it so that bourbon barrel storage can take place in a light industrial area."

But Mattingly said it should be noted that bourbon is a flammable substance and its smell could be a nuisance to nearby neighbors.

Austin Ramsey, 270-691-7302, [email protected], Twitter: @austinrramsey

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