Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, September 11, 2015, at 10:00 AM, at New Riff Distillery, 24 Distillery Way, Newport, KY. Representative Dennis Keene, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator John Schickel, Co-Chair; Representative Dennis Keene, Co-Chair; Senator Dan "Malano" Seum; Representatives Tom Burch, Denver Butler, Larry Clark, Jeffery Donohue, Joni L. Jenkins, Reginald Meeks, Brad Montell, David Osborne, Darryl T. Owens, Arnold Simpson, Diane St. Onge, and Susan Westrom.
Guests: Ken Lewis, President and owner, New Riff Distillery; Jack Moreland, President, South Bank Partners; Tom Fromme, City Manager, Newport, Mike Giffen, City Manager, Dayton; Tim House, Executive Director, Kentucky Association of Master Contractors; Kristin Meadors, Director of Governmental & Regulatory Affairs, Kentucky Distillers’ Association.
LRC Staff: Tom Hewlett, Bryce Amburgey, Jasmine Williams, Michel Sanderson, and Susan Cunningham.
Welcome and introduction
Ken Lewis, President and owner of New Riff Distillery, said New Riff opened in May 2014. The distillery just completed a 50 percent expansion, doubling the workforce with over 20 full time jobs. In the sixteen months since opening, New Riff has experienced 30,000 visitors. Approximately 7,500 barrels of whisky have been produced. Mr. Lewis said the great heritage distilleries created and continue to maintain the industry. However, bourbon’s future customers are influenced by craft distillers. Craft distilling is behind in Kentucky, but the legislature can help distilling move forward and become competitive with other states. Laws and regulations that are crippling and anti-competitive must be changed.
Economic Development in Northern Kentucky
Jack Moreland, President of South Bank Partners, said that, in 2009, six cities and two counties created an inter-local agreement to develop the riverfront. Tom Fromme, City Manager for the city of Newport, said the Route 9 corridor is important to Newport. Along the corridor are vacant sites, including an old steel mill that will be developed as this highway project is completed in early 2017. Mike Giffen, City Manager for Dayton, KY, said there is an extensive project in Dayton known as Manhattan Harbor that includes 142 acres of development. Currently under construction is a single family development. Lots are being sold from $900,000 to $1.6 million. East of this development, a commercial site is being planned. Riverfront Commons will be to the west of this development.
Jack Moreland said Riverfront Commons is an 11 mile walking and biking trail beginning in Fort Thomas and ending in Ludlow. This has been broken into four projects, the first of which will be bid in next two weeks. Construction should be completed by the end of 2015.
Tom Fromme said Aqua on the Levee is an $80 million project. This brings new residents to the city. A new attraction on the Commons is a 180 foot observation wheel that will have heated/air conditioned gondolas that will accommodate up to six people. This will provide a panoramic view of the city and the skyline.
Newport, at the foot of the Taylor-Southgate bridge coming from Cincinnati, supports a large amount of foot traffic to Reds or Bengals games. People come to Newport to have dinner and then walk to the games.
Jack Moreland said that Festival Park is currently being used. However, the space is in need of upgrades. One goal with Riverfront Commons is to increase connectivity. The Ohio, Kentucky, Indiana Council on Governments awarded a $1.3 million grant to complete the project.
There is an old school building approximately one block from Newport on the Levee that has been sold for development. A development with store fronts and apartments named Monmouth Row is open and has a waiting list for occupancy. Red bikes have been installed in Covington and Newport that can be rented by credit card and returned to the rack after use. Ludlow is in phase one of development of a city park.
Representative Burch said that the work done in this area is remarkable, complimenting the northern Kentucky legislators who brought the issue of redevelopment before the General Assembly.
Senator Schickel said that the renewal is a generational issue with millennials moving to urban areas.
In response to a question from Senator Schickel, Mr. Moreland said the Transit Authority of Northern Kentucky (TANK) system has a trolley used for the regional public transit rather than bus due to a weight limit on the bridge that is used on the route.
In response to a question from Representative Westrom, Mr. Moreland said fundamentally cities and counties must compromise on changes for progress in any area.
In response to a question from Senator Seum, Mr. Moreland said South Bank Partners is a not-for-profit group.
2016 BR 72–AN ACT relating to licensing fees and making an appropriation therefor
Representative Montell said his bill addresses the issue of sweeping restricted funds into the General Fund. Several boards have asked if there is any solution to ending this practice. The last budget, FY 2014/2015, swept $214 million dollars with an additional $70 million coming out of the 2015 budget. This makes it necessary for those boards and agencies that have been swept to raise fees in order to operate. In the last eight years, $10.8 million has been swept from three agencies in the Department Housing, Buildings, and Construction.
The bill addresses the sweeping of funds from the departments of Electrical, HVAC and Plumbing in the Department of Housing, Buildings and Construction. The bill defines excess funds for these three divisions. They will be allowed to carry forward up to 20 percent in excess of their annual budget. Anything above 20 percent would be considered excess and could be swept. This ability to carry forward some revenue may allow for the reduction of license fees.
Tim House, Executive Director, of the Kentucky Association of Master Contractors said his association is in support of BR 72. Since 2000 it has been a common practice to transfer funds from agencies into the general fund. When the fiscal year closed in 2000, an emergency meeting was called to notify all departments in HBC that fees would be raised across the board, some as much as 350 percent. In 2008 after $5.9 million dollars were swept, members of the association filed a law suit in Franklin Circuit court. In 2014 the Kentucky Supreme Court ruled in favor of sweeping excessive restricted funds. By defining excessive funds and permitting only excessive funds to be swept, BR 72 allows programs to operate without raising fees. However, it is anticipated that the department will not support this legislation.
In response to a question from Representative Burch, Representative Montell said money is swept from one agency to meet a need in another area.
In response to a question from Senator Seum, Mr. House said the departments of HVAC, Plumbing and the electrical department have seen $11 million swept.
Tourism and hospitality modernization
Kristin Meadors, Director of Governmental and Regulatory Affairs for the Kentucky Distillers’ Association said KDA was founded in 1880 with a mission to promote, protect, and unite Kentucky’s signature Bourbon and distilled spirits industry. Kentucky makes 95 percent of the world’s bourbon. Production has increased over 170 percent since 1999, and the state has the highest inventory since 1975.
The Kentucky Bourbon Trail was created in 1999 to give
visitors a first-hand educational experience of the art of creating the world’s
finest bourbon. In 2012, KDA launched a bourbon trail for Craft distilleries. A
tour map shows the locations of both the large distilleries and the craft distilleries.
Both tours have seen record-breaking growth, with visitors from all 50 states and
more tourist visiting every year. KDA has a
“Passport” program. Each distillery on the map has a space for a visit stamp.
Upon completion of the tour with nine stamps, the visitor can redeem the map
for a Bourbon Trail tee-shirt. Since 2007, more than 75,000 completed maps have
been redeemed.
Eight-five percent of distillery visitors come from out-of-state. The majority of visitors have come specifically for the Bourbon Trail with 31 percent making more than one visit to complete their bourbon visit map. The average visitor spends approximately $1,000 during a stay.
Kentucky, however, is falling behind in bourbon production, ranking eighth in operating distilleries. Other states are changing laws and reducing fees to attract the next generation of distillers. Rhode Island has permanently exempted wine and spirits from its 7 percent sales tax, while in 2009 Kentucky added the 6 percent sales tax to alcohol. In New York, laws were changed to allow distilleries to operate restaurants and sales by the drink. In Washington state, distilleries now participate in special events and have no limit on sales. In 2005, there were no distilleries in Washington, but now there are 110. The number of craft distilleries nationally is on the rise as well. There is a direct correlation between what each states legislature has done to change legislation making laws more business-friendly and the growth of distilleries in those states.
Kentucky cannot afford to lose its historic distilling industry. Change is needed to modernize tourism and hospitality. International and out-of-state visitors are asking for change. Tourists can visit a winery or a brewery and purchase a drink or a flight; however, when visiting a distillery they cannot purchase the spirits.
KDA is asking the legislature for help by allowing distilleries to increase sample sizes, or sell spirits by the drink, and authorize local option elections for distilleries. KDA asks that the legislature permit the sale of antique spirits at the retail level. This concept is already permitted at Kentucky’s beer and wine sites. Everyone benefits when a visitor becomes a fan of Kentucky bourbon. Kentucky’s bourbon industry must stay competitive. If laws are not modernized, Kentucky could see a loss in jobs and revenue and the loss of its identity as the authentic home for bourbon.
Representative Keene stated that the bourbon industry is a true opportunity for economic development in rural areas.
Representative Clark said the industry should come to the chairs of this committee for help rather than the executive branch.
Representative St. Onge said Kentucky is known for bourbon and horses but each stands to be lost if the legislature does not help increase their revenue.
Senator Seum noted that Louisville has an Urban Bourbon trail.
Representative Keene announced that a brief tour of the New Riff distillery is available for those interested.
There being no further business, the meeting was adjourned at 11:34 AM.