Council members want more details about financing for Rupp Arena renovation

bmusgrave@herald-leader.comFebruary 14, 2014 

Urban County Council members said this week that they want to know more about a $310 million expansion of Rupp Arena and the convention center before they back the plan or commit city funds to it.

"My concern is how to fund it," said Vice Mayor Linda Gorton. "The city has already put money into this. I am concerned about the funding, that it does not come back on the city."

Mayor Jim Gray unveiled the redesigns Monday, touting the enhancements as key to invigorating downtown and creating more jobs in Lexington's core.

"At its heart, this is an economic development project," Gray said Monday.

The need for the redesign of Rupp Arena will likely be a key issue in the May 20 mayoral primary. Gray faces two challengers — former police chief Anthany Beatty and Danny Mayer, an English professor.

The city has already put in $2.5 million for the design phase of the project. State and private money paid for the rest of the $5.5 million design costs.

Gov. Steve Beshear has pledged his support for the plan and put $65 million in the state's next two year-budget for the Rupp project. But the state legislature has not yet signed off on the plan. The General Assembly has until mid-April to finalize its budget. Gray said this week that he will deliver a detailed financial plan later this year, hopefully by this summer or fall.

The mayor has said that fan contributions, tax increment financing — or taxes generated from the project — and naming rights will be part of the mix. Rupp will always be part of the name. Gray has pledged to keep the council informed about all aspects of the redesign and financing.

However, Gray must deliver his budget to the council in April. The council typically approves its budget by the end of June.

Many council members said this week that if they don't have a full financing plan for Rupp at the time they approve the city's budget, it will be difficult for them to approve any city contribution.

"I feel that it would be very difficult for the council to give more money in a new budget when we don't know what everybody else is putting in," Gorton said.

The city also has many needs and pent-up demand for capital projects, council members said.

"I think it would be a very difficult thing to approve if we didn't have the full picture of what everybody else is contributing," said Councilman Kevin Stinnett. "We have to balance it with all of the priorities of the city."

And the city's to-do list is long.

Those priorities include trying to figure out ways to stimulate affordable housing, paying for a new senior center in Idle Hour Park, street improvements and investing in the city's parks and trail systems.

"I know that Lexington has a lot of needs, and I'm not sure if that's a priority right now," Councilwoman Peggy Henson said of Rupp. "We just don't have enough information yet."

In addition to financing, council members have other concerns about the project. The new designs call for an outer transparent wall of Rupp with an expanded concourse. The convention center would be moved to west of the complex and would be expanded from 66,000 square feet to 100,000 square feet. Meeting rooms at the center will also be expanded. Retail shops that are now inside Lexington Center will move to the outside of the complex.

"But what's going to happen to those 17 businesses inside Rupp during construction?" Stinnett asked. "We don't know yet."

Gray said this week that the plan is to keep Rupp open during the renovation. Planners are determining how to manage convention center business during the renovation. There's a chance that some of the convention center could be closed during the two-year construction time frame, he said.

Councilman Chuck Ellinger said that the total price tag for the project is actually more than $310 million. The Lexington Center Corporation, which manages Rupp, the convention center and the retail shops, is still paying off its 2004 renovation. The total debt was $22.5 million. It still has $18 million left to pay off, said Bill Owen, CEO and president of the Lexington Center Corporation.

"We still owe I think $18 million on the prior bond issue," Ellinger said.

A tax on hotels pays the debt on that $22.5 million loan. If the convention center is torn down, that loan has to be paid off. What typically happens is the remaining amount of that loan will be rolled into the new financing, council members said. So it could add about $18 million to the current $310 million price tag, bringing the total to $328 million.

The Lexington Center Corporation is self-supporting and receives no general fund money from the city. A portion of a tax on hotel rooms pays for the debt service on the 2004 renovation.

Ellinger said that renovating Rupp will not attract new business. But a renovation and expansion of the convention center could.

"If you had additional space, you should be able to attract different and bigger conventions," Ellinger said. "But I need to see more information about that first. We need to do our due diligence."

Stinnett said if the convention center is expanded, other issues have to be addressed. "Do we have enough hotel rooms?" Stinnett said.

Councilman Ed Lane said he liked the new designs, as did many on the council. "I think everyone is enthusiastic about a renovated Rupp Arena."

But Lane said that the city has to focus on basic government services and improving overall operations first. The city is also trying to rein in its borrowing, he said.

"It may not be a problem at all," Lane said. "Until we know more, it's really hard for us to say."

Gray's opponents in the May primary voiced similar concerns.

Mayer, who teaches at Bluegrass Community and Technical College, said using arenas to spur economic growth is an old idea that has not always worked.

"I think the design pays top dollar to produce a decades-old aesthetic — the big box arena — that is the very opposite of the diverse, small-scale, local-focused business development and design aesthetic that citizens claim to desire for their downtown," Mayer said.

Mayer pointed to development along Jefferson and Short streets as examples of organic, small-scale development that have changed downtown. It cost taxpayers nothing.

Beatty, an assistant vice president at the University of Kentucky, said he hasn't taken a position yet on Rupp Arena and the new convention center.

"We have to evaluate all of the aspects of it — obviously, the financial part would be the most critical," Beatty said. "If public dollars are involved, it should have minimal impact on the public."

Beth Musgrave: (859)231-3205. Twitter:@HLCityhall

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