Rupp Arena project to get $1.5 million; needs UK lease, financial plan for more money

bmusgrave@herald-leader.comMarch 31, 2014 

Despite a last-minute push by Lexington Mayor Jim Gray, the renovation and expansion of Rupp Arena will get just $1.5 million in the two-year compromise state budget approved Monday by the House and Senate.

A bill deemed "critical" to pay for the $310 million project also appears to be dead in the Republican-led Senate.

Gray would not say Monday whether the legislature's decision not to include the requested $65 million would delay or kill the project. He said his staff was "just getting this information on the debt service, so we're plugging it into the Rupp budget."

"The (legislative) session isn't over 'til April 15, and we're going to work every day between now and then to get the legislation that allows us to fund the project," Gray said. "I can say it's going to take more than $1.5 million to keep us on schedule for a $310 million project."

The $1.5 million will have to be matched by the city, for a total of $3 million, state leaders said Monday.

The $1.5 million was part of a deal hammered out by the House and Senate early Sunday after days of negotiations.

House Speaker Greg Stumbo, D-Prestonsburg, said the budget bill included language that would allow the city to return to the legislature in 2015 if it has a completed financial plan in place. In addition to a financial plan, the legislature wants to see a signed lease agreement with the University of Kentucky, Rupp Arena's marquee tenant. If those terms are met, the legislature could authorize $65 million in bonds as early as the 2015 session, Stumbo said.

"We left a path ... for the Rupp Arena project to move forward," he said.

The legislature earmarked $6 million in the state's rainy-day fund to pay for debt service on the $65 million bond if it is issued next year.

In another blow, a bill that would increase Fayette County's hotel and motel tax to generate $3.5 million to help pay for the project is unlikely to be approved by the Senate this session, Senate leaders said Monday. House Bill 544 was approved by the House in March.

Senate President Robert Stivers, R-Manchester, said the Senate had no plans to act on HB 544, which would raise the hotel-motel tax in Lexington from 6 percent to 8.5 percent to fund bonds for the Rupp project, which includes the expansion of the arena, and moving and expanding the adjacent convention center.

"We don't plan to be acting on that," Stivers said Monday of HB 544.

Still, Stivers typically says when asked about the status of any bill that nothing is officially dead until April 15, when the General Assembly must end. Stivers said the $1.5 million could be matched by the city.

"The city can match that. The mayor has said they are sitting on $12 million from last year," Stivers said.

He noted that the 2015 General Assembly would begin in nine months. "We can always fund it at various levels," he said.

Stivers and Republican leaders have said they were concerned that the financial plan to pay for the project had not been made public.

Gray has said that UK had agreed to a 30-year lease in principle but had not finalized the agreement. The university did not want the details made public. Gray said he showed the financial plan to Senate and House leaders in private.

Gray, who made a surprise appearance Saturday in front of House and Senate budget negotiators, said there were three major funding sources for the project: the hotel and motel tax, UK's lease payments, and naming rights for the rebuilt arena. (Gray said Rupp always would be part of the arena's name.)

The hotel room tax would comprise 21 percent of the necessary funding, he said.

The Democratic-controlled House had included $65 million for the project in its budget. The Republican-controlled Senate did not.

Meanwhile, Louisville received $56 million in state bond money to help pay for a renovation and expansion of its downtown convention center as part of the two-year budget. The House and Senate also approved a bill that would use hotel and motel taxes to help pay for the expansion of the Louisville convention center. But the Louisville hotel and motel tax bill was not a tax increase; it would divert part of the money to help pay bonds for renovation of the convention center, which is owned by the state.

Rep. Robert Damron, D-Nicholasville, said Monday that Louisville's tourism industry also backed the redirection of the hotel and motel tax money. Many in the Lexington tourism industry did not back HB 544.

"Members don't like to become referees of local politics," Damron said. "We would like everybody to be on the same page."

He said there still was time for the project to move forward.

"I think the mayor did what he could do, but it was a timing issue," he said. "They can do it in 2015, and it will probably be a better project once you get consensus."

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

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