After questions swirl about Rupp renovation, Lexington council schedules June hearing

bmusgrave@herald-leader.comApril 22, 2014 

Designs released in February show the renovations of Rupp Arena and the Lexington Convention Center. This is an exterior view of Rupp Arena from Main Street.

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Lexington's Urban County Council voted Tuesday to hold a hearing in June on a proposed redesign of Rupp Arena and attached convention center after many questions about the project surfaced during Tuesday's council meetings.

Tuesday was the first day that the council tackled Mayor Jim Gray's proposed $313 million general fund budget, which was unveiled April 8. The budget includes authorizing $40 million in bonds for Rupp. Debt payments on the bonds would not have to be made until 2016.

Frank Butler, project manager for the Rupp redesign, told council during a budget meeting that the design and construction costs for the project have been lowered from $310 million to $302 million. The number does not include additional costs, such as paying off $18 million in debt on a 2004 convention center renovation.

This month, Gray unsuccessfully lobbied the state legislature for $80 million in state aid for the Rupp project.

In addition to $120 million in city and state funding, the University of Kentucky, Rupp's main tenant, would pay $10.7 million a year, or more than $300 million over its 30-year lease, Butler said. Butler said Tuesday that the remaining money will come in part from additional revenue generated by the new Rupp and convention center. Also, some of the money would come from more than $35 million in fan contributions, according to a financial plan obtained by the Herald-Leader.

Tuesday was the first time Butler has publicly discussed key components of the financial plan. The details had been kept secret because UK has only tentatively agreed to a 30-year lease and did not want the lease agreement released. But after the Herald-Leader printed part of the plan given to legislative leaders last week, the information is no longer secret, Butler said.

Butler said all three of the partners — the city, state and the university — have to contribute, or the project won't move forward.

"They all have to come together, or the project is a non-starter," Butler said. "If we don't have the support of (the university or the state), then we won't be back here asking you to issue those bonds."

Butler said the financial plan includes only a one-time $40 million contribution from the city. That's not a bad deal, he said, considering that UK will be contributing $300 million over the next 30 years. "And they don't own it; you do," Butler said. Also, the state would put in double what the city is being asked to contribute, he said.

Vice Mayor Linda Gorton asked whether the city had to authorize the bonds in the upcoming fiscal year, which begins July 1. Butler said the city could authorize the bonds in the coming fiscal year but wouldn't have to issue them until after it is known whether the General Assembly will support the project. The city's commitment could be key to building trust with the three other parties, he said.

"Everybody wanted everybody else to show their cards," Butler said of the stalled negotiations. "When we went to talk to the state, the state said, 'Well, where's the university?' When we went to talk to the university, the university said, 'Well, where's the state? Where's the city?'"

Butler said an effort to lobby Senate and House leaders for the $80 million in state aid will begin as early as June.

Council members also asked whether the city would be required to repay $2.5 million that the legislature authorized in 2012 for the design phase of the project. In all, $5.5 million has been spent on the design.

On the last day of the 60-day legislative session, the legislature approved a bill that would require the city to repay the $2.5 million, which came from coal severance taxes — taxes on coal as it leaves the ground. Many coalfield legislators were angry that money from coal severance funds was used for the Rupp project. During negotiations over the state funding, Gray had told the legislature that the city would repay the $2.5 million.

But council member Chris Ford said Tuesday that he didn't think the city should have to repay the money. In 2012, when the money was given to the city, it was an allocation. The city matched the $2.5 million based on the knowledge that the state money was not a loan, he said.

Butler said the council would not be asked to approve $2.5 million in cash to repay the loan. The $2.5 million would be rolled into the total costs of the $302 million project.

In addition, the legislature included $1.5 million in its $20.3 billion two-year budget for more Rupp design work, with the city required to match that amount. Butler said the mayor's budget proposal does not include the $1.5 million city match, and he said he doesn't plan on asking the city for the $1.5 million until UK and the state make assurances that they are going to move forward with the project.

Gorton had originally proposed holding a meeting to discuss the Rupp project in August. But council members Kevin Stinnett and Harry Clarke said they wanted the meeting to be held before then because of questions they have received from constituents. The council eventually decided on 6 p.m. June 23.

Much about the financial plan for the project has been kept secret because of UK's concerns, and it's time the council and the public learn more about the proposal, Gorton said.

"I think the council finally needs to have a discussion about the Rupp project," she said.

Beth Musgrave: (859) 231-3205. Twitter: @BGPolitics. Blog: Bluegrasspolitics.bloginky.com.

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