The University of Kentucky does not support moving ahead with a proposed $350 million renovation of Rupp Arena and an attached convention center, President Eli Capilouto said, bringing simmering tensions over the project into public view.
In a May 20 letter to Lexington Convention Center chairman Brent Rice, Capilouto said it's clear that there isn't enough public support for the project. He also said he was "disappointed" in public and private criticism of UK by LCC officials and in the lack of a stable financing plan for the project.
"At this time, there is not sufficient public support for committing over $350 million in state, city and other funds to a basketball arena and convention center when there are so many well-recognized educational, economic, retirement and health care needs across Lexington and the Commonwealth of Kentucky," Capilouto wrote.
He said UK had seen little enthusiasm for a piece of the financing plan proposed by Mayor Jim Gray that would sell "Team Rupp" memberships to the public for $300 each.
"We were consistent in advising you that we believed this source would generate significantly less than $10 million," Capilouto wrote. "Nevertheless, at one time the financing plan included $25 million in projections, only to later escalate to $35 million."
Capilouto was responding to a letter sent by Rice in April that asked UK to publicly support the project.
UK has been unwilling to join Gray in touting the latest proposal, citing concerns that state lawmakers might not approve funding for academic buildings if they provided $80 million for the Rupp project.
Rupp's biggest tenant by far is the UK men's basketball team. The school's lease with Rupp ends in 2017-18, and Capilouto alluded to that in his letter.
"Because of the lack of enthusiasm for the current plan among various constituencies (including the Kentucky General Assembly), the lack of firmness of the $350 million financing plan, and the approaching expiration date of our lease, it is important to explore all potential options," Capilouto wrote. "Our preference is to continue to play men's basketball games in downtown Lexington, under the right lease conditions."
Capilouto's strongly worded letter comes less than a week after a Bluegrass Poll showed that only 18 percent of registered voters statewide support spending state money on the $351 million project.
Gray gave no indication Thursday that he was going to drop plans to secure funding for the project despite pushback from voters and UK. Some members of the restaurant and hospitality industry also have criticized the project because the convention center could be closed for as long as 18 months during construction, and that would drain tourism dollars from downtown and the city.
Gray said Thursday that he hoped that an agreement could be worked out and the relationship between the city and the university could be mended.
"So I hope we can continue to work on an agreement that benefits UK, Lexington and our entire state," Gray said. "Game-changing projects create passion and emotion, especially when things don't go as hoped, so I think it's important to step back, take a deep breath and sit down with all our partners and work things out."
Capilouto was out of town Thursday and wasn't available for comment.
Rice, in a response letter sent Thursday, thanked Capilouto for "responding in a timely manner as requested."
The letter said it "is apparent our opinions differ on some of the issues raised in your letter, nevertheless, we must proceed ..."
Rice said the university should contact officials with the Lexington Center Corp. if they "have any desire to discuss and explore alternatives further."
The Lexington Center Corp.'s Rupp committee met earlier Thursday and released a statement, saying for over three years, "many community leaders have contributed towards bringing to reality the single most significant economic development opportunity in this city's history."
"The Lexington Center Corp. board of directors remains committed to pursuing what is best for Lexington," the statement read.
Rice's April 25 letter blamed UK for the project not getting funded.
"Simply put, the university's lack of public support and legislative advocacy significantly compromised our chances for success," Rice wrote.
The project failed to get support during the legislative session because the financing plan changed several times during the 60-day session, Capilouto said. At first, the financial plan asked for $65 million in state support. Then, when an increase in Fayette County's hotel and motel tax failed to gain traction in the Republican-controlled Senate, the financial plan was altered in the waning days of the session. The final proposal, which was never passed by the legislature, asked for $80 million in state support.
"I appreciate the tough choices members of the Kentucky General Assembly face and their reluctance to invest in this project, especially when the financing plan was so fluid and the request for state support jumped $15 million (nearly 25 percent) in the final days of the session," Capilouto said.
Jay Blanton, a spokesman for UK, said discussions regarding the lease are moving forward.
"Mr. Rice's letter raises two options that he wanted the university to respond to by May 23," Blanton said. "The second option was raising the idea of whether discussions should now begin on how best to move forward. Our response is, indeed, we should be looking at all options in deciding how best to proceed."
The financial plan made public in April includes up to $10.7 million annually from a lease from UK. The plan also relies on $40 million in city bonds. The Urban County Council, which has yet to publicly debate the project, has scheduled a meeting about Rupp Arena for the end of June. The council is being asked to issue bonds in the coming fiscal year, which begins July 1. Debt payments of roughly $2.4 million would not be made until the following fiscal year.
The plan unveiled in April includes $35 million in fan support. That number is based on 140,000 fans being willing to spend $300 each to contribute to the project. The plan says $250 of each $300 contribution would go toward the Rupp project; UK would get the remaining $50, which would be a total of $7 million.
Frank Butler, the Rupp project manager, has previously said that project officials thought the $35 million was an accurate estimate. The program, Butler said, is modeled after a stock buy used by the Green Bay Packers to remodel Lambeau Field. That program had generated more than $60 million in fan support.
Blanton said university officials could not comment further on why they thought the $35 million estimate was too high.
Gray and Gov. Steve Beshear, who has long been a supporter of the project, are scheduled to be on Kentucky Sports Radio on Friday to discuss the Rupp project and Capilouto's letter.
Terry Sebastian, a spokesman for Beshear, said the two-term Democratic governor is firmly behind the proposal.
"The governor continues to support the Rupp Arena and convention center project," Sebastian said. "He will continue to seek ways to bring this project to fruition."
Linda Blackford: (859) 231-1359. Twitter: @lbblackford.