The developer of the controversial CentrePointe project wants the state to issue $30 million in bonds for a three-story underground parking garage now under construction in the middle of downtown Lexington.
Darby Turner, a lawyer who represents the Webb Companies, said Tuesday that additional tax revenue generated from the project would pay off the Kentucky Economic Development Finance Authority bonds.
The Webbs are not asking the city or the state to pay the debt payments on the bonds, Turner said. The developers hope to have the application heard at the authority's next board meeting on Aug. 28. But the idea first must get the blessing of the city's Urban County Council.
Turner said the last-minute push for state bond money is not an indication that the project is in trouble. If the state does not approve the $30 million bond issuance, the Webb Companies will seek other financing, he said.
"We will have to figure out other avenues to deal with the tax increment financing," Turner said.
The city and state have approved a tax increment financing district for the project. Under the program, additional tax revenue generated from the project can be used to reimburse the developer for public infrastructure costs such as a parking garage. The 2013 agreement originally said that $31.9 million in direct costs could be recovered for the construction of the garage in addition to $16.9 million in financing costs.
As part of the development agreement between the city and the developers, the city also required that the Webb Companies set aside $4.4 million in case there are problems with the project financing or the project falls apart. That $4.4 million guarantee is roughly how much it would cost to restore the site to its original condition.
If the project does not generate enough new tax money to pay off the $30 million bond, the city or the state is not on the hook for the payment, Turner said.
Joe Lilly, a spokesman for the Cabinet for Economic Development, said that they could not comment on CentrePointe's application because the Kentucky Economic Development Finance Authority, the board that oversees economic development incentives, had not received the application. However, the state will not be at risk, Lilly said, because the structure of the bond would help determine who is responsible to pay the debt on the $30 million bond if the tax revenues don't materialize.
The price tag for the entire CentrePointe project, which is bounded by South Limestone, Vine, Main and Upper streets, is estimated at $393.9 million, including financing costs. The project has been controversial since 2008, when an entire block of historic buildings was razed. Construction did not begin until late December because of difficulty with financing and other problems with the development.
Plans for the CentrePointe project include a 12-story apartment building, an 18-floor Marriott hotel and a 10-story office tower. There is also a 10-story office building. Several tenants — including Stantec engineering — have been announced for the office tower.
The city's Economic Development Investment Board will discuss Webb's request at a Wednesday meeting. The board will make a recommendation to the council whether to pass a resolution supporting the project's bid for state bond money, city officials said.
Lilly said that there is no deadline for the application to be accepted before the Aug. 28 board meeting. The Urban County Council's next meeting is Aug. 14.
"We understand the reason for the request — the lower cost of capital," said Susan Straub, spokeswoman for Mayor Jim Gray. "That said, there are always risks associated with financing public and private projects. Our hope is that the project be completed carefully and timely so that the tenants, who've already announced their intentions, can move in and once again bring activity to the block. Our responsibility is to be cautious and minimize the public's risk so that the development is successful, while taxpayer dollars and the public's interests are protected."