The Lexington-Fayette Urban County Council voted 10-3 Thursday night to fund the 21c Museum Hotel in downtown Lexington.
Listed as Resolution 14 on the docket, the vote allows the city to give final approval to a $6 million loan from the U.S. Dept. of Housing and Urban Development for the luxury hotel project.
The hotel will take about $43 million to build and transform the old First National Building at West Main and North Upper streets with an 88-room boutique hotel, restaurant and bar and a 8,500-square-foot museum and gallery space.
Before the vote was taken, Lexington Mayor Jim Gray opened the floor to supporters and opponents of the development.
Some opponents said the hotel's art work would be too graphic and provocative for the eyes of children. Others thought the money should be spent on affordable housing; a recent report showed the city would need to funnel $35 million annually to deal with Lexington's low-income housing needs.
"A luxury downtown hotel is not the vehicle designed to bring impactful economic development for low-income residents and to rebuild underserved neighborhoods," said First District Councilman Chris Ford. "A HUD loan is the wrong funding source, for what may prove to be an otherwise sound preservation project."
Supporters of the vote thought the money was needed to preserve a historic building, create jobs and make the city attractive for further economic developments.
Craig Greenberg, president of 21c, was pleased with the outcome of the vote after answering a few tough questions by council members Kevin Stinnett and George Myers.
"We're excited about the support for 21c and very appreciative of the overwhelming support that city council continued to provide for this project," he said.
In November 2012, the city passed an ordinance that approved the loan and the public-private partnership.
In May, a breakdown of the $43 million was provided to the Urban County Council that includes $27.7 million in "hard" construction costs, about $4 million in soft or other costs and a $900,000 development fee. Officials from 21c said the hotel wouldn't see any of that money. Instead it includes other costs involved with managing the project during construction. The breakdown also included $1.5 million in contingency funds; it is unclear what would happen with those funds if they're not used.
In addition to the $6 million HUD loan, the city is giving a $1 million loan. Other parts of the financing include $15.7 million in state and federal tax credits, $18 million in two construction loans and $2.7 million in equity from 21c Museum Hotels.
Construction on the company's fifth hotel started Tuesday and should be completed by the end of next year, Greenberg said.
Jeff Fugate, president of the Lexington Downtown Development Authority, said construction of the hotel will offer 125 jobs, drive new money into the city and raise the profile of the entire community.
"That's just the direct impact, and the indirect is huge," he said. "It's media you can't buy, in terms of coverage nationally. It is restoration of a building that there is not a market resolution for and it puts a world class hotel and museum on Main Street."