A resolution authorizing up to $20 million in additional borrowing to pay for a proposed $230 million expansion and renovation of the Lexington Convention Center cleared its first hurdle Tuesday.
The Lexington-Fayette Urban County Council voted during a council work session Tuesday to put the resolution on the agenda for a Thursday council meeting. The measure will get its first reading Thursday and a final vote is expected at the March 6 council meeting.
The exact amount needed will not be known until later this spring, when construction bids for the convention center expansion are awarded.
Councilman Richard Moloney was the only council member who voted against the resolution. Moloney said he wasn’t sure what the additional money would pay for and he thought the council should wait until they know the final cost estimate before authorizing the city to borrow more money.
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“You have to stay within your budget,” he said. “You can build a nice Cadillac (with the money in the current budget). The problem is you’re building a Ferrari.”
Vice Mayor Steve Kay said he supported the resolution because the convention center expansion “has the potential to change downtown.”
The council previously voted to give the project $10 million in 2016. It also set aside an extra $750,000 in the current year budget for additional funding for the convention center, which would have been enough to make six months of debt payments on a $20 million bond. That $750,000 was never used because the start date for the convention center construction has been repeatedly pushed back.
The proposed expansion includes 100,841 square feet of exhibition space, 25,080 square feet of ballroom space and 14 meeting rooms. The total square footage for the new complex is 756,593 feet.
Previously, officials with the Lexington Center Corporation, which oversees the convention center and Rupp Arena, has said money generated from a 2.5 percent hotel tax increase would pay off most of the bonds for the project, including more than $60 million from the state that was approved in 2016. Other funding sources include a 15-year lease with the University of Kentucky that is expected to generate more than $100 million over the term of the lease. Rupp Arena is the long-time home of UK’s men’s basketball program.
Naming rights for the complex would also generate money to pay off the renovation, although Rupp Arena is not part of the naming rights deal. It will remain Rupp Arena.
VisitLex, the county’s tourism bureau, has also pledged $750,000 a year to help pay off the debt.
The resolution considered Tuesday pledges that the city will be the “last money in” for the project, which will help Lexington Center secure bonds at low interest rates.
Tourism officials have pointed to various studies that show Lexington is losing conventions because it does not have enough exhibit and meeting space. A study by Convention Sports and Leisure found that the center generates $42 million a year in revenue through hotel stays and spending at restaurants and local businesses. If the convention center is expanded, that impact would grow to $57 million. Without an expansion, the center will continue to lose convention business and will only generate $27 million a year, the study said.
Lexington Center does not receive a direct appropriation from the city’s general fund, which is unique. Many convention centers operate at a loss and are subsidized by taxpayer dollars. In the past, the city has helped pay for renovations and expansions of the convention center and Rupp Arena.
Officials have said construction will likely start sometime in 2018 and will take more than 24 months to complete. Plans call for the convention center to remain open during the construction.