The Kentucky League of Cities is considering issuing up to $30 million in bonds for the construction of CentrePointe's underground parking garage, city officials said Friday.
The city had considered issuing bonds for the project. However, if the League of Cities issues the bonds, the city would not have to.
Kevin Atkins, the city's chief development officer, said the city has had several meetings with the League of Cities and CentrePointe developers in recent days to discuss whether the nonprofit whose members are government agencies would issue bonds for the long-stalled downtown development.
The League of Cities has helped cities pay for economic development and other projects through its loan and bond programs, League of Cities officials said Friday.
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The League is looking to start a sister corporation that focuses on economic development projects such as CentrePointe, league officials said Friday.
"Our mission is helping cities reach their potential" said Jon Steiner, executive director and chief executive officer. "Economic development is certainly part of that. In this case, if we can step up and help the city of Lexington, we want to do that. Not only would this new corporation benefit Lexington, we know it can be used in many of our member cities large and small across Kentucky."
The Webb Companies, the CentrePointe developers, had originally asked the state to issue bonds for the project, but the state declined and said that the city would be the more appropriate entity to issue the bonds.
The Webb Companies had submitted an application to the city for up to $30 million in bonds for the project. Future tax revenues generated from the CentrePointe project would be used to pay off the loan. The city would not be obligated to pay off the loan if tax revenues fell short.
The Urban County Council was expected to discuss the application in early September. Instead at a special meeting on Tuesday, the council will consider passing a resolution backing CentrePointe's plans to ask the League of Cities to issue the bonds.
Susan Straub, a spokeswoman for the city, said the current proposal would not put the city at any risk.
Darby Turner, a lawyer for the Webb Companies, said late Friday that the League of Cities has experience issuing bonds and has the staff to evaluate applications, such as CentrePointe's. It makes sense for the League of Cities to issue the bonds instead of the city, he said.
"They have a lot of experience," Turner said.
Turner said there won't be any risk to the League of Cities if the project does not generate the tax revenue needed to pay off the loan.
"The League of Cities, the city and the state have no liability" except for pledging to use new taxes generated from the project to pay off the loan, he said.
In a written release, the League of Cities said the group has financed more than $700 million in projects through its bond pools and finance programs. Those projects include fire stations, water treatment plants and water parks.
CentrePointe includes an entire city block and when completed will include a hotel, apartment building and office tower. Work began last year on the three-story underground parking garage, the first phase of the long-delayed project.
The Webbs have said that having a government entity such as the city or the state issue the bonds cuts the financing costs for the project. It's also difficult to get private loans for construction of parking garages.
The project has been controversial since 2008 when an entire city block of buildings was raised for the project but construction did not begin until late last year.