Developers of a proposed hotel at the Kentucky Horse Park have lost their suit against the state for breach of contract, but the state will still have to pony up nearly $500,000 they hoped to recover in construction and utility costs.
Franklin Circuit Court Judge Phillip Shepherd granted a summary judgment to dismiss the suit brought by Brad Burgess and his Bluegrass Equine and Tourism Foundation after the state terminated the hotel contract in 2008 because financing had not been secured. The hotel was supposed to be built in time for the 2010 Alltech FEI World Equestrian Games.
The construction contract was very complicated because the state would own the land for the hotel, requiring the hotel to lease it. That led Burgess to set up both a for-profit company to oversee construction and the non-profit Bluegrass Equine and Tourism Foundation so the state could issue $118 million in tax-exempt bonds for construction. The developers would have received a $5 million development fee.
Shepherd wrote in his opinion the accelerated timetable of the hotel construction was clear. It was therefore "reasonable" for state officials to set an April 2008 deadline for financing in order to build the hotel before the Games.
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"By any reasonable interpretation of this agreement, the failure to obtain financing by April 15, 2008, was unacceptable, and the Commonwealth had every right to protect its interest in ensuring that the operation of the Kentucky Horse Park was not impaired by an uncompleted major construction project during the WEG," Shepherd wrote.
Shepherd had harsh words for the development group. First he noted the group said it had tax-exempt status in May 2007, when it was not granted until November. Shepherd called it "compelling evidence that the plaintiffs' behavior did not comport with standards of good faith and fair dealing."
Shepherd also criticized the developers for pushing the project in the "apparent belief" any failure would be cushioned by a public bailout.
In addition, Shepherd took to task the people involved in the development team who were also politically connected to the administration of then Gov. Ernie Fletcher, writing: "The entire project is an egregious example of the danger of such political considerations infiltrating the state procurement process."
However, Shepherd also slapped the state with $476,322 in utility and construction costs, which it had asked the developers to pay.
"The Plaintiffs knew full well the risks they were taking in pursuing this projects, but persisted in the hope they would obtain a handsome pay-off in development fees," Shepherd wrote of Burgess' team. "Likewise, the state expended substantial funds in relocating utilities to expedite the project, with full knowledge that financing for this project had not been obtained."
Burgess told the Herald-Leader last year he was hoping to come to an agreement with the state to start over with the project. He was not available for comment on Tuesday.
Horse Park officials have said they still want a hotel on the grounds.
Cindy Lanham, a spokeswoman for the Finance and Administration Cabinet, said officials were pleased but would have no further comment.