As part of his 2015 budget address, Mayor Jim Gray on Tuesday proposed that the city authorize $40 million in debt for a $310 million renovation of Rupp Arena and attached convention center.
Gray said the Urban County Council could authorize the bonds this year but would not have to make debt payments until 2016. The payments would be about $2 million a year.
"Yes, this is a significant investment ... and it's the single best opportunity we have to create jobs — and a return on this investment," Gray told the council during his fourth budget address.
He described it as "affordable" and said it "allows the city to continue to invest in all of the services we provide."
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Gray's $313 million budget proposal, unveiled during the council's work session, also includes a 2 percent pay raise for many city employees, money for 15 more police officers, and $8 million for a new senior citizen center.
The proposed budget, for the fiscal year beginning July 1, is 5 percent higher than the current budget of $301 million. The council will get a chance to modify the budget in coming months. It typically approves a final budget by the end of June.
"The budget I am proposing today is built on an improving economy and on a government that is more efficient, more responsive and has better morale than we had three years ago," Gray said.
City revenue, which is mostly dependent on employment taxes, continues to improve, Bill O'Mara, commissioner of finance, said this week.
Gray also credited financial reforms during the past few years — including reworking the police and fire pension and changing employee health insurance — with helping the city right its finances.
Some winners in this year's budget include public safety and city employees.
In addition to money for 15 new police officers, Gray's proposal includes funding for 15 corrections officers, two new positions in the fire department and three new positions for Enhanced 911. Police also will get an additional $150,000 for overtime costs.
In addition to a 2 percent raise for city employees not covered by a collective bargaining agreement, the budget includes $2.9 million to implement changes in salaries that were recommended as part of a compensation study. The Urban County Council must approve the changes before the $2.9 million may be spent, O'Mara said.
The budget includes $25 million in new borrowing. Of that money, about $8 million is earmarked for construction of a senior citizen center at Idle Hour Park. The city has allocated $5 million in initial design costs for the center, which has been in development for several years and will replace the senior center at Alumni Drive and Nicholasville Road. That center was built in 1983.
Gray's budget designates $2.59 million for social services agencies, restoring $250,000 to the Hope Center for its emergency shelter program, which houses men. The Hope Center had asked for $500,000. The allocations to outside agencies also included an additional $44,600 for the Lexington Leadership Foundation.
A committee that ranked nonprofit applications for social services grants used a host of criteria and recommended funding 29 programs. The leadership group and Hope Center were 30th and 31st in those rankings. That's why Gray opted to fund those two groups, city officials said.
The Hope Center did not receive money for its emergency shelter this year, but it did get more than $640,000 for other programs.
Which social services agencies receive city funding has become an area of contention in recent years because social services funding requests continue to grow as other funding sources are tapped out, city officials said. "We are being asked to make up for cuts in state and federal programs," said Susan Straub, spokeswoman for Gray.
The council already has set aside $3.5 million for affordable housing and homeless initiatives out of a projected surplus for the 2015 budget. About $500,000 will go toward homeless initiatives, and $3 million will go toward establishing affordable housing programs.
Some council members said Tuesday that it was too soon to say whether the council would approve the bonds for the Rupp project. Many said the bonds would have to be weighed against competing needs.
"There is a lot of what-ifs," said council member Jennifer Scutchfield. "The idea is great. But we are stewards of the taxpayers' money and we have to protect their investment."
Council member Bill Farmer said he supported the Rupp project. The University of Kentucky men's basketball team has benefitted from a recently upgraded locker room at Rupp, "but the Big Blue Nation also wants a great arena," he said.
But much about the finances of the project remains unknown. Gray has not released the plan because UK — Rupp's main tenant — does not want a tentative lease agreement released.
Although Gray asked the state legislature for $65 million to help pay for Rupp renovation, lawmakers ultimately approved $1.5 million, with Senate leaders saying they wanted to see the financing plan made public. Gov. Steve Beshear has asked lawmakers to reconsider.
Gray also pushed for a bill that would allow the Urban County Government to raise the hotel and motel tax to generate an additional $3.5 million a year to help pay for Rupp. That bill was approved by the Democratic-controlled House but not the Republican-controlled Senate.
Gray said Tuesday that he remained hopeful the legislature would give the green light to the $65 million and the hotel and motel tax when it returns Monday after a two-week recess.
"It's already been supported by many in our legislature," he said. "Often, folks want more information. And that's not unexpected. That's what we are doing today."