Mayor Jim Gray said Monday that a detailed finance plan on how to pay for the $310 million renovation of Rupp Arena and the convention center won't be announced until summer or fall.
The financial plan was initially scheduled to be released in November but has been repeatedly pushed back until the city could get accurate estimates on how much the renovation would cost, Gray said.
"First we had to get the design locked in and then we had to get an estimate of construction costs, and that gives us a solid platform for a financing plan," he said. "That's underway now."
The preliminary designs for Rupp have already cost about $5.5 million — a mix of state, city and private money.
The project got a big boost when Gov. Steve Beshear proposed using $65 million in state-issued bonds to help pay for the $310 million project. But the legislature has not yet signed off on the proposal. It won't until it finishes its budget in mid-April.
Beshear, at a news conference Monday to unveil the plans for Rupp, said he is backing the project because it's important to invest in downtowns. He also said it's a great time to borrow money because interest rates are at historic lows and the Rupp project is a unique public-private partnership that will spur economic growth.
"I am confident with all of these parties at the table, this project will become a reality and I am going to make sure that it does," Beshear said.
House Speaker Greg Stumbo, D-Prestonsburg, said that he, too, backs the renovation of Rupp Arena. The state used $2.5 million from coal severance funds — a tax on coal as it is removed from the ground —to help with the design costs. At the time, legislators from Eastern Kentucky complained that the money was going to Lexington and not back to the coal fields as it was intended.
"I support the project and will work to move it forward and to return the severance money, a concept everyone involved has agreed to," Stumbo said.
Senate President Robert Stivers, R-Manchester, was more cautious.
"The governor's bond proposal for Rupp Arena will be reviewed like every other item in the budget to see if it is feasible in current economic times," he said.
Gray said that the city is pushing state leaders to back the project.
"I feel good about our conversations with the legislature," Gray said. "They are doing their due diligence and asking the right questions. I feel like this is an incredible project. If you look at it from an economic development point of view, what we have is a brand that today is under leveraged and we are providing a plan and an opportunity to leverage it."
Gray said the financing mix would include naming rights for the arena, fan contributions and tax increment financing. He said the city also will contribute but he declined to say how much. That information will be part of Gray's budget proposal, which will be released in coming months.
Tax increment financing uses tax revenues generated from a project to pay off part of the infrastructure costs.
Louisville's Yum Center, home to the University of Louisville's men's basketball team, recently had its bonds downgraded to "junk bond" status largely because the tax-increment financing didn't yield enough revenue to pay off the bonds. Despite that, U of L reportedly has generated millions of dollars in additional revenue after it moved to Yum because some say that U of L was given too-favorable a lease agreement so it would agree to play at Yum.
Gray said lessons from Louisville and other arenas are at the forefront as they put together a financing plan. The city is being cautious on revenue estimates from a TIF district and is going to be careful in its negotiations with UK, he said.
"We have been working on UK with a long-term lease and expect it to be finalized in the next few months," Gray said. Its current 20-year lease expires at the end of 2017.
DeWayne Peevy, deputy director of athletics for UK, was the only representative from UK at Monday's news conference.
Peevy said the university is currently in negotiations on its lease agreement. But Peevy said that the current agreement is structured more like a tenant and a landlord. He said the university views the relationship as more of a partnership.
When asked if UK was in a position of strength to negotiate a better lease and get more money, Peevy said the university wants to be a partner in the project.
"It's part of being a long-term relationship," Peevy said. "It's a partnership, if we're holding their feet to the fire ... that really doesn't help us in the long-run. We don't want that to go back to the taxpayers of the city of Lexington. I live here to. I'm a taxpayer. I don't want that on my back."
Brent Rice, chairman of the Lexington Center Corporation Board of Directors, which oversees Rupp and the convention center, said that in addition to UK, there also are other key rental agreements to be worked out including with the Kentucky High School Athletic Association, which has its Sweet 16 tournament at Rupp. Rice said that they have had several inquiries about naming rights for the project and that option is still being considered. Rice said that the group may look at naming rights after the project is further along and corporations can see the economic value of the project.
"Although we have not made a decision yet on naming opportunities, we know that Rupp will always be part of the name," Gray said.
Gray did not give any more details about how fans can help pay for a renovated Rupp, saying only, "Surveys have shown us that there is a lot of enthusiasm for it."