FRANKFORT — Senate leaders are considering a new financing plan for the renovation of Rupp Arena and attached convention center that nixes an increase in the hotel and motel tax in Fayette County and increases the state's borrowing from $65 million to $80 million.
Mayor Jim Gray, officials with the University of Kentucky and members of the Republican Senate met for more than an hour behind closed doors Monday to discuss the new financing plan that was unveiled earlier in the day as a last ditch effort to get the legislature's support.
Gray told reporters after the meeting late Monday that he was "unshakably optimistic" about the chances of the project getting a green light. "I respect the due diligence these senators are offering," Gray said. "We are going to let the senators examine it, and we will respect the process."
Senate President Robert Stivers said late Monday that the Republican caucus likely will discuss the revamped plan Tuesday morning.
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"They gave us a lot of information that we haven't had," Stivers said. "They've redone their model, and we're going back to the caucus and see what there is in potential support."
But time is running out. Tuesday is the final day of the 60-day legislative session.
Gov. Steve Beshear said during a news conference at the Capitol on Monday that the new plan includes additional state money, but it would not need an increase in the hotel and motel tax in Fayette County to pay off debt.
Instead, the state would grant $80 million in state bonds for the $310 million project. Sen. Tom Buford, R-Nicholasville, said the University of Kentucky also asked for additional borrowing for a new academic building in addition to the $80 million the city requested. Gray declined to comment on whether UK had made an additional request.
Jay Blanton, a spokesman for UK, said the university did not have any comment on UK's alleged request for funding.
Gray declined to give more details of the new financing plan. The mayor has not publicly released a full financing plan for the project. He has said UK does not want a tentative agreement between Rupp and the university made public.
The Herald-Leader obtained a copy of the presentation that was given to Senate leaders. The plan says the convention center project would be decreased by $8 million. The plan also includes $35 million in fan contributions — similar to what the Green Bay Packers did to finance a renovation of Lambeau Field.
As part of his 2015 budget speech last week, Gray proposed that the city would borrow up to $40 million for the project. That would mean roughly $2.4 million a year in debt payments, according to those documents. The debt payments would not be made until 2016.
The fate of the project has been in question for weeks as legislative leaders try to wrap up the session and a two-year budget. A compromise budget between the Democratic-led House and the Republican-controlled Senate approved in late March included only $1.5 million for the Rupp project. Beshear had proposed — and the House had approved — $65 million for the storied home of UK's men's basketball team. A bill that would allow the city to increase the hotel and motel tax in Fayette County to generate an additional $3.5 million to pay off bonds for the project cleared the House in March but never passed the Republican-controlled Senate, which has been resistant to voting for bills that involve tax increases.
After the legislature left for the two-week recess in early April, Beshear and Gray continued to push the legislature to find money in the budget for the project. The state legislature authorized $75 million for the KFC Yum Center, the home of the University of Louisville men's basketball team. That arena opened in 2010. Beshear has argued that it's only fair that Lexington also receive money for the Rupp project. The two-year compromise budget approved by both chambers also included $56 million for a renovation of the Louisville convention center.
Beshear said Monday that a deal between U of L and Yum was also not released at the time the legislature approved the borrowing for the downtown Louisville arena. Bonds for that project were downgraded to "junk bond" status after a tax increment financing district failed to produce the tax revenues initially anticipated.
"The thing that I want to try to convince legislative leaders of is that the Rupp Arena project is in the same normal process ... that the Yum Center project was when we appropriated $75 million in bonding for the Yum Center," Beshear said. "When the bonds for Yum were appropriated, there was no written agreement between U of L and Yum, at that time. There was an agreement in principle."
UK has tentatively agreed to a 30-year lease for Rupp. A spokesman for UK has said that the university did not want to release the agreement because more details needed to be worked out and it had not yet been signed. But according to documents obtained by the Herald-Leader, UK's 30-year lease would be approximately $10.7 million annually. But the contract includes provisions that would allow it to earn some money back — up to $2.7 million.
Beshear said that the state will not issue the bonds for Rupp Arena until all parts of the financial plan have been confirmed.