Plans to expand Rupp Arena and an attached convention center are up in the air after the legislature did not vote in the closing hours of this year’s legislative session on $80 million in proposed state aid for the project.
The fate of the project has been in question for weeks as legislative leaders tried to wrap up the 60-day legislative session.
In the end, a last-ditch retooling of the financial plan for the $310 million project failed to get the legislature’s final approval. Senate leaders considered the plan Tuesday, but never took action.
Shortly after the Senate adjourned, Gov. Steve Beshear issued a statement saying that he still hoped that the project would move forward.
“Rupp Arena, the convention center, Lexington and the surrounding region need this overdue renovation and improvement to attract the conventions and investment that modern facilities bring to city centers," Beshear said. "Delaying this project needlessly delays positive economic development for the central Kentucky region, but I am confident that we will forge a path forward.”
Sen. Alice Forgy Kerr, a Republican from Lexington, said the project will still receive $1.5 million in state money that must be matched by city money to keep the project moving.
Kerr said that Senate members felt that they did not have enough time to go through the latest financial plan that was delivered on Monday. The vote in the Senate Republican caucus was not close, she said. Kerr declined to give the final vote.
"While everyone is sympathetic to the needs of the city of Lexington," Kerr said. "There wasn't enough time and not enough lobbying effort in the Senate."
Kerr said that many senators felt that the state needed to invest money in education. There was also confusion on the financial plan; it had changed several times during debate on the project, she said.
Delaying the project for a year will also allow the city an opportunity to further lobby the legislature, nail down its financial plan and gather more support in the community, Kerr said.
"It will be a game-changer for Lexington," Kerr said of the downtown project.
Mayor Jim Gray called the legislature's inaction on Thursday a "setback."
"Sure it's a setback," Gray said. "But a setback can be a setup for the next round. I've had projects that took years to develop, so I'm patient. A complex, transformational project like this takes time and requires overcoming big obstacles."
Disappointment also was expressed by Brent Rice, Chair of Lexington Center Board. He said the outcome is "sad for UK basketball fans and those people who would have had good jobs in the Rupp District."
Rice said Rupp is "nearly a 40-year-old facility and we can't attract the concerts, conventions, meetings and other NCAA athletic events that our competitor facilities do today."
"It's hard for me to understand how it's fair for Lexington and UK to be shut out when Louisville has been given $75 million for the Yum Center and $56 million for their convention center," he said. "But we'll work to find a way forward because this project is too important to give up on."
On Monday, Gray went to Senate Republicans with a new proposal that increased state aid from $65 million to $80 million but nixed a proposal that would allow the city to increase the hotel and motel tax in Fayette County to help pay for bonds for the project. Senate Republicans have been resistant to vote on any bills that could be viewed as a tax increase.
But the legislature did pass a bill Tuesday that made sure Lexington would repay $2.5 million it received last year for planning and design for the Rupp Arena project.
That money was from coal severance funds — a tax on coal as it is removed from the ground. The bill would require the city to repay the $2.5 million by April 1, 2015. If it can’t be repaid, money will be taken from the state’s rainy day fund to repay the coal severance fund. The $2.5 million will be subtracted from any bond amount issued by the state for Rupp in the future, the bill reads.
Gray has previously said the city would repay the $2.5 million in coal severance funds.
The mayor pleaded his case to Republican Senators for more than an hour Monday night behind closed doors. Senate Republicans discussed the plan in private twice on Tuesday.
Beshear and Gray have pushed for the project, which the mayor has said is the centerpiece of a new arts and entertainment district for downtown. The Democratic-led House had previously supported the project. Beshear and Gray focused efforts on the Republican Senate when the legislature returned on Monday after a two-week recess. 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 it never passed the Republican-controlled Senate.
After the legislature left for the two-week recess in early April, Beshear and Gray continued to push the legislature to find money 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 in March also included $56 million for a renovation of the Louisville convention center.
Many in the Senate said they wanted the full financial plan to be released publicly before the state approved additional funding for the project. Gray has said the University of Kentucky did not want a tentative lease agreement between the city and the university to be released.
Beshear said Monday that a deal between U of L and the Yum Center also was 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.
“When the bonds for Yum were appropriated, there was no written agreement between U of L and Yum, at that time,” Beshear said. “There was an agreement in principle.”
UK has tentatively agreed to a 30-year lease for Rupp. 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.
According to the documents, the plan includes $34 million in fan support — similar to what the Green Bay Packers did to fund a renovation of Lambeau Field. The plan also includes $2 million annually for naming rights.