Taxpayers paid $22 million for renovation of courthouse. But its finances aren’t public.
The former Fayette County courthouse generates more than $500,000 a year in rent and other fees from four tenants but most of the profits in the first five years after its reopening will go to a bank, according to financial documents released last week.
Historic Courthouse LLLP, a for-profit entity created to oversee the $32 million renovation of the former Fayette County courthouse on Main Street, released hundreds of documents last week after the Herald-Leader sued the group in Fayette Circuit Court. Historic Courthouse LLLP voluntarily released the documents but maintains it is not a public entity and therefore not subject to the state Open Records Act.
The Herald-Leader had requested information about the company’s finances earlier this year, but the company refused to release most of the information requested and contended it was not a public entity even though the project was publicly funded and its board consists of current and former city employees.
In July, Lexington city officials said leases for space in the building generated about $285,000 annually, but they did not disclose another significant source of revenue.
Documents show the leases for the four tenants — Visit Lex, the Breeders’ Cup, Thirsty Fox, Zim’sCafe and LexEffect — generate a total of $287,700. In addition, the tenants also pay a monthly fee to maintain common areas — such as the lobby, entrance way, stairs and elevators. That common area maintenance fee generates $222,948 annually, documents show.
In total, the leases and maintenance fees generate $510,648 annually. The expenses to run the courthouse are $362,527, according to Historic Courthouse LLLP’s 2019 annual budget. Some of the big-ticket expenses include $50,600 for utilities, $83,940 for cleaning and $24,300 for security.
That still leaves $148,120 in revenue at the end of the year, according to its operating budget.
All but approximately $1,481 will go back to Old National Bank, said Sally Hamilton, the city’s chief administrative officer and board member of Historic Courthouse LLLP.
“For the first five years, the investor member, Old National Bank, receives 99 percent of those proceeds and the managing member, HIstoric Courthouse LLLP, receives one percent. At the end of the fifth year, the investor member withdraws from the partnership and the managing member receives all net operating income going forward,” said Hamilton in an email response.
Old National Bank purchased nearly $11 million in historic tax credits that helped finance the project. Those tax credits are sold to individuals and businesses, which use them to reduce their tax liability.
According to financial documents, Old National Bank also gave the group a “bridge loan” to help it finance the project until all of the tax credits are realized. That loan was $6.6 million, according to a July 9 presentation to the Lexington-Fayette Urban County Council.
After Old National Bank leaves the project in five years, Historic Courthouse LLLP will remain a private company, Hamilton said.
“The basis for a for-profit entity in a partnership is to utilize tax credits, as non-profits do not pay taxes and therefore would have no use for tax credits,” Hamilton said.
Lexington-Fayette Urban County Councilman Richard Moloney asked who owns the courthouse during Tuesday’s council work session. Moloney said he has been asked repeatedly by constituents about the ownership status of the courthouse.
“It is technically Historic Courthouse LLLP,” said Finance Commissioner Bill O’Mara. After Old National Bank leaves the partnership in five years, the make up of that board may change, he said.
“That board can expand and include community members,” O’Mara said.
Moloney also said he was not aware the building generated more than $500,000 a year. He thought it was just under $300,000.
To date, the operations of the courthouse are self-sustaining, according to its financial records. That means it does not receive any money from the city for its day-to-day operations, which was the goal.
The city, though, spends roughly $1.45 million annually to pay off a $22 million bond the city issued to help fund the renovation project. Historic Courthouse LLLP is not responsible for those debt payments.