Fayette County

Lexington ponders new city government building. Again. But can it afford one?

The Lexington-Fayette Urban County Government Center in downtown Lexington, Ky., Wednesday, Sept. 11, 2019. An EOP Architects report shows the city may need to spend up to $5.1 million to fix exterior problems to the building on Main Street.
The Lexington-Fayette Urban County Government Center in downtown Lexington, Ky., Wednesday, Sept. 11, 2019. An EOP Architects report shows the city may need to spend up to $5.1 million to fix exterior problems to the building on Main Street. aslitz@herald-leader.com

The Lexington council has restarted debate about whether the city should move forward with a new government center after decades of false starts.

Vice Mayor Steve Kay appointed several council subcommittees earlier this year to look at three key issues that have long dogged the debate on whether the city should move: how to finance the project, the location of a new city government center, and how many city employees should be moved into a new city government center.

Those subcommittees made the following recommendations Thursday during a special Lexington-Fayette Urban County Council meeting:

The city should pursue a private-public partnership, which would give the city the most flexibility. A private developer could also buy or swap the city’s current buildings in downtown.

The location for a new city government center should remain in the downtown core.

A new city government center should move employees from all of its locations, including the former Lafayette Hotel and four other downtown buildings, to one location. That would move 630 employees under one roof. That figure does not include the Lexington police headquarters on Main Street.

Still, one key question remains: Can the city afford to move at a time when revenue is relatively flat and costs continue to climb?

The current-year $373 million budget called for 15 percent cuts within many city departments and revenue projections show slowed growth in coming years.

“We need to figure out if we can afford it right now,” said Councilman Richard Moloney. “We need a number.”

Chief Administrative Officer Sally Hamilton said the city will bring in financial advisors that deal with bonding so the council can learn more about the cost and how a public-private partnership would affect the city’s bond rating, or its cost to borrow.

Hamilton also said the city has been in contact with lawyers who write contracts for public-private partnerships that can be consulted for advice before the city issues a request for proposals to developers.

“There are things we now know that we didn’t know before,” Hamilton said. “There are things that need to be in that (RFP) to protect us.”

Finance Commissioner Bill O’Mara said financial advisors may be able to come to a council meeting as early as next week so the council and the administration can determine if it’s the appropriate time to move forward with a new city government center.

When Lexington moved into the former Lafayette Hotel in the late 1970s, it was supposed to be a temporary move.

For the next 40 years, as the city grew, the need to consolidate government operations was debated and tabled multiple times.

The merged government came close to moving last year when it selected a private developer to overhaul the current Lexington Herald-Leader building on Midland Avenue for a new city government center. But that deal was killed after the council expressed unease with the proposal. The Herald-Leader is still in the building on Midland Avenue.

Under that proposal, the city would have paid $5.1 million annually for 30 years. After those 30 years, the city would own the building.

Councilman Jake Gibbs, whose district includes downtown, said he opposed public-private partnerships to build government buildings. As part of the previous deal, the developer would have been responsible for maintenance of the building. Gibbs said that makes him uneasy.

Plus, the $5.1 million was only the first offer. If the city had pursued negotiations with the developer, that cost would have likely escalated, city officials said during Thursday’s meeting.

“I think the government should be in the business of building its own buildings,” Gibbs said. “We would have no control over our own maintenance.”

The city currently spends about $2.4 million a year on its five downtown buildings. But the government frequently raids those accounts and puts off repairs when it is strapped for cash. If the city gets locked into a private-public partnership, it would no longer be able to tap those accounts during tough budgets, Moloney said.

The council also agreed that a new government building should be built on government-owned land. It would likely dramatically cut costs, many said. If the city pursues a public-private partnership, it should lease-to-own, not just lease its buildings.

Staying in the city’s current buildings is also costly. One estimate put deferred maintenance on those buildings at $22 million.

LEX_190911Buildingas02
A crack in the stone at the Lexington-Fayette Urban County Government Center in downtown Lexington, Ky., Wednesday, Sept. 11, 2019. An EOP Architects report shows the city may need to spend up to $5.1 million to fix exterior problems to the building on Main Street. Alex Slitz aslitz@herald-leader.com

The exterior of the former Lafayette Hotel has deteriorated, causing moisture to enter the building. The council voted last month to spend up to $225,000 to fix imminent safety issues on the outside of the building, including replacing a stone portico at the entrance.

The EOP Architects report on the building’s exterior showed the city needed to spend up to $5.1 million to fix all of the exterior issues, not just the immediate safety problems. In addition, the elevators in the main government building are so old the company that services them often has to scour third-party sites such as eBay to find replacement part. A report on how much it will cost to fix or replace those elevators is expected soon.

Councilwoman Amanda Bledsoe said Thursday there is water currently leaking in a wall in her office to the floor below her.

“Apparently, there was once a faucet (in the office),” Bledsoe said. “This was not the intended use of this building.”

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