Lexington Mayor Gray suspends Rupp Arena project after losing UK support

Lexington Mayor Jim Gray announced Wednesday that he is scuttling a $351 million renovation of Rupp Arena and attached convention center after the University of Kentucky told city and state officials that it was interested only in a scaled-back Rupp Arena renovation.

Gray told the Herald-Leader on Wednesday that the plans for the renovation have been suspended indefinitely until all parties can come together.

"We think it's the right plan," Gray said of the Rupp renovation, which included adding chair-back seats to the second tier, luxury seating between the lower and upper bowl, better food and more bathrooms. Gray said Wednesday that UK had requested the luxury seating and other amenities that were originally in the design.

But in meetings with Gov. Steve Beshear and Gray over the past two weeks, university officials said they no longer were interested in those amenities. The university had agreed in principle to contribute $10.7 million annually to the project for the next 30 years. That agreement, according to letters between university and city officials, was agreed to in October.

"We designed this arena based on what UK said they needed," Gray said. "But I understand timing and pacing are everything, especially with major projects like this. So we'll adjust and adapt."

University officials declined to comment on the city's charges that it had backed out of its original agreement. UK Coach John Calipari also declined to comment. Calipari has remained largely silent on the Rupp project, which has been in the works for three years.

Beshear, who has been one of the project's biggest supporters, said Wednesday that he, too, believed in the Rupp project as originally designed.

"I think the original project is still what Lexington and the university need and in time, I hope UK will be ready to move forward."

There is good news for the hospitality and the convention center. Convention center staff can now book conventions for 2015 and 2016. Convention center staff members have said they could not book conventions past 2015 because of the uncertainty over the project. That uncertainty had caused problems for Lexington's hospitality industry. One study showed that the direct economic impact of the convention center for Lexington hotels, restaurants and other businesses was $42 million.

Relations between the university and the city over the Rupp Arena project have been rocky. Those tensions boiled into public view after a letter written by UK President Eli Capilouto was made public in late May. Capilouto said because of lack of public support for the project, UK was withdrawing its support.

Capilouto's letter was in response to a letter to convention center officials who had asked that Capilouto and UK publicly back the project.

Capilouto also blasted city officials for blaming UK's tepid support for the project as the reason the city failed to secure $80 million in state funding for Rupp during the recently concluded legislative session. Capilouto also stressed that the university was concentrating on its academic infrastructure. The university felt that the city's request for state money for Rupp could impede the university's chances of securing much-needed state money for academic buildings.

After the letters became public, Capilouto met with Beshear and Gray to discuss whether the project should move forward. It was during those discussions that Capilouto mentioned a scaled-back renovation to Rupp Arena, Gray said.

But Gray said that it's not that easy to change a very complex design that included a much-needed renovation to the convention center. Three years had been spent on the planning that went into the current proposal, he said.

But there also appears to be little support for tax dollars to be spent on the Rupp project.

A Bluegrass Poll showed that less than 20 percent of statewide voters support using state tax dollars for the $351 million project. A Lexington-Bluegrass Association of Realtors poll released Tuesday showed that Lexington voters think funding for Rupp is a low priority. Only 2 percent said funding Rupp Arena should be the city's top priority. Meanwhile, 36 percent said promoting economic development and jobs should be the city's top priority, the poll of 400 likely voters showed. The hospitality industry had also raised concerns about a proposed increase in the hotel and motel tax that was originally proposed to help pay for the project and was later abandoned.

The legislature in April ultimately decided not to give the project the $80 million in state money that was requested, saying that the financing plan had changed too many times and that UK's support was unclear.

Gray said the city can still focus on parts of the project, including a proposed Town Branch Park that was planned for west of the Rupp Arena project. The city also owns the High Street parking lot across from Rupp Arena. That parking lot has potential to become a prime retail development, he said.

"The Town Branch Park and the 20-acre High Street parking lot present a lot of development opportunities to lift our economy and create jobs for our citizens and enhance the arts and entertainment and mixed-use development in the city," Gray said.

But there are still costs for the planning phase of the project that will have to be repaid.

Gray told the legislature during the 60-day session that the city would repay $2.5 million the legislature gave the project for planning and design. The $2.5 million came from coal severance funds — money generated from a tax on coal as it leaves the ground.

"We plan to honor that commitment," said Jamie Emmons, Gray's chief of staff. The city will have to discuss where the $2.5 million will come from. The money does not have to be repaid immediately.

In total, $5.5 million from city, state and private funds was committed for the design phase of the project. However, more than $650,000 has not been spent, according to information provided to the city. Most of the money went to architects for project design.

Gray said he thinks the money was well spent.

"We have a very good plan that we can use," he said.

But Gray said that he is still concerned that if Rupp and the convention center are not modernized soon, the city could stand to lose concerts as well as convention center and other business to other cities.

The Urban County Council was scheduled to discuss the Rupp project and Gray's previous request for $40 million in city bonds for the project. The council is expected to discuss whether to proceed with the Rupp meeting during Thursday's council meeting.

Despite the announcement cancelling the Rupp project, the university and the city will have to continue to work together. UK's lease expires at the end of the 2017-18 season.

This story was originally published June 18, 2014 at 3:10 PM with the headline "Lexington Mayor Gray suspends Rupp Arena project after losing UK support."