The city of Lexington will have to add $10 million in bond money to bridge a gap in funding for a proposed $250 million overhaul of the downtown convention center. In addition, the General Assembly would have to approve a slightly steeper increase in the hotel and motel tax to make the plan work, convention center officials said Tuesday.
The change in the funding structure was prompted after Gov. Matt Bevin included a $60 million loan for the project in his proposed budget unveiled last week. Lexington Center Corp. had originally asked for a $75 million state appropriation. Lexington Center Corp. manages Rupp Arena, the attached convention center and the Lexington Opera House.
The Urban County Council voted Tuesday to put a resolution supporting those changes on its agenda for its Thursday meeting for a first reading. However, a final vote will not take place until mid-February. Many council members expressed reservations about putting city money into the project during a council work session on Tuesday. A workshop to go over the changes is scheduled before a final vote on Feb. 18.
Craig Turner, the Lexington Center Corp finance chairman, told the Urban County Council during the work session the changes were necessary after Bevin’s budget was unveiled. Turner said the state would loan the city the $60 million to jump-start the project but wanted .5 percent of the local hotel and motel tax to be dedicated to pay off the $60 million loan. That’s the reason the original proposal of a 2 percentage-point increase in the hotel and motel tax was changed to a 2.5 percentage-point increase.
The $10 million the city would commit to the project would help close the funding gap, Turner said.
If passed by the General Assembly, the Fayette County hotel and motel tax would rise from 6 percent to 8.5 percent. On top of that is a 1 percent state tourism tax, bringing the total to 9.5 percent.
The convention center would still use the 2 percentage points to pay off $171 million in bonds that would be used to pay for the overhaul. That still leaves a gap of about $5 million. Turner said after Tuesday’s meeting that Lexington Center believes it can come up with the funds to cover that $5 million shortfall.
Without an expansion, the downtown convention center will continue to lose business to larger convention centers, Turner said.
The proposed overhaul and expansion of the Lexington convention center, which was originally built in 1976, includes an additional 100,000-square-foot exhibit hall, larger ballrooms and additional meeting space at the complex on West Main Street.
The existing convention center is only able to market to about 65 percent of potential national convention business, according to one study by Conventions, Sports and Leisure.
Councilwoman Amanda Bledsoe said she was concerned about passing a resolution committing $10 million in city bond money to the project without seeing the proposed budget for the next fiscal year.
“I don’t know the overall budget,” Bledsoe said. Mayor Jim Gray generally unveils his budget proposal in April.
Councilwoman Peggy Henson said she wanted to know more before she took a final vote on the resolution.
Kevin Atkins, the city’s economic development director, said the state House has already begun discussions on Bevin’s budget proposal. The city needed to give the General Assembly an indication on whether it backed the plan and it needed to do it soon.
“This is a demonstration of the city’s commitment to the project,” Atkins said of the resolution.
Turner said Lexington Center staff will meet with the Bluegrass Hospitality Association, the city’s hospitality group, on Wednesday to go over the change in the financing plan. The council, the Bluegrass Hospitality Association, other downtown groups and Commerce Lexington passed resolutions last year backing the previous financing plan.
Unified support from the community will be key to getting the financing plan through the legislature, Turner said.