House Speaker Greg Stumbo said Thursday he would work to repay the state's coal severance tax fund for $2.5 million that he previously agreed to divert to Rupp Arena in downtown Lexington.
Stumbo, D-Prestonsburg, issued a statement defending the General Assembly's 2012 decision to allocate $2.5 million in coal taxes to help pay for the planning and design of Rupp Arena's renovation.
"When the bonds for renovating Rupp are issued, though, I fully intend to see that the money is replaced ... making it more of a loan than a grant," Stumbo said.
However, there is presently no plan for such bonds. To pay for the preliminary work, the Lexington-Fayette Urban County Government expects to match the state's money with $2.5 million of its own, plus $200,000 from the Lexington Convention and Visitors Bureau and $250,000 from the Lexington Center.
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"In the next few weeks we will be discussing our business plan with stakeholders and the community. After that discussion, we will move ahead with a business plan that shows the path forward for these facilities," city spokeswoman Susan Straub said.
Stumbo's statement "is assuming it moves forward and bonds would be issued," Stumbo spokesman Brian Wilkerson said later. "That's still down the road."
The severance tax is a levy Kentucky collects on coal as it's mined. Coal-producing counties are supposed to get about half of their severance taxes returned to pay for things like roads and bridges, parks, water and sewer lines, and tourism initiatives.
The account that lawmakers tapped — the Local Government Economic Development Fund — is meant to help coal-producing counties diversify their economies beyond mining. The fund distributed $30.45 million in the first nine months of fiscal year 2013, although Eastern Kentucky judge-executives say it's falling short of the region's rising demand as mines close and severance tax collection has dropped 23 percent.
Fayette County, where Rupp Arena is, does not produce coal and typically would not be eligible for coal tax money. But Stumbo and other legislative leaders wrote a loophole into the two-year state budget to include Rupp Arena on a list of 30 projects to get coal severance funds before the coalfield counties can collect their proportionate shares.
Many of the other listed projects, such as mine-safety programs and scholarships for Eastern Kentucky college students, have some connection to the coalfields.
Lawmakers put Rupp Arena on the coal severance projects list because they had no other option, Stumbo said. House Democrats wanted to use bond debt for the arena, he said. But Senate Republicans refused to allow additional debt in the budget, "so if the Rupp Arena renovations were going to stay on target, we had to find the revenue somewhere," Stumbo said.
The Herald-Leader first disclosed the legislature's move Wednesday, angering some Eastern Kentuckians.
"We're getting a barrage of calls from people upset because of that article," said Rep. Leslie Combs, D-Pike ville.
"People are unhappy with us, asking, 'What happened with our money? Why did you let it happen?'" Combs said. "I've been telling them, 'I wasn't happy with what happened, either, but I learned about it after the fact.'"
Combs and Rep. Fitz Steele, D-Hazard, co-sponsored a bill during last winter's legislative session that would have returned all coal severance tax money to the coal-producing counties. It died without discussion in the House budget committee. Currently, half of the coal tax funds are placed in the state's General Fund, and a large portion of what remains for coal-producing counties is earmarked for special projects first, Combs said.
"All of these projects come off the top of what we're supposed to get," he said. "For example, former first lady Glenna Fletcher — her pet project, that Read to Achieve program from years ago? That's still going, and it's still coming out of our coal severance funds."