The project manager of the dormant plan to renovate Rupp Arena has agreed to a sizable pay cut and will work part-time to help the Lexington Center Corp. develop a new plan to increase revenues.
Frank Butler, project manager for the renovation of Rupp Arena and the attached convention center, was being paid $200,000 a year plus benefits to oversee the plan to transform the iconic home of the University of Kentucky men's basketball program.
Mayor Jim Gray mothballed the plans in June after the city and UK couldn't agree on the scope of the project.
But Butler had a contract with the Lexington Center Corp. from September 2012 to Dec. 31, 2015.
During the Lexington Center Corp. board meeting Thursday, Joe Terry, a lawyer for the board, said Butler will now be paid $95,000 and will work part-time to develop a plan for the organization to increase its revenues while future plans for Lexington Center Corp. are being worked out.
The corporation oversees Rupp, the convention center, retail shops inside the center and the Lexington Opera House.
Terry said Butler, who left a high-paying job at UK to become the project manager, will work 750 hours. He won't receive health insurance or retirement benefits.
The board voted unanimously Thursday to approve the amendment to Butler's contract.
Butler didn't attend Thursday's meeting.
Butler was paid out of a combination of state, city and other local money until last July. The Lexington Center Corp. has paid Butler's salary since then.
Gray has not said whether he plans to revive the plan, which includes a new convention center and an expanded Rupp Arena, with modern amenities including chair-backed seats on the second tier. A little more than $4.8 million was spent on architectural and other design costs for the project before it was scuttled.
Susan Straub, a spokeswoman for Gray, would not say whether Gray plans to go to the state legislature to restart the project. The legislature returns to Frankfort on Feb. 3. State funding was key to the $350 million renovation plan.
"There's nothing new to report about Rupp," Straub said. "Its status is unchanged. When the time is right, the plan is ready."
Brent Rice, chairman of the Lexington Center Corp. board, said the board is conducting an in-depth analysis of the arena, convention center, shops and the Lexington Opera House to optimize revenue.
"We are evaluating all components of the Lexington Center," Rice said. "We are asking our partners and our vendors what their needs are going forward. We need to figure out a path forward."
Lexington Center staff gave the board an in-depth review of the center's revenue streams during Thursday's meeting and some of the challenges of operating in a complex that has not been renovated since 2004.
There is good news: For the first six months of the current fiscal year, total operating revenue was $7.8 million, compared with $6.7 million for the same period the previous year. After expenses and depreciation, the center is up $214,965. That's a big improvement over the same period the previous year, when it had a loss of $534,412.
Neal Werner, director of business services for the Lexington Center, said advertising revenue has increased faster than expected. Also, the city's hotel and motel tax pays the debt service on a previous bond used to renovate the convention center. That tax has generated more revenue than the amount needed for debt payments. Additional revenue is put into an account and will be used to pay off the debt. Because of the way the bonds were written, those additional payments can't be made until October 2018.
Although the bond was expected to be paid off in 2021, it's possible that the bond could be paid off by October 2019, Werner said.
"We don't have to use operating revenue to cover our debt," Werner explained to the board.
Still, the buildings have limitations which can restrict potential revenue streams. For example, arena concession sales are a major source of revenue. Carl Hall, director of arena management, told the board that Rupp Arena can't sell grilled items because the concession area doesn't have grill space.
Newer arenas have grilling capabilities and are able to make more money off those items, Hall said.
Rice said the board will probably divide into groups and develop plans to generate additional revenue.
Also Thursday, the board voted to apply for a different type of nonprofit tax status. The center wants to change to a 501c(3) nonprofit status. That way, donations would be tax-exempt. The group also would be able to apply for educational grants for arts programming at the Opera House.
Werner said the group will send the application to the Internal Revenue Service, which will have final say on whether the group can be a 501c(3).
In addition, the board learned that Lexington Center president and CEO Bill Owen wasn't being paid as much as his counterparts in other cities. In fact, until the recent change, Butler was paid a higher base salary than Owen.
Owen's current salary is $197,000. Lyle Hanna of Hanna Resource Group said the minimum salary for people who have similar jobs to Owen's is $208,000. The maximum salary is $312,106. Hanna noted that Owen is unique: He oversees an arena, a convention center and the Lexington Opera House. Many executives used for comparison oversaw only a convention center or an arena.
Rice said the board's executive committee would take Hanna's findings under advisement and would discuss them with the board's executive committee, which evaluates Owen.