UK abandons arena renovation plan when it realizes it might have to pay for it

For more than two years now, Lexington, Kentucky has been working on a $350 million renovation of the University of Kentucky’s Rupp Arena, because the university’s basketball team said it needed new luxury seating and concession stands and bells and whistles and cupholders and whatever. Anyway, the whole plan is off, because the university says it doesn’t want any of those things now:

In meetings with Gov. Steve Beshear and [Lexington Mayor Jim] 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.”

What changed the university’s mind? Reading between the lines of a May 20 letter to the Lexington Convention Center from university president Eli Capilouto, it’s that “there is not sufficient public support” for the project’s funding plan. Specifically, public support from the Kentucky legislature, which Capilouto was concerned might cut off funding for new academic buildings if it had to contribute $80 million toward the arena project. Capilouto also worried about a piece of the funding plan that would raise money by selling “Team Rupp” memberships to the public for $300 each, which would earn buyers absolutely nothing, and which for some reason weren’t proving very popular.

That said, the mayor still wants to renovate Rupp Arena, the governor still wants to renovation Rupp Arena, and you can bet the university still wants to renovate Rupp Arena, so long as they’re not stuck paying most of the load. But it is a case where a sports team asked for a pile of renovation money, legislators said no, and the team backed down, so we know that can work — though admittedly, the University of Kentucky wasn’t going to threaten to move to Seattle.

Kentucky diverting coal-recovery cash to pay for arena plans

There was a story last week in SI about how a renovation has been proposed for the University of Kentucky’s Rupp Arena from 2014 through 2016, and blah blah blah we knew this already, right? So I stopped reading, and my bad, because it turns out that to pay for $2.5 million in planning and design costs, reports ThinkProgress’s Travis Waldron, Kentucky will divert money that’s supposed to help mining communities weather the end of the coal economy:

The so-called coal severance tax generates more than $200 million a year in revenues for Kentucky. Half of that revenue goes immediately into the state’s general fund. The other half is split between two separate accounts for reinvestment into coal-producing counties, with those investments aimed at funding economic development projects that aren’t related to coal, and to foster economic development partnerships between eastern Kentucky counties. In the past, it has funded the creation of industrial parks, road, water, and other infrastructure projects, and scholarship programs for students from coal country. It is meant to address a reality that is staring Kentucky in the face: coal won’t be there forever, and the counties whose mountains have produced it for more than a century need something to turn to when the coal either runs out or is no longer worth mining.

What it isn’t meant to do is build arenas in Lexington. “That’s not what this money is for,” Carrie Ray, a research associate at the Mountain Association for Community Economic Development, an organziation based in Berea, Kentucky, told me. “It’s not intended to build a basketball arena that’s nowhere close to the coalfields.”

As Waldron notes, $2.5 million is a small amount of the $100 million set aside from this fund, but still, $2.5 million. Plus, given that the official source of the $300 million in state funds needed to pay for the actual renovation is “we’ll get back to you,” $2.5 milliion could be just the tip of the coal seam.

Lexington task force proposes $300m rebuild of Rupp, convention center

If you’re wondering what’s been up with the plans to replace the University of Kentucky’s Rupp Arena for these past four years, it’s now transmogrified into a plan to renovate Rupp Arena, plus a bunch of other stuff:

The Arena, Arts and Entertainment District Task Force’s final report envisions a $250 million to $300 million “transformation” of Lexington Center, including Rupp Arena, the Lexington Convention Center, the Civic Center Shoppes and immediate environs…

If financing is found, phased demolition and construction of the civic center and Rupp Arena could start as early as 2014.

“This important project will require a mix of local, state and private funding for construction,” the report said.

The other change since 2007, apparently, is that Lexington is no longer focusing on using a tax increment financing to fund the construction; it can’t help that its neighbor Louisville is having such trouble with its own TIF district. TIFs are still on the table, according to the Lexington Herald-Leader, but along with “naming rights of the arena, premium seating, advertising, sponsorships, concert and event promotions, concessions, stock offerings, state road funds, state tourism tax incentives, tax increment financing and new market tax credits.”

Needless to say, that’s a big mishmosh of arena revenues and public subsidies. Whether this deal makes fiscal sense is going to depend on which items the city and state choose from that menu, assuming they don’t decide the whole thing is too rich for their blood.