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.