Capilouto questions Rupp Project financing

The University of Kentucky will "explore all potential options" for where to play its men's basketball games, university president Eli Capilouto wrote in a letter to a Lexington city official, rather than show public support for a proposed renovation of Rupp Arena.
Capilouto wrote the letter -- dated May 20 and acquired by Cats Illustrated on Thursday -- in response to an April 25 letter from Lexington Center Corporation Chairman Brent Rice asking UK to publicly support a $350 million renovation of Rupp Arena and the Lexington Civic Center.
In that April 25 letter, Rice wrote that UK's UK's "lack of public support and legislative advocacy significantly compromised our chances for success" in obtaining financing.
And Rice listed what the city viewed as UK's two options: To "publicly acknowledge" -- though Capilouto, Athletics Director Mitch Barnhart and basketball coaches John Calipari and Matthew Mitchell -- its "desire for a renovated arena and its financial commitment to the Rupp Project" or to begin negotiations with the Lexington Center Corporation for an extension of UK's current Rupp Arena lease, which expires after the 2017-18 season.
Rice requested a response by May 23. Three days early, Capilouto responded with a strongly worded letter that expressed disappointment in the city's public and private criticism of UK and attacked a the Rupp Project financing plan for its "lack of stability."
In the letter, Capilouto wrote that in October of 2013, UK committed $10.7 million per year for 30 years to support the project as it was "envisioned at the time."
[rl]But he called the city's financing plan "amorphous" and wrote that it "seemed to shift numerous times and often without any perceptible due diligence." He cited uncertainties about "the full scope of the project as well as the firmness and magnitude of revenues from the hotel tax, naming rights and other sources."
"It is very difficult to partner in such an enormous project when the financing story changes so often," Capilouto wrote.
Capilouto also wrote that a Bluegrass Poll reported this month in the Lexington Herald Leader and The Courier-Journal "makes clear that there is very little enthusiasm for the project among Kentucky taxpayers," and noted that the "reluctance among members of the General Assembly to invest $80 million is reflective of this public sentiment."
In addition, Capilouto wrote, UK has "received very little indication from our fan bas that there is support to sell a sufficient number of 'Team Rupp' memberships (at $300 each) to generate the funds that LCC's current financing plan requires."
In the letter, Capilouto says that UK was "consistent in advising" the city that it believed the Team Rupp memberships would generate less than $10 million, but that the city's financing plan projected first $25 million, then $35 million in revenues from those memberships.
"At this time, there is not sufficient public support for committing over $350 million in state, city and other funds to a basketball arena and convention center when there are so many well-recognized educational, economic, retirement and health care needs across Lexington and the Commonwealth of Kentucky," Capilouto wrote.
Capilouto concluded that because of the "lack of enthusiasm" for the current plan, it's important for UK to "explore all potential options," though he did not specify what those options might be, or if they could include exploration of an on-campus arena.
"Our preference is to continue to play men's basketball games in downtown Lexington, under the right lease conditions," Capilouto wrote.
Lexington Mayor Jim Gray responded to Capilouto's letter on Thursday via his Twitter account.
"Game-changing projects create passion and emotion, especially when things don't go as hoped," Gray tweeted. "So I think it's important to step back, take a deep breath, and sit down with all our partners and work things out. UK is so important to Lexington; and Lexington is so important to UK. A vibrant city engages everyone… and a vibrant city creates jobs. So I hope we can continue to work on an agreement that benefits UK, Lexington and our entire state."