This presentation will mark the final scheduled update in a year-long process that began in January. If adopted, this would be Lexington's new framework for determining how and if to expand the Urban Service Area
We’ve received several questions from readers about the deal, so we’re going to try to succinctly answer them here.
General Questions
Why is the city considering a new city hall?
Right now, LFUCG is spread across multiple buildings downtown. According to the city, many of these buildings have significant maintenance issues. The current Government Center alone – where the city moved in 1984 as a “temporary” home – has $50+ million in backlogged maintenance and millions more per year in ongoing needs.
Conversation about a new city hall has been happening for decades. The city came close in 2018, but that deal fell apart in the final hour.
Each year that passes increases the price tag due to rising construction costs and mounting maintenance needs.
What happens if Council says no?
If Council does not advance or approve the proposal, several things would occur:
The city would remain in its current facilities, including the Government Center and other downtown buildings.
The maintenance backlog on those buildings would remain, and costs would continue to increase.
The capital reserve fund would remain available for other capital projects.
If the city wanted to pursue a new city hall later, it would need to restart a site search, public process, and/or RFP, which could take years.
How long has LFUCG been working on this proposal?
While LFUCG has been working on finding a new home for decades, the bulk of the activity that led to this specific proposal began in 2023.
LFUCG commissioned multiplestudies in 2023 to determine what types of spaces could be available downtown and what office needs were for LFUCG employees.
Later that year, they released an open Request for Proposals (RFP) calling for a public-private partnership to build a new Government Center. While the city ultimately got two proposals, they rejected both.
In 2024, Council and the Mayor's Administration met to discuss the results of these studies and determine a path forward. They considered, but ultimately did not accept, an estimated $115 million project to renovate the existing Government Center.
Then, in late 2024, the city issued a newRFP for a public-private partnership to build a Government Center – one that was smaller than the one requested in 2023. This RFP process resulted in this proposal making its way to a Council Work Session in September 2025.
One of the big challenges with topics like this is that while some of this work – RFPs and Work Session presentations – occurred in public, much of it involved internal administrative evaluation, making it difficult to track, especially over a long period of time.
What happens to the current Government Center if a new one is built?
The city hasn't said what it would do with the existing Government Center if staff move to a new facility.
Likely, the city would try to sell the property.
The city could also repurpose it for another city use or continue operations there in some capacity, but this is less likely due to the deferred maintenance on the building.
Cost Questions
Is the total cost $86 million or $152 million?
This has been a point of confusion for many. The total cost of the project is quoted as around $86.6 million for purchasing the existing site, construction, and other expenses. However, under the proposed agreement, the city would pay $30 million upfront and then $3.5 million per year for 35 years once it moves in.
You may notice that $30 million + ($3.5 million x 35 years) = $152.5 million, which is more than the $86.6 million.
The difference is largely due to financing costs, similar to how a $200,000 home can cost far more over the life of a 30-year mortgage at current interest rates.
While the full details of this proposal have not been made public, annual payments in arrangements like this often include maintenance, insurance, debt service, and other financing-related costs.
How is the city paying for it – and would it spend these funds another way, if not on city hall?
LFUCG plans to fund the initial $30 million from a capital reserve fund – essentially a savings account for capital construction costs. The city has been contributing to this fund for years with the stated intent of eventually building a new city hall.
Future annual lease payments would likely come from the General Fund.
While it might be possible for the city to use some of these resources for operational or programmatic expenses, the more likely alternative would be other capital projects, such as:
Construction of a new homelessness shelter, if recommended by the Mayor's Task Force.
Deferred maintenance on the current Government Center
Other building or infrastructure projects
Could the $30 million be used for operational or programamatic needs instead?
The answer is that it’s complicated! Technically, the $30 million (plus an additional $10 million) is in a capital reserve fund that is generally used for capital projects, not operational spending.
As stated above, capital funds are typically limited to buildings, land acquisition, major repairs, infrastructure, and other one-time assets – not operating costs like staffing or assistance programs.
That said, while capital funds are often legally restricted for capital uses, it is unclear from publicly available information whether this particular fund has formal legal restrictions or is restricted only by name, policy, or past LFUCG practice.
If the fund is legally restricted, then the dollars could be used for other capital purposes but not for ongoing operational needs. If the fund is not legally restricted, Council could likely repurpose some or all of it for other costs through a budget amendment.
Public-Private Partnership Questions
What is a public-private partnership (P3), and why use one for a new city hall?
A P3 is a long-term agreement where a private organization finances, designs, builds, operates, or maintains a public facility.
Cities often use P3s when a project involves risks or capacity needs that the government isn’t prepared to take on alone. They can be controversial and come with trade-offs, but they’re a common tool across the country.
The city has not clearly stated why it is pursuing a P3 for this project. But, some potential reasons might include:
Shifting the risk of unexpected costs or delays to the developer.
Speeding up the project and avoiding inflation-related cost increases.
Reducing the staff time and expertise required from LFUCG.
Preserving the city’s bonding capacity and credit rating.
At the same time, P3s also come with a number of well-noted potential drawbacks, including:
Higher long-term costs due to financing and developer fees.
Less public control or flexibility over time.
Reduced transparency around negotiations and contracts.
Potential challenges in enforcement if the private partner under-delivers.
How these trade-offs play out depends heavily on the specific contract and project details – many of which have not yet been publicly released for this project.
Is a P3 cheaper than LFUCG building it outright?
It’s not currently possible to make a direct, apples-to-apples cost comparison between the city leading the project itself and a P3 because not all of the cost details have been released publicly. But, in general, P3s can cost more over time because of financing and developer fees, but, they can also cost less because they reduce the risk of unexpected cost increases to the government.
Does the city have to pay property taxes on a P3 building?
This has also been a point of confusion for many! And for good reason – the answer depends on how the agreement is structured.
Typically, in a P3:
Government-owned property is exempt from property taxes.
Even in a P3, if the city owns the land or the building, the property typically remains tax-exempt.
If a private entity owns the building during construction or operation, there can be varying arrangements, depending on the contract.
In a November discussion with Council, General Services Commissioner Chris Ford said that the city's position was that the project would be of public benefit, and therefore exempt from property taxes.
This presentation will mark the final scheduled update in a year-long process that began in January. If adopted, this would be Lexington's new framework for determining how and if to expand the Urban Service Area
While this ruling blocks the proposed eight-story, 322-unit apartment complex, the developer could still demolish the existing buildings and construct a new four-story, 75-foot structure under the site’s current R-4 zoning without any additional public input.
