Where does Lexington's new Government Center stand? Council gets an update this week

This week, Council will get an update on plans for Lexington's new downtown Government Center, including the public-private partnership the city wants to use to build and finance the project.

In December, Council narrowly advanced the public-private partnership (P3) proposal for the new Government Center by an 8-7 vote.

At the time, opponents questioned whether the city could commit to $152.5 million over 35 years, particularly given uncertainty at the federal level and local needs. Supporters, however, noted that a new Government Center had been postponed for decades and that further delays would only drive up project costs.

During its Tuesday Work Session, Council will hear a presentation from General Services Commissioner Chris Ford about the project's progress.

What's the scope of the project?

In a June 10th letter to state officials included in the meeting materials, Mayor Linda Gorton makes the case for the public-private partnership agreement with the Lexington Opportunity Fund, the project's developer.

The Lexington Opportunity Fund is a partnership between Greer Companies and the Webb Companies, as the Lexington Herald-Leader has previously reported.

Located at 200 West Vine Street, the downtown site includes an existing office building and recently remodeled 286-space parking garage. Gorton notes the site was selected through an RFP (request for proposal) process.

The project involves acquiring and remodeling the existing building at 200 West Vine Street, with a total estimated project cost of $86.7 million.

That cost includes:

• $23.6 million for site acquisition.
• $47.5 million for construction and design.
• $7.1 million for contingency or rainy day funding
• $8.4 million in "soft costs" that cover financing, additional contingency and developer fees.

How does the public-private partnership work?

The partnership with the Lexington Opportunity Fund, the project's developer, is for the design, building and financing of the new Government Center.

It would use a "design-build-finance" model that works like this:

1. Lexington-Fayette Urban County Government pays $30 million from its existing capital reserve fund to purchase the site and cover initial construction costs.
2. The developer gets a private construction loan to finance the rest of the construction. Its team will deliver the project under a "guaranteed maximum price" that still needs to be negotiated.
3. After the construction is complete, LFUCG leases the facility for an estimated $3.4 million each year over 35 years. The money would be used to help cover the project's long-term financing. The agreement also allows LFUCG to purchase the completed facility and issue bonds (borrow money) to cover the debt at any time.

Citing a third-party study, Gorton notes in her letter that this approach would deliver the project 12 months faster, save roughly $2.2 million, and protect against cost overruns that the city would otherwise be responsible for.

What's next?

While it's years in the making, the project still has several major milestones ahead.

Those include negotiating a guaranteed maximum price under which the developer will complete the project, community engagement, and approval before a state board in the fall. Then there's the closing/site acquisition, design and groundbreaking for the project.

Given all that, it's likely years down the road before Lexington's new downtown Government Center opens its doors to the public.