Interim Joint Committee on State Government


Minutes of the<MeetNo1> 2nd Meeting

of the 2017 Interim


<MeetMDY1> July 26, 2017


Call to Order and Roll Call

The<MeetNo2> second meeting of the Interim Joint Committee on State Government was held on<Day> Wednesday,<MeetMDY2> July 26, 2017, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Representative Jerry T. Miller, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Joe Bowen, Co-Chair; Representatives Jerry T. Miller, Co-Chair, and Kenny Imes, Co-Chair; Senators Ralph Alvarado, Denise Harper Angel, Christian McDaniel, Morgan McGarvey, Dorsey Ridley, Albert Robinson, and Damon Thayer; Representatives Lynn Bechler, Kevin Bratcher, Tom Burch, John Carney, Will Coursey, Jim DeCesare, Joseph Fischer, Derrick Graham, Richard Heath, Dennis Horlander, Dan Johnson, DJ Johnson, Brian Linder, Reginald Meeks, Phil Moffett, Tim Moore, C. Wesley Morgan, Jason Nemes, Sannie Overly, Jason Petrie, Rick Rand, Jody Richards, Bart Rowland, Attica Scott, Tommy Turner, Ken Upchurch, and Scott Wells. (Representative David Osborne also attended and sat with the members.)


Guests: William M. Landrum III and Pamela Trautner, Finance and Administration Cabinet; William May, Huston Wells, and Laura Ross, City of Frankfort; Hank Hancock; and Don Stosberg.


LRC Staff: Judy Fritz, Karen Powell, Kevin Devlin, Michael Callan, Roberta Kiser, and Peggy Sciantarelli.


Approval of Minutes

The minutes of the June 28, 2017, meeting were approved without objection, upon motion by Senator Bowen.


Recognition of Guests

Senator Thayer recognized Lexington Catholic High School student Austin Hamelback; Representative Graham recognized members of Frankfort city and county government; and Senator Alvarado recognized a constituent who works in children’s services.


“Capitol Tower Footprint” – Capital Plaza Redevelopment

William M. Landrum III, Secretary, Finance and Administration Cabinet, discussed plans for the redevelopment of Frankfort’s Capital Plaza area. Pamela Trautner, a member of his staff, assisted with the slide presentation.


Secretary Landrum said that the state owns 44 office buildings with 2.6 million square feet and leases 71 office buildings in Franklin County with 1.5 million square feet. The Capital Plaza complex arose from urban renewal 45 years ago, and now the state has an opportunity to give the property back to the people of Frankfort and reduce the footprint of the state. The Capital Plaza is a state-owned crumbling infrastructure with multiple spaces and building code violations. Structural integrity of the elevated plaza slab and the drainage system has deteriorated beyond repair. Deferred maintenance in Franklin County alone amounts to more than $194 million. Secretary Landrum said he reviewed a 2007 facility survey of the complex and 2009-2011 feasibility studies by Sherman Carter Barnhart and national consultant Tom Minter. Between 2010 and 2015, state and local officials, community and business leaders, and others have been involved in numerous discussions but failed to form a consensus or establish a course of action. The state has a crumbling infrastructure in the middle of historic Frankfort, but it is not the fault of city leaders. The plan is to move forward in partnership with the city, the county, and the people of Frankfort.


In FY 2017, 53 events were scheduled at the convention center. Usage rate was approximately 14.5 percent, and venue revenue was $266,644. Tenant revenue was $374,634. About 19,000 square feet was leased to state agencies and approximately 8,000 square feet to the private sector. Most of the tenants have left. FY 2017 net revenue for the convention center and shops (-$154,681) was over 200 percent lower than in FY 2016 ($54,900). According to data provided by the Tourism, Arts and Heritage Cabinet, the estimated direct and indirect economic impact of convention center events in Franklin County increased only six percent from 2009 ($16.3 million) to 2016 ($17.3 million), while total tourist spend increased 36 percent (from $138 million to $187.6 million).


There have been no upgrades to the Frankfort convention center since it opened in 1971. It was originally designed for sporting events and exhibitions, but the majority of bookings are now not sports related. The space design is not well suited for meetings. The finishes are worn and dated. There are no sprinkler or smoke evacuation systems. ADA accessibility is deficient, and the fire alarm, data, voice, and air conditioning/ventilation systems are outdated. Safety is a concern. The building code has been grandfathered since 1971. It would cost $3.3 million to reroute utilities for the convention center and $18.9 million to bring it into code compliance. It would cost an additional $12.3 million to renovate and expand the center to meet current needs and market requirements.


Secretary Landrum said he appreciates that Senate Bill 238 (2017 RS) provided the authorization for the renewal of the Capital Plaza. He reviewed a sketch of the proposed redevelopment, which includes a new state office building and parking garage, plus demolition of the office tower, the convention center, and the shops. The hotel would receive a façade upgrade, and its parking garage would be relocated. The YMCA garage would also receive a façade upgrade. The Mero Street and Clinton Street overpasses would be demolished. The city would have the opportunity to open up Washington Street from Broadway to Mero Street if the YMCA property becomes available in the future.


Secretary Landrum reviewed the planned timeline for the project. The dates are subject to modification. State agencies are scheduled to vacate the Fountain Place shops by September 29, 2017, and private tenants by December 13. The last event at the convention center will be October 31, and salvage operations will start at that time. Conveyance of the property to the developer and lease signing are scheduled for December 13. It will be a lease back from the developer, and the state will make a one-time payment. Demolition of the Clinton Street overpass, the convention center, and the plaza horseshoe is estimated to begin on December 13, 2017. Demolition of the Mero Street overpass is scheduled for January 12, 2018. Demotion of the Capital Plaza tower and tower parking garages will start on January 27, 2018. Demolition of the Fountain Place shops is scheduled for April 16, 2018. Construction of the new state office building is scheduled to begin April 12, 2018. The project is estimated to be complete by March 2020, but it could be sooner.


Parcel B—the area now occupied by the convention center and plaza shops—has potential for a P-3 (public-private partnership) project, based on community vision and planning. The property will probably be available in about two years. Once the YMCA relocates and once the riverfront becomes available, it is intended to return those properties to the city. Secretary Landrum said he has offered to partner with the city and the county to assist in the P3 process. In May he met with local legislators, the mayor, county judge, government and private tenants, Marc Stone (hotel), and Keith Gallagher (YMCA). An op-ed was published in the State Journal on July 2. There has been ongoing community outreach with civic groups and other members of the community.


Secretary Landrum said he understands the emotional attachment to the Frankfort convention center, but it is unsafe by today’s building code. He believes the plaza redevelopment is a “win” for the city, the county, and the people who live and work in Frankfort. It will enable them to focus their vision and imagination on a better Frankfort.


Senator Thayer commended Secretary Landrum for his effort and the time he has devoted to the redevelopment. He urged him to elaborate on his personal background. Secretary Landrum said he served 30 years in the Army, taking care of soldiers during times of peace and war and making decisions that affected both them and their families. With the rank of colonel, he retired as the Assistant Secretary of the Army for Finance Operations worldwide. He was responsible for the direct support of the First Tank Division and, later on, for moving money and reestablishing the banking system in Iraq. He also worked in Washington, D.C., and is a small business owner in a small town. He does not take his decisions regarding the plaza redevelopment lightly. Having inspected many barracks while in the military, he believes that the state’s and Frankfort’s infrastructure needs to be brought up to standard. Senator Thayer thanked him for his service to the country. Representative Miller also commented on Secretary Landrum’s exemplary service.


Representative Graham commended Secretary Landrum for working with local officials in an open and willing manner. Recalling the Secretary’s testimony regarding the project last August to a budget review subcommittee, he asked when the scope of the project started to expand beyond demolition of the tower. Secretary Landrum said the original focus was on the tower and realignment of utilities. He began expanding the scope of the Capital Plaza redevelopment about eight or nine months ago. In talking with the people in downtown Frankfort and the government entities that occupied the plaza shops, and after reviewing studies he had not seen before, he began to question whether the original plan would really work for Frankfort. He knows the decision to expand the scope was not well received, but in walking the grounds during the Expo festival he saw safety violations and was even concerned about people being on the elevated pad. He viewed the expansion as a new opportunity for the city and the state to come together and for Frankfort to pursue its own vision for the plaza area. He confirmed that the new Transportation Building is on a separate power grid. Renovation of the hotel façade will be at state expense, and the hotel has been promised to not have any down time during the construction period.


When Representative Graham asked whether any developers had initially expressed interest in the area, Secretary Landrum said that when the state put the property up for sale there were no responses. He offered to almost give it away to the city, and there was no response—which is understandable, considering the negative value of the property. Now that the property will be developer-ready, there have been 44 requests for an RFP. Representative Graham said his greatest fear is that a new state government administration in the future might ask the city and the county to relinquish the area. Secretary Landrum said by March 2020 he will convey the land to the developer for the purpose of executing the plan of the city, the county, and the people of Frankfort. This will put the property on the tax rolls, and the city will be in control of the property. The deed of conveyance will provide co-ownership.


Responding to questions from Representative Wells, Secretary Landrum said the state owns the Kentucky International Convention Center and another convention center which the state is refurbishing for $207 million in Louisville. State-owned buildings are not exempt from building codes. The doors have been kept open at the Frankfort convention center because it was “grandfathered.” It has received no upgrades since 1971. Rerouting of the convention center’s utilities would require a complete upgrade of the building, at which point the Department of Housing, Buildings and Construction would have to ensure that the building is code compliant. With respect to conveyance of property, the state has worked with local governments in other communities many times.


Representative Carney said he believes it will be a huge win for the local school districts when the property goes back on the city tax rolls. Secretary Landrum said absolutely. Given the opportunity and the timing, his vision is that the redevelopment can eventually expand to include the current YMCA property and also utilize the great potential of the river as a resource to increase tourism in the city and county.


The next speakers were William May, Mayor of Frankfort, and Huston Wells, Franklin County Judge/Executive. Laura Ross, city attorney, assisted in the slide presentation. Mayor May said the city has been asked to develop a strategy for redevelopment of the Capital Plaza area, including the site of the existing convention center. The city is working to design a community engagement process for a multiphase redevelopment strategy that includes the Capital Plaza area, greater downtown, and adjacent corridors, including the Kentucky River. The project team consists of representatives of the city, fiscal court, Downtown Frankfort Inc., Frankfort/Franklin County Tourism, and the Kentucky Capital Development Corporation. The goals are to have an executable vision designed by the citizens that will help transform Frankfort; to build upon existing plans and market studies, including the 2012 Riverfront Development Plan, 2014 Cultural Asset Inventory, and the 2017 Downtown Market Study; and by December 2017, to deliver a public input plan to the state Finance and Administration Cabinet. There will be public forums to allow citizen input in the process.


Mayor May said that, with the assistance of Secretary Landrum, Secretary of the Executive Cabinet Scott Brinkman, the city partnered with the Coast Guard, the Kentucky River Authority, state agencies, and others in a recent project to remove abandoned houseboats along the Kentucky River. The city paid for the project, which came in under budget by several thousand dollars. He thanked all the partners on that project. He said, hopefully, the redevelopment strategy will also provide an opportunity to remove outdated structures that need to be replaced and that the Frankfort community will be supportive of the strategy.


Mayor May said the city will pay a substantial amount to a consultant for the redevelopment, hopefully in partnership with fiscal court. The city does not have the internal expertise to determine what the community would support if a new multi-use facility is built. It could be a sports arena, a performing arts center, or a convention center that could be utilized for meetings and state employee training purposes. He thanked the committee for the opportunity to testify.


Judge/Executive Wells thanked the committee and expressed appreciation to Secretary Landrum for his thoughtfulness and help in working with the community. He said this is a tough time for everyone because change is difficult but that the city and the county are excited about the opportunity provided by the redevelopment.


Representative Nemes questioned why Frankfort would not have to pay anything for the property when it is returned to the city. He also asked how much the state’s payment to the city in lieu of property tax would be reduced. Mayor May said that when the capital plaza project was begun the city contributed about $1.5 million to the project. The state’s payment in lieu of taxes has also been substantially less than a tax that is based on square footage of the buildings. He noted too that the city had provided fire and police protection for the complex and had to purchase more than the typical amount of necessary equipment.


Representative Graham said he learned from the city’s finance director that the state had contributed $1.5 million toward construction of the Capital Plaza and that the county, including Kentucky State University, had also contributed about $800,000. The city and the county have contributed toward maintenance and also to settle the construction debt for the convention center. Payments began in 1970 and continued until 2000. He also noted that when the new Transportation Building was built, the city had to pay in the millions of dollars for a new fire truck that would be capable of elevating the ladder to the top of the building.


Representative Morgan asked whether there are any plans to renovate the hotel. Marc Stone, who was present in the audience, said there are plans for some renovation and that there will be significant work done on the hotel façade.


Citizen Testimony

C. M. “Hank” Hancock, a local citizen and former state legislator, spoke about the 21 years he served in the House of Representatives. He said that during those years the legislators he served with worked toward the best outcome for the Commonwealth. There may have been disagreement, but the effort by all was sincere. Today the committee is discussing some drastic decisions involving millions of dollars of state property. When he came to the legislature in 1974, the Capital Plaza project had just gone into “full swing.” It was a true bipartisan effort, begun during the term of Democrat Governor Ned Breathitt and finished during the term of Republican Governor Louie Nunn. He urged the members, as they deliberate the needs of the Commonwealth, to also consider the needs of the capital city. He suggested that they take the facts and figures presented at today’s meeting and study them, drive through the plaza area, and imagine the vision they would want projected to the visiting public. He thanked the members for their service to the Commonwealth and wished them good luck in whatever decisions they make.


Don Stosberg, a local citizen, voiced his concern about the planned demolition of the convention center. He stated that the cooperation between the state and local officials occurred only after the decision on the Capital Plaza redevelopment had already been made. It is his understanding that for over 30 years the city and county and Kentucky State University paid about 100 percent of the debt service for construction of the convention center. That should allow them standing with respect to its disposal. Tearing down the convention center will have a great impact on the community. A 2004 report during the administration of Governor Fletcher included a recommendation for a convention center annex. It is widely believed that the convention center would have had more bookings if it offered meeting rooms. This could be accomplished by rehabbing the existing center or adding an annex to the building. Instead of tearing it down, it could be turned over to the city.


Mr. Stosberg questioned the credibility of the cost estimates provided in the convention center analysis. He said he had just spoken with a developer who said that the estimate to reroute utilities was much too high. He recommended that the committee thoroughly examine all of the numbers and that that all options for the convention center be considered. He questioned whether SB 238, which authorized renewal of the Capital Plaza complex, also authorized demolition of the convention center. He advised everyone to look at the redevelopment project carefully to avoid 50 years from now possibly having to tear down something else that was not well conceived.


Other Business

Representative Miller announced that the next meeting would be a joint meeting with the Interim Joint Committee on Local Government on August 23 in Richmond, Kentucky, at 10:00 a.m. at the Department of Criminal Justice Training. A luncheon and tour will be available.


With business concluded, the meeting was adjourned at 2:15 p.m.