The use of $2.5 million in coal severance tax revenue to help pay for renovations at Rupp Arena in Lexington has drawn the ire of some county leaders in the eastern Kentucky coalfields.
Letcher County Judge-Executive Jim Ward said it makes little sense for the state to divert severance tax revenue generated by mining in the eastern and western Kentucky coalfields to a project in the states second largest city when coal counties are being forced to cut their budgets because of a sharp decline in severance tax revenue. Ward said Letcher County is slashing its budget by more than $1 million because of cutbacks in coal severance funding. He also questioned whether there would be enough severance funds to pay for water and sewer projects.
Kentucky collects a tax on coal that is taken out of the ground and gives some back to coal-producing counties to assist local governments and help diversify their economies. The revenue is supposed to primarily be used for economic development and for infrastructure projects in the mountainous, rural coal counties. By law, at least two neighboring counties must approve the use of severance tax funds for any capital projects. Three years ago, Boyd and Lawrence counties jointly agreed to use severance tax funds to help build the new Ashland Community Kitchen in The Neighborhood.
Kentucky Speaker of the House Greg Stumbo, D-Prestonsburg, defended the legislature’s decision to use severance tax funds for the Rupp Arena improvements, noting the University of Kentucky basketball program has statewide importance. Indeed, it does, and the $2.5 million in severance tax funds used for the Rupp project represent only a tiny percentage of the cost of the improvements to the arena in downtown Lexington.
Is using the severance tax to finance even a small portion of the Rupp Arena improvements the wisest use of those limited funds? Probably not, but if one were to look at all the ways severance tax money has been spent over the years, the Rupp project probably does not even rank near the top when it comes to questionable use of tax dollars.