capilouto
In the 19 months that Eli Capilouto has been at the helm of the University of Kentucky, the state budget has begun to loosen up, but it’s still tight as a drum when it comes to funding capital projects. Despite that, Capilouto is looking to oversee a half-billion dollars in construction projects at the school in 2013, if all goes according to plan.
Last month, Gov. Steve Beshear announced the legislature had reached a deal to allow UK and a handful of other universities to bond projects and pay for the debt service themselves.
In UK’s case, this means a $65 million re-do and expansion of the building that houses the Gatton College of Business and Economics, a $110 million overhaul of Commonwealth Stadium and a new $100 million science building. Approximately $65 million of those costs would be paid over time by the UK athletics department.
All of this is in addition to $200 million in work already underway to build 2,300 new on-campus beds for students through a public-private partnership with Memphis-based EdR.
“Every state has its unique set of circumstances,” Capilouto told Business Lexington in an in-depth interview in mid-January. “After learning more about Kentucky and our challenges [after coming to Lexington from a former job as provost at the University of Alabama, Birmingham], the opportunity that we saw with the public-private partnership was an infusion of dollars quickly. It didn’t require any issuance of debt, which is important to Kentucky.”
“We had a quality partner in EdR, they’ve built 40,000 beds across the country … They bring terrific expertise to the table. They can build these quicker, better, and less expensively than [if we had] undertaken this project ourselves,” Capil-outo said.
“So that was the advantage of bringing in somebody that has this primary competency. So it was a wonderful partnership. We’re the first university that may, through this entire process, end up outsourcing our entire housing stock. That’s what’s different than any other place in the country … [It’s] not entirely novel, but what is new is to do it at the magnitude under which we’re considering this at UK,” he said.
It’s also not unheard of to have an athletic department contribute to the academic side of a university. UK Department of Athletics has supported scholarships for years, about $15 million in total, according to Capilouto. But to be the major revenue source for an academic building — that might be unique.
“The work at the University of Kentucky I can best describe as being the product of a team. And our athletic department has been at the table from the get-go since I’ve arrived, and I know they were there before I arrived. As [Athletic Director] Mitch Barnhart worked with us, he spent a day with our deans, [during] which we talked about our graduation and retention, which we want to improve,” Capilouto said.
“He fully understood the needs that we have, and early on, said, ‘Let’s look for opportunities to work together.’ So once it became apparent to us that this would be a priority project, Mitch and I sat down and he stepped forward. I’m so pleased and gratified he sees this academic facility as he sees an athletic facility. His student-athletes take their courses in these buildings; he knows the needs. So I’m very proud the University of Kentucky’s Department of Athletics is stepping forward to do something that, as you say, it may have happened elsewhere, but I haven’t heard about something of this magnitude,” he added.
Capilouto said the $65 million for the science building will come from “a combination of the revenues garnered by athletics,” including ticket sales, merchandizing and television revenues from the Southeastern Conference.
In an era when conference realignment has become an annual carousel, Capilouto said extra revenues that could be used as a carrot by a conference with its own cable network such as the Big Ten wouldn’t entice UK.
“No, to be quite blunt,” he said when asked if he’d consider more money to leave the SEC. “The Southeastern Conference is, I think, the top conference in the country in terms of stability, continuity. It is most fortunate that the University of Kentucky is a member of the conference, and we’re certainly not looking to go elsewhere.”
Despite the football team’s futility in the SEC this past season, a 0-8 record in the conference and 2-10 overall, Capilouto said he is confident the addition of more suites and a club level at Commonwealth Stadium will attract enough fans to make necessary payments.
“There is a heavy demand for those suites, and we know the fan experience that comes from those club seats. It’s worked everywhere else in the SEC and in many other conferences, so we’re highly confident that that is going to produce the revenues. We’ll probably have some fundraising that will go on there as well,” he said.
The football program, and its new coach, Mark Stoops, will see more than a reworked stadium after the legislature approves UK’s quest to take the nearly $250 million total in bonds to market.
“We need to have some enhancements there so we can strengthen our recruitment with training facilities and workout facilities, so that we can keep our athletes healthy once they arrive on campus — and catch their eye when they are visiting our campus and making comparisons to other campuses across the country,” Capilouto said.
While the football team is the athletics department’s big recipient of this bond money, Capilouto said it’s with reason.
“It is important to make investments now in Commonwealth Stadium. Football and basketball are positive revenue producers. They make possible the many scholarships — over 400 in the other 20 varsity sports,” he said.
As far as the basketball team is concerned, Capilouto said he looks forward to the city completing its work on planning renovations to Rupp Arena.
“We like playing in downtown Lexington, and we look forward to playing there for decades. We know that they are doing what we just went through and that is sharpening the pencils, trying to look at the totality of the financing,” Capilouto said.
In an interview before the State of the Merged Government Address, Mayor Jim Gray said the Rupp planners have identified at least 14 possible revenue sources to rework Rupp Arena and the Lexington Convention Center.
The agreement that makes Rupp home for UK’s men’s basketball team is up in 2018, and Capilouto wasn’t interested in talking about what the school might do if the city’s revenue sources don’t prove fruitful by then.
“I really don’t deal in hypothetical,” he said. “We plan to be there. We look forward to being a longstanding partner with the city.”
In the meantime, Capilouto is back to looking at his campus’ wish list of projects.
“The law school, as well as other projects, remains a priority,” he said. “We must continue to find those creative ways to fund these. But philanthropy remains a grand opportunity for that project and many others,” he said about fundraising efforts that will pay for the bulk, if not all, of the Gatton project and others.
With the flurry of work being done at the school, Capilouto said he hopes to build on UK’s attractiveness to future students.
“I think we’ll be recognized as a place where people want to be. We already know from the response we’ve had this year and previous years, we’re the first choice for students in Kentucky. We want to remain as that first choice,” he said. “We offer an array of educational opportunities that you can find at few places in the United States. That’s advantageous to Kentucky. By having this infusion of investment to our infrastructure, we’re going to further the terrific service that we offer to today’s students and tomorrow’s students.”