The new financing proposal called for $80 million in state-supported bonding.
The proposal never came up for a vote in the Senate as time ran out on the legislative session.
Earlier in the session, lawmakers refused to include $65 million in state bonding for the project in the two-year state budget that passed the legislature.
Governor Steve Beshear led the push to authorize state-backed bonds to help pay for the project, which was estimated to cost more than $300 million.
"Despite the failure of the Senate to support the Rupp Arena and convention center project, we will continue to seek ways to bring this project to fruition," Beshear said.
"Rupp Arena, the convention center, Lexington and the surrounding region need this overdue renovation and improvement to attract the conventions and investment that modern facilities bring to city centers. Delaying this project needlessly delays positive economic development for the central Kentucky region, but I am confident that we will forge a path forward," Beshear said.
Lexington Mayor Jim Gray said, "Sure it’s a setback. But a setback can be a setup for the next round. I’ve had projects that took years to develop, so I’m patient. A complex, transformational project like this takes time and requires overcoming big obstacles. We’ll just keep working. Rupp is a great brand that inspires pride and tradition and through new jobs will bring new life to our city."
Chair of the Lexington Center Board, Brent Rice said, "Rupp is nearly a 40-year old facility and we can’t attract the concerts, conventions, meetings and other NCAA athletic events that our competitor facilities do today. We just can’t compete with a 1970’s era facility. This outcome is sad for UK basketball fans and those people who would have had good jobs in the Rupp District. It’s hard for me to understand how it’s fair for Lexington and UK to be shut out when Louisville has been given $75 million for the Yum Center and $56 million for their convention center. But we’ll work to find a way forward because this project is too important to give up on."