KFC Yum! Center (vague) financial docs show arena still missing revenue projections
Life always is about numbers.
The numbers quantify success or lack of success through data minutiae – the “metrics,” to use an overused cliche.
Which is why Insider Louisville tried to get a detailed financial report on KFC Yum! Center.
We asked Louisville Arena Authority Chairman Larry Hayes’ office – through his dual hat as secretary of the Kentucky Cabinet for Economic Development – for a report.
“No dice, Charlie Rice,” was the reply. “Ask Goldman Sachs.” Which we did, but got no response.
State officials were willing to give us a simple profit and loss statement, the least amount of information you can call a financial report.
And the numbers for the KFC Yum! Center January 1 through May 31 are not good. (We’re not sure what happened to the June numbers, but we find it odd they’re missing from a report issued in July.)
Let’s move the bottom lines to the top:
For the current month, which we’re assuming to be May, though it doesn’t specify, KFC Yum! Center lost $280,551, according to the report. That’s 17 percent to the downside from the same period last year, when the arena lost $238,893.
And just for fun, the projected net income was supposed to have been $93,750, roughly a $380,000 differential.
“Projected” is important because that projected amount was the basis for covering the $340 million in municipal bonds issued to build the arena.
Other interesting lines include total income, which rose about 23 percent to $370,916 for the latest month compared to $294,403 for the same month, 2011. However, again the actual amount is far below budget – less than half – which was $804,150.
It’s about here when you start thinking, “Gee, smart guy … the arena revenue is going to peak during basketball season in the winter, then decline during the summer.”
Which is true. And which is why we wanted to examine financial documents that would have the quarterly detail of a corporate earnings report or a Uniform Bank Performance Report.
Clearly, the current month’s losses are out of line with the year-to-date results. But without sufficient data, these reports are just pieces of a puzzle.
For the year-to-date, the arena topped 2011 income for the same period … by less than $1,000. Direct event income this year came in at $4.1 million, up from $4.09 million last year. But once again, there’s the problem that could be haunting Kentucky taxpayers for years – actual revenue from events was about $540,000 below the budget projection of $4.64 million.
A big chunk of that was $356,074 paid to co-promoter (other), “other” being other than the University of Louisville, the arena tenant. The projected amount was $170,000.
We’re not entirely clear who that is, though it is most likely AEG Facilities, the Los Angeles-based Anschutz family’s global facilities management company. AEG, which already was booking events at the arena, now is the manager, replacing Harold Workman and his friends-and-family operation at the Kentucky State Fair Board.
(Interestingly, at the most recent Arena Authority meeting July 16, Arena Authority members including Hayes and businessman Dan Ulmer could not stop thanking Workman for the fine job he’s done. Ulmer: “I just want to thank Harold for the fine job in getting us this far.”)
Paying more to a co-promoter could be a good thing since that may indicate higher fees for better performers, or a larger percentage of the gate in sellout. But without greater detail, the Arena Authority’s operating income statement doesn’t answer many questions.
Some maintenance costs were slightly lower, but that’s good because arena authority officials admitted Tuesday to the Courier-Journal that they raided the maintenance fund for $3 million to service the bonds on the $348 million.
So, what we know is, KFC Yum! Center is not going to produce sufficient revenue to cover those bonds.
On the tax side, the news isn’t much better.
The authority anticipates being about $3 million short of the $19.9 million in payments for 2012. Which will come from the coffers of Louisville-Jefferson County Metro Government.
The arena authority currently is paying only the interest on the $348 million, which totals about $525 million with interest over 40 years.
In late May, Moody’s Investors Services downgraded the arena bonds to a junk rating because Moody’s analysts doubt the tax increment financing district created to help pay for the facility will generate sufficient revenue.