(Editor’s note: Terry Boyd also contributed to this post.)
That giant toaster oven on the river is a ticking time bomb of insane debt and good ol’ boy corruption that will be remembered as a very attractive mistake.
The latest effort by the powers that operate it to dump it off on an outside management agency will be seen as a case of passing the most expensive buck in Louisville’s history.
The KFC Yum! Center was built to house the University of Louisville’s men’s basketball program and was projected to pay for itself through hosting other events such as concerts and through a Tax Increment Financing district that turned out to be six miles wide.
Those first two missteps laid the foundation for the house of cards that is now unable to generate enough revenue to service the construction bonds.
One of the many, many problems is that a major piece of the funding formula – the Whiskey Row resurrection – is stalled, the Victorian-era buildings on the block of Main Street east of the arena sitting empty, beyond anyone’s financial capabilities to renovate.
So far, the TIF has generated just $2.1 million instead the $6.7 million it was projected to generate for the 2011 payment!
If the Arena Authority can’t pay the bills from the revenue generated by the TIF (they can’t), city government has to pay the tab, which is hovering at more than $570 million dollars, principal and interest combined at current bond yields. (Though the cost of servicing the debt just got more expensive after Moody’s Investor Service downgraded the arena debt to “junk” status earlier this month.)
I’ve often heard people say, “It’s a nice place, but I wouldn’t want to pay for it.”
There’s the rub.
Another looming problem with the arena is the availability of dates. U of L officials negotiated a sweetheart deal on use of the arena, yet doesn’t pay to use it. The university’s athletic department has seen fit to schedule lightly-attended events such as women’s volleyball, even going as far as giving away tickets to these events through local gas stations and supermarkets to try and boost attendance.
Soaking up all the good dates with non-revenue producing events makes the arena an unprofitable proposition for the people who have to pay for it.
Kentucky Fair Board spokeswoman Amanda Storment told Insider Louisville earlier this year that KFC Yum! Center booked a total of 209 events in 2011. That means last year, the arena sat dark roughly one-third of the time. And how many of the bookings were non-revenue producing U of L events is unclear.
That doesn’t worry the university, though. The school’s athletic association rakes in 80 percent of the take from luxury suites, and it gets nearly all of the merchandising revenue.
That’s a sweet deal for U of L, a rotten one for everyone else.
It is a forgotten fact that both University of Louisville’s Athletic Director Tom Jurich and men’s basketball Coach Rick Pitino were against the downtown arena when it was first proposed. The deal was twisted and manipulated to give the school a state of the art arena for free and a guarantee that there will never be an NBA team in Louisville.
In other words, total control.
Pitino and Jurich now love the place.
It has occurred to us here at Insider Louisville there are so many groups involved in the arena scheme (and each with its own agenda) that we sometimes forget them all. So, here’s a list:
- The Kentucky State Fair Board – Manager of the arena
- The Louisville Arena Authority (LAA) – Owner of the arena, with 10 of 15 members appointed by Kentucky’s governor
- A three-person LAA “Executive Committee” made up Chairman Larry Hayes, retired banker Dan Ulmer and businesswoman Alice Houston
- The University of Louisville Athletic Association (ULAA) – Primary tenant of the arena.
- Venue Solutions Group- Consulting firm hired by Arena Authority that was paid to tell the Authority to hire an outside managing agency to replace the fair board.
- AEG Facilities – Booking agent for arena. Contracted through fair board. AEG is also in the business of operating arenas worldwide.
This deal was doomed from the beginning. Rampant nepotism with a network of familiar names and faces have assured the arena will fail financially, all while boosting their personal fortunes.
Taxpayers will be on the hook soon to cover their long-shot bets, and citizens will not be happy. And finally, when the private company with insider contacts is appointed to manage the arena, the cycle of funneling public dollars into private hands will be complete.
We name the names behind the fleecing of Louisville via the arena. It’s a long list. You’ll want to stay tuned because so much of what has happened around the arena has happened without the public knowing about it. For example, did you know at least three companies made presentations in 2005 to run the arena? But only Insider Louisville reported that one of them – Global Spectrum – has been in talks for years! Stay tuned!