Louisville Arena Authority Chairman Scott C. Cox said Monday that the University of Louisville still has not come to an agreement to amend its lease with the KFC Yum! Center, and he warned of “really negative consequences” for the state, city, university and arena unless a deal is reached soon.
Cox has long expressed confidence that UofL’s athletics department — the main tenant at the arena — would come to a deal on an amended lease, but he told WDRB after the arena authority’s meeting Monday morning that he is “starting to be extremely concerned” about the continued delay in such an agreement.
On the last day of this year’s Kentucky General Assembly session, legislators passed a bill that extended the financially troubled arena’s Tax Increment Financing by 25 years and lifted the cap on tax revenue it could receive, part of an effort to help the arena refinance its bond debt and avoid the looming threat of default by 2020. The original bill required UofL to pay an extra $3.5 million each year toward the arena’s debt payment, but such a requirement was stripped from the bill on the final day of the session — with assurance by Gov. Matt Bevin’s executive cabinet secretary Scott Brinkman that UofL had agreed to pay an extra $2.5 million.
Since the session ended, concern has grown about the lack of an arena lease deal being announced; Cox joined that chorus Monday, expressing concerns that he also shard in an interview with Insider Louisville. Asked what was holding up an agreement, Cox replied: “The hold up is a one-word answer: money.”
Cox noted again that Brinkman testified to legislators that UofL had agreed to pay $2.5 million more per year on its lease for an additional 30 years, a figure that everyone — including financial experts of the arena, state, city, as well as investment bankers who hope to refund the bonds — agreed “would be the absolute bare minimum to give us an opportunity to get an investment grade credit from Standard & Poors and Moodys.”
Cox said lawmakers took the extra step of passing this legislation in a short session so the arena could refinance before interest rates rise — expected to create $60 million in savings over the life of the bonds — but now they can’t even do a feasibility study for potential bond holders because they do not yet have a commitment from UofL on the terms of the amended lease. He noted that Sen. Chris McDaniel — the Republican chair of the Senate’s appropriations committee — had pledged to scrap the new TIF legislation if anyone reneged on the lease deal, which Cox said would be a “catastrophic.”
“I’m starting to get contacted by legislators in both the House and Senate asking why we don’t have an amended lease agreement,” said Cox, adding that the repeal of the TIF legislation “would be catastrophic for everyone. It’s going to be an extraordinary negative event for the state and the city and the university and the arena if we don’t get this done.”
Asked whether UofL has reneged on an agreement with the Bevin administration, or if legislators were told there was an agreement that had not in fact been reached, Cox answered, “I’m just comfortable telling you that we should have had an agreement by now. We need to get an agreement soon, or we’re going to pay more.”
Asked if negative consequences would emerge if an agreement was not reached by this Summer, Cox said, “We need to work on a new lease agreement with the university now. Now.”
Cox declined to answer if arena officials were negotiating directly with the athletics department run by director Tom Jurich or with university officials such as interim president Dr. Greg Postel and the board of trustees, saying “I don’t want to get into any personalities or anything like that.” But he did say that “whatever final agreement we come to will certainly have to be approved by all those groups at UofL, which will take time.”
“I don’t want to negotiate the agreement in the news media, and the university has always met with us in good faith,” Cox added. “It’s also fair to say the university has a relatively new board of trustees and a relatively new president, and they have a lot of issues they’re grappling with. And I’m sure with every issue they’re dealing with there’s a Scott Cox on the other side saying ‘do my deal first.’ However, not doing our deal is going to cost a lot of money and have a lot of really negative consequences for all of us. So we need to get a new deal down now.”
Despite the concerns expressed by Cox, interim President Postel said in a statement sent to IL that the university had in fact agreed to pay the additional $2.5 million to the arena authority and expressed optimism that a deal would be reached soon.
“We hope to soon finalize what we believe will be a creative solution to the KFC Yum Center’s financial challenges,” stated Postel. The university already has agreed to changes in the lease agreement that would return at least an additional $2.5 million to the Arena Authority annually to assist in the payment of construction debt. The university’s goal is to be a team player with the city, state and Arena Authority in preserving the long-term viability of this important community asset.”
University spokesman John Karman confirmed that UofL had agreed to pay the additional $2.5 million for 30 more years of the lease, but he did not answer what specific financial terms are holding up a final deal. UofL athletics department spokesman Kenny Klein told IL that “Dr. Postel is speaking on the university’s behalf on this matter.”
Sen. McDaniel told IL that he was disappointed to hear news of a delay, “because I can tell you that I had personal assurances from both the governor and from Scot Brinkman that they had a deal. The begged me to keep (the required extra payment from UofL) out of the bill because they said it tied up some necessary flexibility. And the fact is, I meant everything I said on the floor, and I will absolutely try to completely dismantle this TIF if it doesn’t work out.”
Asked whether he believes that UofL reneged on their deal or legislators were falsely led to believe that a deal existed, McDaniel said, “I have no idea on that. If I did I would tell you. Because to be honest with you, if they backed out I’d be furious at Louisville, and if I got lied to I’d be furious at the ones that did it. But I just don’t know.”