The chairman of the Louisville Arena Authority told board members on Monday that changes need to be made to improve the long-term financial position of the Yum! Center ahead of debt payments that are scheduled to escalate significantly within the next four years.
Though chairman Scott Cox did not discuss what those specific changes would be during the meeting, afterward he told reporters that these would include strengthening the arena’s tax increment financing (TIF) district by extending it by 10 years to match the maturity level on its 30-year bonds.
Cox’s comments to the board on Monday largely matched what he told IL two weeks ago, as he said the downtown convention center being closed for two years due to renovations might harm TIF revenues, which in conjunction with the escalating debt payments present financial challenges ahead for the authority that must be proactively addressed.
“Because of (the convention center), and because we have accelerated debt payments staring us in the face, we need to improve our financial position for the Yum!” said Cox. “We are in very good shape until at least 2020, and maybe deep into 2020, but after that we’re going to have some issues if we don’t change some things. And that’s what we have started to do.”
Cox said he has met with the arena’s stakeholders and partners recently to discuss these challenges and options going forward — including state legislators, officials in the administrations of Gov. Matt Bevin and Louisville Mayor Greg Fischer, and representatives of the University of Louisville — adding that “I am happy to report that our partners share our financial goals for the Yum! Center.”
Gov. Bevin told WDRB last week that he shares concern about the arena’s financing, specifically advocating that the UofL Athletic Association’s lease at the arena needs to be adjusted because its conditions are too favorable for the university and do not steer enough revenue toward the authority’s debt payments. Cox mentioned Bevin’s comments, though not specifically addressing the lease of the arena’s anchor tenant — the UofL men’s basketball program that is producing far more revenue and net income than any other NCAA basketball program in the country.
“We also have been encouraged, as you all know, by Gov. Bevin to fix the financials, and he wants us to address it now, and I know the mayor feels the same way,” said Cox. “It’s easy in a situation like this – when you know you’re in good shape for three or four years – to kick the can down the road. And the governor does not want us to do that. None of us want to do that.”
Though TIF revenues for the authority have only totaled roughly half of their original estimates, Cox noted that they rose to $10.3 million in the last fiscal year, a 10 percent increase from the previous year and over $1 million more than they had budgeted.
Asked after the meeting what specific changes need to be made to improve the arena’s financing, Cox was only ready to reveal that they would work with Frankfort to update and “strengthen the TIF.”
“It’s a 20-year TIF, and it ought to be lengthened so that it matches the maturity level on the bonds, which are 30-year bonds,” said Cox. “Those are the types of things that we’re trying to get done, and I don’t want to get into too many more details, because we’re negotiating with people now.”
Cox said such a change would require approval from the Kentucky General Assembly, and if that affects the state budget it would require a two-thirds majority for it to pass in the short session of the legislature coming up next year, or else be pushed back to 2018. He added that “we’re meeting with legislative leaders and the governor’s office, and we’re getting great support from everyone.”
Pressed on whether the authority is asking UofL to alter its lease — and if the university appears open to such a suggestion — Cox replied “I don’t want to talk about any specifics like that, other than we’re meeting with all of our partners, including UofL. (UofL Athletics Director) Tom Jurich is a community-minded person and a team player. He wants the Yum! to succeed and be successful. I know that they love playing here, they love having this as their home.”
Asked if there are other areas of potential revenue that the authority is pursuing besides altering UofL’s lease and the TIF, Cox said, “Yes. And I’ll tell you after we accomplish it in the coming months.”
Though leadership of the Louisville Arena Authority has typically downplayed skepticism about its long-term financial position over the past seven years, Cox — who was just appointed by Bevin this year — praised past chairmen of the authority and said its board has always taken this issue seriously.
“Everyone has been alert to it and planning,” said Cox. “None of this began with me, as I said in the meeting. It’s something that people have been working on for a long time.”
Asked if he initiated the current negotiations with arena partners, or if they were already in place, Cox said he wasn’t sure, though “I know they’ve accelerated since I’ve been here, because that’s why the governor put me on the arena authority. He wants the finances improved.”
On Tuesday, the state legislature’s Capital Projects and Bond Oversight Committee will meet in Frankfort and are expected to approve a formal request that state Auditor Mike Harmon examine the arena authority’s finances. Several of the committee’s members have stated that the university’s lease must be amended, while Sen. Chris McDaniel has said the arena authority should not expect Frankfort to bail the authority out if it cannot make future debt payments and faces potential default.