KFC Yum! Center Tax Revenues Lag; Arena Authority May Use Reserves To Pay Debt
The revenue needed to pay for the KFC Yum! Center in Louisville “is falling short of expectations, putting the project at risk of failing to cover its debt and having its bonds relegated to ‘junk’ status,” according to Marcus Green of the Louisville COURIER-JOURNAL. The main culprit is “lagging revenue in a special taxing district that forms the foundation of the arena’s financing plan and is supposed to provide the Louisville Arena Authority with more than enough cash to pay its $349 million in bonds.” The six-square-mile district’s “poor sales-tax performance may force the authority to dip into its reserves -- including money set aside for maintenance -- to make routine debt payments.” Former Louisville Arena Authority Chair Jim Host, who retired at the end of ’11, said that the orgnaization has “no plans to ask Louisville city government to increase its annual minimum arena payment of $6.5 million for the next fiscal year.” Under the authority’s deal with the city, the arena “must first exhaust all other revenue -- from naming rights to operating income -- before asking the city to pay more.” The authority “expected to have $26 million available -- including $6.7 million from the taxing district -- for its 2011 payment of $19.1 million.” But the district produced “only $2.1 million in 2010, which goes toward the 2011 payment.” Coupled with “lower-than-forecast income from arena operations, the authority expects to have only $14.6 million.” For '12, the authority anticipates being “roughly $3 million short of its $19.9 million payment.” Host said that the authority “likely would use money set aside for maintenance to cover that gap.” He also said that the arena’s projections for tax-increment financing “were based on historical data that showed steady tax growth in the six-square-mile area.” Host said that he is "confident that the tax-district revenues will increase." He and Kentucky Economic Development Cabinet Secretary and Arena Authority Finance Committee Chair Larry Hayes said that they are "banking on new restaurants such as Doc Crow’s and the planned development along Whiskey Row on Main Street, and Host said projections showing increased hotel revenues are likely to help" (Louisville COURIER-JOURNAL, 1/21).