Yum! arena deal benefits, not burdens, taxpayers

Several days ago, I read a Facebook post by a state legislator about the KFC YUM Center.

It read, in part: “The original projections were made to get the deal done. Taxpayer be damned. They understood the bonds would default but they did not care. They knew once the Yum Center was built, taxpayers would be forced by legislators and Metro Council to bail it out or there would be a massive scar in the middle of the state’s largest marquee city. They simply did not care how much taxpayers would be hurt.”

I have a lot of respect for this legislator, but his reaction is based on a lack of knowledge of how the bond issue was done and what the benefits have already been to the commonwealth and to Louisville Metro Government.

The arena is not a debt for the city or the state. It is a revenue-bond issue backed by the contracts and revenue the arena generates. The bond issue is guaranteed by Assured Guaranty, which means if there was ever a default on the bonds, it would be responsible — not the city or the state. This was a requirement the city made early on in order to approve the ordinance for the bonds.

The arena has exceeded expectations for concerts and events other than basketball. Over the last five years, Poll Star Rankings have shown that the KFC Yum! Center has averaged being the 26th best arena in the county and 56th in the world for concert ticket sales.

Convention Sports and Leisure, a Minneapolis-based economic-impact firm, did an analysis of the arena after its first four years of operation. At that point, it had already supported an estimated 8,400 full- and part-time jobs and created $300 million in total employee earnings.

As chairman of the Louisville Arena Authority from 2005 until well into 2012, I accept full responsibility for how the arena was financed and built.

I drove almost every day for six years of construction and meetings at my own expense, leaving most mornings from Lexington at 4:45 a.m. I refused each time a free room was offered, opting to drive home to sleep in my own bed. My office was a table in the lobby of the Marriott. If a vendor or interested party wanted to have breakfast or lunch with me, I paid the bill. No arena board member received a penny of expenses for their time.

Every contract bid or negotiated was reviewed by the board in public session and then posted on the arena website. The bond document, well over 300 pages, was written by bond attorneys in Louisville and New York who had to sign off on the numbers and wording as to their accuracy.

On page 158, it shows sales-tax receipts for Louisville and the state from 1990 to 2006. Louisville had averaged growth of 7.05 percent; the state 6.28 percent. The number used to project the tax-increment-financing growth in the Arena TIF District was less than those percentages, in order to be conservative.

Mayor Jerry Abramson and Councilman Jim King believed the city would benefit more from requiring a guaranteed amount, as opposed to collecting the increase in local property and occupational tax revenues from the district.

The point is, the figures were not made up or pulled out of the air. Yet, no one saw the worst recession since the Great Depression coming before the arena construction was finished and after the bonds were issued.

Now, with the opening of another 2,000 downtown hotel rooms in Louisville during the next 18 months, the amount of additional revenue from the growth of property and occupational taxes will exceed the guarantee the city makes for debt service for the bonds. Also, I don’t think the Omni would have been built without the arena first being there.

The current chairman of the authority, Scott Cox, is doing an outstanding job in his volunteer role. The whole reason he and the authority wanted to revise the TIF term is because it would allow the debt to be refinanced at a much lower rate of interest, therefore saving a great deal on debt service.

Once the bonds are paid off, the TIF goes away.

The continued success of the arena is important to Kentucky. Louisville is the economic engine of the state; 40 percent of all tax revenues generated by the city go to help the rest of the state.

So, as Louisville goes, so goes the commonwealth.

This story was originally published April 21, 2017 at 8:17 PM with the headline "Yum! arena deal benefits, not burdens, taxpayers."