A bit of news out of Louisville this week should serve as a cautionary tale for University of Kentucky officials studying the financial feasibility of building a new downtown basketball arena.
The Courier-Journal reported Thursday that sales tax revenue in the taxing district for the KFC Yum! Center isn't living up to expectations in terms of paying off the debt incurred in building the facility. As a result, Louisville's Metro Government may be on the hook for an extra $3.3 million beginning in 2012.
For UK and Lexington officials, the lesson seems obvious: The best-laid plans of tax-increment financing don't always play out as advertised.
As much as one-half of the debt for Louisville's new downtown jewel during its first decade of operation was supposed to be covered by new revenue from property and sales taxes in a six-square-mile taxing district.
At least, that was the plan. But stuff happens — such as the worst economic downtown since the Great Depression. When such stuff happens, people don't spend money as fast or as furiously as the plan anticipated.
Mayor Jim Newberry broached the idea of using tax-increment financing to build a new arena in downtown Lexington nearly three years ago. UK's feasibility study has been in the works for the better part of two years, which may be indicative of the difficulty involved in figuring out how to make such a facility pay for itself.
The report on Louisville's KFC Yum! Center experience certainly didn't make the task any less difficult. If anything, it should make everyone cautious to the point of skepticism when factoring in the benefits of tax-increment financing.