KFC Yum! Center tax district generates more money in 2013 - WDRB 41 Louisville News

KFC Yum! Center tax district generates more money in 2013

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LOUISVILLE, Ky. (WDRB) – The state tax subsidy helping to pay construction debt on the KFC Yum! Center increased last year, according to figures from the arena's financial adviser.

A downtown tax increment financing district, which diverts a portion of property and sales tax revenue to the Louisville Arena Authority, generated $7.4 million in 2013, up from $5.7 million the year before.

The district still is producing millions less than forecast when bonds for the arena were sold in 2008. At that time, arena officials expected a windfall from TIF to help meet annual debt payments that are set to climb in the coming years – reaching more than $31 million in 2022, for example, or $10 million more than is due this year.

Within the last year, two Wall Street firms have lowered their opinion of the arena debt to below investment-grade, or “junk” status, due to concerns that the politically-appointed arena authority will have less money than previously thought to make its payments.

But Louisville Metro Council President Jim King, an arena authority member, said the new TIF figures are a reason for optimism.

“This would be an indication to me that the rating agencies will now have an opportunity to upgrade us,” he said. “It certainly means that our rating will not drop any lower.”

“We're pleased with the TIF numbers and hopefully the TIF will continue to grow,” said William Summers V, chair of the arena authority's finance committee.

The governor- and mayor-appointed board last year announced changes to the TIF, shrinking it from six square miles to two square miles. The board retroactively applied that new geography to revenues from 2012. That means the revenue increase from 2012 to 2013 is an "apples to apples" comparison.

Arena officials say they haven't projected how much money they expect to be generated from the downsized TIF district.

"You don't know what the future holds,” Summers said, “but there are a lot of good things going on around the arena.”

King said it's “realistic” to expect the TIF to grow by $1 million to $2 million a year in the near future. Asked if he believes that growth, combined with the city's annual payment and other arena revenues, will be enough to meet escalating debt payments over the next decade, King said: “Yes, for sure.”

The calculation of the TIF revenue comes as a Kentucky legislative panel has asked Attorney General and Democratic gubernatorial candidate Jack Conway to investigate several arena-related issues, including whether last year's reduction in the TIF district “was legal and if there is a threshold for which projected (arena authority) TIF revenues could be perceived to be inflated.”

In a July 15 letter, the co-chairs of the state's Capital Projects and Bond Oversight Committee also seek an opinion from Conway's office about whether the arena authority is required to pay the Yum Center's previous operator, the Kentucky State Fair Board, for revenue it lost when the University of Louisville's basketball teams moved to the Yum! Center from Freedom Hall in 2010.

In addition, the panel is asking Conway to look into whether current or past arena authority members have had “conflicts of interest under Kentucky law or under federal tax and securities laws.”

Arena critics long have raised concerns over U of L's lease at the Yum! Center. Since leaving Freedom Hall, the school's basketball revenue has increased in part due to a deal that gives U of L control over – and the bulk of proceeds from – suites sales.

In announcing its downgrade of the arena bonds, Moody's analysts wrote that the arena authority's revenue-sharing arrangement with U of L “limits the authority's profit upside.”

Conway's office is reviewing the request, and spokesman Daniel Kemp said in an email Wednesday that there are “[n]o updates to pass along at this time.”

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