Kentucky Auditor to examine Louisville Arena Authority finances, contracts
The state’s bond oversight committee voted to ask for the audit in October, raising concerns that included the arena authority’s ability to cover escalating debt payments in the coming years and a lease with the University of Louisville.
LOUISVILLE, Ky. (WDRB) – Kentucky’s state auditor will audit the Louisville Arena Authority, evaluating whether the board that oversees the KFC Yum! Center is complying with revenue-sharing and other agreements.
Mike Harmon, the state Auditor of Public Accounts, wrote in a Dec. 27 letter to lawmakers that his office will review the arena authority’s most recent financial statements and its contracts and management agreement.
Among the arena authority’s high-profile contracts is one with the University of Louisville, which plays its men’s and women’s basketball games at the building at Second and Main streets.
“If these procedures identify additional risks or red flags, we will consider expanding the scope of the audit,” Harmon wrote to Sen. Stan Humphries and Rep. Chris Harris, co-chairs of the General Assembly’s capital projects and bond oversight committee.
The auditor’s office couldn’t provide a specific timeline, but it is “hopeful” that the work can be finished by summer, Harmon spokesman Michael Goins said.
The state’s bond oversight committee voted to ask Harmon for the audit in October, raising concerns that included the arena authority’s ability to cover escalating debt payments in the coming years and the U of L lease.
Scott C. Cox, the arena authority’s chairman, said he’ll know more about the scope of the audit once he and arena officials meet with Harmon this week.
“There’s going be some focus on the contract that we have with the University of Louisville – and that was done at the request of that capital projects committee in Frankfort,” he told reporters after a meeting of the arena authority on Monday.
Under Cox’s direction, the arena authority has acknowledged it won’t be able to make debt payments as early as 2020 unless the board generates more revenue for the construction bond payments. Arena officials are seeking changes to the revenue sources used to cover those costs.
Besides an annual pledge from Metro government – currently at $9.8 million – the arena relies on a tax-increment financing, or TIF, district around the Yum! Center and some revenues generated by arena events.
But bond rating analysts have cited potential challenges with the TIF, which has lagged behind initial projections before rebounding in recent years, and the U of L lease.
In a research note published last month, Moody’s Investors Service described the TIF as “volatile” and said the university’s deal at the Yum! Center “limits the authority’s profit upside from the successful anchor tenant.”
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