UPDATE: Revised KFC Yum! Center bill clears Kentucky legislature, heads to governor
The bill would give the arena board 25 more years to collect sales, property and other tax revenue from a tax increment financing district near the KFC Yum! Center. The extension would last until 2054 at the latest.
FRANKFORT, Ky. (WDRB) – A bill the Louisville Arena Authority views as a first step in reorganizing its finances easily cleared the House and Senate on the final day of the 2017 legislative session.
The revised version of House Bill 330 passed the Senate Thursday afternoon on a vote of 30 to 7, with one Senator abstaining. The House approved the measure later Thursday night on a 72-8 count.
The arena authority pushed for the legislation as part of an overhaul that also includes a new lease agreement with the University of Louisville, the main tenant of the KFC Yum! Center, and refinancing the project's "junk" bonds at lower interest rates. The goal is to make annual debt obligations more affordable.
Without those actions, arena officials have warned they won't be able to meet a series of escalating bond payments by 2020.
The bill, which now heads to Gov. Matt Bevin, would give the arena board 25 more years to collect sales, property and other tax revenue from a tax increment financing, or TIF, district near the KFC Yum! Center. The extension would last until 2054 at the latest.
After paying debt service on construction bonds and covering other arena operating and maintenance costs, any excess money would go towards retiring the arena’s debt as early as possible.
The measure abandoned an earlier proposal in the Senate to force U of L to contribute $3.5 million a year to the arena and also removed a cap on the amount of TIF revenue for the arena authority, a board appointed by Louisville’s mayor and Kentucky’s governor.
But Scott Brinkman, Gov. Matt Bevin’s executive cabinet secretary, told the Senate budget committee Thursday morning that U of L has agreed to pay $2.5 million more per year towards arena debt, in addition to other payments it already makes. He told reporters that the measure is meant to be a permanent fix.
“Nobody ever wants to ever be in a situation where we’re facing a steep wall and can’t make regularly scheduled debt service," Brinkman said. "This is intended to fix the Yum! (Center)’s finances once and for all and never have to revisit this issue.”
Arena authority chairman Scott C. Cox said he expects his board will reach a new agreement with U of L "in the coming weeks," along with other approvals from Mayor Greg Fischer and the Metro Council. He said the figures cited by Brinkman are "a very close number to how they'll end up."
Cox said U of L's total contribution to the arena will be known once the new lease is signed.
"I am extraordinarily grateful for the governor and the legislature for passing this law," he said. "This will help assure the financial health of the Yum! Center for the rest of our lives."
Even some supporters of the bill did so reluctantly, noting the checkered financial history of the arena authority. The TIF has failed to meet expectations, forcing Metro government to increase its annual payment and prodding lawmakers to question a lease with U of L that limits the arena authority's ability to use event revenue to pay off debt.
In the Senate, those who voted against the bill raised a variety of concerns -- including the arena bonds' status as "junk," or below investment grade, and the revenue that could be diverted away from Kentucky coffers by extending the TIF.
"This is an expensive bill that we're passing," Sen. Joe Bowen, R-Owensboro, said on the Senate floor. "We've got huge pension liabilities out there. I think we need to get our priorities in order."
The bill took a circuitous route on its way through the General Assembly.
The House passed HB 330, sponsored by House Speaker Pro Tem David Osborne, in late February and sent it to the Senate, where it was amended in that chamber's budget committee. Those changes caught Fischer's office off guard, and the Senate didn't take any action before adjourning for two weeks.
When the legislature reconvened Wednesday, the House inserted the arena language into an unrelated Senate bill. The House action surprised Sen. Chris McDaniel, the budget committee chairman, who said Wednesday night that the move "could jeopardize" an arena bill.
But by Thursday morning, the Senate's amended bill had been replaced by one that largely mirrored the original House version. It requires annual reports to lawmakers and the governor about the arena’s financial health and mandates early debt payments with excess revenue.
McDaniel, a longtime critic of the arena deal, said it was a “true travesty” that the new measure no longer makes demands on U of L
“I think all those people have negotiated in good faith,” he said. “But in the event that we get a couple of people removed and they want to start slowing down on their commitments, we’ll be here to keep an eye and I think that the commonwealth will revisit its commitment if they don’t honor theirs.”
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