CRAWFORD | U of L amends arena deal -- now tension must give way to teamwork
While they've been at odds in tense financial times, U of L, the city of Louisville and the state's Arena Authority better get comfortable together, according to WDRB's Eric Crawford.
LOUISVILLE, Ky. (WDRB) – It was always going to have to be a team effort, this arena.
In August of 2005, the first column I wrote (for The Courier-Journal) after the Louisville Arena Authority revealed the terms of its deal with the University of Louisville concluded with a quote from U of L trustee Jonathan Blue, who said, “I’m just glad that all the parties have come together” on the years-long effort to get an arena built.
I tacked on a sentence of my own as the ending: “Let’s just hope they stay that way.”
They have not.
U of L’s move to free up some October dates for KFC Yum! Center scheduling and to pay the arena authority an additional $2.42 million per year, approved by the school’s athletic board and later in a narrow vote of its board of trustees on Thursday, is part of an effort to bail out a downtown arena that is facing financial shortfalls because revenues from a tax district around it have come nowhere close to meeting projections.
“We want to be a team player and to do our part,” interim U of L president Greg Postel said.
But the team hasn’t been acting like much of a team. Legislators in Frankfort have openly derided U of L for not amending the terms of the lease sooner. Politicians in Louisville have pointed at U of L’s profits from the arena to deflect from their own failure to lure more business, or more lucrative business, downtown. U of L, for its part, didn’t seem like a willing team member on Thursday even in approving the amended agreement.
It felt a lot like one of those days in January when the Christmas credit card bill arrives. Nobody was in a good mood. But there was nothing to do but write the check. The damage is done.
NO OTHER CHOICE
Like it or not, the amendment had to happen. It’s a key to the arena authority being able to refinance the bonds to make annual payments more manageable. Everybody is having to take a hit in this deal. U of L isn’t immune, and it did its part. But feelings are frayed, and the action didn’t come without some contention, especially from the school’s board of trustees.
Larry Benz, athletic board member and former chair of U of L’s board of trustees, said: “I don’t think any of us are comfortable with this. I find it extremely disheartening that we’re being punished for success. ... Once again, we find ourselves here, going from a rent that is going up two and a half times – our rent is going to be from 26 to 28 percent of the ticket price – if we were an NBA team we’d have left town. We’re not an NBA team. We’re a team player, and we’ll be a community player, so I’m going to support this, but very, very grudgingly. ... It’s not a great feeling to have to come here and vote on an arena amendment that we’ve gotten strong-armed . . . I appreciate what the (university) has done, and what the city and state have done to essentially rescue what amounts to an absolutely failed economic initiative.”
It wasn’t a warm, fuzzy feeling later in the trustees meeting, either. John Schnatter told the board, “I think this thing was set up to fail from Day One.” And he’s not Monday morning quarterbacking – because he and David Jones Jr. spoke up against the waterfront site deal from the start, spending $200,000 of their own money to commission a study that wound up showing the waterfront option was too expensive. He was the only “no” vote on the arena deal.
For his part, Tom Jurich’s words were barely audible in the athletic board discussion. When faculty athletic representative Elaine Wise said she wanted to hear from Jurich on the subject, and asked him directly if he was on board with the renegotiated agreement, Jurich said, “Well it seems we’re down the road, so yes. The answer is yes.”
After the meeting, WDRB’s Marcus Green asked Jurich if, as some reports late Wednesday speculated, he felt whether he’d been sufficiently kept in the loop on the new agreement, Jurich brusquely said, “We’re good,” and left the building.
Kenny Klein, spokesman for U of L athletics, said that Jurich “absolutely” had been involved in discussions with Postel, with the governor, with all parties involved. Postel said Jurich had been appraised of developments, though he’d been out of town on vacation the past two weeks, and was notified of the final agreements when he returned.
Regardless, it’s completely the prerogative of a university president, interim or otherwise, and board of trustees, even a new board, to oversee a multi-million-dollar commitment from a university’s athletic department or any other department. Most people, in fact, would say that’s the responsible way to handle such things.
RESENTMENT ALL AROUND
The trustees aren’t completely sold. They approved the amendment in a 7-2 vote with four abstentions, amid many unanswered questions, chief among which was whether this move would actually solve anything for the arena.
“This doesn't fix the problem,” David Grissom, chairman of the trustees, said. “It puts a band-aid on it. And we hope it's going to work.”
Some of U of L’s resentment stems from this: Had things been done the university’s way, this problem wouldn’t exist. On April 11, 2005, an arena committee made up of university and community leaders got together, looked at preliminary plans for a new arena at the fairgrounds next to Freedom Hall, along with renovation plans for Freedom Hall, and in conjunction with the governor’s office and State Fair Board decided to vote on one of those options later in the week. It already had an architect, drawings, financial proposals.
I was there. I covered the meeting. I brought the story back to the newspaper. I told editors what had been decided. At that point, news editors got involved. One said, “This is (Gov. Ernie) Fletcher trying to make (mayor Jerry) Abramson look bad by getting out ahead of him on a Louisville arena. We need to get reaction from the mayor’s office.” Soon, the political wheels were turning.
The mayor’s office said it viewed U of L’s meeting as “another step in the discussion,” and, noting its preference for a downtown site on Second Street, added, “We don’t view this as throwing cold water on the discussion of a downtown arena.”
Metro councilman Dan Johnson was more direct, saying that U of L would need to get on board with a downtown arena or no arena would be built.
From that point, the arena story passed to the news department. But it began the dance that went to a stalemate, with U of L saying it absolutely wouldn’t play in the mayor’s preferred downtown location, and city leaders entrenched against an arena at the fairgrounds. Things might have died there, had the publisher of The Courier-Journal not come forward with the idea of putting an arena on the site of an LG&E substation on the riverfront, where it eventually wound up.
Turns out, it only costs a lot more to go first class.
U of L feels like it is being blamed for fleecing the city, when it didn’t want to play downtown in the first place. Had Jurich and the school had their way, they’d have built at a proposed cost of $162 million at the time (plus maybe $30 million more for a parking garage if decided upon), on land already owned by the state, and none of these discussions would be happening today.
But city leaders and others in political circles feel U of L then drove up the price by refusing to play in an arena built where the Omni Hotel now is being constructed. It was a far cheaper option. And, in fact, they have an argument too. U of L did dig in its heels and didn’t budge until the waterfront option came under discussion, and when a deal was finally done, the school used its leverage to get an agreement of a kind that most college basketball programs can only dream.
THE BLAME GAME
Let’s be clear. The KFC Yum! Center has been a windfall for the U of L athletic program. Let’s also be clear – a new arena at the fairgrounds, or even a renovated Freedom Hall with a couple of new decks of suites and premium seating, would’ve been the same thing.
Benz, Wise and others criticized the tone of the news media regarding U of L and its part in the arena’s financial struggles. And U of L, it should be said, is an easy place to go for blame, because it has made money on the deal.
But there’s something else at play here – U of L has found itself shouldering blame precisely because politicians often are more adept at avoiding blame than anyone.
This arena was built downtown precisely because politicians – and many in the media – favored a downtown location. The public, at best, was split. A Courier-Journal poll in September of 2005 showed that 63 percent of Jefferson County residents surveyed favored a new arena, but 63 percent also opposed the use of tax money to build it. As to location, 47 percent preferred the fairgrounds location, 41 percent downtown (within the poll’s margin of error). The newspaper itself endorsed a downtown location on its editorial pages.
For his part, Jurich said famously at the time, “I keep hearing about Fourth Street Live. What about this end of Fourth Street?”
Who was right? Has the development downtown been worth the financial heartburn the arena is causing? Some believe it is, and will prove to be a better investment as things move forward. Others will say that the city keeps throwing money away trying to develop a downtown that is not a hub for many Louisvillians in other parts of the city.
But when the bills start showing up, the time for debating has pretty well passed.
HOLDING THE BAG
We now have our downtown arena. There’s no changing that. The price tag, from documents circulated at U of L yesterday, includes nearly $840 million in principal and interest payments through 2042.
Taxpayers and ticketholders are going to be left holding the bag in the end. When are they not? Along with its amended agreement on Thursday, U of L got the right to charge up to an additional $6 per ticket as a surcharge to help fund its responsibility. Jurich said, with regard to funding the additional university payment to the arena authority, “everything is on the table.”
Moreover, since the shortfall already is from tax revenues, it’ll just be trading one set of taxes for another when the city (your tax dollars at work) picks up its inevitable hefty portion of the tab.
And no, none of us as taxpayers likes the idea of footing more of the bill for this – any more than the people at U of L like kicking in more. But we keep electing the same bunch of people who are committed to these courses of action, so to some degree, we’re getting what we vote for.
You can’t re-write history. But we also shouldn’t forget it. In the end, all that has gone before doesn’t matter as much as where we are now. And where we are now is in a deep hole. The time has come for everybody to shake hands and pick up their shovels, the same way they shook hands and picked up their shovels when they broke ground.
Everybody knew the terms going in. Everybody also knew that if the tax increment financing came up short, this day would come, and they’d all have to pitch in. It happens in just about every publicly financed athletic facility you can find.
And in the current agreement, it’s not going to get easier. The biggest December 1 payment on this arena due to date has been $13.2 million. In December of next year, it’s $15.4 million. In 2020, the December payment goes to $19.9 million. By 2025, the check due will be for $26 million. Four years later, it tops out at $31.1 million. And that’s just the December payments. June payments range from $7.4 to $9.7 million from 2016 to 2026 before decreasing.
Against the backdrop of that kind of money, the $2.42 million a year U of L is kicking in looks like little more than a drop in the bucket.
Nobody likes this situation. But these parties better get comfortable together. And they’d do well to handle future challenges with a little more teamwork and a little less tension. They’re going to be in this for a while.
And even if they don’t act like it, they’re all on the same team.
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