Despite refinancing, Louisville Arena Authority to make higher annual KFC Yum! Center debt payments
Preliminary figures show the arena board would pay less over the next decade, but starting in 2030 the debt service would be higher than current levels.
LOUISVILLE, Ky. (WDRB) – Even after refinancing a burdensome debt load, the Louisville Arena Authority would pay more per year to retire new bonds for the KFC Yum! Center than under its current plan, according to a WDRB News analysis of documents made public last week.
Arena officials would be on the hook for annual payments averaging $29.3 million through 2045, compared with $25.8 million under current obligations that end in 2042.
But by refunding the arena’s bonds and replacing them with new ones issued this fall, the arena authority anticipates that its yearly contribution will be less over the next decade – in some cases, as much as $10 million less.
And in 2020, the year arena officials warned could lead to a default, scheduled debt payments of $22.5 million would be nearly $7 million below current levels.
Starting in 2030, however, the arena authority would pay more in debt service each year. For example, after refinancing, it would face a $27.9 million payment in 2031 – more than $7 million more than its scheduled payment for that year.
Overall, the payments are set to gradually rise each year and rely on steady increases in arena revenues and a tax increment financing, or TIF, district near the building. That district returns a portion of sales and property taxes to the arena authority for the project’s debt.
“There are no more huge peaks,” said Scott C. Cox, the arena board’s chairman. “They’re much more evened out – the payments – and they’re coordinated basically to rise as the TIF grows and our revenues grow.”
The Kentucky Economic Development Finance Authority adopted a resolution last week endorsing the proposed bond refinancing. Board members would need to approve a final resolution, expected in late September, once a public hearing occurs.
While preliminary, the documents filed with the state provide the first details of the arena authority’s plan, which expects bond proceeds of $387.5 million but could issue up to $450 million; with principal and interest, the total amount owed would be $819.2 million over 28 years.
Besides refunding the existing bonds, arena officials plan to use bond proceeds to cover bond insurance costs and stock a debt service reserve fund. More than $1 million would be earmarked for the Kentucky State Fair Board, which has argued it is owed more than $11 million for revenue lost when the University of Louisville’s basketball teams moved to the downtown Yum! Center from Freedom Hall at the Kentucky Exposition Center in 2010.
Bond documents also anticipate $2 million in “issuance costs,” but they do not show the breakdown for consultants and other professional firms working on the deal.
The arena authority, which is appointed by Kentucky’s governor and Louisville’s mayor, has spent much of the year preparing to refinance its debt. In March, it successfully lobbied the Kentucky General Assembly to give the TIF district more time to collect money for arena debt.
In July, U of L approved changes to its lease agreement for the Yum! Center, agreeing to pay $2.4 million more annually toward arena debt and cede control over some dates. The Metro Council also has signed off on a revised arena deal.