Louisville arena board OKs returning $500k to contractor in construction lawsuit
The money has been withheld from M.A. Mortenson Co. because of the case pending in Franklin Circuit Court.
LOUISVILLE, Ky. (WDRB) – The Louisville Arena Authority has approved giving back up to $500,000 to the company that built the KFC Yum! Center, a move that would effectively end the arena board’s part in a nearly 10-year-old lawsuit.
The money has been withheld from Minnesota-based M.A. Mortenson Co. because of the case pending in Franklin Circuit Court, Ed Glasscock, the arena authority’s general counsel, said after Monday’s arena authority meeting.
“We didn’t feel it was appropriate to pay out the retainage until all that was completely resolved,” he said.
The authority, which oversees the finances of the downtown Yum! Center, voted to let chairman Scott C. Cox and vice chair William Summers V negotiate the details of the agreement. Once complete, Cox said, “we will no longer be involved in any of that litigation.”
Louisville’s RAM Engineering & Construction sued Mortenson and the arena board in 2008, arguing it was treated unfairly after losing out on a subcontract for earthwork and other pre-construction work. Franklin Circuit Judge Phillip J. Shepherd ruled earlier this summer that Mortenson didn’t follow Kentucky procurement law in awarding the contract to a RAM competitor.
Shepherd ordered the sides to try and resolve their differences through mediation; the arena authority’s action Monday could signal that efforts to settle the lawsuit are underway.
Cox and Bruce Stigger, an attorney for RAM, declined to comment on the mediation.
Under the potential agreement approved by the arena board Monday, up to $500,000 in the Mortenson account would be returned to the company. The remaining amount – about $63,000 – would stay with the arena authority, Cox said.
The arena authority expects to lock in the terms of its upcoming bond sale in November and sell the bonds in December, a financial adviser told the board Monday.
Anticipating that it won’t be able to make a series of escalating payments on the Yum! Center’s construction debt, arena officials have taken steps this year to refinance the original bonds sold in 2008.
Kentucky state government, Metro Louisville and the University of Louisville, the arena’s main tenant, have approved changes this year to financial agreements sought by arena officials that include additional money for and flexibility in paying off the building’s debt.
Several approvals remain, however. The Kentucky Economic Development Finance Authority still must give its final approval of the proposed bond issue, and the Kentucky legislature’s bond oversight committee is expected to discuss the matter in October.
Preliminary figures show that by refunding the arena’s bonds and replacing them with new ones, the arena authority expects to lower its annual debt payments by as much as $10 million in some years in the next decade.
Overall, 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, according to a WDRB News analysis of public documents.
The existing arena bonds are considered “junk,” or below investment grade, because of Wall Street analysts’ concern about the arena authority’s ability to repay them.
Chip Sutherland, a senior vice president at arena consultant Hilliard Lyons, told the board that he is “confident” that the new bonds can attain a higher rating.
“Knowing what we know about interest rates right now, and knowing what we know about the credit strength of the arena authority now – I feel very confident about investment grade (bonds) for the arena authority,” he said.