LOUISVILLE, Ky. (WDRB) – Even though the KFC Yum! Center is closed, arena officials expect to make the building’s debt payments this year – but beyond that, the financial picture is uncertain.
The COVID-19 pandemic shuttered the arena at Second and Main streets shortly after the March 10 Lumineers concert and after the University of Louisville men’s and women’s basketball teams completed their regular seasons. Since then, promoters have cancelled concerts and shows.
The Louisville Arena Authority refinanced its construction debt in 2017, resulting in a more affordable series of annual payments. But to make those payments, it relies on revenue from sales and other tax revenue and money generated when the arena holds events, in addition to fixed payments from Louisville city government and U of L.
The arena board can make its June and December debt obligations, said Chip Sutherland, managing director of Kentucky public finance for Baird, the arena authority’s financial adviser. Those payments total $16.9 million.
The arena authority – an agency appointed by Kentucky’s governor and Louisville’s mayor – has $15.6 million in a reserve fund earmarked for debt payments.
Sutherland told the arena authority at a meeting Monday that bond rating agencies agree with his analysis. “But they said it’s too soon to make projections about beyond the medium term to determine our ability to make payments, given the nature of the pandemic,” he said.
S&P Global Ratings already has placed the arena debt on a list of projects under scrutiny, joining Major League Baseball’s Yankee Stadium and Citi Field in New York. It noted the Louisville arena’s reliance on tax increment financing, or TIF, which diverts a portion of tax revenues downtown for the building’s debt.
The Kentucky International Convention Center is among the biggest contributors to the arena’s TIF district, Sutherland said.
S&P warned in a March report that “fallout from the coronavirus, including an economic recession, could also materially lower TIF sale tax revenues, which are volatile and together with TIF property tax revenues account for more than a third of total revenues.”
The report gave the arena project “negative implications.”
Events scheduled into the summer, including the Aug. 12 Justin Bieber concert, have been postponed, although a Janet Jackson concert and Thunder Over Louisville viewing parties are still on the August calendar, among other events.
Eric Granger, general manager for Yum! Center operator ASM Global, said several new shows could be announced soon for 2021.
“There definitely is demand from both the audience standpoint as well as the artists and the promoters. That’s how they make their money,” he said.
It’s possible that the arena could hold events again in 2020, arena authority chairman Scott C. Cox said, including U of L basketball games with fans. “But all of that really is speculative,” he said.
“We’re going to open the building back up when the governor and mayor tell us that we can – and when it’s safe," he said.
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