LOUISVILLE, Ky. (WDRB) — Louisville’s downtown arena will remain the KFC Yum! Center for the next decade and beyond.
The Louisville Arena Authority approved a new 11-year naming rights deal Wednesday for the building at Second and Main streets with fast food giant Yum! Brands, capping months of negotiations.
The agreement will provide slightly more money to the arena board each year to help pay off construction debt, but it comes as the oversight agency expects a drop in key tax increment financing revenues due to the economic fallout from the COVID-19 pandemic.
Naming rights are just one revenue source for the construction debt that was refinanced in 2017.
Under the terms of the contract that will run through September 2031, Yum! Brands will pay an average of $1.48 million to the arena annually, compared with to about $1.4 million a year during the initial agreement that ran from 2010 until this year.
Leslie Geoghegan, the arena authority's chairwoman, said the deal is a "major milestone."
"As our founding partner, Yum!'s investments for the first ten years have allowed us to bring world-class events to Louisville, and we've really been very persistent over the last several months to renew this agreement," she said.
Talks have been underway for months, starting during the tenure of former arena authority chairman Scott C. Cox, who was named to his position by former Kentucky Gov. Matt Bevin. Bevin's successor, Gov. Andy Beshear, appointed Geoghegan as chairwoman last summer.
In 2017, three years before the pandemic, a consultant hired by the arena authority concluded that the market value for the building's naming rights was expected to be $2.2 million in 2021, and $2.4 million per year over 10 years.
The consultant, Frisco, Texas-based Convention Sports & Leisure, noted at the time that the average annual naming rights deal for 10 other "major" arenas without a professional tenant was $853,000, while it was $1.2 million for 10 other comparable college facilities.
Geoghegan said the financial figure-- $16.3 million over 11 years -- was the amount that was being discussed when she began negotiating on behalf of the arena authority.
A copy of the agreement wasn't immediately available Wednesday.
Scott Catlett, Yum! Brands' chief legal and franchise officer, said the company has remained "very healthy" despite the worldwide challenges of COVID-19 and views the sponsorship as part of its role in the Louisville area.
"We're in a position where we're able to extend this naming rights agreement," he said. "We do believe that it is a great source of pride for our employees in the community."
Besides the financial commitment, the deal also provides for updated menus and the arena's Yum! concession stands; new inside and outside signs; and a pledge to work with arena officials for "community engagement" events for young people and underserved populations.
Yum! Brands and KFC have announced plans to invest $6 million over five years in programs to improve equity and opportunity in Louisville, especially in the city's western neighborhoods. That investment, according to the company, will focus on Black students, teachers, entrepreneurs and others.
"Really the sky's the limit," said Eric Granger, the general manager for arena operator ASM Global. "We're excited about the opportunity that they want to be part of how we can reach out to the community and not just have the great ticketed events that we have," but also other opportunities for people to come to the Yum! Center.
The arena relies on sales taxes generated by tax increment financing, or TIF, in a two-mile area downtown to help pay off its construction debt.
The TIF district created $13.4 million for arena debt payments during 2019. But arena officials believe those tax revenues in 2020 may not even reach a minimum required threshold -- potentially resulting in no revenue at all for the arena authority.
The arena authority owes nearly $17 million in bond payments this year. By next year, that amount rises to $20.6 million, then to about $21 million in 2022.
Besides the TIF revenue, Louisville Metro government makes an annual guaranteed payment of $10.8 million. U of L's $2.42 million yearly lease payment also goes toward debt service, as do naming rights and sponsorship revenues; and some revenues from arena events, such as premium seating and concession sales.
Arena officials had projected well above $30 million per year in total revenues for the bond obligations over the first half of the decade.
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