Auditor Mike Harmon hopes all parties will commit to put KFC Yum! Center on stable financial ground

05/19/2017 03:16 PM

State Auditor Mike Harmon is concerned that the KFC Yum Center could fail to make their bond payments as early as 2020.

The financial review of the Louisville Arena Authority, released on Thursday by Harmon’s office, found that the group missed annual payment deadlines under a lease agreement with its key tenant – the University of Louisville Athletic Association.

The report attributes the delay in payment to ULAA and LAA not providing information to each other in a timely manner. Harmon is recommending better coordination between the two to ensure deadlines are met.

Additionally, Harmon outlined other concerns in a letter to LAA chairman Scott Cox. The auditor’s primary concern expressed in the letter being the lack of sufficient cash flow to maintain the intended renovation and replacement fund for the arena.

During the legislative session the General Assembly passed a bill, HB 330, to extend the Tax Increment Financing district of the arena to generate more revenue for debt payments. At the time that the legislature passed the bill lawmakers said they were under the impression that an agreement by the University of Louisville to amend its lease and provide additional annual funding to the arena had already been completed.

However, on Thursday UofL Interim President Dr. Greg Postel told reporters no such agreement has been reached. During the meeting, Postel was given authority by the board to finalize an agreement.

In Harmon’s audit he stressed that this situation needs to be addressed immediately, since the state legislature has already expanded the TIF agreement under the impression that the University had already agreed to add 2.5 million in annual payments. Postel told reporters on Thursday that no such agreement has been put in writing.

“It’s not been in writing and that may be at the end of the day, be the deal,” Postel said. “Although we are not to that point where we can announce that yet. So that’s just a conversation that took place and there was some discussion about.”

In Harmon’s audit he did not say that the university was at fault for the arena’s financial short comings. Harmon did highlight the difference between the financial success of the YUM! center and Louisville’s athletics.

“The KFC Yum! Center is an important investment for the Commonwealth, the city of Louisville, and the University of Louisville. Yet, since the opening of the KFC Yum Center the LAA has faltered badly, and the financial position of the University of Louisville athletic association has dramatically improved,” Harmon said. “The state has stepped up with a willingness to expand the TIF, but now it’s time for all parties involved to make the commitment necessary to put the arena on a sustainable path.”

Insider Louisville published numbers reported to the U.S. Department of Education under the Equity in Athletics Disclosure Act that show since moving into the Yum Center UofL men’s basketball program has become the most profitable in the NCAA.

The original version of HB 330 included language that the athletics department would pay $3.5 million more a year to go towards debt payments. This was put into the legislation since the program profits sky rocketed in 2010 when the team moved into the Yum! Center.

That provision was stripped from the bill though, lawmakers being assured that that additional $2.5 million had already been agreed on. According to the Associated Press Cox is optimistic about discussions with UofL and believes they will reach an agreement soon.

Auditor Harmon’s office is schedule to present details on the audit to members of the Capital Projects and Bond Oversight Committee at its meeting Tuesday, June 20 in Frankfort.


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