There was an interesting article in the 'Ville Voice about Steve Beshear authorizing the hiring of a number of law firms by the University of Louisville. From the article:
What’s interesting about it all? The contract wasn’t put out for bid, leading many within the legal community and within state government to suggest that there could be semi-emergency status. And it’s for regulations and bankruptcy.
It does seem passing strange that the University of Louisville, as flush as it is with cash, would need any advice whatsoever on bankruptcy. Perhaps this is just some kind of boilerplate, I have no real idea. But the Voice has long been on the case of the Louisville Arena Authority's sweetheart deal with the University of Louisville and the KFC Yum! Center, pointing out that the Arena Authority is in poor financial shape.
The article also goes on to mention a rumor (and it is nothing more than that) that the IRS and SEC are poking around in the LAA and U of L Athletic Association. If I were you, I would not believe that without confirmation. If it later turns out to be true, there will be some hard questions to be asked of the Louisville Courier-Journal, who should be on top of this with their vastly greater contacts and budget, rather than tiny 'Ville Voice, which is little more than a website.
Late last year, Standard & Poors reduced its ratings on the bonds used to finance the arena junk status:
On its website, Standard & Poor's says the BB rating is "less vulnerable in the near-term but faces ongoing uncertainties to adverse business, financial and economic conditions."
The former BBB-minus rating on the bonds is "considered lowest investment grade by market participants," according to the website.
To be fair, the state auditor looked into the arrangement and found that the contracts between the Louisville Arena Authority and U of L were "legally executed," which is to say there is no apparent conflict of interest or illegality in the arrangement. That does not mean the arrangement is fair, or that taxpayers won't wind up footing the bill if the LAA becomes insolvent due to surrendering a large amount of its proceeds to U of L.
Also, WHAS reported early this year that the LAA has a plan in place to avoid soaking taxpayers:
The Louisville Arena Authority Board says it has the plan to keep taxpayers off the hook from paying the KFC Yum Center’s $340 million debt.
They say they will have the documents finalized this week regarding the TIF District around the arena.
That means they will receive a portion of sales tax from businesses within two square miles of the KFC Yum! Center, instead of the originally proposed 6 square miles.
Some plan. That revenue goes to pay Kentucky's bills, and now it's going to service the debt. This is virtually the same thing as getting additional money from the State of Kentucky in the form of tax revenue. As I'm sure you're all aware, this is little more than robbing Peter to pay Paul.
My feeling is, and this is just an impression, that there is an awful lot of smoke around the Louisville Arena Authority's arrangement with U of L. That doesn't necessarily mean there is any fire there, but it can't be ruled out. There may be a perfectly innocent justification for a $600,000 dollar no-bid contract for 75% of the major law firms in the city. I have no idea.
The State Fair Board is upset because the economic impact of the KFCYC has substantially affected the Fair Board's revenue at Freedom Hall:
KFC Yum! Center officials say they don’t intend to pay $7.5 million the Kentucky State Fair Board claims it’s lost since the new arena began siphoning business from Freedom Hall when it started hosting University of Louisville basketball and other events.
William Summers, chair of the finance committee for the Louisville Arena Authority, wrote to KSFB Chairman Mark Lynn in a letter earlier this month that its lawyers have concluded that it doesn’t have to pay the money.
Ultimately, the LAA chucked $1.47 million to the KY FB, and you'd be safe in assuming that the lion's share of the $6.03 million shortfall went straight to the Louisville Athletic Association. So who do you suppose will have to make up the difference? My assumption would be Kentucky taxpayers in the form of more taxes going to the KY FB to make up at least some of the insufficiency. Again, to be fair, it's a sure bet that the KY FB inflated its lost revenue numbers substantially, so that amount may not be as prodigious as that, but it will surely be in the millions of dollars normally needed to pay the bills.
I'll leave you with this recent piece from Insider Louisville on March 31st of this year:
While it’s a huge money pit for Louisville taxpayers, who pay $9.8 million per year to keep the Louisville Arena Authority from defaulting on arena bonds, the downtown arena deal makes U of L – as we recently noted – the richest professional college basketball team in the universe.
It's more than Louisville taxpayers footing the bill, dear Kentucky fans who are residents of the Commonwealth. It's also your tax money. But then again, if the state kicks in funds for the Rupp Arena expansion (assuming that ever actually comes to fruition), well, we'll get some of that back from Louisvillians.
So it's not all bad, right? Right?