Louisville arena TIF fund on verge of needing bailout

Hey, remember back in 2010 when it was reported that Louisville’s tax-increment financing district wasn’t actually generating any incremental taxes, and if things didn’t improve the city would need to bail out its stadium fund with general revenues? Well, guess what:

The revenue needed to pay for the 15-month-old arena at Second and Main streets is falling short of expectations, putting the project at risk of failing to cover its debt and having its bonds relegated to “junk” status.

The main culprit is lagging revenue in a special taxing district that forms the foundation of the arena’s financing plan and is supposed to provide the Louisville Arena Authority with more than enough cash to pay its $349 million in bonds.

Arena authority chair Jim Host told the Louisville Courier-Journal that he has no plans to ask the city for money immediately, but did apparently tell city officials that he will ask for as much as an extra $3.3 million a year starting in 2013.

There are already plenty of reasons to be wary of TIFs, among others that much of the “new” tax revenue is actually money that would have been collected somewhere else in your city regardless. But the scariest part for city officials may be their uncertainty — a relatively small shortfall in consumer spending that causes tax proceeds to go down, not up, and in the words of subsidy expert Greg LeRoy, “a liability that was supposed to be taken care of by the TIF is now eating the lunch of the general fund.”


3 comments on “Louisville arena TIF fund on verge of needing bailout

  1. Not only might it “have been collected somewhere else”, depending on the land use it might have been collected at the very same site.

    TIF has everything to do with changing property values and oftentimes those values rise and fall irrespective of development.

    Sure a TIF recipient might say “in 20 years the value of this land has doubled”, but if the rest of the land in the jurisdiction has gone up 80% that isn’t really mush of an accomplishment.

    You are giving the developers 100% of the tax increase for providing 20% of the benefit. And of course that doesn’t even get into the substitution and increased service needs issues you were hinting at.

  2. David,

    Good one and you beat me to the punch, the ad with the arena and waitress just popped in my head.

    It’s great to know that Goldman is willing to the samething for Santa Clara!