Louisville refinances arena debt, hopes magic TIF beans work out better this time

As noted briefly last month, Louisville is in the process of refinancing its debt on the KFC Yum! Center, which has been hemorrhaging city money since it was built for the University of Louisville in 2010. Now the numbers are in on how much the city will save in annual debt payments, and it turns out it’ll be paying … wait, more?

Even after refinancing a burdensome debt load, the Louisville Arena Authority would pay more per year to retire new bonds for the KFC Yum! Center than under its current plan, according to a WDRB News analysis of documents made public last week.

Arena officials would be on the hook for annual payments averaging $29.3 million through 2045, compared with $25.8 million under current obligations that end in 2042.

What’s actually going on here is simple: In exchange for lots of big payments soon, Louisville has pushed back a bunch of its payments to 2030 and later, by which time surely that whole “wait for tax receipts from new development around the arena to soar” plan will be working out great! Or, at the very least, the people currently running Louisville will be long since retired. It’s a win-win!

(Tl;dr version: Tax increment financing is for suckers.)

Friday roundup: Everybody still has lots of dumb stadium ideas, sun keeps rising in east

And aside from the Cleveland Cavaliers arena subsidy returning from the dead, Mrs. Lincoln, here’s how some of the rest of the week in stadium and arena news went:

  • Chicago is looking at closing some streets to accommodate DePaul University’s new city-subsidized basketball arena, because of course they are.
  • The new arena for the Detroit Red Wings and Pistons will have a Kid Rock-themed restaurant, because of course it will.
  • San Diego mayor Kevin Falconer wants to build a professional lacrosse stadium, even though the owners of the city’s newly created lacrosse franchise say they don’t need one, because of course he does.
  • Rhode Island state senate president Dominick Ruggerio says he hopes the state legislature will vote on $38 million in public funding for a new Pawtucket Red Sox stadium in November, despite not believing the team has a viable threat to move to Worcester if it doesn’t get what it wants, because “You know what, we’ll get criticized for anything.” And you know, he’s got a point: No matter what elected officials do, there’s somebody somewhere who won’t like it, so might as well do whatever they want, right?
  • The Las Vegas Raiders’ stadium construction could be delayed because nobody realized until now that they needed Army Corps of Engineers approval to remove a flood culvert. (The Raiders have agreed to pay the $1 million cost, at least.)
  • Dave Zirin at The Nation has examined how Joel Osteen’s dithering over whether to let Hurricane Harvey evacuees into his megachurch has its roots in the Houston subsidy deal that turned the Rockets‘ old arena into the church in the first place, and I put in a cameo to note that while littering the landscape with redundant current and former sports venues is one way to create a lot of hurricane shelters, it’s probably not a very cost-effective one.
  • Wells Fargo released a report that “real stadium construction spending” on new sports facilities has “climbed 80 percent over the past five years” to $10 billion per … something. And are they counting money committed, or actual construction money spent, and does this count both private and public funds? I guess we should cut Wells Fargo some slack, they have a lot on their minds these days.

Montreal stadium used for refugees from U.S., isn’t this a scene in “Handmaid’s Tale”?

Lightning round!

  • Boise is all in a tizzy over plans to build a minor-league soccer stadium, because it would get a property-tax exemption. This is the kind of subsidy that people don’t usually notice unless they’re the mayor of Minneapolis, so good on Boise.
  • We finally have a due date for proposals for developing land near Belmont Park that the New York Islanders owners have targeted for a possible new arena: September 30. Tune back in then, and maybe we’ll see what they have in mind, and how they hope to pay for it.
  • Louisville is moving ahead with plans to refinance its debt on its disastrous arena deal. This won’t help a ton — the arena deal will still be a disaster — but even stanching the flow of red ink slightly is something, I suppose.
  • El Paso is involved in a court case over whether they’re allowed to hold sporting events at their new arena, because the bonds it used can’t be used for “sports facilities” and — know what, just read about it yourself, it’s too insane to describe in detail here.
  • The mayor of St. Petersburg is “intrigued” by the idea of building a new soccer stadium on the site of Tropicana Field if the Rays move out, something he apparently neglected to discuss with the local would-be MLS team owner first.
  • Buffalo Bills owner Terry Pegula is still refusing to demand a new stadium, despite the NFL really wanting him to.
  • Montreal’s Olympic Stadium is now being used as a temporary shelter for asylum seekers fleeing Trump’s America. There are undoubtedly many, many jokes to be made here — that’s what the comment section is for, so have fun!

Louisville arena bleeding even more public money than before, could go bankrupt

When we checked in on Louisville’s KFC Yum! Center three years ago, the University of Louisville was turning an annual $26.9 million profit on the arena, while the city of Louisville was losing $9.8 million a year. According to two researchers who testified before a state legislative committee last week, that’s changed now — in that the city is doing much, much worse:

Louisville entrepreneur Denis Frankenberger and J. Bruce Miller, senior partner in J. Bruce Miller Law Group of Louisville, told the Kentucky General Assembly’s joint Capital Projects and Bond Oversight Committee on Tuesday that the center lost more than $17 million in 2015 and is losing $1.4 million a month…

[Frankenberger] cited an initial [tax increment financing] revenue stream projected at about $4.5 million the facility opened actually came in at about $615,000. A second-year TIF revenue projection of $6.6 million came in at about $2.1 million…

“The University of Louisville makes $20 million a year on events,” Frankenberger told the committee. “It’s a taxpayer scam.”

A bit of context here: When the city built the arena for the state university for $339 million in 2010, the bonds were supposed to be paid off roughly evenly from city general fund money, luxury suites and arena advertising, and cash from that TIF district (i.e., any increased property taxes collected in the area right around the arena). The university, meanwhile, would collect almost all other revenues from the arena. With the TIF revenue falling short, the city now needs to come up with another way to pay off its share of the bonds (about $13 million a year) plus operating costs, or else let the place go bankrupt.

The good news is that this is mostly just a bookkeeping problem: The city vastly overestimated its future TIF revenue, so now needs to dip into one of its other pockets if it wants to keep up with its arena bond payments. The bad news is that this was going to be city money either way — since even according to the city’s own figures the TIF district was just cannibalizing property taxes that otherwise would have been paid elsewhere in the city, taxpayers were going to be on the hook for more than $200 million worth of bonds regardless. So now it’s just a question of how else to pay off the debt.

State legislators are now demanding that the city renegotiate its lease with the U of L, which sounds great except it’s not clear the city has any leverage to do so, which could result in the university saying, “Yeah, tough break about those TIFs, but we have a contract.” This was a horrible, horrible deal for Louisville residents in the first place, and the TIF shortfall is making that more obvious. But unless the threat of arena bankruptcy somehow gets the U of L to the bargaining table, it’s hard to see how this is much more than posturing.

Chicago’s $250 million arena for DePaul universally decried as dumb idea, getting built anyway

Meant to report on this yesterday: On Friday, the Chicago Tribune ran a long article on the state-run Metropolitan Pier and Exposition Authority — aka McPier — and its $450 million convention center hotel and $250 million DePaul University arena projects, and determined that, well:

The Tribune found that McPier’s formula for success is based on a series of optimistic and risky predictions.

The $250 million figure [for annual economic impact] comes from a McPier-funded study that assumes DePaul fans will fill almost all of the arena’s 10,000 seats for games — nearly tripling the team’s recent average attendance. The Blue Demons, who now play in suburban Rosemont, haven’t had a winning record since 2007.

McPier officials also are hoping that, between basketball games, the arena will host convention meetings, concerts and other events, bringing new guests to the planned hotel, a 1,200-room, $450 million Marriott Marquis. But a recent study commissioned in New York found that sports facilities are unattractive to conventions because of their fixed seating, a sentiment some convention officials also expressed to the Tribune.

The arena is mostly being paid for out of McPier’s budget, which is already stretched to the breaking point and heavily subsidized by state taxes; the city of Chicago is kicking in $55 million in tax-increment financing money, while DePaul is putting in $82 million, almost half of which it will get back from naming rights and sponsorship deals. (The arena’s price tag, you may recall, was originally $140 million, but ballooned to $250 million when it was determined that it was being built in dirt that was too soft.)

There’s much more to the Tribune story, including a note that more than half of the projected economic benefits would be from money that’s already being spent in Chicago by local residents — though given that it’s already been reported that DePaul’s economic study included counting tickets that the university buys from itself and never uses, really all of its numbers should be treated as apocryphal. Perhaps best of all is the quote that the Trib managed to get from Chicago sports consultant Marc Ganis, who almost never sees a stadium deal he doesn’t like, but who said of the DePaul arena, “It was a dumb idea when it was proposed, it was a dumb idea when they approved it and it will be a dumb idea in the future.” Convention authorities really will throw money at just about anything regardless of past results, won’t they?

Louisville Yum! Center to allow bringing guns to shows, will still ban pointy umbrellas

If you’ve been jonesing to see Kid Rock’s New Year’s Eve Bash at Louisville’s Yum! Center but didn’t know what to do with your handgun during the show, there’s good news for you:

The Louisville Arena Authority ended its total ban on firearms and agreed Monday to give promoters and booking agents of events at the KFC Yum! Center the right to decide whether ticketed visitors can carry firearms into the downtown arena.

The new policy is in line with a new Kentucky law that bans public and “quasi-public” entities from restricting people with weapons permits from bringing their guns into venues. Since promoters aren’t quasi-public, the public authority that runs the Yum! Center has decided to kick the decision over to them, which means you’ll have to ask Kid Rock for permission to come packing to his show — something he’ll probably be okay with.

You will still be prohibited from bringing cameras with detachable lenses or umbrellas “with pointed tips” into the Yum! Center, because somebody could get hurt with those.

DePaul arena hits $110 million in cost overruns, thanks to too-soft dirt

When last we heard from Chicago Mayor Rahm Emanuel’s plan to spend $125 million on a complex of buildings that would include a new arena for private DePaul University, it had just gotten final approval. Except that “final” is always a dangerous notion in the arena biz, something Chicago is finding out now that the price tag on the arena has soared by $110 million:

A sticking point is the “dug-in” design of the 10,000-seat arena, which places its playing floor well below ground level. That feature has pushed construction costs above the $140 million that McPier and city officials optimistically projected when they announced the project in May 2013, sources said.

Although a final price has not been set, the cost of that design, by New Haven, Conn.-based Pelli Clark Pelli, could be as much as $250 million, sources said.

Yeah, that’s not good. Apparently the problem is that nobody noticed they were going to be building the arena in soft glacial soil, which tends to cave in if you don’t shore it up with retaining walls, which is pricey. From the sound of it, McPier (the totally awesome nickname for Chicago’s Metropolitan Pier and Exposition Authority) will look to redesign the arena to bring down the price tag; if that doesn’t work, Crain’s Chicago Business gives precisely zero information on how the cost overruns would be covered. This was just the bestest idea ever!

[UPDATE: At least one Crain’s Chicago Business columnist does not think it was the bestest idea ever.]

Akron spending tax hike on police, not arena, because public has spoken (no, really)

If you’ve been wondering what’s up with Summit County, Ohio’s plans to raise sales taxes to build a $79 million basketball arena for the University of Akron, it is no longer considering raising sales taxes to, you know, do that thing.

Summit County officials plan to ask County Council to approve a measure that would prevent a proposed sales tax increase from funding a University of Akron arena.

Instead, at an Aug. 4 County Council meeting, these officials will ask Council to adopt resolutions that will eliminate funding for the arena and instead put the increase on the ballot for public safety, criminal justice and capital needs. The new resolutions would also limit the length of the tax to 10 years, rather than the previously proposed permanent tax.

“Since the adoption of the previous resolutions, the public has informed us that there is not sufficient support among the voters to pass a sales tax issue that includes the arena,” said Pry on July 31. “As a result, we feel it is best to remove the arena project from this issue and instead focus solely on the county’s public safety and capital needs.”

Read that again. While there’s no doubt some spin going on here, the upshot is that voters didn’t want their tax money spent on sports venues when it could be spent on police and infrastructure, and the county said: Okay, whatever you guys want. I think Ohio is still in America, but maybe I missed some news…

UK abandons arena renovation plan when it realizes it might have to pay for it

For more than two years now, Lexington, Kentucky has been working on a $350 million renovation of the University of Kentucky’s Rupp Arena, because the university’s basketball team said it needed new luxury seating and concession stands and bells and whistles and cupholders and whatever. Anyway, the whole plan is off, because the university says it doesn’t want any of those things now:

In meetings with Gov. Steve Beshear and [Lexington Mayor Jim] Gray over the past two weeks, university officials said they no longer were interested in those amenities. The university had agreed in principle to contribute $10.7 million annually to the project for the next 30 years. That agreement, according to letters between university and city officials, was agreed to in October.

“We designed this arena based on what UK said they needed,” Gray said. “But I understand timing and pacing are everything, especially with major projects like this. So we’ll adjust and adapt.”

What changed the university’s mind? Reading between the lines of a May 20 letter to the Lexington Convention Center from university president Eli Capilouto, it’s that “there is not sufficient public support” for the project’s funding plan. Specifically, public support from the Kentucky legislature, which Capilouto was concerned might cut off funding for new academic buildings if it had to contribute $80 million toward the arena project. Capilouto also worried about a piece of the funding plan that would raise money by selling “Team Rupp” memberships to the public for $300 each, which would earn buyers absolutely nothing, and which for some reason weren’t proving very popular.

That said, the mayor still wants to renovate Rupp Arena, the governor still wants to renovation Rupp Arena, and you can bet the university still wants to renovate Rupp Arena, so long as they’re not stuck paying most of the load. But it is a case where a sports team asked for a pile of renovation money, legislators said no, and the team backed down, so we know that can work — though admittedly, the University of Kentucky wasn’t going to threaten to move to Seattle.

Chicago is still building that $125m arena for DePaul, in case you were wondering

Heather McCoy of KUCI, whose show I’ll be making my weekly appearance on at 8 am Pacific today, asked me yesterday what was up with Chicago Mayor Rahm Emanuel’s much-ridiculed plan to build a $125 million basketball arena for private DePaul University. The answer, it turns out: Damn the ridicule, full speed ahead.

The Metropolitan Pier and Exposition Authority board has approved the purchase of the final land for a planned entertainment district in the South Loop around McCormick Place. … The city is contributing $55 million in tax increment financing to McPier for the project, of which $26 million will go for hotel and ABC building land and $29 million toward hotel construction. McPier paid $14 million for the remaining land needed for the DePaul arena.

The state legislature approved the plan last spring, then the city council followed suit with a “very quiet” vote in favor last July. Now that the land has been acquired, construction can begin, and Chicago will at last have the 10,000-seat arena that it’s been lacking for all those concerts by bands that are too big for 5,000-seat venues but can’t fill 20,000-seat venues. In other words: Nickelback, please never retire.