Oh god oh god oh god, sometimes the combination of government stupidity and journalistic stupidity is enough to make my head explode. Here’s the headline in yesterday’s Louisville Courier-Journal:
Arena cash may ease crunch: Security sale could bring millions to KFC Yum! Center
And here’s the key section from the accompanying article:
Louisville Arena Authority officials say they are considering selling a package of securities that financial statements show increased in value by $5 million last year.
The authority’s guaranteed investment contracts provide it a fixed rate of return of 4.7 percent a year — more than $740,000. As interest rates on other investments have declined, the arena’s contracts’ underlying value has increased. The securities were worth $22.6 million at the end of last year, up from $17.6 million the year before, according to the arena’s financial statements.
In case you didn’t follow what’s going on here, allow me to explain: The arena authority has found itself with some investments that earn an annual return of 4.7%, which in the Great Recession era is pretty fantastic. So instead of actually collecting that $740,000 a year in interest year after year, it’s going to sell the investments for $22.6 million, pour all that money into the gaping maw of debt that is the KFC Yum! Center, and be left with nothing.
It’s certainly a defensible strategy, given that the authority needs the money now and doesn’t have anyplace else to turn for it. But treating it like a windfall that actually solves any problems is like cheering paying off a stadium by selling a public hospital, or selling off future parking revenues to pay for a new arena, or, for that matter, selling off city services like swimming pools and golf courses to raise quick cash.
In other words, a more honest headline would have read: “Arena authority forced to sell off only worthwhile assets to pay off KFC Yum! Center debt.” I probably should stop expecting honest headlines by now, but I keep hoping that one day…
Are you sure your head didn’t explode because there is a thing in the world called the “KFC Yum! Center”?
Hey, wasn’t Goldman Sacs touting the great success of this arena in a national ad campaign not too long ago?
Gosh, I hope they will be able to cite their involvement with the Santa Clara (“Your Name Here”) municipal (har, har har) stadium in the not too distant future.
There is one fun irony here: If they offered the arena rent-free to the Maloofs, the taxpayers of Louisville would be better off than they are today. That would depend on how they structured such a deal, but it’s certainly within the realm of possibility.