The University of Louisville will forgo some KFC Yum! Center sponsorship revenue over the next three years, giving the Louisville Arena Authority more cash to pay down larger-than-expected debt.
The issue: a tax-increment-financing (TIF) district set up to help pay down bonds issued to pay for arena construction has not yielded the anticipated returns, forcing the arena authority to seek out other sources of income for KFC Yum! Center debt service. From WDRB.com:
Overall, the arena generates about $5.5 million in sponsorship revenues a year, according to AEG, the building’s operator. U of L stood to receive $1 million in sponsorship money this year but agreed to receive $750,000, with next year’s share capped at $850,000 and $950,000 the following year, said Justin Jokovich, AEG’s finance director.
The move will free up an estimated $1.5 million for arena debt payments over three years….
Critics also have called on changes to the authority’s lease agreement with U of L – a move they claim would generate more revenue from the lucrative men’s college basketball program. For example, the university keeps 88 percent of the revenue from suite rentals at the building. The remaining 12 percent is available to the authority for debt payments.
KFC Yum! Center debt is a big issue: while this move is to cover the next three years, it could be addressed later if TIF revenues aren’t enough to cover KFC Yum! Center debt service. There is still some $349 million outstanding in arena construction bonds.