KFC Yum! District’s Debt Woes
Revenues from a special taxing district in Louisville, Ky., are lagging, leaving some officials with concerns over servicing the debt on the city’s
The 22,000-capacity arena opened in October 2010 and reported a successful first year. But the taxing district surrounding it is performing so poorly that two credit ratings agencies have threatened to downgrade the venue’s bonds, according to the local Courier-Journal.
The authority that oversees the Yum! Center anticipated sales taxes in the district would grow about 4.5 percent per year, generating millions to help pay down the $349 million in arena bonds. Instead, taxes in the district dropped 9 percent in 2009, then grew only 1 percent in 2010, generating a mere $2.1 million toward the authority’s $19.1 million bond payment for 2011.
John Vrooman, a sports economist at Vanderbilt, told the Courier-Journal tax-increment financing plans are “very risky.”
The district “will become self sufficient again when the economy recovers but this is way too much risk for Louisville to have taken from the beginning,” Vrooman said. “This volatility should have been anticipated before the debt was issued.”
The authority estimates it will fall $3 million short of a $19.9 million bond payment for 2012. Authority Chairman Jim Host told the paper the group could use maintenance funds to cover the deficit or money from a $16 million debt service reserve.
“That’s a last resort and we have no intention of ever tapping that,” he said.