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Tenanting Key to Fixing KFC Yum! Center TIF Woes

June 15, 2012
By

At Monday’s Louisville Arena Authority’s (LAA) meeting, the LAA Board of Directors decided it’s time to part ways with the Kentucky State Fair Board and find new arena management.  Three national venue management firms have made proposals to manage the KFC Yum! Center with the Board hoping one of these firms can help the arena increase revenues and decrease costs.

We already know about the incompetence and cronyism at the arena under Kentucky State Fair Board President Harold Workman.  We further know that the lease with the University of Louisville Athletic Association funnels most of the arena revenues to UofL.

Given this news, Business First’s Business Pulse survey is asking readers the following question:

Do you think the KFC Yum! Center will operate more efficiently under private management than it has under the direction of the Kentucky State Fair Board?

Eighty-one percent of respondents have answered yes.  An overwhelming majority believe that more professional venue management will reduce costs and increase efficiency.  This may be the right answer, but the wrong question has been asked.

Efficiency is not the key to fixing what ails the KFC Yum! Center, tenanting is.  While a more flexible lease with the University of Louisville Athletic Association may enable more non-UofL events in the arena and increase revenues, there are only so many big-name concerts, wrestling matches, ice skating shows and motivational speakers that can consistently fill up the KFC Yum! Center calendar.

While there has been some development and activity around the arena, more events are needed to drive more people into the TIF district and spur additional development and activity.

While arenas in other cities have been financed with more stable revenue sources ranging from dedicated sales tax increases to additional car rental and hotel taxes, the KFC Yum! Center repayment model depends heavily on the TIF district.  Unfortunately, the TIF is currently producing only 31% of projections ($2.1m versus the forecasted $6.7m).  In order to repay the arena construction bonds, tax revenues within the arena TIF district must increase.

The key is finding another permanent co-tenant that can call the Bucket home and drive people into the surrounding area before, during and after events.  An NBA team with 40+ home games would be an ideal tenant delivering somewhere between 800,000-1,000,000 fans into the TIF district each home season.  Based on the crowds at bars and restaurants currently in the fledgling arena district during UofL games and concerts, one could easily imagine more and more bars and restaurants, and eventually other businesses, opening in the area and giving fans more reasons and options to spend time and money in the area.

Again, the only way to make the bond repayment model work is by consistently driving people into the arena TIF district.  Improved efficiency and decreased costs are always good, but bottom line management will not deliver more people into the arena TIF district.  The arena needs a plan to grow the top line.  An NBA team could do just that.

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Albrecht Stahmer

Albrecht is your typical Paraguayan-born German-American raised primarily in good ol' Louisville after moving here at the age of six. He's also lived and worked in New York, Miami, Hong Kong, Guangzhou and Singapore, but is proud to call the River City his hometown. He currently lives in Tokyo working as a consultant helping foreign companies globalize their management and blogs on global issues that affect Louisville. If he were the King of Louisville, he'd devote himself to four issues: 1) improving educational attainment, 2) establishing mass transit, 3) legalizing gambling and 4) bringing an NBA team to Louisville. In his spare time, he scours the globe in pursuit of the world's best bourbon bars.

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