Wednesday June 21, 2006
Louisville Metro Council
For More Information Contact:
Tony Hyatt: 574-4137/ 526-3622
For Immediate Release:
Louisville – Members of Louisville’s Metro Council are reviewing a plan that could save millions of tax dollars as the city looks to build an arena downtown.
“By taking a look at how the Authority sees its future profits, we have found a way to fund the city’s commitment to the project while saving taxpayer dollars,” says Majority Leader Jim King (D) 10.
The Council’s Budget Committee is currently taking a closer look at the Memorandum of Agreement between the city and the Louisville Arena Authority.
The Memorandum is one of several required before the arena can be built.
During questions last week, King and Councilman Kelly Downard (R) 16 looked closely at the money the Authority actually needed from the city as a guarantee for the project.
The initial request was for an average of $10 million a year over 30 years. The Arena Authority indicated debt service on the project would be $18 million per year. There is a debt service coverage ratio of 1.5 to 1 needed to market the bond issue. The coverage ratio of 1.5 to 1 on $18 million would indicate a cash flow annually of $27 million.
The current projected average annual cash flow for the arena is at $33 million per year according to Arena Authority projections.
“There is no need for full payment to guarantee a loan, if the person who borrows the money can make the payments,” says King. “So the Authority has agreed to review what is needed.”
The Arena Authority has now indicated it will likely reduce the city’s annual payment by $3.5 million per year over the life of the bond project. The city would only be required to make good on its guarantee if the arena fails to make its projected profits.
There is also an indication the Authority will rebate 45 percent of any excess cash it accumulates annually with Metro Government after making required payments for debt service and maintenance.
The maintenance reserve will be increased by $3,000,000 annually.
“This will work very well for the city if the Arena projections are reliable,” says King.
The Committee tabled discussion on the Memorandum on Tuesday after concerns about labor and prevailing wage contracts were reviewed. The Arena Authority has yet to hire a construction manager for the project.
Another special meeting will be scheduled.
While the Metro Council reviews the agreement, similar discussions are underway between the Authority and the University of Louisville, LG&E, Humana and the Kentucky State Fair Board.
Jim King (D) 10
Kelly Downard (R) 16