UPDATE II: Arena Authority Owes Over $55,000 in Taxes

by admin on May 3, 2011

Records from the Jefferson County Clerk’s office show the Louisville Arena Authority owes the city over $55,000 in delinquent property taxes for year 2010.

Established by the Metro Council in 2006, the quasi-government agency was created to oversee constructing of the $238 million KFC Yum Center, which opened six months ago in the bosom of downtown Louisville.

The authority now supervises the arena’s day-to-day operations and features a who’s who list of local business leaders on its board of directors. According to local tax records, however, the authority currently owes $55,319 if paid by the end of May. If not, another interest penalty will be added and increase the delinquent tax to $55,919.

From LEO Weekly:

“They pay their bills, but I’m surprised to hear that one’s not paid up. That’s quite a surprise,” says Councilman Kelly Downard, R-16. “I did not see anything in the (authority’s annual) audit report that said anything about delinquent taxes, so I don’t know what’s going on.”

(SNIP)

…according to the Arena Authority’s website, (it) can only use tax increment financing money to repay the $350 million in city bonds used to build the Yum! Center.

TIF funds are essentially a method of financing large development projects by offering subsidies (in this case, bonds) to an entity (in this case, the arena authority and Goldman Sachs) in the hopes that they develop a parcel of real estate in exchange for future, higher tax revenues that can be collected by the bond-giving municipality, thus resulting in a coveted “win-win,” or so the theory is supposed to work out.

According to Mark Rosentraub, University of Michigan professor of Sport Management and an expert on the financing of sports arenas, language in the ‘06 resolution makes clear that additional sources of revenue must be collected to pay the property taxes.

“I take it that the (authority) has a tax payment to make that was not exempted,” says Rosentraub. “If so, what are the sources of revenue available to the authority?” adding that it appears as though Louisville will have to divert some resources to make up the shortfall.

In December 2010, authority officials predicted the arena would turn a profit in 2011 on both its capital construction and operating budgets. And it was reported that after its first two months, the facility $130,000 in the black, according to Business First.

An authority spokesperson has not returned out request for comment.

UPDATE:

Authority spokeswoman Amanda Storment says the agency doesn’t owe the city any property taxes because it is exempt due to its non-profit status.

“We’ve got a letter from the department of revenue dated back in 2006 that if you’re a 501(c)3 you don’t pay real property taxes,” she says. “I’m not sure what you’ve got or what’s going on. I’m just not sure what the issue is.”

Asked about listings on the Jefferson County clerk and sheriff’s office websites, which both show delinquent taxes are due,  Storment pointed back to a message from the state’s office of property valuation (warning:PDF) dated November 20, 2006.

“I just don’t understand that,” says Storment. “We have a letter. I’m certainly no tax expert, but all I can tell is this is what this letter says.”

WFPL News has left messages seeking comment from the county clerk’s office and state department of revenue.

UPDATE II:

Despite its non-profit status, the Louisville Arena Authority is required to make pay taxes to the Louisville Downtown Management District based on the property assessment of the Yum Center. The arena is likely exempt from state taxes due to that status, but it still has to pay the downtown district agency to provide services such as security and cleaning.

Apparently, the authority is holding up those payments while discussing terms of a new flat fee.

From the Courier-Journal:

Harold Workman, president of the Kentucky State Fair Board, which operates the arena, acknowledged receiving a bill requesting payment.

Workman said in an interview that he and Deb DeLor, the district’s executive director, had been discussing the possibility of a “negotiated flat fee” for some of the district’s services—an arrangement similar to the fair board’s deal at the Kentucky International Convention Center.

(SNIP)

Workman said the arena authority is not trying to avoid paying its assessment.

“As far as I’m concerned we’re still working with the downtown management district,” he said.

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