In a unanimous vote, the Louisville Metro Council approved a measure reducing the size of the tax increment financing district surrounding the KFC Yum Center from six square miles to two square miles.
Council members hope this change will develop better revenue projections for the arena to help pay down its debt.
Since February, city officials have been discussing new ways to deal with financial woes at the downtown arena.
The TIF district is made up of property, occupational and sales tax revenue that goes towards the Louisville Arena Authority to help retire the $349 million in construction bonds.
But the taxing-district has fallen far below its expected projections putting a heavier burden on the city—and Louisville taxpayers—to cover more of the costs.
“Reducing the TIF area allows the TIF revenues to directly reflect the success of the arena and eliminates changes in business activities unrelated to the arena,” says Council President Jim King, D-10, who sponsored the bill. “This approach is more realistic and gives the city a better monetary outcome in the future. It also taps into promised state tax revenues.”Before construction began, boosters said the TIF would generate approximately $20 million towards the arena by 2012. Supporters of the project also said that amount would increase annually, but thus far the taxing-district has produced just under $6.5 million in total.
For the past two years, Metro Government's contribution towards the arena construction bonds has been $6.5 million annually. But the arena authority has asked for an additional $3 million, which Mayor Greg Fischer planned for in its budget this year.
The amendment will create a “Two Mile Zone” within the Central Business District, but the remaining agreements within the original TIF district remain intact.
King's bill also frees up land that is no longer covered by the TIF area for other development projects. It's a change that city lawmakers on both sides of the aisle hope will lower the overall debt at a faster rate.
“The reduction more firmly establishes a nexus between increases in new tax revenue and the arena,” says Councilman Kelly Downard, R-16. “This appropriately allows arena activity to pay down the arena debt.”
Interestingly enough, the KFC Yum Center was praised by Rolling Stone as the seventh best arena in the country despite concerns about its increased financial demands on the city.