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Saturday, January 21, 2012

YUM not producing as expected...

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SATURDAY CARDINAL COUPLE

-KFC YUM CENTER...Coming up short?

The University of Louisville women's basketball team has the privledge of playing in one of the finest, if not the finest, basketball arenas in the world. The KFC YUM! Center is a state of the art, one of a kind venue for college basketball, concerts and major events.

But, revenues needed to pay for the KFC YUM! Center bonds are falling short of goals. In all probablity, the Louisville Arena Authority will have to tap into reserves to cover the debt. Reserves earmarked for maintenance and improvement.



The KFC YUM Center is the home of UofL Basketball.
That apparantly isn't enough to pay the bills.

Drive by the YUM Center on any given night. I did recently while going westbound on I-64. It was lit up, a shining jewel on the Louisville riverfront. Visable from over a mile away. There weren't any events going on there that night, but all the lights were on. I wouldn't want to cover the monthly LG&E bill.

The arena is used for college basketball primarily. There have also been some top flight concerts there. Headliner acts Taylor Swift, Lady Ga Ga, the Eagles, Rush and more to come...like Jimmy Buffet and Van Halen. It isn't enough.

Projected revenues the first year of operation were $6.7 million dollars. Actual revenues were $2.1 million. In 2011 $8.3 was projected. $3.9 was generated.
I'm no math major or CPA, but it's pretty clear to me that expectations are not reaching their goals. If I spent $80,000 a year, and made only 39,000...I'm pretty sure that my bank balance wouldn't be "in the black."

The arena is in a six-square-mile district taxing area. The main problem is that the revenue in this special taxing district isn't covering the tab. What happens once the reserve money runs out? The investment bonds get downgraded. It's like your credit score. If you are in debt and failing to cover your bills, your credit score drops.

Can the area ever cover the spread? New businesses and sources of revenue will help add to the tax base, but if people don't frequent the restaurants, bars and other areas for consumer spending...these places won't make money and will eventually close.

I've never been to the area businesses surrounding the Arena on non-event nights. My guess is that places like Bearno's,The Troll Pub, Impellizari's and the 4th street Live venues aren't as busy.

Will the beautiful facility by the Ohio River become a white elephant? Probably not. Will it ever become a profitable arena? Probably not.

It's a great place to watch a basketball game or concert. It just can't pay for itself. The 'bucket' doesn't have enough 'chicken' in it. This infant is 15 months old...but needing much more attention than the parents can provide or finance. 2000 people for a BIG EAST volleyball game is an amazing turnout. In a 22,000 seat arena though, the revenue probably doesn't pay the utilities and employee expenses for the day. Pro sports? The thought of NBA basketball there sends some people into violent hysteria and uncontrollable rage. Share our college gym with a bunch of overpaid professional athletes? Not on my watch. And, just how many NBA teams actually make money? Maybe they should turn part of the facility into a Wal-Mart. Those stores always seem to have a lot of business. (I'm kidding, before you start sending us e-mails...) 

When monies owed exceed monies earned for any extended period of time..you know the scenario. It's called "being in debt."  

Welcome to corporate America.
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1 comment:

  1. The Yum is doing fine, exceeding expectations, in fact. It's the business district surrounding the arena that isn't growing its tax base.

    ReplyDelete

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