Wednesday, November 6, 2013

Under Further Review: A College, an Arena, and a City in Debt

The University of Louisville is riding high. They are about to embark on defending their NCAA men's basketball championship from last year, and their football team has one of the most exciting quarterbacks in the game right now in Teddy Bridgewater. It is a great time to be a Cardinal.
It's also a great time to be head basketball coach Rick Pitino. He made $4.9 million to coach Louisville to the national championship. Heck, he even has a brand new tattoo to show for it!

It's a great time to be in Louisville's athletic department. In basketball alone, the Cardinals brought in $42.4 million in revenue during 2012-13. Subtract $15.5 million in expenses, and Louisville turned a cool $26.9 million profit on their basketball team. That lead the country averaging $1.35 million of profit for every home game last year. Every. Single. Home. Game.

You won't be hearing any complaints from Louisville's ticket department anytime either. Playing in the KFC Yum! Center (we will get to this shortly), the three year old arena has a capacity of just over 22,000. That figure clocks the KFC Yum! Center in as one of the largest in the country. A tough sell? No way. The Cardinals averaged 97.65-percent capacity last season -- just about 21,571 fans per game.

Averaging 21,571 fans per game is nice, but do you know what's nicer? $25.8 million in ticket revenue. Their 71 luxury suites in the arena brought in a reported $14.6 million in revenue

It all keeps getting better too. Reportedly, the Cardinals brought in $20 million in basketball related donations. When they join the ACC in 2014, their conference television revenue will jump from the $3 million they get in the Big East deal up to $17 million -- a nice little 567-percent jump.

All of the above figures came from an infographic published late last week on Cardinal red is beginning to look surprisingly green, but now it's the city government seeing the red. Tucked away neatly and disposed of in the most nonchalant of manners is perhaps the most staggering of all the numbers.

The KFC Yum! Center cost $238 million to build. And it was publicly funded.

I'll give a quick moment to let that sink in. 

If you thought that taxpayer dollars were only used to build the palaces of professional sports, then you were wrong. Professional sports regularly engage in what Sports on Earth writer Patrick Hruby calls "sports welfare," and, in fact, leagues actively encourage the practice. Professional sports franchises use questionable economic impact studies and the relatively empty threat of leaving town for a new city.

(Related: Patrick Hruby speaks at Sport For Social Change Conference about head injuries in football.)

How can those justifications work for a university? Universities don't have the luxury of saying that they will pack up and leave if the already cash-strapped governments don't fork over the cash bags. Louisville administration initially wanted to build their arena on-campus but eventually settled on the current location. After seeing some details of the lease agreement, it's hard to argue with them. Some believe that it could have been a move by the city to take a step closer to potentially landing an NBA franchise.

Because of these false (or, um, nonexistent) leverages, these professional sports teams and the University of Louisville enjoy sweetheart lease deals. Terry Boyd of Insider Louisville broke down the lease deal, and he simplified it into easier terms. 

The University of Louisville keeps 90-percent of the revenue from each game.

There are three main revenue streams: money from the TIF district, money from arena operations and a guarantee Louisville Metro Government will pay up to $9.8 million to cover any shortfall.

The total debt service of $22 million on the bonds due in 2012:
• TIF revenue $ 3.5 million (projected to be $8.2 million at the time of the bond issue in 2008)
• Naming rights and sponsorship revenues 4.5 million
• Suites/premium seating 1.4 million
• The city 3.3 million (above its minimal legal obligation of $6.5 million)
• Interest income .7 million
• Event revenue 0 (net of event expenses through June 30, 2012. Projected to be $7 million)

Next year, event projections remain at $7 million while the TIF projection rises to $10 million, then to $12 million in 2015.

Read the full article HERE. If you are interested in anything pertaining to KFC Yum! Center controversies (this isn't the only one), then check out Boyd's work. It's fantastic.

I added the bold letters to highlight some of the main points, but, basically, what you have there are some alarming facts. Even if you don't understand the intricacies of what is above, it's still easy to understand that there were some terrible projections made in this deal ultimately landing one huge bill in the lap of the city government.

You would never know any of the highlighted information if you just looked at the infographic on I love a pretty infographic as much as the next guy, but let's not let it get in the way of the truth here. 

To be honest, I don't know who is to blame here. Is it the University of Louisville? Is it the city government? Who knows. The only people who know are the ones who were directly tied to those meetings, and we all know how murky behind-closed-doors politics can get are. 

What I do know is that the concept of sports welfare needs to be changed. No, better yet, eradicated from our vocabulary and business practice. Cities across the country are teetering on the edge of bankruptcy, unable to fund proper education programs, and much more. We are always looking for the leeks in our governments, but our love for the games may be blurring our ability to properly assess. Sports are bankrupting our cities, and it's about time we all take notice.


Kevin Rossi is a junior Drexel Sport Management major with minors in Communications and Business Administration. Since joining the SMTSU, Kevin has worked his way up the ladder to President. Currently, Kevin is also the Drexel editor for Kevin recently finished his second co-op with Temple University in their Athletic Communications office where he still writes football program feature stories and volunteers on gamedays. Follow Kevin on Twitter @kevin_rossi.

Connect with Kevin Rossi on LinkedIn

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