LOUISVILLE, KY (WAVE) - State Auditor Mike Harmon blamed both the University of Louisville and the Louisville Arena Authority for not properly completing the annual payment for use of the KFC Yum! Center.
The results of a financial statement audit of the Louisville Arena Authority found issues with the lease payment from the University of Louisville being made on time.
According to a release by Harmon's office, "the single finding in the financial statement audit relates to the failure to timely finalize the annual payment under a lease agreement between LAA and the University of Louisville Athletics Association (ULAA), which sets forth the revenue-sharing arrangements between the two parties."
The report says the payment was to be calculated by April 20 each year and the payment made by April 30. When auditors reviewed the years 2016 and 2017, they found the calculations and the payments were not completed until after the deadlines had passed. The report blames the delay on "ULAA and LAA for not providing information to each other in a timely manner."
The audit goes on to say the delay has caused "an increased risk of undetected errors in the calculation and cash flow problems for LAA."
Arena Authority chair Scott Cox, who was appointed last July by Governor Matt Bevin, said the deadline mistake is not the university's fault.
"I'll take responsibility for that," Cox said.
According to Cox, he should have stayed on vendors like those with concessions and those that market the arena to get their financials to him by April 20, so they can be sent to UofL and they can write a check and make the April 30 deadline. But Cox maintains, "It didn't cost anyone a penny, every bill is being paid."
Cox says it's hard for vendors to make those deadlines because they were set before the arena was ever built. That, said Cox, needs to change.
"The basketball seasons for the men go longer than anticipated and it takes more time for our vendors to get it to us," Cox explained, "so we need to modify the lease agreement and stretch it out about a month."
Cox also agrees with Harmon that they should have competitively bid for management companies instead of just extending the contract with Anschutz Entertainment Group (AEG), which Cox said was competitively bid when AEG was originally hired to take over. The Arena Authority extended the contract because he says AEG did a phenomenal job the last couple of years packing the calendar with top concerts, like four shows with Garth Brooks.
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What has been huge in trying to turn the arena's financial issues around, Said Cox, is state lawmakers helping by extending the TIF, the taxation district by adding 35 years and eliminating the $265 million cap.
So why hasn't the lease agreement been signed with UofL? Cox said they have been meeting with their primary tenant in good faith to rework the deal.
"I will tell you today," Cox said, "I'm convinced we will have a new lease agreement very soon."
A UofL spokesman also confirms the university is close to a deal with the Arena Authority. Cox says once they get a new lease with UofL, and get Mayor Greg Fischer and Metro Council on board, the arena needs to go for an investment grade credit to save about $60 million in interest payments.
Recommendations in the audit say LAA, ULAA, and other third parties need better coordination to ensure the deadlines are met.
The audit was begun in January at the request of the Capital Projects and Bond Oversight Committee. The auditor's office will present the details of the audit, plus additional observations related to the Arena Authority and UofL Athletics Association, to the committee June 20 in Frankfort.