(12-07-2016 10:05 AM)Dr. Isaly von Yinzer Wrote: [ -> ]Well, just from reading some articles on it, I think it is clear that the city wanted to build an arena and they needed Louisville to commit to playing in it to justify building it.
Louisville, understanding that it had leverage, stuck it to the local leaders - and by extension the people of the state of Kentucky.
Now, everyone's having buyer's remorse and of course they want to renegotiate the terms. Louisville is making $20 million per year and reaping 88% of the profits. That is really high and it would be even for a professional sports team. I mean did the university contribute even a nickel towards its construction?
That's a pretty good deal if you can get it. You don't assume any of the risk and you make 88% of the profit.
With that in mind, of course Louisville does not want to renegotiate that lease. Why would they? They might have the best deal in the entire country right now. I would do the same thing if I were in their position.
However, for the people of Louisville and the state of Kentucky, they are on the other end of that spectrum. They may have the worst deal in the entire country right now.
Honestly, I don't blame anyone involved. I do think those terms or onerous for the long-term viability of that arena. However, that's up to the people of Kentucky to decide.
Also, I think Jurich's sabre rattling here is beyond absurd and the exact wrong tack to take in this case. He should be calming the waters and letting sleeping dogs lie, not challenging everyone.
If I were a leader in Louisville or Kentucky and I read the athletic director make those asinine remarks, I would publicly call his bluff. I would openly encourage him to build an arena on their campus. I understand that would leave the Yum! Center without an anchor tenant but the truth is you can fill that facility with other events. Kansas City has been doing it for years.
I guarantee you Jurich would back down so fast it would make your head spin. I mean, what happens if they were only to make 75% of the profit and just $15 million per year; or just 60% of the profit and $10 million per year? Would that really constitute a tragedy?
I'm pretty sure that's still a FAR better deal than building a brand-new arena on your campus.
Some info to enlighten this post a bit ...
The site that the Yum Center was built on, had $125 million in added expenses, as it housed a sub station for Louisville Gas and Electric. Removing this industrial eye sore from main street, and relocating it, was the primary reason this site was chosen. U of L was in favor of two other downtown sites for the arena, because of this extra financial burden. But U of L agreed to the site when the state and city assured them that the financials could work. So, being the good corporate citizen U of L agreed to move their games to this location, despite their misgivings about the financial underpinnings. And now .... when it appears that the misgivings U of L had in the first place are coming to fruition, and the local political leaders are publicly painting U of L as the bad guy in this deal ... you can see why Tom Jurich is pushing back, as hard as he is.
Also ... when you add $125 million to the construction cost, it makes it impossible to accurately compare it to other city arenas, like the Kansas City Sprint Center. Subtract that $125M, and yeah, you could get away with it being empty of a primary tenant, just hosting events, and an arena league team. But ... this added expense means the city desperately needs the 50-60 events that U of L provides it a year. Take those away, and the city will default on the property, and it's bond and credit rating would take a gigantic hit. THIS is why Jurich can leverage things the way he is.
Finally, while revenues to U of L increased when they moved to the Yum Center, so did expenses, and the actual increase to the athletic program is not as great as can be made out by those with agendas (in this state, that has been local political leadership, and state wide, it is the Big Blue supporters, who were desperate to try and build an equivalent facility for UK in Lexington - which failed last spring/summer). U of L pays about $160,000 a game in rent for each men's game, and $5,000 a game in rent for women's games. Not sure what the volleyball match rent is, but I would assume it is around what the women's game rental fee is. (To contrast this, UK pays $25,000 a game for use of the city owned Rupp Arena.) The concessions deal is the same as it was in state owned Freedom Hall, and is a revenue stream for the arena. And the suites wouldn't get sold nearly to the degree they have been, without U of L as a tenant.
I think in the end, all parties will agree to some increase in their level of responsibility toward making the $$$ work on the Yum Center. But as long as the newly cleared space on campus remains vacant, you can guarantee that Tom Jurich will use that to leverage his position in this whole bargain. And .... if the city foolishly calls his bluff (and the mayor today is sounding like that
won't happen) .... I would never bet against him when it came to building facilities. The one thing he has done throughout his AD career, all the way back to NAU and Colorado State, was improve facilities. U of L's athletic department is on sound financial footing, and is expanding the football stadium WITHOUT need for state or local bonding. He has proven his flexibility at getting things done. And I think he'd be more than up to the task if push came to shove.
But .... I don't think push will come to shove. I think the mayor will tell the alderman who are popping off to shut their pie holes until things get resolved. We shall see though.
