Financing
As a result of the subtracted hotel and the revised projected revenues, the arena, which would have lost $123,000 a year originally, might turn a small profit. The arena would generate $9.2 million a year in rent, merchandise, concessions and other revenues, along with funds from a $2 ticket tax on every Louisville men's basketball game during the first 30 years of the arena's operation. The arena would spend just under $9 million a year, generating an annual profit of $196,000.
Another reason for the revised operating expenses is the reimbursement fee that the Louisville Arena Authority must pay to the Kentucky State Fair Board for the arena's impact on Freedom Hall. The decrease in revenues, from $1.3 million to $738,000 during the first 10 years of operations of the new arena, is the result of a revision taking into account fewer events for the center.
On May 28, 2007, it was announced that the Louisville Metro Council will propose an arena-financing deal that would save city taxpayers $3.4 million/year, or $100 million over three decades. The proposal, required the arena officials to exhaust other revenue sources, such as naming rights and luxury suite sales, before asking the metro government to pay more than its minimum pledge. The minimum pledge is $206 million towards the construction of the arena in annual installments between 2010 and 2039. Under the deal, the Louisville Arena Authority can ask the local government for up to $3.5 million more a year to cover the debt only if at least five other sources are drained. If the Louisville Arena Authority has to use additional city funds for two straight years, the Louisville Metro Council has the right to audit the arena's revenues.
The financing agreement allowed $339 million in bonds through the state of Kentucky's Economic Development Finance Authority to be issued to construct the $252 million arena. The total debt on the bonds, $573 million over 30 years, will be paid through several sources. These include the city's $206 million commitment, $265 million from a tax-increment financing district, $179 million from advertising rights inside the arena, $63 million from luxury box sales, and at least $37 million in arena naming rights. The tax-increment financing district will allow part of the anticipated growth in state taxes to help pay for the arena. The arena's share of that revenue is capped at $265 million, although the project will be able to use the excess revenues to pay down the debt. It is expected to generate $574 million over 20 years.
In September 2008, financing was completed for the new waterfront arena.
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