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Louisville Meeting on Arena Packs Aldermanic Chambers

by Theresa Fritz Camoriano

On December 1, Louisville's board of aldermen met to hear presentations on the proposed NBA arena.  The aldermanic chambers were packed, and people spilled out into an adjacent room where the proceedings were shown on television.  Many people wore small signs opposing a tax-funded arena.  President Steve Magre informed the audience that they were to be silent and not to disrupt the proceedings.  He pledged that there would be at least one, and probably two public hearings on this issue before the council takes its final vote, even though the city is not required to have public hearings. 

Speakers favoring the Mayor's plan included the Mayor's representatives, representatives on behalf of Greater Louisville Inc., and Ray Wooldridge, the Hornets' owner, who together spent about one hour presenting their position to the Aldermen.  Two speakers who questioned the soundness of the financial plan, Bill Stone and Malcolm Chancey, were allotted twenty minutes.  Although Wooldridge's supporters had the lion's share of the time in this meeting, and Wooldridge had previously met one-on-one with individual aldermen, he spent the first part of his presentation complaining that he had not been given sufficient time to make his case.

First, Deputy Mayor Jane Driskell and Development Director Bruce Traughber presented the plan on behalf of the Mayor.  They assured the council that, once they had the benefits of the outside consultants, they would be able to come to the council with a financing package that included sufficient guarantees and "backstops" that it would not put the taxpayers at risk.

Next, the Greater Louisville Inc. team, which has been promoting the Mayor's plan, made a presentation. This group spoke in terms of its image for the future of the city, the desire for a vibrant downtown, and the need for the city to take risks and not be too conservative.  Speakers said they believed this opportunity was a turning point for the city.  Cobb pointed out that Louisville has lost 50,000 of its young people to other cities, and he said he believed the most important thing that could be done to bring talented young people back to the city would be to attract an NBA team.  When speaking of the need for the city to take risks, Cobb did not distinguish between private individuals voluntarily taking risks with their own money and elected officials taking risks with tax money that will be taken from the residents by force. He also did not mention a point that has often been made in the past by Greater Louisville Inc., that employment prospects are a very important factor in where mobile, young professionals decide to locate.  Also not mentioned was the fact that low taxes and an environment conducive to entrepreneurial activity tend to attract growing businesses and up-and-coming young professionals, while putting the city into debt to build an arena would further drain resources that could better be used by private enterprises to create jobs.  This group said that people opposed to the Mayor's plan were naysayers, not "can do" people who were going to make the city grow.  In other words, the presentation was long on "vision" and short on facts.

Next, Bill Stone and Malcolm Chancey were given the opportunity to present their case that the plan for financing an arena must be fiscally sound and should not put the taxpayers at risk, which they have not seen so far in the plan that has been presented.  Bill Stone said he loves professional sports and would love to see an NBA team locate here.  He said the aldermen should give the consultants a chance to come up with a financing package, but they should demand at least a one-month review period, and they should review the package very carefully in order to ensure that the taxpayers are not at risk. 

Malcolm Chancey, a retired banker, said he certainly was a "can do" person, not a naysayer, and he had raised hundreds of millions of dollars for city projects during his career, most recently to build the Papa John's Cardinal Stadium.  He received loud applause when he said the arena should be built with private funds, and the people should have a chance to vote on the project.  As a banker, he did not believe the proposed project was fiscally sound.  First, it proposes a thirty-year loan, which has never been done in the city and has not been done in this state for over thirty-five years.  He said such an extraordinarily long term loan did not make good financial sense, because the useful life of an arena is far less than thirty years, but it was presented in this manner in order to try to make the project look less expensive.  However, in fact, including interest payments over thirty years, the proposed $250 million project would end up costing $500 million in payments, much of which would be payable after the expected useful life of the arena.  (This would amount to a commitment of approximately $4,000 for every family of four in the county.)

Chancey noted that the project was structured like the old balloon loans banks used to make, with the largest payments toward the end.  He said that those kinds of loans often failed and resulted in foreclosure.   He said the city would be like the bank in this case, and the bond holders would be looking to the city to make those payments whether or not there was an arena still standing or a team playing.  Chancey asked, where is the collateral?  Are the Hornets owners willing to put up the franchise as collateral?  If so, what is it worth?  What will it be worth in twenty years?  What guarantee does the city have that the team will stay on a long term basis and not leave or go bankrupt?  Chancey also pointed out that the proposed commitment by the state to $5 million per year in the early years and as much as $12 million per year in the later years had not been approved and likely would not be approved.  He also said that the city should not go forward without a long term commitment from the state -- since what has been proposed so far was only a one-year commitment. 

Ray Wooldridge, the Hornets owner, then spoke.  He said the Hornets had no interest in managing the arena or in being responsible to book other forms of entertainment in the arena.  They were in the basketball business, not the facility management business.  He described the team's role as only that of tenants in the city's arena.  He said the value of the franchise could not be based on its profit and loss statement, because franchises rarely make money, and he was not interested in making money, but the franchise was healthy and expected to continue to be healthy, thanks to television rights.  Wooldridge said the aldermen should not allow the current recession to stop them from making this commitment.  They should look at this as a long-term deal, assuming that there will be economic boom times and bust times during the life of the arena. 

Following is a letter from Donna Mancini, chair of the Libertarian Party of Kentucky, to Alderman Magre, based on his earlier decision to table the vote on a contract for the consulting group that is putting together the financial package:

Dear Alderman Magre,

 Thank you for  voting against   spending money on consultants for the arena.  We all know that if there is money in ANYTHING that private  business will 
gladly  accept the opportunity  !!  The arena is a loser and  truly a misuse of our tax dollars.

 Taxes are taken by force, and people should not be forced to invest in  business ventures.   The  people of Louisville  have personal priorities on
how they choose to spend their  own  hard earned $$$.  Money does not GROW on trees!!!!   Our public officials work for  us , the Citizens,  not the  other way around, which seems to be the way things are headed in Louisville these days.

 I  am sure that  the vast majority of our citizens would vote against this "  Arena Plunder" if given the opportunity. This is obviously the reason it is not being put to a vote.

 The vote that  we will get , however, is who gets elected next time around.  Fortunately,  we the people can  get rid of politicians who  misuse public funds for their political and personal gain.

  Sincerely,

 Donna Walker Mancini
 Chairman , Libertarian Party of KY
719 Talon Place
Louisville, Ky. 40223

  P.S.

 I am against subsidizing the Marriott, or any other private business as well. Using our taxes other than for legitimate purpose of funding the government and other true " public goods"  is totally  wrong in my book.