In otherwords, I’m waiting for hell to freeze over.

Pookey wears a whig

Are you concerned that perhaps GS is lying again and the Louisville economy has not been revitalized by their ESC?

I only mentioned Goldman Sachs because I saw a less than bright commentator in the Sac Bee comment section using Goldman Sachs’ PR bullshit.

The KFC YUM! Center had a $349.2 million plan and the city was on the hook for $281 million of it. The plan was for the bonds to be paid back through arena revenues for 30 years and the public was assured it wouldn’t cost them a dime.

Now, this is somewhat important so bare with me but a big chunk of those revenues each year were actually not from the revenues directly at the arena but were actually coming from rebated state and local taxes that the arena managers could count as “new revenue.” Here, they essentially created a Tax Increment Financing (TIFs) District downtown. It’s a 6-square-mile district around the arena site. The arena would share the incremental state property and sales taxes generated within that district with the state. The TIF District also includes state income taxes generated from salaries and wages paid to employees within the arena complex itself. This income will be used solely for debt service on the arena bonds. Essentially, they calculated the sales tax and property tax it generated BEFORE the arena was built and then all future tax revenue above that baseline number becomes the “tax increment” and can be used to help subsidize the new arena. So essentially, if the arena created a huge boom in that area, that extra tax money would go back into funding the bonds until they are all paid and then the city would start seeing all the awesome tax benefits in 30 years (think of the Anaheim deal the Maloofs got and the fact that the city would not see any revenue once the arena went over $12 million a year until the bonds and loans for the Maloofs were paid off to Samueli).

Great plan so long as new sales tax receipts and property tax increases are enough to pay off the costs and projecting big revenues is exactly how companies like Goldman Sachs and Bear Sterns pull off these types of deals and make a shit ton of cash. Unfortunately, cost overruns and revenue shortfalls are quite common when building arenas (don’t believe that was a big problem here though). Also, TIF forcasts by these companies usually fell short even BEFORE the real estate bubble popped in 2008 and almost always it’s the city’s general fund that has to bail out these projects because none of these companies would dare back these bonds without assurances that the public are the ones taking all the risks.

Anyway, long story short, these types of projects are one way companies like Bear Sterns and Goldman Sachs made a shiiiiiiiit ton while us dumb bastards pick up the check. Welcome to one of the reasons why our economy is in the shitter and these bastards are making billions. As I noted in a previous comment, Goldman Sachs recently touted itself as as the savior of Louisville helping create “a vibrant downtown scene, where new business are opening (and) existing businesses are expanding.” I’ve even heard Grant Napear tout how smart Lousiville was and how the arena has revitalized the city of Lousiville.

Only one tiny problem. Lousiville currently has an 11% unemployment rate and are currently negate $22 million in their general fund. Obviously not the arena’s fault but didn’t exactly revitalize the city either. The city will also be on the hook for over $3 million of the arena bonds next year even though there was supposedly no “existing” public money funneling into it. That’s because the arena isn’t generating as much revenue as they predicted. In fact, it was supposed to be generated over $4 million in sales tax under the TIF. Currently it has generated $0. Basically because of the crappy economy it is generating below the sales tax revenue we saw in that 6 square miles BEFORE the arena was built and the city not has no TIF money but must take out somwhere between $3.5 and $3.3 million from their currently negative $22 million general fund of “existing” public funds to pay it off.