Kyeland Jackson —
Kentucky auditor Mike Harmon will audit the KFC Yum! Center, answering calls to action by legislators.
Legislators asked Harmon to audit the center, managed by the Louisville Arena Authority and leased by the Louisville Athletic Associtation, Oct. 19. Harmon said the audit will review fiscal year 2016, investigating the Authority’s compliance with agreements and contracts, including the revenue sharing agreement, and internal control work to get insight on management agreements and operations within Authority. He expects the audit, which could be expanded, will be finished by summer.
“If these procedures identify additional risks or red flags, we will consider expanding the scope of the audit,” Harmon’s statement said. “Upon completion of the audit, we will provide the capital projects and bond oversight committee a copy of our report.”
U of L’s Senior Associate Athletic Director for Media Relations Kenny Klein said the athletic department will cooperate with Harmon.
“We are a tenant in the arena and will cooperate if asked for information. We have always participated in their annual audit,” Klein said.
Lawmakers cited possible failures in the arena’s financial management in October, attributing U of L lease agreement costs as part of the problem. U of L’s lease agreement with the YUM! Center guarantees 88 percent of private suite sales go to the university. Businessman Denis Frankenberger forecasts the stadium will go bankrupt.
“Basically what you’ve got is a conduit by which taxpayer dollars are funneled through and out the other end, and they go into the University of Louisville Athletic Association,” Frankenberger said. “The stadium is more than $22 million in debt. While the stadium claims to pay down its debt regularly, projections estimate it will rise to $37 million by 2029. Bond rating firm Moody’s last year found YUM! Center projections should cover the debt, yet the stadium carried an “ascending debt service payment profile.”
Built in 2010, the $238 million, 721,762 square foot arena is the premier location for U of L’s basketball and volleyball games. The arena was voted 21st nationwide by a 2014 Pollster magazine, and hosts concerts, sporting events and graduation ceremonies.
This is Harmon’s second audit involving U of L, after he finished an audit investigating the university and the University of Louisville Foundation. That audit found dysfunction and obfuscation between the university and endowment manager, citing board conflict, questionable compensations and a lack of checks and balances. The lack of checks and balances allowed former U of L president James Ramsey to approve a $67 million loan between the university and foundation without proper board approval. Ramsey refuted the findings, pointing to university progress achieved in his tenure.