Louisville Arena Board Creates State’s New Economic Engine

By Mark Green

Louisville has a gleaming new, high-octane economic engine freshly installed downtown: the KFC Yum! Center. After a few decades atop local leaders’ wish list, last month beaming officials cut the ribbon, held a celebratory evening gala and put on its first public event, a concert by rock superstars The Eagles.

Now that it’s finished, the $238 million facility is attracting superlatives for its unique, graceful, modern design; for its integration into the heart of downtown; for great sight lines inside the arena and the stunning river and skyscraper views its glass-walled concourses provide; for inviting lounges. Additionally, there’s praise for making sure local companies, including those owned by minorities and women, got lots of subcontracts; for creating a successful, effective minority worker training program; even for traffic management measures.

“It’s the best college (sports) facility in the country, by far,” said Paula Yancey, lead project manager with PC Sports, the Houston firm that served as owner’s representative during design and construction.

Some suggest the KFC Yum! Center is the best arena of any sort in the nation, but there is argument in Pittsburg, which christened a $321 million NHL facility in August, and in Orlando, which opened a $480 million NBA palace on Oct. 1.
“It’s state of the art,” says Mike Clay, a principal and project leader for sports architect Populous, chief designer of Louisville’s arena – Populous also did Pittsburg’s new Consol Center. “It’s nicer than most NBA facilities in terms of technology.”

Perhaps most impressively, the Louisville arena, whose silver rolled-edge roofline is inspired by the nearby Falls of the Ohio River, was completed on budget and on time.

And it immediately began bringing crowds downtown: The Eagles filled the house Oct. 15, and University of Louisville basketball fans sold out the 22,090-seat arena for the annual Red-White scrimmage Oct. 24. The Cards’ 22-game exhibition and regular-season home schedule began Oct. 31 with a visit from Northern Kentucky University.

There’s no measure yet of spinoff economic activity, but arena crowds are expected to generate plenty of fresh spending downtown at the many restaurants, bars and hotels nearby – a contrast from 54-year-old Freedom Hall at the relatively more remote Kentucky Fairgrounds. And that spending means not only private profits but public tax dollars, which arena organizers point out flows from Louisville to every corner of Kentucky. Only 60 cents of each state tax dollar generated in Jefferson County returns there, local and state officials report. Meanwhile, the arena already has stimulated some $55-60 million in downtown entertainment and hospitality industry investment, with an additional $200 million-plus proposed.

Rising tax revenues generated by growing activity in a 6-square-mile
district around the arena, in fact, will help pay off bonds for the arena project. Financing plans call for at least $6.8 million a year in tax-increment-financing (TIF) payments toward bonds.

Taking the facility from drawing board to reality required feats of vision, leadership, management, hard work, determination, dedication, coordination, cajoling and cooperation over the course of five and a half years. There was high-finance drama as well.

Significant credit goes to the Louisville Arena Authority (LAA)?board, a 17-member body populated with 10 appointees by former Gov. Ernie Fletcher, five by Louisville Metro Mayor Jerry Abramson, and two ex-officio members who represent the Louisville Metro Council and the Kentucky State Fair Board, which is now operator of the arena. They had the skills and gravitas to pull it off and avoid political pitfalls that ensnared previous efforts.

“As Louisville goes, so goes the commonwealth,” Fletcher said. It is Kentucky’s economic leader and generates the most tax revenue, with 40 cents of each dollar in state taxes paid in Jefferson County flowing out to and benefitting the other 119 counties.

Maximizing economic activity was the winning argument for positioning the arena on the riverfront downtown rather than at the Kentucky State Fairgrounds site where Freedom Hall was built 54 years ago or on the UofL campus, both of which had their strong proponents.

An analysis conducted by an outside firm “clearly pointed to downtown,” Fletcher said, “and that wasn’t unexpected because you have a much better ability to attract folks who will come in and do much more than just go to the game and leave, which they would have at the fairgrounds. They will come in, maybe spend the night, visit the restaurants and Fourth Street Live and a lot of other activities down there.”

Fletcher launched the project in 2005. He formed a task force chaired by his Lt. Gov. Steve Pence and co-chaired by his Commerce Secretary Jim Host and including public and private sector notables such as U.S. Sen. Mitch McConnell, Abramson, University of Louisville Athletics Director Tom Jurich and Papa John’s Pizza founder John Schnatter. With the task force having studied and blessed the project, Fletcher persuaded the 2006 General Assembly to put up $75 million.

Host, who also had led the effort a generation ago to build Rupp Arena in Lexington, was given chairman’s duties for the subsequently created LAA board, which then had to shoulder the heavy lifting, beginning in January 2006.
Fletcher and Abramson collaborated closely on picks for the board to craft a team with expertise in business, sport, finance, political insight and community knowledge. And they loaded the board with people who, as a result of their careers and lives, command respect.

Weighty decisions included choosing among three sites and hiring key project coordinators such as an architect, a construction manager, and a firm to negotiate and manage contracts and costs. And then there was the twin task of coming up with a budget and financing.

As architect, the board chose Populous (formerly HOK Sport), a global sports facility specialist based in Kansas City with nearly 1,000 projects under its belt. Populous took on Louis and Henry Group, C.L. Anderson Architecture and Jill Lewis Smith Architects, all of Louisville, as associates for the project.

The construction manager was Mortenson Construction of Minneapolis. A high-tech 3D image modeling system Mortenson uses was a key to it winning the contract, Host said. He estimates efficiencies the imaging system brought to coordinating construction saved $7-8 million.

LAA hired Houston-based PC Sports as its owner representative. As project manager, PC Sports negotiated and managed design, consultant and construction contracts, tracked project costs, provided plan review and value analysis, and more.

LAA board members provided input on design elements for the arena project after making site visits to various new sports facilities in the region and cherry-picking their best characteristics. However, Host points out, board members made these visits on their own dime and received no expense compensation. And none accepted even a free meal from a project vendor.

“The chairman (Host) wanted a building that was state-of-the-art technology,” Clay said. Yum! Center has Internet protocol data and communications, its video screens and scoreboards are high-definition, its TV studio is HD, and visitors should find a 3G cell service signal from all carriers throughout the structure.

Host steadfastly deflects all suggestions that he deserves more credit than any other LAA board member. He does admit, though, that during the five-plus years of overseeing the project he was up by 4 a.m. daily at his Lexington home, read several newspapers and was on the road in time to be in Louisville by 6 a.m. Those days often lasted into the night. He used no office, requiring only a spot to use his cell phone and to park his inches-thick binder of paperwork.

Resisting advice to get an apartment in Louisville, Host said he preferred returning to his own home at night, plus the time driving alone was when he got a lot of thinking accomplished.

“He is very detail oriented and involved in everything from minute details to global issues,” Yancey said. “He was extremely involved, more so than any client I’ve had.”

Clay agreed.

“Jim Host made it happen,” he said. “I admire the guy. I’d work for him again in a heartbeat.”

The Chairman, as he came to be called during the project, said he did not outline a list of specific steps and goals at the outset. He did, however, have decades of experience directing projects and campaigns, and creating and building organizations. Host, 71, had joined the Cabinet of Gov. Louie Nunn at age 29 after having created a Kentucky sports radio broadcasting network for which he did play-by-play. Host Communications, a company he formed in the 1970s, became one of the nation’s top sports marketing operations before he sold it more than a decade ago.

After the LAA took shape, Host created committees and assigned chairs and duties sometimes based on obvious backgrounds and other times reacting to ideas and issues that surfaced at meetings. When board member Tim Corrigan, a lawyer and political science adjunct professor, exhibited understanding of information technology issues, Host added an IT Committee and made Corrigan its chair.

The Chairman said “quite a bit” of his role was to be a cheerleader and motivator-in-chief for the group. The most difficult challenge of the entire project, he said, came on July 22, 2008, the eve of a planned bond sale to put the comprehensive financing in place.

As he was arriving back in Lexington, Host received a call that the company insuring LAA’s $300 million-plus in variable-rate bonds had just been placed on credit watch by the Moody’s bond rating agency – the interest rate and LAA’s repayment cost suddenly were beyond the bounds of its budget.

“At which point,” Host recounted, “they said, ‘What’re you going to do?’ and I said, ‘I may have a bourbon and water, maybe two, then I’m going to go to bed. And tomorrow morning, like I’ve been doing, I’ll get up at 4 o’clock, I’ll leave the house at quarter to 5 and be in Louisville by 6 to 6:10, and we’ll figure it out.’ And we did.”

A revised, fixed-rate bond issue financing the arena closed Aug. 25.
Renegotiation with building contractors and the bond insurer cutting $15 million and $12 million in direct expense, respectively, translated to $60 million less in bonding requirement. Key to completing the deal was Louisville-based investment firm Hilliard Lyons agreeing to take a final, subordinate and uninsured segment of taxable bonds.

Additionally, with the world financial system lurching toward a Fall 2008 crisis that shut down all deals, LAA pushed its sale through during U.S. bond market makers’ traditional vacation period. As a result, Host said, the $349 million in bonds drew more than $1 billion in purchasing interest, driving their yield down and saving another roughly $10 million.

Finding and hitting that window of opportunity to sell the bonds was the arena project’s toughest challenge, Mayor Abramson said.

Multiple revenue streams will pay off the bonds over 30 years. UofL basketball is locked in as top tenant. All but two or three of the 70-plus suites were sold by mid-October. Sponsorships for arena products, services and advertising totaled $48.8 million, foremost being Yum! Brands’ naming rights deal: $13 million for the first 10 years. TIF revenue ranging from $6.5 million to $10.8 million yearly is the most significant stream.

Now that the KFC Yum! Center is complete, one aspect of the project that LAA members are especially pleased with is its Pipeline Project. The initiative recruited, trained and hired minorities and women for construction work and looks likely to have an ongoing, legacy impact. It helped the arena project surpass its aggressive goals for women and minority business enterprise (WMBE) participation.

Approximately 2,000 workers put in 1.55 million hours, and $217.8 million in contracts for work were let. The LAA set goals of having 20 percent minority and 5 percent women workers, and achieved 23 percent and 5 percent, respectively. Subcontracting goals were 27.5 percent WMBE participation, and 30 percent ($65 million) was achieved.

The Pipeline Project, a collaboration with the Louisville Urban League and a council of 15 construction trade unions administered by KentuckianaWorks, produced a training program with a 120-hour curriculum covering such topics as math, industry awareness, blueprint reading, construction tool use, safety, first aid, resume writing, interview techniques, communication and teambuilding.

The National Urban League expressed strong interest in the Pipeline Project, said Juanita Sands, director of the Center for Workforce Development.

“I think this program is really going to take wing across the country,” Sands said.

At a wrap-up meeting of the LAA Affirmative Action and Labor Committee, Host said he hopes Pipeline efforts continue for the Museum Plaza project when it resumes and that he wants to see it become a template used on projects all over Kentucky.

“This group meant more to me than all the rest of the project,” Host said, adding that achieving WMBE goals “didn’t happen by accident” and required close monitoring and verification “of every number along the way.”

An associated result was improved community relations.

“There is a newfound trust because this is a project that did what it said it was going to do,” said LAA board member William Summers V, who chaired the committee. “Now we have a new business as usual.”

Beyond WMBE, the project also set overall community participation goals for keeping hiring and contracts within the region: that 60 percent of workers would be Louisville Standard Metropolitan Statistic Area residents and 75 percent would be Kentuckiana residents. Final overall participation was 64 percent and 84 percent, respectively.

Arena project leaders are unanimous that it also improved relations between Louisville and the rest of the state as well as bridging political partisan boundaries. The Louisville and Lexington chambers of commerce have begun taking joint fact-find trips, Host cited as an example of closer ties.

Former Gov. Fletcher said his enthusiasm for initiating the project “was a vision, if you will, that I ‘caught’ from Louisville.” The state’s financial and political help with the project improved the Louisville business sector’s outlook, Abramson said.

“It has enhanced our relationship,” the mayor said. “You always hear folks in the community say we pay a dollar in taxes to Frankfort and we only get 48 cents back, especially business folks. This is a real shot in the arm.”
And there is growing understanding outside Jefferson County about the financial role the commonwealth’s largest city plays.

“I learned that Louisville is a great city,” Host said when asked what he’d learned during the arena project. “I learned that as Louisville goes, so goes Kentucky. I learned that the people of Kentucky don’t have a clue about what Louisville means to Kentucky.”

Host, an alumnus of the University of Kentucky, said he received questions “from my Big Blue brethren” as to why he was building an arena for UofL. His answer, he said, was that he was doing it not for UofL but for the commonwealth.

“We’ve got to do a better job of understanding that the strong of this state, the Louisvilles and Lexingtons, have got to be continually developed and pushed because it helps the rest of the state.

See it built
To see images of the arena site, including a time-lapse presentation of its construction, visit oxblue.com/pro/open/ksfb/louisvillearena.

KFC Yum! Center Facts
Groundbreaking: Nov. 28, 2006

Official opening: 1 p.m. Sunday, Oct. 10, 2010

Cost: $238 million

Location: On the Ohio River in downtown Louisville, bordered by Second, Main and Third streets and River Road.

Size: 721,762 s.f.

Levels: 7 (event floor, lobby, main concourse, suite mezzanine, suite, upper concourse, catwalk)

Seating: 22,090 maximum for basketball – 9,100 lower; 590 suite mezzanine; 1,850 suite; 10,550 upper (71 suites on two levels) (212 wheelchair seats with 212 companion seats)

Locker rooms: home men’s, home women’s, visitor’s, officials men’s, officials women’s, employee men’s, employee women’s, 5 auxiliary, 5 star dressing rooms, “green” room

Restaurants/lounges: Burnett’s V Lounge, 3,900 s.f.; Evan Williams Bourbon Bar, 3,900 s.f.; Kentucky Ale Taproom, 2,300 s.f.; Woodfoord Reserve Club, 8,750 s.f.; Premium Box Lounge, 5,800 s.f.; Terrace Club, 5,900 s.f.
Concessions: 27 permanent, 24 portable, 2 novelty

Meeting rooms: Legends Room, 6,400 s.f.; Hickman/Camp Room 6,100 s.f.; President’s Room, 4,600 s.f.; Spirit Room,12,000 s.f.

Restrooms: 22 men’s (171 facilities), 22 women’s (235 facilities), 17 family
Other features: 1½ acre entry plaza; 760-car underground parking; administrative offices (7,500 s.f.); 2 first aid stations; 6 passenger elevators; 9 escalators; full-size basketball practice court; press lounge, workroom, interview room; 4 loading docks; trash dock

Anchor tenant: UofL Basketball

Owner: Louisville Arena Authority

Operator: Kentucky State Fair Board

Owner’s representative: PC Sport

Construction managers: Mortenson Construction Co., Minneapolis; Mathis & Sons, Louisville

Architect: Populous, Kansas City, Mo. (formerly HOK Sport)

Associate architects: Louis and Henry Group, Louisville; C.L. Anderson Architecture, Louisville; Jill Lewis Smith Architects, Louisville

Graphic design: Swope Design Group, Louisville

Civil engineer: Qk4, Louisville; Classickle, Louisville

Landscaping: Vivian Llambi & Associates, Louisville

Food service: Centerplate, Stamford, Conn.

Naming rights partner: Yum! Brands

Louisville Arena Authority Board
Here is a look at the 17 members of the Louisville Arena Authority and the roles each has played in guiding the KFC Yum! Center project to completion:

Jim Host, Chairman
Secretary of Commerce for Gov. Ernie Fletcher, founding chair of the Alltech 2010 FEI World Equestrian Games. Appointed at age 29 to Gov. Louie Nunn’s Cabinet to head Department of Public Information, then Department of Parks. Republican nominee for lieutenant governor in 1971. UK and pro baseball player. Created and did play-by-play for a UK sports radio network. Founded Jim Host & Associates sports and tourism marketing company. Led project that built Rupp Arena. Widely honored.

Host was tapped to lead the LAA because of decades of success directing large projects, extensive business and political experience, understanding of sports and marketing, and willingness to work tirelessly. The lobby of KFC Yum! Center is named Host Hall, the only piece of the project done without his knowledge.

Larry Hayes
Secretary of the Cabinet for Economic Development and former Secretary of Governor’s Executive Cabinet for Gov. Steve Beshear. Former deputy mayor and secretary of the Louisville Finance and Administration Cabinet. First president of what is now Greater Louisville Inc. Owned Midwest Construction Inc., Secretary of the Executive Cabinet and state budget director for Gov. Martha Layne Collins. Executive assistant to state Senate President Joe Prather for six years.

Hayes brought key financial expertise as well as local and state political knowledge to the LAA. He was Chairman Host’s confidant early on.

Larry Bisig
A Louisville native and UK graduate. Founder of what is now Bisig Impact Group marketing firms with expertise in sports radio and music festivals. Founding vice-chair of the Greater Louisville Sports Commission.

Bisig brought important marketing and business to LAA. His company created and donated the LAA logo and provided other support.

Ulysses “Junior” Bridgeman
Former UofL and 12-year NBA basketball player. Owner/president of Bridgeman Foods Inc. with 156 Wendy’s restaurants. Former UofL Board of Trustees chairman. Serves on the boards of Fifth Third Bank and the Louisville Convention Visitors Bureau.

Bridgeman is a highly respected leader who brought sports knowledge, strong business expertise and important ties to UofL and the minority community to the LAA. He helped push the Pipeline Project.

Todd L. Blue
Co-founder and CEO of the Cobalt Ventures involved in downtown Louisville revitalization. Oversaw metals trading at his family’s Louisville Scrap Material Co. Active in young executives and economic development organizations. Member of Louisville’s NBA Pursuit Team 2000-2002 that sought a downtown arena.

One of the youngest LAA members, Blue brought experience in downtown redevelopment and ties to UofL to the LAA. His deep knowledge of demolition issues was key as the project moved forward.

Tim Corrigan
Lobbyist, civil/ environmental engineer and attorney, founder of The Rotunda Group lobbyist. Former engineer and attorney for the U.S. Army Corps of Engineers. Adjunct professor of political science at UofL.

Corrigan brought legal and technical expertise to LAA along with ties to UofL. Host created an IT committee and named him chairman when his knowledge of IT issues became apparent.

Reba Doutrick
Longtime director of community relations in the cable TV industry, now for Insight Communications. Resident of Valley Station with extensive civic and community organization involvement, including the Louisville-Jefferson County Redevelopment Authority.

Doutrick was a strong liaison with the state legislature and provided guidance in LAA dealings with state government and the Metro Council. She brought strong knowledge of technology and was instrumental in a deal LAA struck with Insight to provide arena communication infrastructure.

Eric Gunderson
President of Gunderson Marketing; entrepreneur and community leader, including president of Young Professionals Association of Louisville. Former marketing director for Tradecast Securities in Houston.

Gunderson provided marketing skills and links to the young professional community. He took on one of the toughest jobs, heading the Parking and Transportation Committee, whose work led to smooth opening events.

Ronald Carmicle, Ex Officio
Chairman of and previous Finance Committee chief for the Kentucky State Fair Board, which now operates the KFC Yum! Center; longtime president of River City Development Corp., chairman of Central Bank of Jefferson County, chair, Construction Training Institute; a Western Kentucky University graduate.

Carmicle is a successful businessman with strong expertise in finance and construction. He brought an understanding of the synergies possible between existing facilities at the Fairgrounds and the new arena. Carmicle had a large role in shaping the budget and finances of the arena project.

Alice Houston
Past president and CEO of family businesses Johnson-Houston Inc., Active Transportation Co. and Automotive Carrier Services Co. Former chair of Greater Louisville Inc. Former National Urban League board member. Wife and mother of UofL assistant basketball coach Wade Houston and NBA star Allan Houston.

Houston brought passion for Louisville, strong business expertise and a sports background to the LAA. She acted as a community conscience and uniter. She helped ensure LAA goals on minority and women’s business involvement were met.

Elaine (Cissy) Musselman
Vice chair of Risk Management Services Corp. Former chair of Greater Louisville Inc. board. Former president of Harris & Co. insurance. Long involved in civic and sports activities. Member of Louisville Regional Airport Authority.

Musselman, a member of one of Louisville’s best-known families, brought expertise in business and community relations to LAA. She gave voice to community concerns and insight into addressing them.

James A. Patterson
Founder of Long John Silver’s, Chi-Chi’s Mexican Restaurants and Rally’s Hamburgers. Major franchisee of Wendy’s. Diverse business interests. A national 2002 Horatio Alger Award recipient. Active in civic and education issues. A UofL grad.

Patterson brought extensive business expertise and entrepreneurial vitality to LAA. Intelligent and highly respected, he was a carryover from the original task force. Patterson has a passion for UofL and an insider’s understanding of concerns.

Tom Owen, Ex Officio
Current Metro Council president; UofL history professor; former Methodist minister.

Owen’s council role brought him to LAA. He represented Metro Council concerns and promoted making the arena green; it is Energy Star certified.

Lindy B. Street
Marketing and public affairs executive with healthcare and financial institutions. Former senior VP with Columbia/HCA Healthcare. Active with civic and charitable boards. Spirit of Louisville Foundation Bell Award recipient. Former Junior League of Louisville president.

Street brought public affairs expertise to LAA along with long civic leadership. She was the conscience of the authority. She also influenced the interior design of the arena.

William E. Summers V
Vice president of Central Bank’s Louisville Private Banking Division. His father was a Louisville vice mayor. His grandfather’s station was in the Kentucky Central Radio Network founded by Host in the 1950s. Civic activist.

Summers brought a connection to the young professional community. He worked extensively with Host in developing the Pipeline Project and ensuring LAA goals on minority and women’s business involvement were met.

Daniel C. Ulmer Jr.
After a 40-year career, retired in 1994 as chairman/CEO of PNC Bank, Kentucky. Former chair of UofL Board of Trustees. Former member of UK Board of Trustees. Former chair of the Kentucky State Fair Board. Chair and an owner of Louisville Baseball franchise, owner-investor in several small businesses. Former Board of Trustees chair for Minor League Baseball. Active in many civic, charity and arts groups. Past Louisville man of the year by multiple organizations.

Ulmer brought extensive business and finance expertise, community knowledge, passion for Louisville and understanding of sports facility operations. Ulmer was Host’s peer and backup on the LAA, copied on all of the chairman’s emails. He was Host’s sounding board for strategy and ideas; they met or spoke daily.

Robert L. Woolery
Former president with McKenzie, Woolery and Webb PSC law firm.
Former assistant county attorney in Boyd County. A UK Fellow. Former president of Ashland Beer Distributors and Big Sandy
River Trucking.

Woolery brought legal and insurance industry expertise to LAA. From Host’s hometown of Ashland, he has known the chairman for decades. He a voice for Kentucky residents outside Louisville.

Louisville Arena Task Force
(predecessor to LAA)
Lt. Gov. Steve Pence (non-voting, chairman); U.S. Sen. Mitch McConnell; U.S. Rep. Anne M. Northup; Mayor Jerry Abramson; UofL Athletic Director Tom Jurich; Commerce Secretary Jim Host (vice chairman); state Sen. Dan Seum; state Rep. Larry Clark; Councilman Kelly Downard; John Hindman; James Patterson; Alice Houston; Eddy Roberts; Cissy Musselman; John Schnatter; Clestine Lanier; Bill Samuels; Ron Carmicle

Committee Chairs
Affirmative Action & Labor: William E. Summers V; Construction: Daniel C. Ulmer Jr.; Executive: W. James Host; Finance and Budget: Larry Hayes; Insurance: Robert L. Woolery II; IT: Tim Corrigan; Media and Public Relations: Lindy B. Street; Nominating: Junior Bridgeman; Parking and Transportation: Eric Gunderson

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