Louisville’s Billion Dollar Basketball Arena

Photo Credit: Jamesmac96, CC BY 3.0

I was conveniently in Louisville the day this Courier-Journal article I was quoted in about the KFC Yum Center came out. So much of the writing about the boondoggles of publicly financed sports venues focuses on stadiums. But this piece shows that arenas can be plenty expensive too. Including interesting, Louisville spent $1 billion on a new arena – for a college basketball team.

I spoke to the reporter a while back and gave some general context about other arena projects, but much of the specifics around the financing of the KFC Yum Center was new to me. And quite eye-popping.

The arena’s total cost, including debt repayment, is estimated around $1 billion. And unless the debt is paid off early, the taxpayer subsidies will keep coming until Yum Center is 37 years old. “There is more public subsidy of the arena than was intended at the beginning or that anyone believed would happen,” said Pam Thomas, senior fellow at the Kentucky Center for Economic Policy. She called the arena a “cautionary tale” about the need to vet costs and benefits of big economic development projects.

Keeping Yum Center afloat now costs Louisville Metro nearly $11 million per year — more than three times the city’s annual budget for such emergency equipment as fire trucks and ambulances. Over the next 30 years the city is expected to pay more than $300 million toward the arena. The state, with its own budget issues, also has pledged hundreds of millions more in taxpayer dollars over the life of the debt and has lifted a cap originally set at $265 million.

“It’s one of the major local scandals in recent history,” said Wayne, who was a member of the Legislature’s capital projects and bond oversight committee as the arena project moved forward. In 2008 he voted for the bond issue but still expressed reservations about the finances and the volatility of the credit market. “It’s what happens when a power elite tries to impose something in kind of an autocratic way,” Wayne said.

Civic leaders were confident the arena would pay for itself, even after choosing a waterfront site in 2006 that was criticized as $114 million more expensive than a smaller downtown alternative. In 2007 they killed an on-site hotel designed to provide more income, saying it would cut into the plaza space and wasn’t needed. With the exception of $75 million from the state, the arena was largely financed with bonds – a form of debt much like a home mortgage….Goldman Sachs called the arena financing a win for Louisville, even putting out a slick video touting how it would help revitalize downtown in 2011.

To help compensate for the TIF’s poor performance, arena officials began raiding a maintenance fund to make debt payments. Metro Louisville in 2012 also bumped up its $6.5 million annual subsidy to $9.8 million, the maximum then allowed under the agreement with the arena. But debt payments and other expenses still exceeded what the arena was generating. In 2013, U of L agreed to a three-year cap on its share of Yum Center advertising revenue, freeing up an estimated $1.5 million the arena could use for debt payment. And the authority tried a fix that seems counter-intuitive — shrinking the TIF to two square-miles as a way to remove some areas in decline. TIFs capture changes in revenue from the base tax year. That usually means revenue goes up, but change can cut both ways. When Boland Maloney Lumber Co.’s downtown lumber yard closed in 2008, for instance, the TIF lost value.

Adding to the arena’s money woes were escalating annual debt payments. In 2013, annual debt service was nearly $21 million. By 2022, it would exceed $31 million. Cox became the authority’s fourth chairman in a decade in 2016 and said he quickly learned the arena faced a bond default within a few years. “We were so far behind what everyone expected,” Cox said. “To me, that was overwhelming.”

One area that deserves further scrutiny is how the University of Louisville was able to secure an almost NBA-style lease on the new arena.

As the Yum Center’s debt struggles became commonly known, U of L’s lucrative lease became the subject of debate. The lease, which originally ran through 2044, gave U of L 88 percent of private suite revenue; half of net revenue from merchandise sales, whether the school was playing or not; half of net concessions during U of L events; and other revenue. In recent years, the men’s basketball team made about $20 million from ticket sales, concessions, premium suite rentals, advertising and other revenue. In 2016-2017, the program paid the arena a net settlement of $1.36 million.

This exceptionally lucrative lease, which former arena board member Todd Blue says allowed the university to “commandeer” a community asset, was part of what made U of L the biggest money-making basketball program in the NCAA.

Part of how U of L did this was by threatening to build their own arena on campus. City officials wanted a downtown arena. I question whether the university’s threat to build a campus arena was credible. The state likely would not have given them the money. Meaning that if the university wanted to build a super-lucrative money maker with luxury suites and such, it would have had to directly borrow the huge amounts of money needed to do it – meaning most of the revenue would be pledged to debt repayment. I doubt they would have netted anything nearly as much out of their own arena.

As reporter Allison Ross points out, conflicts of interest suggest this negotiation with the university may not have been all that it seemed:

Denis Frankenberger, a Louisville businessman and outspoken critic of arena finances, questioned whether there were conflicts of interest in the original contract negotiation, noting that several of the arena’s board members have ties to the university. They include former U of L basketball star Junior Bridgeman and Jim Patterson, for whom the U of L baseball stadium is named.

Given what we know about Louisville’s basketball program, some kind of shady situation can’t be ruled out. There should at least be some sort of forensic investigation into this to find out exactly what transpired.

In any case, don’t think that stadiums are the only sports projects that can suck up huge cash. Arenas can also be far more expensive than you might think.

Click through to read the entire article in the Courier-Journal.

from Aaron M. Renn


The Once and Future Lagos

Lagos, Nigeria. Image via City Journal

City Journal just ran a very interesting piece on Lagos by Armin Rosen. Lagos is by some estimates Africa’s largest city and is well known as a creative capital. I don’t know anything personally about the city, but found Rosen’s description balanced and fascinating. Here are some excerpts:

Poverty, confusion, and moral fluidity haven’t stopped Lagos from achieving global prominence. Maybe an all-pervading looseness has even been a source of the city’s growth, since it has expanded with a velocity that prudent planning would avoid. Lagos is now West Africa’s economic and cultural hub, as well as perhaps the continent’s largest city, depending on which population figures one accepts. By most accounts, Lagos has twice as many people as London, along with a GDP greater than all but six African states. In its successes and failures, the city offers a cautionary preview of where an urbanizing developing world is hurtling.

The project seeks to expand the congested Victoria Island area, while creating a glittering showcase of world-class high-end real estate, thus helping to reverse Lagos’s reputation for disorder. But the initiative reflects a certain myopia: the landfill destroyed Bar Beach, once a popular public space in a city with no large parks and few major squares or monumental avenues. It’s not obvious whether the existing infrastructure can support such a large development so far off the mainland; as it is, Victoria and Lagos Islands are accessible only through a gauntlet of traffic choke points. The development is also aimed at a tiny upper sliver of an overwhelmingly poor city. “The plan is to create a Dubai and just ignore people who can’t afford to live in the proverbial Dubai, which describes most of the population,” says Olaolu Ogunmodede, a researcher at the Lagos-based Center for Public Policy Alternatives and an editor at The Republic, of the Lagos state government’s approach. (The city is organized as a state within the Nigerian federal system.)

In nearby Ikoyi and Victoria Island, affluent Lagosians have little reason to venture too far, either—they live in gated estates, with their own security, garbage collection, electricity, and private bus services. One gets frequent reminders of how segmented Lagos is, how cordoned off its parts are from one another. Cut down a side street in Ikeja, and you’re suddenly in a squalid parallel world, where generators scream beside narrow mud streets, lined with freelancing numbers-runners and peddlers hawking broken clocks. The alley ends, and the modern downtown resumes again. From the Third Mainland Bridge, travelers can see the plush villas of Banana Island and Lekki glimmer in the distance at night, while the vast lagoon-side Makoko slum, less than 500 yards west of the six-mile-long causeway and home to an estimated 250,000 people, is invisible in the darkness. Makoko has become a transit point for timber from farther down the coast, creating yet another vibrant hyper-local poverty economy. You can smell the tang of burning garbage and wood from the bridge whenever traffic slows.

Cheta Nwaze, a researcher at SBM intelligence, offers more insight into the city’s divisions. Nwaze and another SBM analyst, Ikemesit Effiong, meet me at Seven Eagles Spur, a diner-style restaurant inside Ikeja’s City Mall, decorated in images of southwestern American desert highways and chiefs in feather headdresses. Nwaze informs me that, a decade ago, the land that the mall now occupies was a slum. Residents were removed with a minimum of due process or public deliberation—still the standard procedure for any big-ticket Lagos development project. The mall has a KFC and a Nike store, and our lunch bill comes out to 9,100 naira, or $25. The people who had lived on the site of the future mall probably never imagined such a thing. “You give someone 9,100 naira and tell them to kill someone, and they will do it,” Nwaze says, only half-joking.

Lagos is booming. Credible estimates put the population at 17 million or 18 million, but the city defies understanding of its true scope. “Most Nigerians can’t be accessed even by the government,” Effiong notes. This relative lack of data could turn out to have broader significance, since the world is sure to look more like Lagos in the coming decades. An estimated 54.5 percent of the global population now lives in cities, but urbanization is less complete in the developing world. Slightly more than half of Asia’s population, and nearly 60 percent of Africa’s, still lives in rural areas. The number of cities with 500,000 inhabitants or more is expected to grow by 80 percent in Africa alone between now and 2030, and the ten cities that the UN projects to cross the 10 million–inhabitant “megacity” threshold by 2030 are all in developing countries. By 2030, some 730 million people, or 8.9 percent of the people on earth, will live in these megacities, up from the current total of 500 million, or 6.8 percent. Success has made Lagos an unnerving glimpse into the near future.

This constant flux can make for a verdant creative environment. Jumia and iRoko, West Africa’s leading e-commerce and entertainment streaming services, respectively, are regionally important companies founded in Lagos during the past decade. Music and movies produced in the city dominate West Africa and beyond—it was a Lagosian, Wizkid, who appeared alongside the Canadian pop star Drake in his 2016 megahit “One Dance.” As Edet Okun, an assistant curator at Lagos’s Nimbus gallery explains, the city has also fueled a burgeoning art market. “The money is here, and you have a high concentration of people,” Okun says, guiding me through a collection that includes traditional Ife bronzes, as well as striking monochromatic abstract works from Nigerian artist Olu Okekeanye.

Attracting Nigerians of every description, Lagos offers hope for a country often defined by its religious, regional, and ethnic cleavages. It is the exception to Nigeria’s fault lines, “probably the one place in the country where, regardless of where you came from, you can feel like you belong,” one Nigerian told me. For some Lagosians, the rationalized marketplace of the city is also the only way of escaping a dead-end village economy, in which labor is a social or familial obligation, rather than a source of money and freedom. “A lot of these many odd jobs that people do for free in rural areas, people pay for in Lagos,” says Ray Ekpu, cofounder of the magazine Newswatch. Ekpu moved to Lagos from Nigeria’s southeast in 1980 and has seen the worst of the city: he was imprisoned six times during military rule, and a close colleague at Newswatch died in a mail-bomb attack in 1986 that many suspected was linked with the magazine’s work. “People come searching for the bright lights,” Ekpu observes. “They think they can find a good life here. Some of it is true. Some of it is a myth. They think if they can get here, they can find something to do.” That Lagosian myth—of opportunity and an escape from Nigeria’s various social and political ills—has an intense hold over the country.

Infrastructural lapses aside, Lagos uneasily embodies one of civilization’s fundamental divides: the split between the city and the provinces, between a flagging periphery and the center toward which that periphery gravitates. The numbers reflect an astounding imbalance. Lagos contributes more to Nigeria’s GDP than any other state, and twice as much as the second highest-ranked state. Only 214 Nigerians pay 20 million naira ($56,000) or more in taxes each year; all live in Lagos, which collects some 39 percent of Nigeria’s internally generated revenue. Lagos state governor Akinwunmi Ambode has claimed that 60 percent of the country’s industrial and commercial business takes place in his city.

Click through to read the whole thing.

from Aaron M. Renn

America’s Aging Counties and Migration Destinations

Here are a couple of quick hit items. The Census Bureau has out a press release touting new data showing the Midwest has the large number of counties where the media age is declining. But what we see is that it is really more the Great Plaines by common view, and the Great Lakes area most people think of as the Midwest continues to age.

And over at New Geography, Laura Dzwonczyk has some interesting charts and maps of migration using what looks like ACS migration data. Here’s one sample:

from Aaron M. Renn

The Decline of Boating

Monroe Harbor in Chicago. Photo Credit: Diego Delso, CC BY-SA 3.0

The Chicago Tribune ran an interesting story on the declining number of boats moored in some of Chicago’s lakefront harbors.

Experts in the industry offer a few explanations for struggling harbors like Monroe and 31st Street in this post- recession era: An aging demographic of boaters, competition from other marinas, the time-intensive nature of the sport and the fact that many boat owners want slips — which allow boaters to park right at the dock — because they’re generally more convenient, if more expensive. Monroe Harbor only has moorings which require boaters to hail a tender out to their boats.

In 2007, there were 980 total moorings at Monroe Harbor and all of them were occupied, according to Westrec. With hundreds of moorings removed in recent years, there were 390 available at the start of July and 373 were snapped up.

Those in the local boating community say the sport is on the rebound. But the overall occupancy rate in Chicago harbors is still significantly lower than the mid 2000s. In 2007 Westrec told the Tribune the harbors were 99 percent occupied with 5,100 spaces. As of June, the occupancy rate was at 80 percent with 4,281 of the 5,339 spaces taken.

It’s surprising that even has Chicago is experiencing an in-city white collar residential and employment boom, boating is in decline.

CityLab also recently wrote about the declining Millennial interest in country clubs and golf. CityLab follows the trend of speaking of this this mostly in terms of Millennial high mindedness. But they lead with a more likely cause: not enough money. Millennials today are burdened with student loans and paying a high fraction of their salary for an apartment in the neighborhoods they desire. This makes it harder for them to afford club expenses, even for hip places catering to them. Even in New York City, there are probably more old line city clubs than there are new school places like SoHo House.

Obviously each new generation is going to have different consumer preferences than their predecessors, and this challenges established institutions to constantly reinvent themselves to stay relevant. But the comparative lack of available income resulting from real declining salaries, student loan debt, and high real estate costs is going to prove a structural challenge for people hoping to induce Millennials to open their wallets for what are at core luxury purchases.


from Aaron M. Renn

Nashville Hot Chicken and the Pork Tenderloin: A Tale of Two Sandwiches

One of the things you’re sure to hear about if you read up on Nashville is a local dish called “Nashville hot chicken,” a local culinary specialty.

Prince’s hot chicken, CC SA-2.0

To listen to people talk about it, you’d think eating Nashville hot chicken was some kind of ancient local religious rite. In fact, Nashville hot chicken appears to be a dish of fairly recent provenance. According to the Wikipedia entry for it:

Anecdotal evidence suggests that spicy fried chicken has been served in Nashville for generations. The current dish may have been introduced as early as the 1930s, however, the current style of spice paste may only date back to the mid-1970s. It is generally accepted that the originator of hot chicken is the family of Andre Prince Jeffries, owner of Prince’s Hot Chicken Shack. She has operated the restaurant since 1980; before that time, it was owned by her great-uncle, Thornton Prince. Although impossible to verify, Jeffries says the development of hot chicken was an accident. Her great-uncle Thornton was purportedly a womanizer, and after a particularly late night out his girlfriend at the time cooked him a fried chicken breakfast with extra pepper as revenge. Instead, Thornton decided he liked it so much that, by the mid-1930s, he and his brothers had created their own recipe and opened the BBQ Chicken Shack café.

In other words, it’s possible that this dish has been around a while in some form in the local black community, but what we know today as the Nashville hot chicken is from the 70s or 80s. A Midwestern reader with longstanding family ties to Nashville told me a while back that at least through the 1990s he never heard hot chicken mentioned there. I read that Nashville hot chicken is now supposedly popular around the south, but having spent extensive time in Alabama 10-15 years ago, I never once came across it there.

An enterprising journalist should write a true history of hot chicken, but it appears that this was a minor product, until fairly recently mostly limited to the black community and not even especially prevalent there.

Yet once again Nashville managed to take something about itself and create a mythos around it to build the brand. I just read this week that Pringles is now releasing a Nashville hot chicken flavor.

Being from Indiana I can’t help but contrast this with the pork tenderloin sandwich, which may be served regionally in various places (supposedly especially in Iowa) but is a particular speciality in Indiana.

I did not eat these growing up. The far Southern Indiana area I grew up in had a strong Kentucky influence and orientation, and tenderloins were not a thing there. I suspect there are other parts of the state where that’s also true. For example, I’ve never seen one on a menu in Northwest Indiana, nor have my many friends from there ever referenced it. But the pork tenderloin is fairly ubiquitous in Central Indiana, where it is on practically every bar and grill menu. I’m not sure of the actual origins and history of this product either, but it’s been around at least as long as Nashville hot chicken and in a much more extensive way.

Yet, as typical for Midwest food products, this never became a branding element outside Indianapolis or outside the state. (A better example might be Cincinnati style chili, which is better known, but never became “cool” in any sort of national way, though Skyline chili tried to expand regionally a while back).

Why was Indianapolis unable to do with the tenderloin what Nashville did with hot chicken?

For one thing, it never actually tried. The most telling thing in this regard is that I’ve never once seen or heard of a chef at any of the new hip restaurants in Indy do an interpretation the pork tenderloin. My wife lived her entire adult life in Indy until recently and she couldn’t think of one either, though it’s possible it happened recently.

Go to the restaurant page of the Indianapolis tourism agency and there’s no mention of a pork tenderloin sandwich, nor a picture of it. There’s nothing on the Indianapolis Monthly dining page either, though I know they occasionally do cover tenderloins. One place that I have seen do something with it is north suburban Hamilton County, which has an annual tenderloin trail event – conveniently happening this month – with discounts at 27 different places on “Tenderloin Tuesdays.”

I again and again see that Southern cities start with little to nothing, and yet what they do have they treat as the greatest things of all time. As illustrated by Nashville hot chicken, they’ve also looked at their often neglected black community as a source of local cultural identity.

The Midwestern cities not only fail at this consistently, they typically don’t even try. There are tons of regional food products in the Midwest – Chicago style dogs, St. Louis pizza, etc. – but other than Chicago’s deep dish pizza, they have been dramatically underexploited in the marketplace even as these cities say that they are very keen to raise their brand profiles.

Note: I will be on vacation next week and likely not posting. I will also be traveling extensively during July and may only be able to post intermittently.

from Aaron M. Renn

Now Even Universities Moving to the Sunbelt

Photo Credit: Runner1928, CC BY-SA 3.0

Institutions like universities are highly regarded as community anchors because they are seen as geographically immobile, unlike factories or people.

But as higher education gets squeezed, will this change?

Law schools are among those feeling the heat right now. A news report out of Tennessee reports that the Valparaiso University law school in Northwest Indiana is contemplating a move to Tennessee to become part of Middle Tennessee State University.

This is only one program, not an entire university. But it’s pretty extraordinary news.

Let’s not get carried away. Universities are still largely fixed. But this shows the extent to which survival challenges may dictate radical actions by universities, particularly for less than elite/flagship schools in weaker market communities.

from Aaron M. Renn

Lone Star Carpetbagger

Photo Credit: Robert Hensley, CC BY 2.0

I subscribe to Jeff Wood’s must read Overhead Wire daily newsletter. Today I clicked on a link that looked interesting called “Making Dallas a Desirable Place to Live.” Looking at the byline, I was not surprised to see that it was written by Patrick Kennedy, who seems to write every other piece I come across on Dallas.

Kennedy is a fascinating fellow whom I met once a few years back. This blog post isn’t really a profile of him but rather a sketch of why I think he’s someone who ought to have a proper analysis done.

Kennedy is a classic carpetbagger. While he doesn’t use the term, he all but cops to the charge. In this 2015 local profile of him says:

When Kennedy finished school, he had to decide where to ply his craft. Many of his friends went to the “design capitals,” cities like Chicago, Seattle, D.C., and San Francisco, places noted for their vibrant street life and communities of designers and architects. But Kennedy wanted something else. Having seen how Lockwood had transformed places like Chattanooga and West Palm Beach, Florida, Kennedy wanted a place where he could make a big impact. He had two requirements for a city: it had to be warm, and it had to be car-centric.

“I wanted to go to the most sprawling place I could find,” he says. “Where is better than Dallas?” In 2002, Kennedy moved to the city without ever having visited it.

Patrick Kennedy moved to Dallas specifically because a) he was looking for an opportunity to be an agent of civic change and b) Dallas was everything he didn’t like.

What’s unusual is that a guy who moved to Dallas specifically because he didn’t like it managed to become extremely influential. I’m not sure I can point to exactly what policies he has influenced, but his mindshare there is very high. I had dinner with a local bigshot a while back and he was telling me things Dallas needed to do, all of which came from Patrick Kennedy. Many of the local elite are now singing from his hymnal.

Kennedy has managed to pull off a remarkable feat: he appears to be totally contemptuous of everything about Dallas while simultaneously coming across as a city booster straight from a Chamber of Commerce brochure.

I can’t help but contrast his getting traction in Dallas with the failure of any equivalent urbanist activists in Rust Belt cities. For example, Randy Simes of the now largely quiescent Urban Cincy web site is a Cincinnati native, but otherwise has some similarities to Kennedy. He’s an urban planner who has worked on elite projects at elite firms. He’s a relentless booster of Cincinnati. He wants to move it in a more progressive urbanist direction. If anything, he’s far more positive than Kennedy. He rarely directly criticized the city, and the web site founded was very positive. He’s also more realistic and less idealistic than Kennedy. Yet Simes never had the impact on the civic leadership that Kennedy did.

On the one hand, this probably says something about the cultural difference between the Midwest and Texas. The Sunbelt boomtowns have embraced newcomers and new ideas with open arms. The Midwest not so much. For example, there’s a classic book about Chicago politics called We Don’t Want Nobody Nobody Sent, which basically sums the place up.

But it would be worth doing a case study on Kennedy to see what could be learned from him that others might be able to try in other cities. A few things I note from afar are:

  • He had no personal connection to Dallas and hence could see it as his project, without the emotional complications that come from trying to make an impact in your hometown. This also had the added benefit of his not being burdened by existing social ties or an existing slot in a social hierarchy, similar to a consultant.
  • He’s benefitted enormously from the megaphone of D Magazine.
  • He went “all in” on Dallas and by all accounts has skin the game for his preferred lifestyle (e.g., he doesn’t own a car).
  • He figured out that unpleasant truth is acceptable if used in the service of orthodox urbanists ends. For example, Wendell Cox often points out the weakness of downtown job markets and population dynamics of most cities outside of a small handful. He’s roundly despised and dismissed for this. But Kennedy has used pretty much the same findings as an argument in favor of traditional urbanist policies, whereas most urbanist advocates tend to be overly pollyannish (e.g., bragging about the large number of apartments under construction downtown). Uptown Dallas has tons of new skyscrapers in it, but Kennedy says it’s not nearly enough. If anything, he overstates the negatives. For example, that piece about making Dallas a desirable place to live is ridiculous. The city of Dallas has over 1.3 million people – an all time population high. It has grown its population every single decade since 1860, yes 1860. Dallas is a very desirable place to live; Kennedy is projecting here.
  • While he’s not necessarily hostile to Dallas a region, he focuses primarily on the city, and has been able to leverage the fact that the city political and business structure has interests that diverge from the region as a whole. (Most Midwest boosters heavily tout metropolitan statistics, which I don’t see Kennedy do nearly as much).

I should point out that my recent paper on ten infrastructure projects we should build included the I-345 teardown, which is one of Kennedy’s initiatives.

My impression is that Kennedy has been unusually effective in changing the urbanist conversation within the power structures of Dallas. This makes him worthy of a detailed case study or Dewar’s Profile to identify characteristics and strategies that could be tried elsewhere. As with everything, a good chunk of his success may well be random, but there’s no harm in trying to see if there are things that might be reproducible.

from Aaron M. Renn