Nine months after a Frankfort committee’s official request, Kentucky Attorney General Jack Conway’s office released a legal opinion last Friday on questions concerning a dispute over whether the Louisville Arena Authority owed the Kentucky State Fair Board a $7.5 million reimbursement for business lost at Freedom Hall due to the new downtown Yum! Center, in addition to whether the authority’s board members had conflicts of interest.
Though Conway finally released the opinion — saying the Arena Authority did not owe any money to the Fair Board — these findings were prefaced by stating that it was “not a formal opinion of the Attorney General.” Additionally, the opinion did not make any comments on the alleged conflicts of interest among those authority board members, saying it did not know who or what the question was referring to.
Rep. Jim Wayne of Louisville — a member of the Capital Projects and Bond Oversight Committee that made the request last summer — tells Insider Louisville he is concerned about several aspects of Conway’s opinion, including the fact that it provides no clarity to what the committee sought answers for.
“Well, I’m not sure why when the chairs requested an attorney general opinion we got one that was not really an attorney general opinion,” says Wayne. “That seems rather odd from the start.”
Of the informal opinion, Wayne takes the most issue with it saying that the General Assembly legislation of 2006 — putting the arena construction in motion and stating that the Fair Board must receive a net negative reimbursement from the Arena Authority — was rendered moot once the management agreement of the Fair Board to operate the Yum! Center was terminated in 2012.
“The concern that I have is he may not have understood that it was the intent of the General Assembly that the lost revenue from the fairgrounds be compensated and paid back by the Arena Authority,” says Wayne. “That was part of the agreement we made in passing the legislation. It was definitely the legislative intent in that budget bill. That is separate from the management agreement, and he seems to have conflated the two, so when the management agreement terminated, that terminated that responsibility, too.”
The Capital Projects and Bond Oversight Committee meets again Tuesday afternoon, where Wayne says he will formally ask their attorneys to review Conway’s opinion. He says he is concerned that on top of the Fair Board not receiving this $7.5 million, that cash-strapped state agency is about to ask for more money in next year’s budget, which will require taxpayers to pick up more of their bill.
“This is a major issue, because what the Fair Board is doing is preparing to come to the General Assembly and ask for more money to enhance the fairgrounds facility, and we don’t have the money,” says Wayne. “Because of we don’t have tax reform and any revenue coming in, we’re cutting across the board everything… It’s not right for the taxpayers to have to then be squeezed again because of the arena.”
Wayne adds that since Conway’s office did not truly resolve this issue, the matter might have to be settled in court.
“What this could set up is a situation where someone could file a suit to clarify the issue legally,” says Wayne. “That may be the only alternative we have… The aggrieved party could well be any taxpayer who has to cough up more money for the state fairgrounds because they are not getting what some would say is justly due to them from the arena.”
A longtime critic of the way the financing of the arena was structured, Wayne says that while arena and city leadership have been able to keep their “house of cards” stable by meeting debt payments — despite their tax revenue falling well under projections and their debt downgraded to junk status — taxpayers deserve more transparency around the arena’s troubled financing.
“So much of this is due to the power elite in Louisville wanting to make this thing work,” says Wayne. “And for the sake of our community, we all want it to work. But it would be so much easier if we don’t play these games. We should just lay out what the financial needs are and find a way to do this above the board without a lot of mucking around.”
Wayne also was concerned that Conway decided not to weigh in on the potential conflicts of interest of Arena Authority board members, particularly their close ties to the University of Louisville and its athletics department. Some observers have advocated restructuring the arena’s lease with the university — saying U of L is taking too large a share of the profit, making the arena reliant on the city’s maximum $10 million payment each year to make debt payments — and point to these these relationships as why that has not happened.
“(Conway) said he wasn’t given any specifics,” says Wayne. “Well, that’s easy to address: by finding out who the members of the board are and then finding out what their other interests are… There are serious questions about conflicts of interest across the board.”
While Wayne is concerned about Conway’s informal opinion, a statement given to IL from current Fair Board CEO Rip Rippetoe appears to be conceding the argument he’s made over the past two years that they are still owed this money by the Arena Authority.
“The Kentucky State Fair Board respects the Attorney General’s informal opinion expressed in the April 17 letter regarding the net negative financial impact reimbursement,” wrote Rippetoe. “We will continue to work with the arena authority as we move forward to provide services and events for this community and for the Commonwealth. It is of utmost importance to the Fair Board and to the KFC Yum! Center that we work jointly to increase the economic impact of bringing events and business to the community.”
Through his spokeswoman, Rippetoe declined to reply to follow-up questions asking if he actually agreed with Conway’s opinion, and whether he would rule out future litigation against the Arena Authority to collect the $7.5 million.
Sen. Chris Girlder, the Republican chair of the committee that requested the opinion of Conway, has not replied to IL’s request for comment. Neither has Sen. Chris McDaniel — a member of the committee who has been a vocal critic in the past few years of forgiving this debt, and authority officials — and Commissioner of Agriculture James Comer, who is a member of the Fair Board’s board of directors. Comer and McDaniel are running for governor this year on the same ticket, hoping to face Jack Conway in this fall’s general election.