BRADENTON, Fla. — The Louisville-Jefferson County Metro Government is negotiating the use of a public-private partnership and bond financing to assist in the reopening of the Kentucky Kingdom theme park.
Six Flags Entertainment Corp. operated the 60-acre park until early last year when the company was unable to negotiate a new lease for the property, which is owned by the Kentucky State Fair board. Six Flags continues to operate 19 parks in the U.S., Mexico, and Canada.
Louisville Mayor Greg Fischer is negotiating a deal to fund the $50 million needed to make improvements and reopen the park with the state as another public financing partner and local developer Ed Hart as an equity partner.
Hart’s firm, Kentucky Kingdom Redevelopment Co., would operate the park. A spokesperson for the firm declined to comment because negotiations are still pending.
Fischer has presented a plan in which Louisville would issue $17.5 million of general obligation bonds later this year secured, in part, by parking revenues and a 1.25% existing occupational tax collected on park employee wages. Another source of security for the debt may be park revenues backed by a third-party guarantee, according to the city’s chief financial officer, Steve Rowland.
The Legislature was approached earlier this year about issuing bonds for the project but negotiations could not be completed since this is the second year of a biennial budget, he said.
Lawmakers will be asked to approve a $30 million bond issue for the project during next year’s regular session.
Hart is investing $7 million in the project, according to Rowland.
“What makes this project unique from the city’s perspective is we originally agreed in January that if the state issued bonds they would receive 10% of the [park’s] proceeds in excess of $20 million on an annual basis,” he said. “That is in our proposal.”
If the park is sold, Louisville would get 30% of the net profits from the sale and sufficient funding to pay off the bonds.
“Our approach has been that we want to support the project,” Rowland said. “We think it’s important not only for employment but as recreation for our citizens and as an enticement to bring tourists in.”
In March, the jobless rate in Kentucky and the Louisville-Jefferson County Metropolitan Statistical Area was 10.2%, according to the Bureau of Labor Statistics.
Once all improvements are made the park is expected to generate 1,250 full-time jobs.
The project is backed by the Greater Louisville Inc.- Metro Chamber of Commerce, which also serves as the economic development agency, said spokeswoman Carmen Hickerson.
“We are very supportive of the effort to get Kentucky Kingdom opened,” she said. “Its part of the whole package of what people are looking for in terms of entertainment options, and it’s an economic development tool because it creates jobs.”
The city’s proposal was presented to the fair board and the developer last week for review.
It is not yet clear if the bonds will be sold as taxable or tax-exempt. Rowland said that the fair board is a unit of state government that owns and leases the public land where the park sits so there may be an opportunity to sell some or all of the bonds as tax-exempt.
The plan of finance is structured to limit risk to taxpayers even though the city would lend its GO pledge to reduce borrowing costs, he stressed.
“We think that in the business plan that Kentucky Kingdom has developed there would be more than sufficient money to service the bonds and the city’s tax dollars would not be needed to service the debt,” Rowland said.
An official presentation about the finance plan has not been made to the 26-member Louisville Metro Council because negotiations are ongoing.
However, Council President Jim King and Council member Marianne Butler, who is chairwoman of the budget committee, have expressed concerns about using the GO pledge and said they would prefer financing the project with industrial development revenue bonds.
Rowland said he has had discussions with Butler and King about financing options and other elements of the agreement.
“I believe we can issue the debt at less cost if we go the GO route and the agreement calls for revenues to be assigned to us so that there is limited risk to the taxpayers,” he said. “We won’t bring a proposal to the Council until we have an agreement with the developer and with the state fair board.”
Rowland said it is hoped that a deal can be finalized soon so the city can issue bonds later this year and still provide enough lead time to make some improvements and open the first phase of the park in the summer of 2012.
The second phase of park improvements would be done after the state approves and sells its bonds, most likely next year after the legislative session.
“We feel comfortable going ahead and issuing $17.5 million,” Rowland said, noting that state officials are supportive of the project.
When the park is fully developed, it is expected to once again become the regional attraction that it was prior to its closing.
“We think we’ve put forth a proposal that works for all the parties and protects the taxpayers,” he said. “We fully anticipate that we will be able to reach an agreement.”
Louisville-Jefferson County had $354.5 million of general obligation bonds outstanding as of June 30. Occupational and license taxes are the primary collateral for the bonds.
The debt is rated AAA by Fitch Ratings, Aa1 by Moody’s Investors Service, and AA-plus by Standard & Poor’s.