May 30, 2014

Conventions, Sports & Leisure International

520 Nicollet Mall, Suite 440 • Minneapolis, Minnesota 55402 • Telephone 612.294.2000 • Facsimile 612.294.2045

May 30, 2014

Ms. Karen Williams

President & Chief Executive Officer

Louisville Convention & Visitors Bureau

401 West Main Street, Suite 2300

Louisville, Kentucky 40202

Dear Ms. Williams:

Conventions, Sports & Leisure International (“CSL”) is pleased to present this report

regarding the economic and fiscal impacts generated by the operation of the KFC Yum!

Center since its opening. The attached report summarizes our research, analyses and

findings.

The information contained in this report considers various sources, including historical

KFC Yum! Center operations, University of Louisville sports operations, results of patron

intercept surveys, and other information developed from research of the market,

knowledge of the industry, and other factors, including certain information provided by

you.

We sincerely appreciate the opportunity to assist you with this project, and would be

pleased to be of further assistance in the interpretation and application of the study’s

findings.

Very truly yours,

CSL International

����

��������������� � �

I. INTRODUCTION ........................................................................................ 1

II. OVERVIEW OF KFC YUM! CENTER ................................................................ 2

III. STUDY METHODOLOGY .............................................................................. 3

IV. SURVEY RESULTS ...................................................................................... 8

V. ECONOMIC & FISCAL IMPACT ANALYSIS ....................................................... 13

����

�� ����������

1

Conventions, Sports, & Leisure International (CSL) was retained by the Louisville

Convention & Visitors Bureau (LCVB) to develop an independent estimate of the

quantifiable benefits of the KFC Yum! Center (Center) to Louisville since its opening.

Typically, and for purposes of this report, quantifiable effects are characterized in terms

of economic impacts and fiscal impacts. Economic impacts are conveyed through

measures of direct spending, total output, personal earnings, and employment. Fiscal

impacts denote changes in tax revenues.

The assumptions underlying the estimates of economic and fiscal impacts are based on

the historical operations of the Center over the four-year period since its 2010 opening,

the results of 1,100 random patron-intercept surveys conducted at various Center

events, industry data, the use of IMPLAN multipliers, and CSL’s experience in quantifying

the economic and fiscal impacts of similar projects.

The study’s findings are presented in the following sections:

II. Overview of KFC Yum! Center

III. Study Methodology

IV. Survey Results

V. Economic & Fiscal Impact Analysis

This study is designed to assist the Louisville Convention and Visitors Bureau, the City of

Louisville and other stakeholders in understanding the positive impacts that the KFC

Yum! Center has had on the Louisville community, and should not be used for any other

purposes. This report should be read in its entirety to obtain the background, methods

and assumptions underlying the findings.

����

���������������������������

2

The KFC Yum! Center is located in downtown Louisville, Kentucky and is home to the

University of Louisville men’s basketball program and women’s basketball and volleyball

programs. The multi-purpose arena is owned by the Louisville Arena Authority and

operated, as of July 1, 2012, by third-party facility manager, Anschutz Entertainment

Group (AEG). Prior to AEG assuming operating responsibilities, the Kentucky State Fair

Board was the sole managing agent of the Center. In 2013, the Center was ranked 53 in

the world (and 25th

in the country) in terms of ticket sales.

Since hosting its first event, in October of 2010, the Center has evolved into a multi-

faceted sports, entertainment, and event venue, hosting an average of over 100 events

annually. In addition to hosting nearly 50 pre-season and regular season home games

for the University of Louisville, the Center attracts a wide range of other events,

including concerts, family shows, other sporting events and conventions. Notable

concert acts have included Taylor Swift, Justin Bieber, Lady Gaga, the Eagles, Elton John,

Beyonce, Justin Timberlake, Katy Perry, Bruno Mars, and George Strait. Additionally, the

Center has acted as host for numerous major post-season NCAA basketball and

volleyball tournament events.

The table below illustrates the number of events held annually at the Center since its

opening in 2010.

������� ������� ������� ����������

�� ��

��� ����������

�� �� ��� ��� �

��� ���� �������������� ������������������� ������������������������������������� ��� � ������

��� !������������" ������ ������!����������������!"#���

$���%��&����� ��#�������!"���������'(��)!"*����������� ������ ��!"����������������#��+��������� ������������

,�!���%��'(��)!"*��������- � ��"���.�����

First Four Years of Operation

KFC Yum! Center Events

The KFC Yum! Center has successfully attracted events that generate economic impact,

and that enhance the entertainment options and quality of life of area residents. The

Center has contributed directly to a stronger Louisville economy by increasing visitation

to and spending in the City and providing and supporting jobs in the local marketplace.

The additional, qualitative, “quality of life” benefits, in the form of increased vibrancy

and excitement in downtown Louisville, are also realized through this new and dynamic

facility. These non-quantifiable benefits are important to recognize when considering

overall impacts. As the quantitative and qualitative effects continue to flow-through

and enhance the attractiveness of downtown Louisville, development has, and will likely

continue to follow, providing increasingly higher levels of activity and impact into the

future.

����

����������������� ������

3

The KFC Yum! Center provides significant quantifiable benefits to the City of Louisville

and the Commonwealth of Kentucky. Typically, and for purposes of this report,

quantifiable effects are characterized in terms of economic impacts and fiscal impacts.

Economic impacts are conveyed through measures of direct spending, total output,

personal earnings, and employment. Fiscal impacts denote changes in tax revenues.

Note that we have not audited information provided to us by third parties.

Direct Spending

In assessing the economic impact associated with the Center, the first important step

involves defining and quantifying the existing sources of direct spending. When

analyzing the direct spending generated by Center events, three major areas of

spending will be measured, as follows:

In-Arena Spending – Spending by Center patrons within the Center, including the

purchase of admission tickets, food and beverage, and merchandise.

Out-of-Arena Spending – Spending by Center patrons, at other local businesses,

that takes place in conjunction with attendance at the Center event, including

transactions at area restaurants, bars, hotels, retail centers, service stations and

other businesses.

Other Arena Spending – Spending that takes place within the Center or as part of

general Center operations that doesn’t necessarily get captured in the In-Arena

category, such as naming rights, sponsorships, certain premium seating charges,

and other various event and non-event revenue.

Gross direct spending represents the aggregate of the three streams of revenue defined

above. Spending flows to various economic entities, including the Center, restaurants,

hotel operators, retail businesses and other such entities.

Multiplier Effects

Economic impacts are further generated through re-spending of the direct spending.

The total impact is estimated by applying an economic multiplier to initial direct

spending to account for the total economic impact. The total output multiplier is used

to estimate the aggregate total spending that takes place beginning with direct spending

and continuing through each successive round of re-spending. Successive rounds of re-

spending are generally discussed in terms of their indirect and induced effects on the

area economy.

����

����������������� ������

4

Each is discussed in more detail as follows:

Indirect effects consist of the re-spending of the initial or direct expenditures.

These indirect impacts extend further as the dollars constituting the direct

expenditures continue to change hands. This process, in principle, could

continue indefinitely. However, recipients of these expenditures may spend all

or part of it on goods and services outside the market area, put part of these

earnings into savings, or pay taxes. This spending halts the process of

subsequent expenditure flows and does not generate additional spending or

impact within the community after a period of time.

Indirect impacts occur in a number of areas including the following:

• wholesale industry as purchases of food and merchandise products are

made;

• transportation industry as the products are shipped from purchaser to

buyer;

• manufacturing industry as products used to service complex vendors and

others are produced;

• utility industry as the power to produce goods and services is consumed;

and,

• other such industries.

Induced effects consist of the positive changes in spending, employment,

earnings and tax collections generated by personal income associated with or

directly resulting from the Center and Center events. Specifically, as the

economic impact process continues, wages and salaries are earned, increased

employment and population are generated, and spending occurs in virtually all

business, household and governmental sectors. This represents the induced

spending impacts generated by direct expenditures.

Indirect and induced effects are calculated by applying the appropriate multipliers to

the net new direct spending estimates. The appropriate multipliers to be used are

dependent on certain regional characteristics and also the nature of the expenditure.

Generally, an area which is capable of producing a wide range of goods and services

within its borders will have high multipliers, a positive correlation existing between the

self-sufficiency of an area's economy and the higher probability of re-spending occurring

within the region. If a high proportion of the expenditures must be imported from

another geographical region, lower multipliers will result.

����

����������������� ������

5

The following graphic illustrates the flow of direct spending through the successive

rounds of re-spending including indirect and induced effects.

The multiplier estimates used in this analysis are based on the IMPLAN system. IMPLAN,

which stands for Impact Analyses and Planning, is a computer software package that

consists of procedures for developing local input-output models and associated

databases. Input-output models are a technique for quantifying interactions between

firms, industries and social institutions within a local economy.

IMPLAN was originally developed by the U.S. Forest Service in cooperation with the

Federal Emergency Management Agency and the U.S. Department of the Interior's

Bureau of Land Management to assist in land and resource management planning.

Since 1993, the IMPLAN system has been developed under exclusive rights by the

Minnesota Implan Group, Inc. which licenses and distributes the software to users.

Food & Merchandise Wholesaler

Transport Company Manufacturers Energy/Utilities

Numerous Other Industries

Business Services

Household Spending Governmental Spending All Other Economic Sectors

KFC Yum! Center Revenue

Ancillary Community Spending

The

����

����������������� ������

6

Currently, there are thousands of licensed users in the United States including

universities, government agencies, and private companies.

The economic data for IMPLAN comes from the system of national accounts for the

United States, based on data collected by the U. S. Department of Commerce, the U.S.

Bureau of Labor Statistics, and other federal and state government agencies. Data are

collected for 440 distinct producing industry sectors of the national economy

corresponding to the Standard Industrial Categories (SICs).

Industry sectors are classified on the basis of the primary commodity or service

produced. Corresponding data sets are also produced for each county and zip code in

the United States, allowing analyses at both the city and county level and for geographic

aggregations such as clusters of contiguous cities, counties, individual states, or groups

of states. For purposes of this analysis, economic multipliers specific to Jefferson

County were used.

Data provided for each industry sector include outputs and inputs from other sectors;

value added, employment, wages and business taxes paid; imports and exports; final

demand by households and government; capital investment; business inventories;

marketing margins and inflation factors (deflators). These data are provided both for

the 440 producing sectors at the national level and for the corresponding sectors at the

local level. Data on the technological mix of inputs and levels of transactions between

producing sectors are taken from detailed input-output tables of the national economy.

National and local level data are the basis for IMPLAN calculations of input-output tables

and multipliers for geographic areas. The IMPLAN software package allows the

estimation of the multiplier effects of direct spending (also termed “changes in final

demand”) for one industry on all other industries within a local economic area.

The multiplier effects estimated in this analysis include:

• Total Output represents the total direct, indirect, and induced spending effects

generated by Center operations. Total output is calculated by multiplying the

appropriate total output multiplier by the estimated direct spending within each

industry.

• Personal Earnings represent the wages and salaries earned by employees of

businesses impacted by Center operations. Personal earnings are calculated by

multiplying the appropriate personal earnings multiplier by the estimated direct

spending within each industry.

• Employment is expressed in terms jobs supported by the different levels of

spending that occur as a result of Center operations. Employment is calculated

����

����������������� ������

7

by dividing the appropriate employment multiplier by one million, and then

multiplying by the estimated direct spending within each industry.

Fiscal Impacts

In addition to the economic impacts generated by the

Center operations, the public sector benefits from

increased tax revenues. In preparing estimates of

fiscal impacts, total tax revenues attributable to the

direct spending are estimated, as well as estimates of

the effect of total output and earnings on the tax

collections. Tax revenues estimated herein include

those generated through state sales taxes and other

various visitor-industry related taxes applied to hotel

direct spending.

Primary Data Collection

In order to accurately quantify initial direct spending that has occurred since the Center

opened, CSL obtained operational history from KFC Yum! Center management, including

event levels by event type; attendance by event type; average ticket price by event

type; in-arena per-capita spending for food, beverage and merchandise by event type;

and arena financial operating information showing additional revenue streams.

Additionally, over 1,100 intercept surveys, representing groups consisting of 3,200 total

attendees, were completed with KFC Yum! Center patrons during the months of March

and April of 2014. The results of the patron-intercept surveys are the primary basis for

developing assumptions related to fan origination and out-of-arena spending, both of

which are essential to determining direct spending. Detail on the survey process and

results are provided in the next section of this report.