UO Pitches Plan for New Arena

The State Legislature's Special Session is underway today, and one issue that lawmakers will address in the coming days is a proposal from the University of Oregon to use state bonds to help build a new basketball arena.

From the Oregonian:

University of Oregon leaders will make their biggest pitch ever to the Legislature this month, requesting $200 million in state-backed bonds to build the most expensive campus basketball arena in the nation.

Lawmaker approval would create a no-money-down, 30-year mortgage that the university plans to repay with arena revenues and athletic department donations.

UO's proposal pushes a debate held largely in faculty meetings to the floor of the Capitol: Is it appropriate to use public debt for a posh athletics venue while the state's universities struggle to support core academic programs?

Or is the plan, which requires no cash from the state, merely a creative way to replace an ancient arena and maintain the school's national edge in sports facilities?

The project's risk to taxpayers, who would be on the hook if UO couldn't repay the bonds, would be greatly diminished by a $100 million athletic department endowment created by Phil Knight, which university officials say could plug any financial gaps.

The proposal earned praise from members of the Joint Ways and Means Committee:

The Joint Ways and Means Committee last month approved sending the arena financing plan to the full Legislature. Co-chairman Sen. Kurt Schrader, D-Canby, praised the plan's ingenuity, a feeling shared by others.

"I'm in favor of the project," Sen. David Nelson, R-Pendleton, said. "In fact, I think we need more projects like this where you have people basically stepping up and saying, 'OK, we're going to help finance this for the good of Oregon, and we're not going to use taxpayer dollars.' "

Rep. Bruce Hanna of Roseburg, the House Republican leader, said he's impressed with the UO presentation.

"I have pretty good confidence that you're not going to see this become a general-fund obligation to the taxpayers," Hanna said.

But he acknowledged that many of his constituents have called with just that worry.

If revenues, annual athletic department donations and Knight endowment proceeds and principal don't cover arena bond payments, the university would dip into funds generated by dormitories and parking lots, Frohnmayer said. He added that such an event is so unlikely it's "theoretical," and has promised not to use academic funds to pay off arena debt.

Read the rest. Is the plan a good idea?


  • (Show?)

    I was open to the idea of the bonds based on the assumption that the Phil Knight endowment was obligated to take on the extra cost in case of a problem in paying off the loans.

    Then I heard that this wasn't just a new facility to replace an aging one, but would be the biggest in the country. Considering that UofO is in a rural area in a small state I consider this an absurd waste of funds and state bond obligations. This is nothing more than a monument to excess and Phil Knight. (Maybe that's redundant.) If Phil wants to build the biggest college basketball arena in the country he should feel free to do so on his nickle with no state support. Let's keep in mind that the university just announced that they intend to build a baseball stadium triple the size of the OSU national champions.

    Is UofO a university anymore or just an athletic boot camp?

  • Larry McD (unverified)

    This is not simply absurd, it's obscene.

    As the state abdicates its responsibilities in funding its instutions of higher education, the University of Oregon goes on a "no money down" $200,000,000 spending spree to build the most expensive basketball arena in the nation.

    As the academic standards and reputations of these schools sink to Mississippi community college levels, and the best and brightest local high school graduates rush for the state line at increasingly higher speeds... THESE PEOPLE WANT TO BUILD THE MOST EXPENSIVE TEMPLE TO A COLLEGIATE FIVE PERSON TEAM SPORT IN AMERICA! It's also the first university financing arrangement of its kind in the country. Better and lesser schools than this one build new non-academic facilities by conducting capital campaigns not by saying "If we build it, they will pay!"

    If this were a single family dwelling, it would be the equivalent of a multi-million dollar palace built on the Vernonia floodplain with sub-prime mortgage funds.

    The Faculty Senate is absolutely right. Stop this insanity now.

  • Jiang (unverified)

    Not one cent of public money, bond raised or otherwise, no public involvment period, if the public cannot access the games without paying full fee, as if they were not stakeholders.

    I'm tired of paying for stadia that sell their rights to broadcasters that black out the games to the people that raised the bond money. I understand about costs and sport realpolitik, but there is no reason the U of Os internet feed could not be free radio and at-cost video. They are taking a 100% corporate grab every dime mentatlity. Fine if that's how you want to run higher ed. But don't ask me for money to build your sports stadium if you only see me as a sales mark.

    Since U of O started this two years back, I have stopped following the games. Am I unique? How is that good for Ducks football? It's only good for the bottom line. I do not accept that all of our public institutions can simply think corporate=fraud without regard to their public service. Its a general phenomenon. I've lived in a lot of places, and the "service ethic" among Oregon public institutions is the worst I've ever seen. I actually heard an HR manager in Salem tell managers that "those who enter State government with idealistic sense of service to the public self-select out". I have never once heard the rampant cynicsim in OR government addressed when you ask to expand government through bond issues.

    It's the same issue. We are not here to finance your good times and self-appointed duties. Serve the public or don't ask for our help!

  • NorthCoastDemo (unverified)

    I am a U of O alum and a huge sports fan and Duck supporter..... and I think this is ludicrous. The numbers used to support this project by Kilkenny and the U are fantasy. What happens when the team is 500 and doesn't make the NCAA tournament? Do you think that building is going to be sold out to people who want to see UCLA, Arizona, Stanford, and WSU kick the crap out of the Ducks?

    I was there in the Monson years and let me tell you - attendance was grim. Athletic success is cyclical and transient. Even the best programs have down years. It sounds like this is a done deal. The U has sold its soul more than once to Phil Knight - here we go again.

  • JustTheFacts (unverified)
    1. The UO needs to replace Mac Court regardless of the specifics of the new arena due to its age, safety considerations and the rising cost of maintenance.

    2. The UO is one of only 21 university athletic programs in the U.S. that is self-supporting. It has demonstrated that success and capability for several years. This project would strengthen that position, enabling the basketball program to generate more revenue, which is constrained due to the limited capacity of Mac Court.

    3. UO has spent only about 25% of its construction money on athletic projects. The majority (75%) has been spent on academic, student, and community projects. Private funding has supported new academic buildings and programs. In fact the the Legacy Fund's largest donor (Phil Knight) has already contributed much to academics (new Law School and doubled the size of the library).

    4. Only 13% of the institutional budget is from state funds

    5. The project pays for itself.

    6. The project makes no demands on the state budget; It doesn’t use state money. Even using worse case scenario revenue estimates, the Legacy Fund is sufficient enough as a back-stop to make the payments. Even if the fund is needed to help pay the debt there will still be money left.

    7.The project does not put pressure on the bond debt limit; this is an entirely separate kind of bonding since it pays for itself with its own revenue, not with state money.

    1. The project will provide construction jobs during what is expected to be a downturn in the economy and a rise in unemployment.

    2. Many more single game tickets will be available than what the community has access to now, priced at $15.

    3. This is planned as a major facility for Oregon, the largest venue between Portland and San Francisco. It will host, as Mac Court does, visits by well-known persons and groups and other regional and community events.

    I place a higher value on academics than sports. But when faced with the facts about this project, I see it is not an either/or choice. Rather it is a savvy financial decision by the UO to seek a financing mechanism that will result in a new arena, preserve the maximum amount of capital (the Legacy Fund) possible, and save them millions per year in interest costs.

  • (Show?)


    Only by stretching the truth can you say these are the facts. They are the selling points of a group seeking government support. The key is that it is a fantasy to believe that it will pay for itself since the ticket sale assumptions are not connected to a hard reality. Second is the statement that it is the largest facility between SF and Portland. Right there it ought to tell you that it will be hard to sell. There is a lot of population in the North Bay area of San Francisco that would better be able to support a facility this size and if they haven't justified it I doubt the real numbers work in Eugene. Lastly, whenever somebody says there is no cost to the state in either bonding capacity or cost I know they aren't facing the facts. Remember about free lunches.

  • rural resident (unverified)

    JustTheFacts ... The arena pays for itself only under the most optimistic of projections. However, the revenue projections for the arena financing are more inflated than the economy of a banana republic.

    Among other questionable items, the plan assumes that several firms will pony up $50 million or so in promotional bucks over 10 years. I can't imagine one firm – let alone several -- paying this sum for the naming rights to the arena, let alone for in-arena advertising. I can't see corporations needing to be restrained from throwing their promotional bucks at UO basketball for a team that schedules a bunch of weak sisters and then goes 15-14. And, what's going to happen to attendance (which needs to increase to generate necessary revenues) when the team has those inevitable down years? Or when the price of seats doubles -- or more, including the "seat licensing fees" the UO is talking about? $15 tickets for non-students?? Up in the rafters, maybe. Even up there, based on what I've read, I think you're dreaming.

     Let’s assume that the bonds are sold with a 3% interest rate.  The total principal and interest to be repaid would total $303,555,600.  Annual payments would be approximately $10,118,500.  This does not include the $22,231,816 paid for the former Williams Bakery site on which the arena will sit. This would mean at least another $1.1 milllion per year.  Based on the information in Rachel Bachman’s article in <i>The Oregonian</i>:

    “ . . .annual operating costs will add yet another $4-5 million. So even at a very low interest rate, arena revenues would have to be at least $16-17 million a year to break even.

    Further, according to Bachman: "However, a report by CSL projected that the new arena would generate $9.6 million to $15.6 million annually. A university senate budget subcommittee analyzed men's basketball ticket revenue estimates and concluded CSL's "conservative" estimate was the best Oregon could hope for.”

    Kulongoski and the state legislators are supporting this because the problems won't be noticed until after many of them are out of office. It's a "feel good" project that won't be making Oregon's taxpayers feel good a few years down the road.

  • Kurt Chapman (unverified)
    1. NO state backing of funds for a sports related arena when funding for public post high school education is down at its lowest level as a percentage of state spending.

    2. WHY back this ego boost to Nike Founder Phil Knight?

    3. REALISTIC folks understand that U of O Basketball has risen under the firm guidance of Ernie Kent, but comeon folks. The Dukes will never be the Tar Heels, Cardinals, Wildcats or Bruins.

    4. WHO in their right mind will travel to Eugene to see some Super Group when they can see them in Seattle, Portland or San Francisco? Also, why would any group stop?

  • JustTheFacts (unverified)

    I’ve read a lot of pessimistic comments about why the project won’t work, which are primarily directed at my earlier point #5 (5. The project pays for itself). However, simply trying to refute point #5 doesn’t deem #6 irrelevant...

    6. The project makes no demands on the state budget; It doesn’t use state money. Even using worse case scenario revenue estimates, the Legacy Fund is sufficient enough as a back-stop to make the payments. Even if the fund is needed to help pay the debt there will still be money left.

    How and under what circumstances does the arena project use state dollars? Under what circumstances do we as tax payers get stuck with the bill if the UO’s vision doesn’t pan out, given the Legacy Fund's obligation to make the bond payments?

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