The University has been
considering a new basketball arena since the turn of the century, and although it is as close as it’s ever been to building one, it’s still tangled in red tape. The 2007-08 school year saw a windstorm of activity, and now the University sits on the brink of breaking ground. It’s still waiting for approval from the city and constituents before the project can begin, but the old bakery that used to sit on the site has been demolished, and the funding for the arena has been
secured. To get yourself caught up on the issue, here’s a compilation of frequently
asked questions.
I’m already caught up, but
what happened
this summer?
The Eugene City Council approved the University’s bid to remove the
alley, but University student Jonathan Bowers is appealing that decision to the State Land Use Board of Appeals. The University also filed an application for a conditional use permit, and its
hearing will be Oct. 7. If the application is
approved, construction can begin.
I’m not caught up. When will construction begin?
That depends on how long it takes to get the needed permits. The University is trying to break ground this fall, and it has already demolished the Williams’ Bakery, which was the old building on that lot. If the University doesn’t break ground by November, it will likely miss that deadline.
When will it open?
If construction begins before
November of this year, it should be open before the 2010-11 basketball season.
Where is the arena
being built?
It’s taking up almost an entire city block on the corner of East 13th Avenue and Moss Street. That is on the east end of campus, near the intersection of
Agate Street and Franklin Boulevard. To see a map, go to www.oregonarena.wordpress.com.
So what’s holding up the
arena construction?
The University was originally
allowed to build an arena without any special land use permits, but the
local neighborhood association
protested. The Fairmount Neighborhood
Association appealed the decision that said the University did not need a
conditional use permit, which requires more public say over how the arena would impact the neighborhood, and it won that appeal in June. The University turned in its application this summer and is waiting for approval, which it could get as early as Oct. 7.
How much does the
arena cost?
The building itself has a $200 million price tag, but several other expenses that aren’t included in that figure bring the estimate closer to $245 million.
Either way, this will be the most expensive
college arena to date. Those other
expenses are:
? $27 million for the land. (Already purchased by the University.)
? $18 million for a 500-car
underground parking garage. (To the University’s credit, a parking garage is something that has been considered for some time, regardless of the arena.) Only 70 percent of a $10 million bond will be under the auspice of the athletic department. The remainder is being paid for by the University.
How is it being funded?
The arena is being paid for by a
taxable $200 million bond, which the University acquired from the Oregon Legislature. The bond will be paid back over 30 years, at about $16.5 million annually, using arena-generated revenue and revenue from an investment known as the Oregon Athletics Legacy Fund. The Legacy Fund was established by (Nike co-founder) Phil and Penny Knight’s $100 million donation to the Oregon Athletic Department. Athletic department officials expect other
donors will add $50 million to this fund, and the interest gained from it will be used to cover athletic department
expenses as well as debt for the arena.
This model sounds
different than before. Has it changed?
Yes. Originally, Knight’s $100
million donation was not allowed to be used to construct the arena or pay down the debt because doing so would violate IRS tax law. (For more information, go to www.oregonarena.wordpress.com.) Because the bond was classified as taxable in May, that barrier is eliminated and his money can be used to pay back the debt.
So is my tuition paying for this thing?
University President Dave Frohnmayer promised that no academic dollars will be used to pay for the arena, but if the project completely belly flops, it’s unclear what will happen – a back-up plan hasn’t been fully established.
What about my
tax dollars?
No – unless the project
completely flops. While taxpayers are the final back-stop to the University’s $200 million bond and are technically
fronting the money to the University, the
chances that they will have to directly pay for the project are extremely low. If all goes as planned (in which case the arena would earn enough revenue to pay back the debt), then everybody wins. Unless, of course, you’re a fan of the 82-year-old McArthur Court, which could be demolished.
How is Phil
Knight involved?
In short, this is Phil Knight’s baby. Knight’s generosity and capacity to donate to both athletics and academics gives his word an extra urmph with the athletic department and the administration, and the man likes beautiful
buildings. But if you want the more detailed answer, read on. (And to see Knight’s gift agreement, go online to www.oregonarena.wordpress.com.)
Who is Phil
Knight, anyway?
He is a former University student/Oregon track athlete. He went to
Stanford for graduate school and came up with a business model that sought cheap labor overseas to manufacture athletic shoes. He and his former track coach Bill Bowerman founded Nike. The rest is billionaire history.
How long has Knight been connected to the project?
The University has been seeking a new arena since the turn of the century, and athletic officials have made it clear from the get-go that it wouldn’t be possible without his support. At first, the University wanted Knight and other donors to finance the entire facility – a feat once thought possible when the price tag was around $150 million. But Knight delayed his gift (coincidence or not, he waited until
former athletic director Bill Moos resigned). After years of delay, the project’s costs rose and getting donors to pay for the whole thing became impossible.
What? Who is Bill Moos?
That’s a long story. He was the athletic director for nearly 12 years, but there were signs that his relationship with Phil Knight was less than friendly. Some speculate that Knight refrained from donating until Moos was gone. Read more about it under the Phil Knight FAQ section at www.oregonarena.wordpress.com. Their relationship was so sketchy that both The Oregonian and ESPN Outside the Lines did special reports on it.
So how is the project being funded now?
Essentially, the University took out a $200 million loan to pay for it.
So did Phil donate the money or what?
Yes. At the end of summer 2007, Knight and his wife
Penny donated $100 million to the athletic department.
And what will that money be used for?
The donation established the Oregon Athletics Legacy Fund. This fund is expected to gain an additional $50 million from other donors within the next few years. The return from the $150 million investment and the
principal can be used at the athletic department’s discretion.
What the hell does that mean? The AD’s “discretion”?
That discretion was
originally limited to athletic
department expenses. The
money could not be used to pay for the arena. Why? Because Phil Knight would only donate the money if the University got a loan from the state of Oregon to build the project. Knight and the UO thought it would be best to take out a loan to pay for the arena, pay it back with arena revenue, then still have a fat
investment to help fund future projects.
Pretty smart, if it all works out – the UO can have its cake (the arena) and eat it too (the Legacy Fund).
So what’s the status of the fund now?
The fund can now be used to pay back the debt on the arena bonds. The state treasurer’s
office determined the $200
million of state bonds should be taxable. When a college gets a state bond, it is usually not taxed but there are lots of
restrictions on how the
money can be used. Now that the bonds are taxable, the
University can spend it however it likes, including to pay back
the debt.
What about
McArthur Court?
The fate of the famous 82-year-old arena is still uncertain. A staff, alumni and student committee has been established to decide what to do with that space, and although the ASUO Student Senate tried to pass a motion to prevent demolition of “The Pit,” comments from
administrators indicate the site will be used for academic
purposes – aka an entirely
new building.