The Joint Ways and Means Committee of the Oregon Legislature gave overwhelming support to the University’s basketball arena project on Thursday, and recommended to the full legislature that a $200 million taxpayer bond for construction should be approved during the special February legislative session.
Ways and means committee throws weight behind arena projectWhat does the Joint Ways and Means Committee of the Oregon Legislature have to do with the arena’s funding? The committee is one of the final checkpoints the funding model has to pass through before the University can get its funding. The University is requesting a $200 million bond from taxpayers, and that bond must be approved by the full legislative body, which meets in Februrary. The Joint Ways and Means Committee just gives a recommendation to legislators on how they should vote, but what it says carries a lot of sway. Why do they support it? Legislators like the project because it allows the athletic department to become more financially stable and it probably won’t cost taxpayers or the academic general fund anything because the debt from the $200 million bond will be repaid with revenue earned by the arena. Because private firm CSL International and the Legislative Fiscal Office give promising revnue projections for the arena, committee members are confident that the athletic department won’t have any trouble paying back the loan. The $100 million donation from Phil and Penny Knight also bolstered their confidence because it shows the athletic department can raise the money to support athletics. What are the concerns? Committee members said their constiuents complained that the legislature would spend millions of dollars on a basketball arena when the transporation, health care and school systems are in shambles. Legislators are confident that the $200 million loan won’t be coming from taxpayer money, so the bond won’t affect funding for those programs. Faculty have been concerned that the University is taking out its largest loan ever to pay for a non-academic project. They’re also worried that the huge debt load could hinder academic projects. Why do administrators say the arena is crucial? If the University doesn’t replace McArthur Court this year, construction costs could go up as much as $20 million, University President Dave Frohnmayer said. There’s no question that Mac Court, which is a wooden structure which won’t stand up to an earthquake, must be replaced sooner or later, he said. A state-of-the-art arena could also double the amount of revnue currently brought in by Mac Court events, which would help the athletic department be more financially stable. |
The session also exposed a new 30-year debt repayment plan rather than a 40-year plan as was earlier anticipated. The new model will up the cost of debt repayment to about $14.5 million per year, a number that includes debt payments on the property where the arena is to be built.
The new plan puts greater importance on the athletic department’s ability to raise enough revenue to pay down the debt each year, but it also decreases the total amount of interest that the University must eventually pay. The higher annual debt service also throws a recent report by faculty that painted a more pessimistic vision of the funding model, which indicated the athletic department could run out of money by 2024 if revenues fall 50 percent short of the most conservative estimations of between $9 and $14 million.
Legislators highlighted the concerns of their constituents, saying many of them felt the state shouldn’t spend money on a basketball arena when it already can’t properly fund education, transportation and mental health hospitals.
But the committee concluded with just the opposite idea. Taxpayer money likely won’t go toward this project, because the athletic department will earn enough revenue to pay back the debt.
“It’s been the practice general to not use taxpayer dollars to support athletic programs,” said Sen. Kurt Schrader, committee co-chair. “And I think that’s what we have here before us today. We are not using your taxes to support athletics, what’s better yet about this project is that it’s trying to be self-sustaining.”
Now that the University has the blessing of the committee and the State Board of Higher Education, it faces essentially the final hurdle of full legislative support this February. If the bonds are approved, the University will return to the state board for final approval before breaking ground after the conclusion of the Olympic Trials in July.
“I would hope we have more projects like this coming forward,” Schrader said. “This is exactly the type of leadership that we need to have to ensure your taxpayer dollars can go to academic programs in these tight times.”
The support adds significant credibility to the arena’s funding model because the committee’s suggestion carries a significant influence on the Oregon Legislature.
Thursday’s meeting shed new light on the parking situation around the arena’s future site on the old Williams’ Bakery lot.
Frohnmayer said there could be as many as 940 new parking spaces around the arena on the old Joe Romania lot, which was purchased with funds from the sale of Westmoreland Housing Complex in 2006, and a nearby property currently owned by the Oregon Department of Transportation. That number also includes potential leasing deals for parking lots across Franklin Boulevard.
Frohnmayer said the University won’t have to figure out how to get parking for 12,500 fans, because fans are already able to find parking when they attend games at Mac Court.
The Oregon Treasury told the Legislative Fiscal Office that the $200 million bond the University is seeking must be paid back in 30 years, instead of 40 as originally proposed.
“It’s important in two ways,” said Allan Price, Vice President for University Advancement. “One is that it does mean we have to make sure the (revenue estimates) will allow us to make the annual debt service payments … and by only going 30 years instead of 40 years we’ll save substantial interest in the long term.”
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