The University announced Tuesday that it sealed a $67.1 million advertising deal with Oregon Sports Network and IMG College, which will more than double its current annual advertising income over the next 10 years.
The deal couldn’t have come at a better time for the University, which has drawn skeptical glances from legislators after the revelation that a 2004 report estimated a new arena might only earn $4.1 million annually.
When the 2004 report, known as the EcoNorthwest report, surfaced on Friday, several legislators called for a review of the Legislative Fiscal Office’s recommendation of the funding model, which hinges on $200 million in taxpayer-backed bonds to pay for construction.
“I’m not saying we shouldn’t continue our funding process,” said Sen. Bill Morrisette, D-Springfield. Morrisette said he was not one of the legislators who called for review, but did say, “I think the old information should have been presented at that hearing as old information … I think it’s just the idea that there’s some secret stuff out there that freaks people out.”
University President Dave Frohnmayer said nothing was intended to be secret, and said the report would have been included in his testimony before the Joint Ways and Means Committee at their Jan. 17 meeting but he didn’t know there was a written version.
The fiscal office’s review, which is being done by Principal Legislative Analyst Steve Bender, carries significant weight for the legislature. Without knowledge of the 2004 report, Bender supported the financing model, and his three-page report helped the Joint Ways and Means Committee back the funding model at their Jan. 17 meeting.
Bender is currently reviewing his recommendation, but told the Emerald on Tuesday that he likely wouldn’t be finished until sometime today.
He was unsure if his recommendation would change.
Advertising deal
The advertising deal struck Tuesday guarantees the athletic department at least $56.2 million over the next 10 years. Each year the athletic department will receive more money from the deal, and if profits exceed certain benchmarks, the department could get 50-50 profit splits.
The deal between Oregon Sports Network, IMG College and the University is an extension of the current $2.15 million deal. The new advertising contract promises to be much more lucrative for the University.
The deal, which grants exclusive broadcasting and signage rights, includes television, radio and signage advertising for all University sports, Autzen stadium, the new baseball stadium and the new arena. Revenue from the deal can be used to pay down the debt from the bonds.
Private consultant CSL International estimated in their 2007 report that the athletic department could earn between $2.5 million and $4 million in annual advertising.
Tim Roberts of Oregon Sports Network said that would be easy to achieve given the new contract.
Reserve fund
University President Dave Frohnmayer said he is planning with legislators to form an Arena Bond Reserve Fund, which would be a $1 surcharge on tickets that cost more than $8 to create an additional firewall against having to use academic dollars if arena revenue falls short.
The fund is still in the planning stages, but it comes at the request of Joint Ways and Means Committee co-chairs Sen. Kurt Schrader and Rep. Mary Nolan, who wanted additional precautions in the wake of the 2004 EcoNorthwest report.
The fund might begin in July 1, 2010 and “will continue until it contains the lesser of $12 million or 6 percent of the outstanding principal balance of all bonds connected to the $200 million bond issue,” according to a letter Frohnmayer sent to the co-chairs. The fund will grow no slower than by $500,000 per year, Frohnmayer wrote.
The athletic department will only draw from it when “the combination of the department’s operating budget and available withdrawals from the Athletic Department Legacy Fund are insufficient to fund the debt service requirements” or to “reduce the balance in the Arena Bond Reserve Fund to an amount equal to six percent of the outstanding principal balance of the bonds.”
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