Smoke and mirrors

is not the same thing as transparency. New Greg Bolt story on athletic department budgeting, in the RG today, here. Story on Matt Court costs and wildly exaggerated revenue here. In defense of Jamie Moffitt, she did finally post a good chunk of financial info, here, but only after a lot of pressure from the Senate IAC and just before leaving the AD to become UO CFO.

But the administration is still in denial about the Jock Box costs, the secret Frohnmayer / Kilkenny deal to freeze athletics department overhead rates and use student money to pay for the skybox tickets for administrators, etc. For some reason that MOU is still not on the AD’s financial website. (Actually, it now is, under “debt service on purchase of land …”) I eventually got it with a public records request, as explained in this Steve Duin story in the Oregonian. I posted the memo here.) And given how much digging it took to discover these sorts of subsidies, any reasonable person would wonder what else is still being hidden. Maybe the new AAD for finance, Eric Roedl, will open the books, admit they are in the hole, and start himself off with a nice clean slate?

For the historically minded, here’s the key page from the 2004 report by Terry Moore and Econorthwest on Arena feasibility. Frohnmayer hid this from UO and the Senate Budget Committee arena task force for 4 years, because the numbers were too realistic, and therefore made it impossible for UO to sell tax-exempt bonds to finance the thing. My recollection is that it was the SBC and documents like this that forced Knight to establish the legacy fund to get OUS approval for the arena. (Bad memory. See the comments for the real tax arbitrage story. SBC report here, thanks). And without that we’d be $15 million in the hole, each year.

It took three months and two petitions to the DOJ to make Frohnmayer release this and give it to the SBC. He had UO spend thousands of dollars at the DOJ, trying to stall the release, as this Oregonian story explains.

In the end, it was a remarkably accurate forecast. So you can be damn sure UO will find a more pliable economic consultant and will try very hard to keep the Senate out of the loop, when they start trying to sell us on the Autzen expansion plans!

2/26/2012.

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12 Responses to Smoke and mirrors

  1. Anonymous says:

    Entry is just about Eric Roedl’s best opportunity to come clean. If he doesn’t, history suggests that he will pick up his share fo blame, plus that of previous AAD-finance people. Move quickly on this, Eric. It’s your path of least resistance.

  2. due credit! says:

    The article does not mention this, but to their credit the Senate Budget Committee had the fortitude to put out an analysis quietly savaging the absurdly rosy scenarios being propagated by the athletic department and their hired consultants. Even the budget committee apparently did not predict how badly revenue would fail to meet the projections — who then knew that the Great Recession was just around the corner? But they did foresee the possibility of disappointing receipts and the need to tap the Legacy Fund, which is exactly what happened.

    To his credit, Lariviere belatedly recognized the Budget Committee’s work, whereas the athletic department and Frohnmayer had treated it with scorn. Of course, the BC’s pessimistic scenario gave UO and Lariviere cover when the poor receipts started to become apparent — at less than HALF the athletic department’s absurd projections, but more like 3/4 of the BC’s low-end projection (apparently — going by the numbers in the article) — the BC saved the University major embarrassemtn from the Arena’s financial performance.

  3. UO Matters says:

    Yes, the SBC deserves major credit for its work, which led to the legacy fund, without which we would *really* be in trouble.

    UO Matters also deserves a little credit for getting the EcoNorthwest report on arena projections and giving it to the SBC. The foundation spent $123K on this consulting report.

    Frohnmayer didn’t like the projections – too realistic – so he hid it from the SBC and then spent thousands more in DOJ fees trying to hide it from my public records requests, and then another $200K or so getting a new consultant report with the rosy predictions used to sell the project to the legislature.

    The hidden Econorthwest report is here: http://dl.dropbox.com/u/971644/uomatters/Arena/EcoNorthwest_2004_Report_020108.pdf

    A column in the Oregonian by Steve Duin, describing some of what it took to get this report from Frohnmayer, is here:
    http://dl.dropbox.com/u/971644/uomatters/Arena/Duin_PR_Secrecy_20080214.pdf

    In the end, pretty accurate forecasts, for a bunch of economists! CSL’s work was a joke.

  4. Anonymous says:

    This is such an unbelievable amount of crap, it’s sickening. Frohnmayer and the UO administration never tried to hide the report. That’s bogus. I literally laughed out loud at your attempt to support that proposition by citing an article whose sole source of evidence is YOUR OWN QUOTES. When will you stop wasting everyone’s time?

  5. UO Matters says:

    It’s true. Ask Attorney General Kroger for his public records opinions and the billing records.

  6. Anonymous says:

    I don’t doubt that you’ve made many requests for information and have been repeatedly stonewalled. What I’m saying is that your interpretation of that fact is incorrect. The reason people don’t respond to you is not that they’re “hiding” anything, the reason is that responding to you is a huge drain on their time and resources that could be better spent serving the state of Oregon. You think of yourself as a shrewd investigator when really you are–and are thought of as–a waste of time.

  7. UO Matters says:

    Go to sleep, gentle reader.

  8. Gordon Sayre says:

    To set the record straight, the ECONorthwest report was not shared with the SBC’s sub-committee on Arena Financing, in spite of the fact that it was indisputably relevant to the charge of the committee and to the administration’s stated commitment to cooperate with our committee. We only learned of it after it was made available through the public records request. I would also like to challenge the idea that Phil Knight decided to create the legacy fund only after the plan to sell tax-exempt bonds had been squashed. I have a Daily Emerald article from Feb. 22, 2008 about how the AD continued to claim that the plan for tax-exempt bonds would not constitute arbitrage.

    Gordon Sayre
    2007-08 UO Senate President

  9. Mike Kellman says:

    I was on the SBC at the time of the arena report, and though not on the subcommittee, was active in discussions of the report before it went out of the SBC, involved in discussion of the numbers for the various scenarios. I don’t recall hearing about the ECONorthwest report, I doubt that it played much of a role in our discussions. I don’t recall that we were movers in the creation of the legacy fund — it was already in the works. My memory may be spotty on this, perhaps it was not as much of a done deal as I seem to remember.

    We certainly were very skeptical of the projections coming out of the Athletic Department and their consultants, and said so, perhaps a bit obliquely for my taste, but clearly enough. We also certainly entertained a “pessimistic” scenario, should the economy turn down. We said that with the legacy fund, but only with the fund, would the bond repayments fly in case of a bad turndown. Of course, soon thereafter the economy really went bad, in a way that I don’t think any of us foresaw, but we were certainly not the only ones not to see the coming disaster.

    I think the skepticism of our committee has been more than vindicated, and it was nice to receive a certificate from Lariviere long afterward in appreciation of our efforts — I don’t recall that they were much appreciated at the time! Fortunately, the legacy fund is in place and I hope it is still more than enough to see through the repayment of the bonds with a surplus left over.

    I don’t claim that we were great seers, only that we used common sense and were not afraid to stick to our judgment. John Chalmers was the “pro” finance guy on the committee who ran all the numbers on a spreadsheet — if there were others, I have forgotten — the rest of us looked at the numbers, compared them with the high-priced outside projections, and concluded that we trusted our own judgment.

    All in all, despite reservations at the time, I think the University managed to come through with a good plan for the arena, all in all, with the involvement of the various players — it is much better to have it with the financing plan that eventuated, than not.

  10. UO Matters says:

    Thanks for these comments guys. I’m no economist, but here’s the deal:

    The initial financing plan was to sell $200M in cheap tax-exempt government subsidized bonds, repaid with market rate earnings from legacy fund, which would therefore never be depleted.

    The IRS calls this “tax-arbitrage” and it is illegal – because every agency in the country would want to exploit this, flooding the market with exempt bonds and causing the IRS to have to raise taxes on everyday schmucks to compensate.

    So the IRS typically requires that tax-exempt bond sellers who are using funds like this to repay the bonds show they could, in theory, repay the bonds with earnings from the project.

    But UO’s initial revenue estimates, from ECONorthwest, showed they couldn’t repay – which would make the Legacy Fund part of an illegal tax scam.

    So Dave Frohnmayer and Melinda Grier hid that estimate. They then commissioned new inflated estimates from consultants at CSL – who are well known for their willingness to provide such, for a price.

    The public records requests and petitions eventually forced Frohnmayer to make the ECONorthwest estimates public. It was too late for the SBC Arena Committee to use them in their report. But when the state treasurer’s office saw them they said no dice: these bonds cannot be sold as tax-exempt.

    Upshot, the Arena committee did a very good job, and could have done it much more easily if the raw data had not been hidden from them by the UO administration.

    We will see what they do this time, with the Autzen expansion revenue estimates!

  11. Anonymous says:

    From DEAD DUCK QUACKS: I agree that we faculty can be a real pain and often think and act as if we are the smartest people in a room full of administrators, but any administrator who forgets that he or she has a smart,savvy faculty is in for serious trouble,so the comment by anonymous about responding to requests for information being a waste of time speaks for itself. Even if one counts the dismissed ethics inquiries against UO matters, the remaining batting average for revealing important or misleading information is pretty darn good by my count. Moreover, a prompt, honest response eliminates the need for follow up requests and builds trust that earns a little benefit of doubt on subsequent issues. whereas, a delayed, grudging, or misleading response has the opposite effect. None of that requires advanced experience or training in managing anything other than daily life with real people. if an administrator really thinks responding to faculty inquiries is a waste of time, I humbly suggest considering devoting time to something else somewhere else.

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