The gift that keeps on taking. BB sales fall to $2.8M

2/18/2013: Back in 2008 Frohnmayer and Kilkenny were flashing around a consultant’s report predicting that Matt Court Arena revenue would be between $10M and $16M a year. But they were hiding a more substantial report with drastically lower projections: $6M to $8.6.

Frohnmayer and Melinda Grier sat on my public records request for month, and then told me it would cost $40 to see it. I paid the SOB’s. Then I gave it to John Chalmers and ODE reporter Ryan Knutson, who wrote this story:

“It surprises me that this is the first time I’ve seen it,” said professor John Chalmers, head of a University Senate sub-committee that analyzed the arena project. “This would have been helpful information.”

I also sent it to the Oregon legislature’s bond analyst, who then vetoed Frohnmayer’s scheme to finance the arena with tax-exempt revenue bonds: not enough revenue, the IRS would be all over us. Instead they had to sell regular taxable bonds. $235 million of them.

Five years later the ODE has another reporter, Sam Stites, who’s got a healthy sense of skepticism about big-time college sports, and a knack for making public records requests. As usual, Dave Hubin’s public records office tried to prevent the ODE from getting the documents, by trying to charge a student $109 for the data. Really Dave? Stites managed to get it anyway, and wrote this story, in the Emerald today:

The new ticket revenue projections for men’s basketball show a $900,000 difference between what was originally forecasted in December 2010 and now — down from $3.7 million to $2.8 million, with over $5 million in operating expenses for the team.

There’s a little extra revenue from monster trucks and cage matches, but basically they were exaggerating by about 300%. I particularly like this quote from Jamie Moffitt:

“All arena fund debt has been fully paid, on schedule, as planned,” Moffitt said. “The Athletic Department is an auxiliary operation. Like other auxiliary operations, such as Housing and the EMU, it is responsible for paying for all of its operating costs with its projected revenue streams.”

Sure the athletic dept pays all its operating expenses. I’ll have a motion in the Senate next meeting showing just how exaggerated that claim is too.

Then there’s this quote from the OUS VP for Finance, explaining how the $235 million in bonds has left UO unable to borrow money for academic purposes – those little niceties like classrooms.

“Our board has a policy on debt that we don’t want any one campus to have a debt ratio more than 7 percent,” Kenton said. “UO has 7 percent limitation and frankly are probably one of the highest in terms of being close to that threshold.”

Matt Court Arena – another one of Phil Knight’s gifts that just “keep on taking”. And don’t miss the report by Matt Walks and Aubrey Wieber on the disaster that is Paul Westhead, also in the ODE.

University sells $500 million in bonds for academics

11/6/2011: Ohio State has just borrowed big to fund an expansion of the academic side. Fascinating Oregonian column by David Sarasohn here on the very unusual 100 year bonds. (Yes, we know Frohnmayer sold $230 million in bonds for 2008, but that was for a basketball arena – although tuition money guarantees the repayment.) You know President Lariviere with his New Partnership, and Governor Kitzhaber with his 40/40/20 plan, are watching to see how this goes over. And so is UO’s Athletic Director, Rob Mullens – who may well want to soon call on UO’s borrowing authority to expand Autzen Stadium. Especially now that he knows how easy it is to trick the academic side into repaying athletic department debts.

Matt Court worth more than 300,000 children.

3/17/2011: From the popular Portland blog, Bojack.org. One of his readers passed on an email, ostensibly from Gerry Williams, the chair of the Oregon Seismic Safety Policy Advisory Commission, which ended with this:

An initiative passed several years ago mandates all schools be upgraded in Oregon by 2032, a two billion dollar program. As of this writing we have allocated a total of $15 million with another $7.5 million to be allocated (if the bond sale actually goes through) this spring. The State Treasurer has advised the state that we cannot issue any general obligation bonds without endangering our bond rating and driving up interest rates – making them more costly to finance. So schools, emergency facilities, dams and bridges are just going to have to wait.

However, in the last session, knowing that the economy was still taking a dive, the state used up $200 million of its bond capacity to finance a monument to Phil Knight at the University of Oregon – because Phil gave the athletic department $100 million – none of which, however, could go to pay any of the capital costs of the new Knight Arena.
It’s about values and money – and a guy like Knight who has the money, gets to dictate the values. Because apparently, the Oregon Legislature values U of O basketball more than the potential of losing 300,000 school children’s lives in a major earthquake.

This is a little over the top, even by my standards! And now Bojack reports Mr. Williams is denying he wrote it. OK.

Frohnmayer also played the seismic card when he was selling Matt Court arena to UO. But that turned out to be bullshit, like so much else we heard from Dave after Pat Kilkenny bought him. From the UO Senate Arena Committee report:

The safety concerns of Mac Court have been mentioned by President Frohnmayer and other UO officials as a reason why a new facility is urgently needed. Our subcommittee made an effort to evaluate the safety of Mac Court. We were informed that Mac Court, like all university buildings, is subject to building inspection, fire alarm inspections, fire sprinkler inspection and testing. In addition, fire pumps, standpipes, and fire extinguishers are inspected and tested per the fire codes. It is also noteworthy that the safety issues for Mac Court are quite different from other campus buildings given that the capacity of the facility is large but the usage is infrequent relative to other campus buildings.

Our subcommittee focused on the seismic risks, because the danger of earthquake threatens all University buildings, and because studies have been done that compare the risks of various university structures. On October 18th the subcommittee invited Chris Ramey, Senior Architect and Director of University Planning, to a meeting to discuss seismic risk studies and renovation potential for Mac Court. Mr. Ramey referred us to the University of Oregon Natural Hazard Mitigation Plan published in Winter 2006, which includes a detailed building by building assessment of Seismic risks (see page 7). The seismic risk of McArthur Court is not at the level of the structures which are of greatest concern (darkest purple on the map) and is in about the middle of the pack overall. According to the plan, buildings that are at a higher priority for additional seismic assessment and reinforcement include Esslinger, Friendly, Fenton, Hendricks, Knight Library, Lawrence, Susan Campbell, and Volcanology.

Pat Kilkenny is an investor in Courtside and Center Court

1/6/2011: Pat Kilkenny was hired as UO Athletic Director by former UO Pesident Dave Frohnmayer to push Phil Knight’s basketball arena project through, after Kilkenny made a well-timed $240,000 donation to Frohnmayer’s Fanconi Foundation.

Kilkenny then got the OUS Chancellor and board to sell $237 million in state guaranteed bonds to build the arena, by lying to them, the faculty, and then to the state legislature about the revenue projections. Frohnmayer helped out by hiding a UO Foundation paid consultant’s report from the legislative fiscal analyst.

Now it turns out Kilkenny is part owner, with his brother, of 2 large apartment complexes built right next to the new arena. And UO has a special contract with the buildings to house students. And Kilkenny is still on the UO payroll – just enough to be eligible for our benefits package. Last year President Lariviere told us:

“This institution did not follow acceptable business practices in the past. That will not be repeated under my administration.

It is being repeated. Time to put our new General Counsel, Randy Geller, on the case. Unless he’s the one who wrote the contract, of course. Camilla Mortensen of the Eugene Weekly rakes through the muck:

Will Pat Kilkenny profit from developments next to the Matthew Knight Arena he pushed through when he was UO athletic director? Mega-donor Phil Knight has lauded Kilkenny for making the arena possible, and we heard from multiple reliable sources that Kilkenny is one of the unnamed partners in the costly Courtside apartments next door. Portland attorney Russell Kilkenny, agent for 1410 Orchard Street LLC, which bought the Courtside property in February 2010, confirmed via email, “Pat Kilkenny has an ownership interest related to 1410 Orchard Street, LLC.” …

According to the UO website, Pat Kilkenny is still a part of the university as the “Special Assistant to the Athletic Director,” and, according to the UO unclassified personnel list of March 1 to May 31 2010, his 12-month appointment is a 50 percent full-time equivalent (FTE), enough to be eligible for the state benefits package. His salary is $25,883.

As an employee of the UO, which is a public body, Kilkenny can be considered a public official. According to Oregon state law,  “A public official may not attempt to further or further the personal gain of the public official through the use of confidential information gained in the course of or by reason of holding position as a public official.”

One question still unresolved is why Pat Kilkenny chose to not publicly disclose his financial interest in this housing project from the beginning. — Camilla Mortensen

How did kilkenny get to be Athletic Director? The year before Frohnmayer put him on the UO payroll and gave him control of hundreds of millions in public bond money Kilkenny donated $240,000 to Frohnmayer’s Fanconi Foundation.

Everybody has a price – sad is not the only word that comes to mind here. Here are the clips from Kilkenny’s “Lucky Duck Foundation” IRS reports:

2006:

2007:

2008:

2009: The filing deadline has passed, but they are ignoring requests for the forms.

There goes the reserve

9/29/2010: Utterly unsurprising news in the RG today. The arena is not going to bring in the revenue Frohnmayer promised when he was selling the bonds to the legislature. And Chip Kelly needs another big raise to keep him on board. So the ticket money will go to Kelly, and the reserve fund – the principle, not just the income – will be used to make the bond payments. They are looting the reserve to pay their salaries, and when that money runs out they will run too. You can bank on it.

Now Lariviere has to go back to the legislators to sell his restructuring plan, to try and save UO’s academic and research missions:

“Well, Richard, the last time a UO President came to talk about bonds – I think his name was Dave – he played me for a fool. The state took on $200 million in debt, lost $10 million in revenue, and drove up borrowing costs for other agencies. And the money ended up in the pockets of your coaches. Hell, even the Register Guard figured it out. Now the Treasurer tells us the state is above our debt limit. So why should I listen to your new scheme?”

Economics professor argues new arena is losing money:

8/4/2010: At Missouri State, we mean. Change a few names and this story from the Springield Missouri News-Leader is eerily similar to the ones Ryan Knutson wrote for the Oregon Daily Emerald.

The quote at the end from the new president sums it all up: “I will not ask for state support,” Cofer said. “Student support? That’s a different story.”

UO’s current plan is to subsidize our new Arena on the sly, by increasing student and faculty/staff parking fees and by having the UO general fund pay the jock box operating costs.

We haven’t heard any reports on how Matt Court ticket sales are going, or how quickly the “Athletic Legacy Fund” will be drained. When that money’s gone they can fall back on the $1 ticket surcharge they are – supposedly – squirreling away in a rainy day fund. 

Review of JQH Arena finances planned
Didi Tang • News-Leader • August 1, 2010

James Cofer, the new president, plans to review the finances of JQH Arena, which outgoing president Mike Nietzel had promised would pay for itself.


“I’m not promising anything at this stage,” said Cofer. But he added he believes the arena is an asset to the university. “It’s important we utilize that asset,” said Cofer.
Attendance at the arena is not bad, but Cofer said he would like to see more people.

The financial viability of JQH Arena became controversial after economics professor Reed Olsen last fall contended it lost $400,000 in its first year of operation. Nietzel in 2006 said JQH Arena would pay for itself and have no impact on the rest of the university budget.

“We will support this through revenue. We have not asked the state for support and have not asked for general revenue from the university,” Nietzel said in 2006. “The whole thing is based on revenue that will flow from activities in the arena and gifts for the arena.”

There is no binding contract that JQH Arena would be self-sufficient financially. Nietzel refuted Olsen’s claim, arguing JQH Arena had a $1.1 million surplus after its first year.

In his calculations, Nietzel counted $1.4 million in one-time interest income, which drastically cut the university’s debt obligations to $700,000 in the 2008-2009 fiscal year.

Financial statements of the arena also show a student fee has been reallocated to support the basketball facility.

In 2006, the Faculty Senate charged its budget and priorities committee to monitor the arena’s financial status, but last spring the Faculty Senate agreed the task would be pointless after the leadership change, because the new president is not bound by his predecessor’s promise.

On Friday, Cofer said JQH Arena would stay within the university budget. He said he would review how revenues, such as student fees, and costs are allocated between JQH Arena and Hammons Student Center, the old basketball arena.

“I will not ask for state support,” Cofer said. “Student support? That’s a different story.”

Thanks to Margaret Soltan for the link.

no bid contracts and the Arena

1/22/2010: An anonymous commentator pointed readers to this ODE story by CJ Ciaramella on no-bid contracts for the Arena. There’s another in the RG today:

I’d wondered what the story on that billboard on Franklin Blvd was. When someone rents a billboard to complain UO is not following the public records law it kind of gets your attention. The Director of the union group that erected it says of UO:

“The amount of time that it’s taken to get a public records request processed is far longer than we are used to dealing with,” Bonham said. “For this institution to be not completely transparent and forthcoming is a concern for the public.” The University general counsel’s office, which handles public records requests for the University, did not return calls seeking comment.

For the record, The UO official in charge of public record requests is Doug Park, dougpark@uoregon.edu, (541) 346-3082. Doug doesn’t sign his name to public records responses, and likes to use the email address gcounsel@uoregon.edu instead of his real one. I’m not sure if this is because he is embarrassed by what his boss Melinda Grier makes him do for a living, or is just trying to forestall an ethics investigation over the details.

I still remember the efforts to get a copy of this report on the arena revenue forecast from UO. Melinda Grier was trying to hide this report because its revenue forecasts were 1/3 of the 15 million needed to justify tax-exempt bonds. She and Doug Park stalled for months, ignored repeated emails and calls, and the Oregon DOJ played along with her efforts to keep this report secret. Finally it came out and we found this:

So the projection is for $4 million in net revenue, for $15 million per year bond repayments. When the State Treasurer’s office finally saw this report they refused to allow UO to sell the bonds as tax-exempt, because these numbers mean the IRS could have argued this was tax arbitrage, and imposed millions in penalties on UO. I wonder what Melinda is hiding this time?