RACHEL BACHMAN of The Oregonian Staff reports that:
Phil Knight's $100 million pledged donation to the Oregon athletic department expires June 1 and is contingent on the university securing state-backed bonds to fund its basketball arena project, according to a document signed by Knight.
The pledge terms add urgency to the Legislature's emergency session, during which UO officials are trying to secure $200 million in bonds to pay the entire design and construction cost of the arena. The Legislature's emergency session started earlier month and ends Feb. 29....
The document reads in part: "The Donors' obligations under this Agreement shall be contingent on the approval of the state of Oregon on or before June 1, 2008 for the issuance by the State of XI-F(1) bonds to fund the cost of design and construction of a new basketball arena for the University of Oregon."
The state issues XI-F(1) bonds for projects that are self-liquidating and self-supporting.
The agreement goes on to say that the Legacy Fund created by the donation is for use by Oregon's athletic department only, and that distributions of principal and interest will be handled by the athletic director.
It also helps explain why Oregon is seeking state bonds for the entire cost of the arena.
"The Pledge Amount shall not under any circumstances be used to directly pay any costs of planning, design or construction of a new basketball arena," the agreement reads.
Athletic department officials say they plan to pay the debt service on the arena's bonds with arena revenues. If those don't suffice, Oregon will use annual donations to the athletic department to help pay off the bonds, and replace that money in the operating budget with proceeds from the Legacy Fund.
Since projections have varied widely on how much revenue the arena will generate, the Legacy Fund has been a key assurance to legislators that the financing plan will work.........
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Under the Athletic Departments plan they will get Legislative authority to sell $200 million dollars in bonds to build the new basketball arena which will be paid off from revenue from the arena. If there is not revenue enough to pay off the bonds then the Athletic Department will use funds from other donors to the Duck Athletic Fund (DAF) and will supplement those funds from the $100 million dollar gift from Phil Knight which will act as a "safety net" for the Athletic Department. It should be remembered that the $100 million dollar gift in the form of an endowment will also be earning income from investment. Too bad some reporters and college professors don't understand the concept. They just get their salary each month!