COURT AWARENESS: (Counter-clockwise) a design of the Matthew Knight arena (image courtesy uoregon.edu), an aerial view of the Ducks' new hoops home (image courtesy mactomatt.net), and the home being built for Phil Knight's aide, Howard Slusher (image courtesy Darryl James).
Democratic and Republican legislators shredded the University of Oregon this week like the Ducks' men's basketball opponents did on the court last season.
It's rare to see a powerful institution so badly battered in a routine interim legislative hearing like the one on Monday before the Senate Business and Transportation Committee.
The topic was the school's $227 million basketball arena project, $200 million of which came from a 2008 state bond issuance. But the real issue going forward is far larger than the arena, now that new school President Richard Lariviere is asking the Legislature to support an $800 million operations bond (see "Hotseat: Richard Lariviere," WW, May 19, 2010).
"The university does not inspire confidence," says committee chairman Sen. Rick Metsger (D-Welches). "What you get from this project is either they don't know what they're doing or they don't want the public to know. Neither is good."
Committee members reacted angrily to a case made by John Williams, a researcher for Plumbers and Steamfitters Local 290. Drawing on university documents he began collecting last July, Williams sketched out the evolution of the arena project. The 12,500-seat arena to replace 84-year-old McArthur Court began in 2003 as a private project to be funded by Nike founder Phil Knight and orchestrated by his right-hand man, Howard Slusher.
Records Williams presented to the committee show that three firms expressed interest in building the arena. Two were the Turner and Hunt construction companies. Both are experienced arena builders, and each said it could build the arena for $125 million with a management fee of 2.25 percent. Hoffman Construction said it would build the arena for $150 million and charge 3.25 percent.
Despite the higher charges, the Slusher team began working with Hoffman, a Portland firm that has completed major construction at Oregon Health & Science University, Portland International Airport, the Portland Art Museum, South Waterfront and Nike's campus.
But between 2003 and 2007, the arena deal morphed from a privately financed project to one the Legislature agreed to fund. Normally, such large public projects require competitive bidding to ensure the best deal for taxpayers. But in 2008, the Oregon University System voted to exempt the arena project from that requirement because Hoffman had been working on the deal since 2003, finding there was "no reasonably available alternative."
So the state sold bonds. And construction began last year. Frances Dyke, a UO finance vice president, says Hoffman has required competitive bidding for its largest subcontracts. But Williams illustrated instances in which subcontractors pledged mysterious "in-kind" donations to the project to win bids, only to subsequently submit change orders to recoup the cost of these donations.
A larger question that emerged from the micro details is whether the university is equipped to handle large publicly financed projects in a transparent fashion.
"I'm having a hard time understanding why a public entity would be satisfied by not using the lowest bidder," says Sen. Bruce Starr (R-Hillsboro).
Starr compared Williams' description of university officials stonewalling on public records requests with what he called the relative openness of the Oregon Department of Transportation on its capital projects.
Dyke told the panel that Lariviere is revamping UO's approach to public records. She added the arena project is "on time and on budget" to open for the 2010-2011 season.
Dyke presented few answers to the specific criticisms that Williams raised, however. She pledged that the university looks forward to cooperating with a planned secretary of state audit of the arena.
"We are aware of concerns expressed by the construction industry," Dyke told lawmakers. "We take these concerns seriously and are fully supportive of the audit."
Williams and trade union representatives at the hearing seemed skeptical of Dyke's pledge of transparency.
A tangible source of their skepticism is a nearly 12,000-square-foot home on the shores of Lake Oswego that Hoffman is building for Slusher, who led the selection of Hoffman to build the arena.
Hoffman is one of Oregon's largest and most successful contractors. But the firm rarely builds single-family homes.
"It's not something we're well known for," says Bart Eberwein, a Hoffman spokesman. Eberwein says in an average year the firm might build three or four single-family homes for high-end customers.
Eberwein acknowledges that Slusher oversaw the arena project early on but says that role ended in 2004. Several years later, he says, Hoffman agreed to build a home for Slusher in Lake Oswego.
Eberwein says there is no link between Slusher's role in the arena project and the Lake Oswego home.
"There's absolutely no connection," Eberwein says. "It's a clean deal." (Slusher declined to comment.)
"I have no evidence [of a quid pro quo], but the appearance is just awful," says Williams of Hoffman building Slusher's house. "If Hoffman won the arena job in a competitive situation by being the low bidder there'd be no cloud. But this contract was awarded by a single individual [Slusher] and rubber-stamped by the university."
The Matthew Knight Arena takes its name from a son of Phil Knight's who died at age 34 in a scuba diving accident.