Men's Basketball

‘An innovative deal’: How Texas will get a $300 million basketball arena at no cost to taxpayers, boosters

Longhorns will lease the land to Oak View Group LLC, who will build the $300-million facility and loan it to UT basketball

Posted December 17th, 2018

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Story highlights
  • Oak View Group — not Austin taxpayers or UT boosters — will shoulder the bulk of the cost.
  • New arena could hold 17,000 but only configured to hold 10,000 for basketball games.
  • Final details will be unveiled Thursday at the UT regents meeting.

University of Texas officials have struck an innovative financial agreement in which the Longhorns will get a $300 million basketball arena with zero out-of-pocket cost.

The UT System Board of Regents is set to approve a measure Thursday that will mark the school’s official marriage with Oak View Group LLC, a Los Angeles-based company with a long track record of managing professional sports venues.

According to a source with firsthand knowledge of the agreement, UT will turn the 6.64 acres just south of Mike A. Myers Stadium over to Oak View Group in a lease arrangement. OVG will build and manage the arena, giving UT approximately 60 dates annually for men’s and women’s basketball games, graduations and other school-related functions.

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Upon completion, the university will own the building. However, OVG will recoup its investment by keeping the revenue generated, including things such as concessions, for 10 years. After the first decade, Texas will get a portion of the annual revenue, according to the source.

University of Texas officials prefer a site just south of Mike A. Myers Stadium for the Longhorns’ new basketball arena. (University of Texas)

At most, Texas will have to pay for some incidentals, possibly concerning traffic and utilities. But OVG — not Austin taxpayers or UT boosters — will shoulder the bulk of the cost.

“This is an innovative deal that will be good for the city and the university,” UT President Gregory L. Fenves told the American-Statesman. “UT is a strategic partner with our community, and I’m looking forward to discussing the details, subject to the regents’ approval, later this week.”

The new arena is required due to future expansion of the UT Dell Medical School. Construction is expected to start next summer, and the arena is scheduled to be open by the start of the 2021-22 season. The basketball configuration will be about 10,000 seats with the upper decks closed off for every game, creating an “intimate” atmosphere, the source said.

“Not even for Kansas,” a second source told the Statesman.

The Erwin Center is home to the UT men’s and women’s basketball teams but also features graduations, concerts and other events. (Ricardo B. Brazziell/American-Statesman)

Typically, Texas draws about 8,000 fans for men’s games and fewer for women’s games. Only a handful of games, such as those involving the Kansas men or Baylor women, come close to reaching sellout status. Even then, it’s iffy. The Erwin Center holds 16,540 for basketball games.

The new arena’s total capacity could reach 17,000, making it a suitable replacement for the 41-year-old Erwin Center. OVG is expected to bring concerts, WWE events and whatever else comes through downtown Austin to the new facility.

The company touts 26 “world-class venues” on its website, including partnerships with AT&T Center in San Antonio and American Airlines Center in Dallas. OVG also works with Madison Square Garden and the Forum. Company officials could not be reached.

However, UT’s new arena will not have a basketball practice facility built underground or attached to it. Early on, men’s coach Shaka Smart and women’s coach Karen Aston were told that it would.

As it stands, the UT basketball offices are in the north end zone of Royal-Memorial Stadium. The new arena will be between Robert Dedman Drive and Red River Street. The current practice facility, Cooley Pavilion, will remain in place for now, one source said. Cooley is adjacent to the Erwin Center on the arena’s south side. 

Other schools, such as Kansas, offer one-stop convenience and will use that against Texas in recruiting.

Texas athletics director Chris Del Conte, cheering after Texas’ 24-17 victory over Kansas in November, could have something else to celebrate Thursday. [NICK WAGNER/AMERICAN-STATESMAN]

According to Texas’ athletics master plan unveiled in 2016, the preferred site for a new basketball practice facility is at the corner of Red River and Clyde Littlefield Drive. Currently, there’s a small field for throwers as part of the track stadium at that location.

Losing the basketball practice facility as part of the new arena might be part of the give-and-take negotiation process for this financial arrangement.

For years, the school has financed construction projects via long-term debt. That’s how UT once renovated Royal-Memorial Stadium. The athletic department has at least $14 million in annual debt service payments scheduled through 2044, according to audited figures obtained by the Statesman.

With principal and interest payments, Texas athletics is still on the hook for $306.7 million for previous construction.

In September 2014, then-athletic director Steve Patterson enraged city officials by saying Austin taxpayers should help fund a new facility.

“The reality is that Austin has had a free arena for 3½ decades at no investment whatsoever,” Patterson said during a speaking engagement. The blowback was instantaneous as arena financing became a hot-button issue. UT was forced to table the issue to let things cool down.

Fenves has made it clear he would not seek city funding for a new arena. He and athletic director Chris Del Conte were both laughed at when they first broached the feasibility of this type of arrangement, two sources said Monday.

Now, Fenves can face city leaders and say that UT is providing a new, state-of-the-art facility for Austin residents at zero cost to taxpayers. Del Conte is providing a new arena to UT’s two basketball programs without athletic boosters generating a pile of cash.

Both Fenves and Del Conte are expected to meet with reporters Thursday after UT regents vote on the measure. They might be taking victory laps.

Contact Brian Davis at 512-445-3957. Email bdavis@statesman.com.

RELATED COVERAGE

Feb, 2, 2018: Texas commits to an on-campus basketball arena, opens prices for bids

April 7, 2017: UT officially announces new basketball arena will be on campus

April 8, 2017: Questions abound, but new arena requires laser like focus from Longhorns

Aug. 22, 2016: UT President Fenves: New arena will be ‘basketball-only’

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