Site
Index



Athletics Committee
April 2000


The following committee report was presented to the Executive Committee of the Faculty Senate on April 17, 2000.


A Financial Review of the Construction and
Operation of the Thompson-Boling Assembly
Center and Arena


A Report to the Faculty Senate Executive Committee

Submitted and Approved by the
Faculty Senate Athletics Committee

Authored by Daniel P. Murphy, Associate Professor

April 6, 2000


Memo

To: Faculty Senate Executive Committee
From: Faculty Senate Athletics Committee, Burton English, Chair
Date: March xx, 2000
Re: Construction Financing and Operating Costs Funding of the Thompson-Boling Assembly Center and Arena


In 1983, a lawsuit was filed by 86 University of Tennessee faculty members in Knox County Chancery Court challenging the financing of the to-be-named Thompson-Boling Assembly Center and Arena. The lawsuit was eventually settled and terms agreed to.

The Senate Athletics Committee has been asked by the Senate Executive Committee to review this settlement and ensure a full disclosure of information deemed relevant to the Faculty Senate under the settlement be made.

The Senate Athletics Committee Chairman, Burton English, asked committee member Dan Murphy to lead this review and prepare a report for Senate Athletics Committee approval. The report is now being submitted to the Faculty Senate Executive Committee for review. If you have any questions, you should not hesitate to contact me or Dan Murphy.


A Review of the Construction Financing and Operating Costs
Funding of the Thompson-Boling Assembly Center and Arena

Background and Scope of the Review

In 1983, 86 University of Tennessee professors filed suit against the Public Building Authority in the Chancery Court for Knox County challenging the plan to finance the construction of the planned assembly center and arena. The lawsuit was motivated by faculty concern that the university's academic budgets and student fees would be used to finance the construction costs.

The lawsuit was settled in April 1983 and the compromise was approved by Chancery Court. Under the 1983 settlement, the Faculty Senate has the right to request from the University of Tennessee a "... full disclosure of information concerning the funding and operation of the Assembly Center and Arena...." Based on our investigation, it does not appear that a full disclosure has ever been made to the Faculty Senate. A review of the lawsuit settlement terms indicates that the University must disclose to the Faculty Senate the following:
  • A review of the Thompson-Boling Assembly Center and Arena (TB) construction project to determine whether costs exceeded $30 million. If so, confirmation must be made that these additional funds came from the Athletics Department and not other university sources.

  • An examination of the financing for the TB project. Specifically, details must be provided that disclose the total debt amount, how the debt is currently serviced, and what is the schedule for debt repayment.

  • A Sources and Uses of Funds statement for TB needs to be prepared that details the various operating costs and identifies the revenue source(s) used to cover these costs.

  • An attestation that university funds, other than those from the Athletics Department, have not been used to pay for either TB construction or operation costs.

  • A confirmation that University of Tennessee student fees are not and have not been used to operate TB.

    • University Disclosures to the Senate Athletics Committee

    A Review of TB Construction Costs

    The total TB construction costs far exceeded $30 million. The schedule below summarizes the TB construction costs and funding sources.

    TB Assembly Center and Arena Expenditure and Funding Schedule

    Expenditures:
        Contractors $35,974,087.99
        Design/Consultants 5,309,233.60
        Temporary Financing 1,233,105.00
        Other 789,362.96
        Litigation 12,644,187.32
    Total Expenditure $55,949,976.87
    Funding:
        State of Tennessee Capital Outlay $7,000,000.00
        Tennessee State School Bond Authority 8,000,000.00
        Knox County Public Building Authority 10,000,000.00
        Gifts 5,099,373.00
        USF&G Insurance Payment 16,309,861.00
        C.N.A. Insurance Payment 2,116,977.00
        UT Men's Athletics Department 7,423,765.87
    Total Funding $55,949,976.87

    Source: University of Tennessee Office of the Treasurer


    The $8 million Tennessee State School Bonds are administered through the UT Office of the Treasurer. The approximately $5.1 million in gifts received came from a fundraiser initiated and administered by the UT Athletics Department and did not come from gifts made to UT for non- athletic purposes. The approximately $7.4 million from the UT Men's Athletics Department was paid out of their operating budget over a few years.

    From our review of these data, it appears the financing of the TB construction complied with the court settlement and did not involve funds from general university sources.

    TB Debt Service

    As shown in the previous section, $8 million of debt was issued by the Tennessee State School Board Authority. These bonds are administered by the University. The original debt issuance was refinanced to take advantage of lower interest rates. At that time, the debt principle was about $6.5 million. Appendix Schedule I is an amortization schedule of this remaining debt balance. The debt should be completely paid off by 2014.

    According to UT Treasurer Charles Peccolo, the funds to service the debt come from the earnings realized by a charitable lead trust established for this purpose and annual remittances made by the UT Athletics Department. The debt is not being serviced with funds used for general operating or educational purposes.

    TB Operating Expenses

    The UT Office of the Treasurer accounts for the annual operations of the TB. Appendix Schedule 2 provides copies of the 1988-1999 Auxiliary Enterprise Fund Statements of Balances, Operations, and Transfers for the TB Arena. Fund expenses represent building maintenance, not debt service. Fund revenues come from rents charged to event promoters for use of TB, fees received from Ticketron sales, and transfers from the Athletics Department. It should be noted that ticket sales for athletic and entertainment events are not included in this fund balance. Conversations with Mr. Peccolo made it clear that funds used to cover operating expenses do not come from general university funds. A letter from Mr. Peccolo confirms that no student fees have been used to operate TB. A copy of this letter is in included in the Appendix.

    Conclusion

    The purpose of the 1983 lawsuit settlement was to ensure that funds used to finance and operate the Thompson-Boling Assembly Center and Arena did not come from sources that would otherwise be used for academic purposes or from student funds. After meeting with members of the UT Athletics Department and the Office of the Treasurer and reviewing pertinent documents, it is our judgment that the University of Tennessee is complying with the terms of the settlement.

    Senate Directory
       Officers
       Committees
       Members    		 Governing Documents
       Senate Bylaws
       Faculty Handbook
       Tenure Policy    		 Search

    Reports     		Calendar

    Archives    		 Resources

    Senate Home

    To offer suggestions or comments about this web site, please click here.