The university will pull $12.5 million from its reserves. Those funds will be repaid through philanthropy and fundraising, with the difference if necessary made up through funding from the athletics department.
Another $10 million will be used from the profits from recent property sales — the former UConn West Hartford campus, which was sold to Seven Stars Cloud Group Inc., and the sale of the Nathan Hale Inn to a developer.
The remainder — $22.5 million — is where it gets a little more complicated. UConn plans to hire a developer for the project. The developer will create a special purpose entity, essentially a subsidiary, that will design, construct, own and operate the new arena. That company will finance the rest of the project through tax-exempt bonds.
In return, UConn and the entity will enter into a 30-year lease and the university will pay an annual fee to pay down the overall project cost. The annual cost over the lease is expected to be about $1.6 million, but operating revenues could drive that down to about $1.2 million.
So UConn's up front cost:
$12.5M
$22.5M
$35.0M
Ongoing cost = $1.6M x 30 yrs = $48M
Total cost (w/o regard to time value):
$35.0M
$48.0M
$83.0M
This doesn't seem like a particularly good deal to me.