Time to just blow that place up. I would be super hesitant to drop any more money into it. You can either have a modern, multi-purpose, 15,000 to 18,000 seat arena with all the amenities, or you can have an intimate, smaller venue designed as an ideal basketball arena (some of these vintages ones still exist, other ones in this style are being built today).
What you don't want is Carver.
If I'm Goetz, I'd be really tempted to keep my powder dry for the next year or two. Iowa City is becoming an absolute mecca for women's basketball, and Jan is taking recruiting to an elite level. There are only a handful of programs above Iowa right now (at most), and when Gino retires, there may be one less.
And the men very well may hit a new "goldern era" over the next few years, with the program enjoying a honeymoon with fans. The likes of which hasn't been seen in decades.
I think I'd be tempted to let both programs breathe for the next season or two, and then leverage the presumed success to go all out for a new facility. Just keep doing the cheap, low hanging fruit for now. More ice cream machines...hell, bring in some food trucks and let people order from their seats and have it delivered down to them, throw in a few porta potties down low, and jam in a few more students around the court.
And then go with a 10,000 or so throwback fieldhouse style arena that wouldn't require an enormous footprint. Not a bad seat in the house. Close to at least a few bars and restaurants. Honor the past. Celebrate the present. We deserve it.
And fill in that pit in the ground for good.