College Football’s Top Teams Are Built on Crippling Debt

[Zinhead]

From Bloomberg:

https://www.bloomberg.com/news/features/2017-01-04/college-football-s-top-teams-are-built-on-crippling-debt

By many standards, University of California, Berkeley has an incredible sports program. Its 30 sports are second only to Stanford in the Pac-12 Conference, and the school has won 22 national titles in the past decade. At the Rio Olympics, current or former Cal athletes collected 21 medals, including eight golds.

By another measure, Cal sports are in big trouble. After completing the most expensive college football stadium overhaul ever, the Golden Bears now owe more money than any other college sports program. Hobbled by debt service payments, the athletic department ran a $22 million deficit last year and expects to end this fiscal year deep in the red.

It is one of a series of articles Bloomberg ran on College Football’s Financial Woes

https://www.bloomberg.com/news/special-reports/college-football

[barrons]

And some schools are using the sports revenues to help balance the overall budget.

Next year’s budget includes $10.9 million in cash revenue that will be transferred to campus.

http://host.madison.com/wsj/sports/college/badgers-sports-committee-approves-million-wisconsin-athletics-budget-for/article_985308d4-1752-5796-85a6-b4fcc28b087c.html

[Zinhead]

And some some schools in the same conference are drowning in debt.

Michigan Athletic Department Is $240 Million In Debt

http://campussports.net/2017/02/27/michigan-athletic-department-is-240-million-in-debt/

[Quote]
Hard to believe, isn’t it? With an arsenal of deep pocketed donors and a butt in every seat on Saturdays, Michigan’s debt problem is complex and without a definite solution. The root of the problem are the multi-million dollar construction projects and renovations to existing facilities that the school has undertaken.

With dwindling television revenue, the Wolverines find themselves in a bind. Consumers now have an array of options in which they can consume game day action, and without a number creative solutions to turn profit off of things like Twitter updates and Snapchat, they might need to look elsewhere for funding. Michigan’s debt is expected to grow substantially, estimates put it around $371 million by 2046.

The Wolverines plan to begin repaying the debt at $20 million per year in 2019. That number will decrease to $15.7 million by 2022.

[Quote]

[twoinanddone]

I’m not worried about any of these schools ending their sports programs.

[Gator88NE]

If you can’t run Michigan’s athletic department at a profit, you’re doing it WRONG.

Also, how can television revenue be “dwindling”? The Big10 network has proven to be hugely successful. Perhaps that article is overplaying the issue? They have the revenue to support that debt.

https://record.umich.edu/articles/athletics-presents-fiscal-year-2017-budget

The University of Michigan Athletic Department on Thursday presented to the Board of Regents a balanced budget based on operating expenses of $154.8 million for the 2017 fiscal year.

Highlights of the budget, presented by Warde Manuel, the Donald R. Shepherd Director of Athletics, include:

• Football season ticket prices remain unchanged for the public for a third consecutive year.
• Student football season ticket prices remain unchanged, and reflect the 37.5 percent reduction in FY2016, in addition to offering need-based discounts based on federal Pell Grant eligibility in football, men’s basketball and ice hockey for a second season.
• Football ticket sales are projected to increase due to an eight-game home schedule in FY '17, compared to seven games last year.
• Budgeted corporate sponsorship revenues are projected to increase by $1.49 million due to a new apparel agreement.
• Budgeted facility revenues are projected to increase by $1.4 million due to a special event in Michigan Stadium following a fiscal year with no such events.
• Total operating expenses budgeted for FY '17 will increase by approximately 4 percent from the projected actual operating expenses in FY '16 due to inflationary increases in financial aid, compensation and an increased funding transfer to the university.

[yikesyikesyikes]

@Zinhead

I think we need to consider how debt does not tell the whole story - or if it is even a fair indicator of financial wellbeing for athletics programs. Michigan Athletics is able to cover all its operating expenses, and usually then some. Debt is unavoidable when it comes to building new facilities. Anyone involved in college development will tell you that large colleges rarely pay for major renovations or new facilities/buildings with all cash (unless a donation is involved) - there is almost always some sort of debt taken out. Michigan has done a good job on repaying its debts.

[barrons]

When you can borrow at the rates UM can (4% or so) spending cash for buildings is not smart. https://www.moodys.com/research/Moodys-assigns-Aaa-to-University-of-Michigans-312M-General-Rev–PR_339695

http://www.municipalbonds.com/bonds/issue/914455JZ4/

I’d love my income to “dwindle” like this

http://awfulannouncing.com/2016/big-ten-schools-will-see-media-revenues-skyrocket-thanks-new-tv-deal.html