Possible (probable?) new subdivision

[Seaa Blue]

U. Texas spent $250m+ recently, and so did U Michigan. Who services the debt? The academic side. .

Both of those programs make money, so isn't it just accounting funny money at that point to say that the academic side services the debt?

 

[kyleslamb]

I think I follow what you're saying but didn't have the time to follow the logic of what you ;aid out. You're saying the coaches get paid too much, right?

Well, put it this way. if the coaching cap was $1m, you'd still have general fund money, student fees, etc. going to athletics. And here's the whopper that is NEVER a part of AD budgeting. Buildings. Stadiums and arenas are funded by the academic side. U. Texas spent $250m+ recently, and so did U Michigan. Who services the debt? The academic side. Now you can make the argument that this is money well spent but you can't say they are profiting. Because they're not. They are investing and losing money. The only ones profiting are the coaches.

But before you take coaches pay and distribute it to the players, you should probably take that money and instead lower the student fee ($1k per student at many universities--$10m to $15m divided by say 20k students).

I can definitely say from personal experience with direct knowledge of some department operations that is not always true. For instance, I can tell you that straight from the source(s), there are basketball programs with multi-purpose arenas where the department charges a set fee for time share and deducts it as an expense against that program for accounting purposes. There are several that I'm aware of that do this. Don't know the percentage, but it's fairly common in my experiences. I definitely think you're overstating the academic side paying for the facilities; I can't count how many times I've seen facility renovations/projects based solely on donations, fund-raising, etc. The academic side sometimes isn't involved in facility projects.

The facilities don't lead to anyone profiting, though -- that's something I agree with. But to the extent the academic side is financing those facilities, they're doing so because it's a good loss leader for exposure. One study I read that was performed a couple decades ago showed that at state universities, athletics led to another 1,000 students attending on average, and success of football and basketball specifically increased that even more. Universities do finance some of the athletic facilities (though like I said, I know of several cases where the athletic departments are paying the expenses on the debt), but they're doing it because it's helping them. It's just not traditional profit.

I don't necessarily have a problem with coaches making that money, so I don't want to say they make "too much," but if it comes down to finding a way to pay a stipend, I'm merely saying it could be done. When I studied this a few years ago, I found coaches' salaries comprise about 30 percent of expenses nationally among all Division I schools. The average assistant coach in FBS for all sports was bringing in roughly $150,000 (though obviously non-revenue sports would have been less) with the average head coach averaging over seven figures.

I'm definitely not against paying coaches a cozy salary. All I mean to say is that there is a lot of additional money being reinvested in salaries and facilities that could be spent on miscellaneous aid if they really wanted to do so.

 

[upstater]

I can definitely say from personal experience with direct knowledge of some department operations that is not always true. For instance, I can tell you that straight from the source(s), there are basketball programs with multi-purpose arenas where the department charges a set fee for time share and deducts it as an expense against that program for accounting purposes. There are several that I'm aware of that do this. Don't know the percentage, but it's fairly common in my experiences. I definitely think you're overstating the academic side paying for the facilities; I can't count how many times I've seen facility renovations/projects based solely on donations, fund-raising, etc. The academic side sometimes isn't involved in facility projects.

The facilities don't lead to anyone profiting, though -- that's something I agree with. But to the extent the academic side is financing those facilities, they're doing so because it's a good loss leader for exposure. One study I read that was performed a couple decades ago showed that at state universities, athletics led to another 1,000 students attending on average, and success of football and basketball specifically increased that even more. Universities do finance some of the athletic facilities (though like I said, I know of several cases where the athletic departments are paying the expenses on the debt), but they're doing it because it's helping them. It's just not traditional profit.

I don't necessarily have a problem with coaches making that money, so I don't want to say they make "too much," but if it comes down to finding a way to pay a stipend, I'm merely saying it could be done. When I studied this a few years ago, I found coaches' salaries comprise about 30 percent of expenses nationally among all Division I schools. The average assistant coach in FBS for all sports was bringing in roughly $150,000 (though obviously non-revenue sports would have been less) with the average head coach averaging over seven figures.

I'm definitely not against paying coaches a cozy salary. All I mean to say is that there is a lot of additional money being reinvested in salaries and facilities that could be spent on miscellaneous aid if they really wanted to do so.

Overstating? Why even accuse me of that when you can check it out yourself? http://blog.mlive.com/annarbornews/2007/09/um_professors_urge_reconsidera.html $226 for the stadium and another $30m for Crisler. Brandon also said the total liabilities are $318m at this point. UM's AD actually services a portion of that debt. It's a line-item in their budget, but it's only 1/4 of the debt service required.

Show me the studies you cite because Andrew Zimbalist has been doing studies showing the exact opposite.

 

[upstater]

Both of those programs make money, so isn't it just accounting funny money at that point to say that the academic side services the debt?

They don't make enough to service the debt.

 

[kyleslamb]

Overstating? Why even accuse me of that when you can check it out yourself? http://blog.mlive.com/annarbornews/2007/09/um_professors_urge_reconsidera.html $226 for the stadium and another $30m for Crisler. Brandon also said the total liabilities are $318m at this point. UM's AD actually services a portion of that debt. It's a line-item in their budget, but it's only 1/4 of the debt service required.

Show me the studies you cite because Andrew Zimbalist has been doing studies showing the exact opposite.

Not sure how [one] university project by Michigan, in which the university financed a stadium renovation, in any way invalidates my comment that you were overstating things when you said "(S)tadiums and arenas are funded by the academic side. U. Texas spent $250m+ recently, and so did U Michigan. Who services the debt? The academic side."

I'm telling you that you're overstating things because I know for a fact this is very often not the case. In fact, I'd say that probably far more projects are financed by the athletic department than not. So you showed an article where the academic side funded a project at Michigan? Not sure how that's relevant since I never said it doesn't happen. But I can tell you for a fact, that a lot of facility projects are funded by athletics. Like I said, not all, but many.

What studies are you referring to? If you're referring to my comment about athletics being a loss leader for the university in gaining students, I frankly don't feel like taking the discussion down that road. I know of Zimablist's stance on the subject, but he's just one of many voices and not everyone agrees with him. He's not a final authority.

 

[upstater]

Not sure how [one] university project by Michigan, in which the university financed a stadium renovation, in any way invalidates my comment that you were overstating things when you said "(S)tadiums and arenas are funded by the academic side. U. Texas spent $250m+ recently, and so did U Michigan. Who services the debt? The academic side."

I'm telling you that you're overstating things because I know for a fact this is very often not the case. In fact, I'd say that probably far more projects are financed by the athletic department than not. So you showed an article where the academic side funded a project at Michigan? Not sure how that's relevant since I never said it doesn't happen. But I can tell you for a fact, that a lot of facility projects are funded by athletics. Like I said, not all, but many.

What studies are you referring to? If you're referring to my comment about athletics being a loss leader for the university in gaining students, I frankly don't feel like taking the discussion down that road. I know of Zimablist's stance on the subject, but he's just one of many voices and not everyone agrees with him. He's not a final authority.

While athletics can raise funds for stadiums, they never fund them, because the academic side always bonds out the building of them. The money raised by the athletic side for the building of those stadiums is often counted as donation revenue for the athletic side.

Look at Oklahoma State: http://online.wsj.com/news/articles/SB10001424052702304782404577488592793245510

Now, no doubt it's great to have an alum give so much money, I'm not offering this to show how getting money is a bad thing, but if you read the article, you can see that the school took a loan out with BofA to finance the stadium, and they in fact maxed out their credit so bad that they couldn't take out other needed big loans. In one case, they lost a huge research grant that was contingent on building new laboratories. And the money from Pickens (after he lost $1 billion) is now trickling in over several years and is being counted as revenue in the ADs office.

Here's more on it: http://www.texasmonthly.com/burka-b...ion-oklahoma-state-athletics-may-be-wiped-out

As for U. Texas, the same situation as Michigan exists. Read this article and then especially read the comments where the author explains more: http://admin.collegepublisher.com/preview/mobile/2.3382/2.4490/1.2140563

http://www.utexas.edu/research/pasp/publications/editorials/8feb10.html

These are three exampes. Michigan is not a one-off.

 

[Seaa Blue]

http://blog.mlive.com/annarbornews/2007/09/um_professors_urge_reconsidera.html

Because U-M backed the project's bond with university funds rather than athletic department funds, Goldstein said, the principle or interest would be paid from the same budget as academics if the athletic department can't pay the debt. He also said the bond drives up the cost of borrowing for academic initiatives.

But Executive Vice President and Chief Financial Officer Timothy Slottow said the project does not interfere with U-M's ability to borrow money for major new academic projects. He said U-M used the financial strength of the entire university to lower the long-term cost of the bond, which is financially responsible. The athletic department's financial plan is conservative, he said.
​

Information on the subject is hard to find. With conference television revenues on the rise, I can only hope that some of that money is being used to reduce the stadium debt and that the plan at Michigan is indeed "conservative".

 

[upstater]

http://blog.mlive.com/annarbornews/2007/09/um_professors_urge_reconsidera.html

Because U-M backed the project's bond with university funds rather than athletic department funds, Goldstein said, the principle or interest would be paid from the same budget as academics if the athletic department can't pay the debt. He also said the bond drives up the cost of borrowing for academic initiatives.

But Executive Vice President and Chief Financial Officer Timothy Slottow said the project does not interfere with U-M's ability to borrow money for major new academic projects. He said U-M used the financial strength of the entire university to lower the long-term cost of the bond, which is financially responsible. The athletic department's financial plan is conservative, he said.
​

Information on the subject is hard to find. With conference television revenues on the rise, I can only hope that some of that money is being used to reduce the stadium debt and that the plan at Michigan is indeed "conservative".

I actually looked through UM's budget. The AD does provide $4m a year for stadium/arena debt service. I asked a guy who puts together big deals what it would take to service this amount of debt, and he gave me a figure in 30 seconds, $17-18m a year in today's climate. UM did its deal in 2008.

I want to emphasize that I have no problem with UM spending $13m a year on the academic side for athletic facilities. I only offered this to show that there are hidden costs not in the AD budgets, and that the question of profitability is muddy. My take on what is happening is that, if you want to maintain the student-athlete ideal, then you need to swallow the idea of losing $10m or below a year, having kids go to class half-time in season, establish some reasonable admission requirements, eliminate all this NCAA academic ridiculousness, and put less pressure on the athletes. If you don't want to do this, go semi-pro and run it like a business with the athletes getting half of all profits, with absolutely no support from the academic side.

 

[Seaa Blue]

I actually looked through UM's budget. The AD does provide $4m a year for stadium/arena debt service. I asked a guy who puts together big deals what it would take to service this amount of debt, and he gave me a figure in 30 seconds, $17-18m a year in today's climate.

Here's Michigan's operating budget. It includes numbers that appear to be closer to your figure.

In an environment that is blessed with people willing to donate lots of cash to be a spectator, I don't have a problem with what I see there. Cal's stadium expansion is another story...

http://www.regents.umich.edu/meetings/06-13/2013-06-X-13.pdf

 

[Seaa Blue]

They don't make enough to service the debt.

Apparently at least one does

 

[kyleslamb]

While athletics can raise funds for stadiums, they never fund them, because the academic side always bonds out the building of them. The money raised by the athletic side for the building of those stadiums is often counted as donation revenue for the athletic side.

Look at Oklahoma State: http://online.wsj.com/news/articles/SB10001424052702304782404577488592793245510

Now, no doubt it's great to have an alum give so much money, I'm not offering this to show how getting money is a bad thing, but if you read the article, you can see that the school took a loan out with BofA to finance the stadium, and they in fact maxed out their credit so bad that they couldn't take out other needed big loans. In one case, they lost a huge research grant that was contingent on building new laboratories. And the money from Pickens (after he lost $1 billion) is now trickling in over several years and is being counted as revenue in the ADs office.

Here's more on it: http://www.texasmonthly.com/burka-b...ion-oklahoma-state-athletics-may-be-wiped-out

As for U. Texas, the same situation as Michigan exists. Read this article and then especially read the comments where the author explains more: http://admin.collegepublisher.com/preview/mobile/2.3382/2.4490/1.2140563

http://www.utexas.edu/research/pasp/publications/editorials/8feb10.html

These are three exampes. Michigan is not a one-off.

I'm not disputing the notion that schools take out loans to finance facilities. What I'm saying, and I know this for a fact, is that many times the loan is secured but the expenses to repay the debt comes from the athletic revenue. So while the school secures the loan, it's still the athletics side that is financing the repayment. Like I said, there are several schools I know that actually charges each individual program for usage of an arena out of the expense column to account for repayment of the facility debt. So if a school builds a new arena, they'd charge each of the men, women and volleyball programs a set amount out of the revenue by those teams, and use that money to repay the loan.

The schools secure financing for many facilities. That is not disputed. What you're missing is that often times, those facility loans are re-payed out of athletics funding by way of future donations, future budgeting or specifically accounted through sport-specific revenue. Once again, as I said already, that's not *always* the case, but it often is.

 

[Seaa Blue]

I should have specifically mentioned that the Michigan AD budget shows that athletics is servicing loans for athletic facilities.

 

[upstater]

I'm not disputing the notion that schools take out loans to finance facilities. What I'm saying, and I know this for a fact, is that many times the loan is secured but the expenses to repay the debt comes from the athletic revenue. So while the school secures the loan, it's still the athletics side that is financing the repayment. Like I said, there are several schools I know that actually charges each individual program for usage of an arena out of the expense column to account for repayment of the facility debt. So if a school builds a new arena, they'd charge each of the men, women and volleyball programs a set amount out of the revenue by those teams, and use that money to repay the loan.

The schools secure financing for many facilities. That is not disputed. What you're missing is that often times, those facility loans are re-payed out of athletics funding by way of future donations, future budgeting or specifically accounted through sport-specific revenue. Once again, as I said already, that's not *always* the case, but it often is.

This was discussed above when I looked at UM's budget. $4M goes from AD to the academic side, but that's not nearly enough. A lot of schools, like Rutgers, actually pocket the extra money from ticket sales as income, without giving any back to the academic side. I mean, if money was going back to the academic side at most schools, why in the world would you have direct institutional support and student fees? Presumably, you would use the extra income to defray student fees first, since the debt costs for facilities are largely hidden. The two Texas articles also show that UT doesn't return enough to service the hundreds of millions of debt.

 

[upstater]

I should have specifically mentioned that the Michigan AD budget shows that athletics is servicing loans for athletic facilities.

I said the same thing. It does show that. Just not nearly enough.

 

[Seaa Blue]

I said the same thing. It does show that. Just not nearly enough.

You said $4M, right? I see $15M. Or is that still not enough?

"debt service transfer to plant fund: $14,968,000"

 

[upstater]

You said $4M, right? I see $15M. Or is that still not enough?

"debt service transfer to plant fund: $14,968,000"

View attachment 5906

Well, that's for FY14 and those are projections. So that's good. I looked at last year's university budget, not the AD's budget. And it was listed as $4m. It was the actual university budget and it showed what was actually paid. It could be they are expecting more money this year. This is one of the things the writer of the Texas article was discussing, that the debt service payment from the AD depends on department revenues and the ability to pay.

 

[tjhusky]

Many ways to feed the beast. Was at FSU a few years ago for godson's graduation. I was amazed to see the the walls of the football stadium are actually classrooms and admin offices, that just happened to enclose a stadium.

http://www.fsunews.com/article/2013...l-Stadium-houses-more-than-just-football-fans

 

[IthacaMatt]

They don't *want* to do it, but it's not just a ploy... they're scared to death of this unionization and they know they've got no choice. I don't disagree they might be simultaneously using this as a bargaining chip to get more autonomy and create the new subdivision, but they are very much planning to institute these new policies because if they don't, unionization will happen.

The O'Bannon lawsuit is still out there, too, and the players getting a cut of name and likeness rights might also figure into this.