Okay, I gotta admit this was good for a chuckle:
The UGA athletic board met, and approved the spending of $12 million to renovate baseball’s Foley Field. When the news was tweeted out by this reporter, a member of the football team, cornerback Sheldon Dawson, immediately responded.
“And we can’t get no indoor (practice facility),” he wrote, the disgust hard to miss.
Now, I agree with Seth that there’s a certain amount of symbolism attached to the IPF. It’s not my highest financial priority, although I understand the arguments of those who disagree about that. And I also acknowledge that we’re in an era and a region where universities are routinely expected to do with less and less public funding of their needs. (Private funding is the new black for SEC athletic facilities.) So I get that prudence and caution with athletic department funds aren’t dirty words.
However, methinks they doth protest a wee bit too much.
The subject of the Georgia athletics department’s massive reserve fund came up about midway through the meeting. An accountant with Ernst and Young had just presented his annual audit of the athletic association, reporting that as the new fiscal year began Georgia had $67.1 million in that reserve fund.
Yes, $67.1 million. Seemingly a lot of money to throw around, and build four-and-a-half indoor practice facilities.
But it’s not that simple.
Board member Bill Archer, a retired executive with Georgia Power, spoke up. Yes, that’s a lot of money, but UGA has almost twice that in debt, Archer pointed out.
“We got that money there. But we got a lot of that money there because we took out bonds to get it,” Archer said.
Across the table another board member, Bob Bishop, chimed in with agreement.
“That’s what I like to call unallocated funds,” Bishop said.
Is there another athletic department in the country that’s more defensive about how it handles its money making than Georgia’s? I’m hard-pressed to think of one. And here’s what’s particularly noteworthy here – this is coming from a program that is routinely in the top three or four nationally in terms of athletic department profitability, but ranks nowhere near as high in overall revenues. It’s not hard to do the math to figure out how that’s possible.
As far as the bonds argument goes, I think any average Joe or Jane who’s ever borrowed money to buy a house will tell you that assuming you’ve made a sound investment, cash flow is a lot more relevant than whether you’ve got enough money in the bank to pay the mortgage off tomorrow. Georgia is doing swimmingly there, and stands to do even better once the new TV moneys start rolling in.
So you’ll have to pardon me if I take McGarity’s hand wringing about revenues…
“You see that big reserve there, but our margin’s right now are not very strong, because of our revenue. Think about it, we haven’t raised ticket prices since ’08. … The only way we can really generate more revenue is to raise ticket prices. We don’t want to do that.”
… with a rather sizeable grain of salt.
How much has the SEC’s wealth grown? Just four years ago, the SEC distributed $132.5 million ($11 million per school), meaning the conference’s payout has increased by 118 percent since its current ESPN and CBS deals began in 2009-10. [Emphasis added.]
As far as using the reserve fund to pay down the outstanding debt, that’s something you do if it’s your best financial option. It’s not something you do emotionally, simply because you feel better with less debt on the books. And when I say “best financial option”, that doesn’t just mean what kind of rate you can get investing your savings (although that’s certainly a valid goal). It also means taking steps to strengthen the programs that generate the cash flow that grows the reserve fund.
As the article indicates, this isn’t all about McGarity. But there is a unity of purpose at work there. Let’s just say B-M is lucky to have somebody like Mark Richt at the helm of the football program. In a number of ways, Richt helps make knee-jerk frugality pay off.