War is hell (on the reserve fund).

Chip Towers issues a call to arms.

I’m sure you’ve seen and read a lot from us regarding the Georgia football facilities situation lately. The truth is, I don’t think any of us likes writing that much about it. But the reality is it’s a very big part of what’s happening right now, not just with the Bulldogs but throughout the SEC.

There has always been a bit of an ongoing facilities arms race going in the conference — and in college football in general — but it’s as though they’re waging World War III on that front these days. And while it could be argued it wasn’t engaged for a long time, UGA is fully engrossed at the moment…

Not coincidentally, Smart made sure to thank the TD Club members for all their financial contributions and encouraged them to continue to donate. Because, he said, Georgia needs to “keep the momentum going.”

And, you know, I used to scoff at such talk. But I don’t anymore. I’m starting to see the reality of the facility arms race that’s going on in college athletics. I don’t like it, but I know it to be the real deal these days…

Now for brevity’s sake, I’m not going to get into the argument about UGA currently having $77 million — at least — in unallocated funds sitting in its athletic reserves. I’ll just say based on the landscape I’m seeing, the Bulldogs need to break it out and start spending that cash like it’s going out of style! Georgia is, after all, a non-profit, or at least that’s what it says on the tax forms I’ve seen.

He goes on to say that’s not literally practical, but that McGarity can easily afford to reorient his thinking.

But I still don’t think Georgia is thinking big enough, especially with the financial climate such as it is. Athletic director Greg McGarity keeps talking about needing to hold fast to that hefty reserve fund in the case of a “rainy day.” But if 2007-10 weren’t rainy I don’t know what it is. And right now it is quite bright and sunny in the SEC.

Every time you turn around the SEC is backing up a dump truck of money and pouring it out on its “member institutions.” That’s to the tune of about $40 million a team this year, and $32 million last year. With that kind of income and the obvious unwavering support of its donors, Georgia could have easily built a basketball/gymnastics facility downtown or over on East Campus and plopped down a whole new baseball stadium somewhere…

… I see what South Carolina has done and Clemson has done and Florida is now doing. It’s not just the Alabamas of the world that are living large and spending lavishly anymore. Everybody is.

The Bulldogs better get on board — fully — or get left behind. It’s either that or you’re really going to be in for a rainy day. And based on the dearth of championships I’m seeing at the moment, it’s looking pretty cloudy in Athens.

I doubt you’d find a single UGA coach who would disagree with Towers’ sentiment.  In real life, though, I suspect all this boils down to in practical terms is a new message for Butts-Mehre to send donors as to why they need to pony up extra funds to make things happen.

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57 Comments

Filed under Georgia Football, It's Just Bidness

57 responses to “War is hell (on the reserve fund).

  1. Dawgholio

    What constitutes a “rainy day”? Are we losing so much money on women’s soccer that we might need the $77 mil?

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  2. sniffer

    So, with the current state of affairs, how much pressure is McGarity under these days? Are the influencers/money people really satisfied with the Athletic Association?

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    • Your first is a good question. I have no idea.

      To be honest, I’m surprised McGarity has responded to the public criticism even in the limited way he has with the bathroom situation.

      As far as the second goes, I have no reason to think there’s much dissatisfaction there.

      Liked by 1 person

      • paul

        I think all that changes very quickly though without at least a trip to Atlanta either this season or next. No SEC championship in three or four years and I believe McGarity is gone and Kirby maybe has one more year. The only real consistency in UGA athletics across the board in recent years is that we’ve gotten consistently worse. The one bright spot was football, where we could at least be counted on to win 10 games most seasons. In declaring that not good enough, McGarity and the entirety of UGA athletics have tied their fortunes to Kirby Smart. If he fails to win quickly, the rats will begin to abandon ship expeditiously. Since nothing structural is likely to change, McGarity and Kirby must take the sword. McGarity because he really is responsible. Kirby, not so much. But he knows what he got into.

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        • Macallanlover

          Good comment. But I do believe McGoofy is under some heat, and would expect a change sooner than you project, even if we win the disrespected East this fall. We need that, but it is almost a yawner and isn’t a strong enough accomplishment to offset the fan unrest with the piss poor performance of the other athletic teams and his ineptness with fan/media relations.

          McFrugal is paid a lot of money yet is castigated almost daily by UGA fans and there is nothing hanging on the wall under his administration. His superiors cannot be that tone deaf to the groundswell of opinions by the natives. Many of them are not among the elite donor group but collectively they can really hurt in the long run. You don’t want to end up totally dependent on a few fat cats with large egos. There is nothing happening athletically at UGA to feed those egos for much longer.

          Towers it right, he had better start spending some of that reserve fund right away because his story angle isn’t selling. And despite the $100MM+ being allocated, no is mentioning UGA as a program on the move…in any sport, or facility, under his control.

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    • Bulldog Joe

      Athletic money being funneled to the university is at an all-time high.

      Poor results on the field and on the court have had no effect on private contributions and the university is getting his (and the baseball coach’s) position filled at no cost. There is currently no other in-state program drawing support away from his program.

      He is untouchable right now.

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  3. 3rdandGrantham

    I’m sure someone can clarify this for me, but I’m having a hard time understanding why our large reserve fund is such a big deal when we have (I believe) around 175 million in outstanding debt from previous projects that need to be paid off. More so, our yearly interest on this debt alone is in the 5-6 million range annually, from what I’ve read previously.

    Shouldn’t paying off our massive debt be priority #1, and then worry about any additional massive spending on other projects?

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    • The reserve fund isn’t being used for that purpose, either, is it?

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    • Normaltown Mike

      I would say most organizations (businesses, governments, etc.) are content to pay back debt (like the bonds used to finance construction projects) in as long a manner as the bond allows. It’s a generally accepted principal of business.

      since UGAAA doesn’t distribute profits per se, there was no incentive to not hold onto the year to year budget surplus. I think Chip’s article and McGarity’s responsiveness lately indicate that that thinking is changing and that UGA will be entering the arms race to a greater extent than we ever did, for better or worse.

      Liked by 1 person

    • Shouldn’t paying off our massive debt be priority #1, and then worry about any additional massive spending on other projects?

      There’s more than enough free cash flow to do both, but they’re dumping the excess under the pillow and asking donors to fund the rest. It’s just plain bad capital structure management. I don’t know of a single other business that operates under the premise that it needs to have sufficient liquidity on-hand at any given time to cover the outstanding debt load. It’s an inefficient use of capital that could be better invested elsewhere. As long as the SEC keeps distributing $40M annually to the Universit, there’s absolutely no reason to be sitting on $80M of cash reserves for a rainy day.

      Liked by 1 person

      • Normaltown Mike

        As a business principle, why spend the money when you can ask for someone else to spend it for you?

        If it doesn’t work on the end zone, we’ll find out what they are willing to spend. But for the IAF all they had to do was ask and the money magically appeared in less than 2 years.

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        • As a business principle, why spend the money when you can ask for someone else to spend it for you?

          Sure – that, in and of itself, is fine. However, the mentality is just a greater symptom of the disease that infects the decision making at B-M. I don’t know any successful business that doesn’t regularly re-invest in itself using cash flows from its operations.

          As the Senator keeps making the comparison – it’s frustrating that they can’t seem to figure out how to walk and chew gum at the same time with capital projects and now they’ve gotten so far behind that they’re going to have to start ramping up spending if they ever want to be competitive again.

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        • DawgPhan

          I could be wrong, but I think of the checks the donors can write as being more limited than the available credit of the athletic association.

          Meaning you can only go out and ask for 8 figure checks so many times.

          Borrowing money has basically been free for 8 years. We should have been spending like sailors on shore leave over the last few years to play catch up with everyone else and we didnt. Now we have tapped into the private funds just as rates are starting to move up. Chances are if we go all in on building now, we start either spending down our reserve cash or we are borrowing at a higher rate than we could have been because our access to private funds has already been tapped.

          Investing in our teams is something we should have always been doing and figuring out the best way to finance/pay for it should have been pretty easy. We didnt invest and now we are going to have to play catch up in a more difficult financing environment. The Georgia Way.

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          • We didnt invest and now we are going to have to play catch up in a more difficult financing environment. The Georgia Way.

            Pretty much this. Assuming B-M is actually going to do all the spending they need to do to catch up, it’s gonna be a helluva lot more expensive to do it now with interest rates starting to creep up. This is what happens when the people leading an organization think sound finance is how much is sitting in the bank earning 0.1%.

            Stepping over dollars to chase pennies seems to be the Georgia Way. I understand that warm security blanket feel you get from having a large reserve fund, but you truly have to spend money if you want to run a successful operation.

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      • 3rdandGrantham

        Got it, thanks AD. I’m a cyber security guy, not finance, hence me asking for clarification. To make a rudimentary example on more of a personal level, its akin to having a 500K mortgage with a low, 30 year fixed at 3%, 200K in a savings account, and 175K household income. Yet you’re going to family members with your hands out saying you need a gift of 30K to add on a sun room or swimming pool, as it just wouldn’t be financially prudent to tap into your 200K savings.

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    • Uga81

      The reserve fund doesn’t have a damn thing to do with that

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  4. Where is the additional TV money going? Do we funnel it into the university? I don’t have a problem with that, but things like donor requests and ticket prices keep rising… would just like to know where that money is going. We seemed to be more successful BEFORE the SEC was making all this TV money – So what are we spending it on that other programs do not? While alabama dumps it back into the program, are we not?

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  5. Got Cowdog

    I wonder what the annual dividend would be on 77 million? Depends on what kind of account it was in, I suppose. Where would it go?
    McGarity is a financial guy, it isn’t in his DNA to let it sit there and not generate income. At what point does a bloated reserve fund disqualify an entity from non-profit status? Based on what happens to me this time every year I can’t believe the IRS isn’t beating their plowshares into swords and pitching up the torches.

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  6. Bright Idea

    I’m surprised that Towers wrote this. It will further stir up the low level folks like me who want to win, but won’t mean a thing to the big donors. He should also ask the question, is the energy within B-M needed to win championships also in reserve. There’s something else wrong besides McGarity being a tightwad IMO. I’m starting to believe we caught USCe’s chicken curse.

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  7. McTyre

    I’d say the Rainy Days for UGA Athletics of recent times are as much, if not more, a dearth of competent coaches (and Dept staff) as of facilities. Buyouts for Fox and Stricklin, legit search firms and comp for ready-to-win coaches should be priorities as well.

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  8. Uga81

    and dont forget about our equestrian team

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  9. CB

    Build a new baseball field and basketball coliseum on East Campus, turn Stegeman into an entertainment center complete with player lounge, theme park, putt putt course, and a massage parlor that would make Rick Pitino blush. Also, put in an arcade like the one they used to have in the Tate Center when I was a kid.

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    • Lrgk9

      But , McGarity nixed hiring Bobo and Blomgrem because they were out of line it’s UGA salary scales.

      That poisoned the water and we ended up wit Schotty and a Division II OL coach cause no other top tier coaches would come.

      And, Senator – you forgot about the ‘footnote’ 28 million being held in trust for the athletic association by the university since Michael Adams raided the till. Plus UGA admin get to keep the annual interest on that as a fee for being such a good trustee.

      It’s a joke. We should reinvest our revenues from football back into football at a rate that keeps us at the top of the SEC on rate of reinvestment.
      We have historically been in the bottom 1/3 of reinvestment. Ergo, our ‘precious’ rainy day reserve.

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      • rchris

        The reason we are behind in the facilities race is that McGarrity was determined to fire Richt so he refused to build which torpedoed Richt in recruiting (and he also lost Richt asst coaches due to low salaries). Even at that he was only able to get his win total down to 10 and fired him anyway. Now that he has his guy in there, he’s frothing at the mouth to support him any way he can.

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        • Normaltown Mike

          hilarious!

          I guess when McGarity approved the IAF while Richt was here, it was some perverse mind game.

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    • I think Chip’s got the right idea – Buy some land downtown to build your arena – that’s how you get people excited about basketball. Rupp Arena is in the middle of Lexington, not far from campus. Would be perfect for Athens, and bring in many more disinterested students.

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      • The Georgia Way

        We can’t do that because blah, blah, blah, blah, blah…

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      • Governor Milledge

        I don’t think you can have a modern arena and a city-owned facility such as the Classic Center competing against each other for events (such as large scale concerts or conferences).

        Somehow a new facility needs to work with the Classic Center, or otherwise the extracurricular events needed beyond basketball/gymnastics will be a constant fight to the death (and race to the lowest $) between the city and university.

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  10. I've Stopped Caring

    The Athletic Department has been run the same way since the 1960’s. Ideas and methods that Vince Dooley and Joel Eaves brought in 1963 were nothing less than a Godsend then. Today, they are as dated as the London Fog windbreakers of the time. It is not disrespectful to move away from these methods 54 years later. We are being left behind and as an overall program are settling into the bottom third of the league. Even sports we’ve always had as strengths, (swimming, golf), will nosedive when their current coaches eventually retire. The loyalty we’ve been able to monetize for decades will evaporate, particularly with our ever evolving admission policies. The time is now. We need to clean house on the 2nd floor of the BM. No one should keep a job for 40+ years.

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  11. Alfred E Neuman, Reserve Fund Black Belt

    The Society of the Miserable strikes again.

    FYI – We’re looking into adding new soap to the Foley Field bathrooms for 2019.

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  12. Chico Dawg

    After the research I did earlier this week and posted on another of the Senator’s threads, it seems to me that the purpose of the folks in B-M is to funnel excess cash generated from its income and frugal expense behaviors to the UGA Foundation and its lagging behind endowment. This practice is rubber stamped by the Athletics Board (controlled by faculty) and the folks on North Campus, since they are the ones who benefit the most form this skimming exercise. In the current environment, spending reserve money on facilities, or athletes, or fans is considered bad business practice.
    The costs of winning at any sport is a secondary goal. I’m not sure how anyone can deduce any other synopsis.

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    • Normaltown Mike

      stop it! I’m going to pee in my pants!!!

      UGAAA had a surplus of 27 million last fiscal year. Of that, they donated 5 million to the Foundation.

      Who ya gonna believe…me or your lying eyes:

      http://www.dacbond.com/dacContent/doc.jsp?id=0900bbc78016605e

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      • Chi-town Dawg

        Chico Dawg is right about the UGA faculty controlling the UGAA board 10 to 8 including holding all of the officer positions. It’s been awhile since I took accounting, but the 2015 YE financial statements seem to indicate the following:

        The UGA Foundation holds $46M in funds for the UGAA.
        Assets – Liabilities indicates the UGAA has $200M in shareholder equity even with all of their long term debt.
        Despite rising revenues, UGAA spending/expenses decreased from 2013 to 2014 and then rose far less then revenues from 2014 to 2015 i.e., less reinvestment in UGA athletics.
        Cash flow is extremely strong despite transferring $5M to the foundation.

        Tells me the UGAA is rolling in cash and financially very strong – most companies would love to be their position. Perhaps someone more knowledgeable than me can add other observations.

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  13. After last night, it’s another wave of demanding excellence from B-M. Mississippi State (!) ends UConn’s win streak, and South Carolina beats Stanford for an all SEC women’s final. Where’s Georgia (a once proud women’s hoops power)? At home …

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  14. Bob

    Amen. Our athletic program is the Titanic. Set football aside for the moment. South Carolina is in the men’s final four. South Carolina and Miss State are playing for the women’s title. Georgia’s gymnastics program is now middle of the road SEC. Georgia’s baseball program is the worst in the SEC. Golf, Tennis and Swimming seem to be on solid footing, but McGarity has little to do with that. Our facilities are substandard in far too many areas. Our coaching hires are more than questionable, although it might be hard to judge based on the level of support out of B-M. And while the football recruiting gives hope, I can’t fail to remember that last year we lost to 3 of our 4 biggest rivals for the first time since Jim Donnan’s last year in Athens. I am hoping for the best, but not holding my breath.

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