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Paying to play
Ohio State leads nation with $203 million in sports debt
Wednesday, December 01, 2004
Curtis Eichelberger
BLOOMBERG NEWS
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</td></tr> <tr><td class="credit" width="200"> FILE PHOTO </td></tr> <tr><td class="cutline" width="200">An aerial shot of Ohio Stadium during renovation work in 2000 </td></tr> <tr><td align="center">
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Ohio State University has the country’s largest athletics program — and a debt to match.
OSU carries $202.7 million in athletics-related bond debt, according to a survey of 87 public schools with major sports programs. The figure eclipses the debt held by the secondplace school, the University of Wisconsin, in Madison, which owes $90.8 million.
Other schools carrying large debt include the University of Virginia, in Charlottesville, $88 million, and Virginia Tech, in Blacksburg, $81.7 million.
Private institutions aren’t required to disclose the information and were excluded from the survey.
The number of universities facing big bills is likely to grow.
At the University of Washington, for example, Athletics Director Todd Turner is facing a financial crisis. With football-ticket sales sagging, he’s drawing from a reserve fund and said he may need as much as $150 million, partly through a bond sale, to renovate the Huskies’ 84-year-old stadium in Seattle.
It’s the kind of budget crunch that Myles Brand, president of the National Collegiate Athletic Association, indicated may be looming at schools in the NCAA’s top division, I-A.
He said athletics expenses, including debt service, have risen so dramatically that any unexpected shortfall could derail some departments. The survey of 87 Division I-A schools shows total bond indebtedness at more than $1 billion.
"Where do we get the money to fix the stadium? That’s the challenge," Turner said. "It’s not millions. It’s tens to hundreds of millions. You can only borrow so much. How do you pay the debt service?"
Average athletics expenses have grown at 7 percent to 8 percent annually in the past six years, Brand said. That’s double the 3.7 percent average annual increase in university costs as a whole during the same period, according to the Higher Education Price Index published by Wilton, Conn.-based Commonfund, which manages endowments for nonprofit organizations.
"The growth we’ve seen in college athletics can’t be sustained," Brand said.
Tom McMillen, a former National Basketball Association player who represented Maryland in Congress for six years, said the priorities of universities that spend heavily on sports may be askew.
"We have to wonder if, as a country, we’ve lost our senses on all these public-funded stadiums," said McMillen, chairman of Washington Capital Advisors, a merchant bank based in Landover, Md. "If we could do it all over again, I don’t think this is the model of college sports that we would choose."
A turning point may not arrive, he said, until a university faces bankruptcy.
"Without it, the spending and borrowing will continue."
Twenty state-supported universities are carrying more than $40 million each in athletics debt, according to documents obtained by Bloomberg News. The average annual athletics budget in Division I-A is $27 million, the Indianapolisbased NCAA said.
At Ohio State, the sports debt does not include bonds for the $115 million Jerome Schottenstein Center, which was part of the athletics department when it opened in 1998 but was later switched to the Office of Student Affairs.
OSU financed its $200 million renovation of Ohio Stadium and the construction of other athletics venues by selling bonds in 1999 and 2002.
The Buckeyes’ stadium opened in 1922, and in recent years the concrete began to disintegrate, Athletics Director Andy Geiger said. The repair bill, he said, was $55 million, and the sports program didn’t have the money.
So the university lowered the field to add higher-priced club seats, built luxury suites to lease and added other amenities. The $15 million in additional annual revenues generated by the project paid for repairs, a new home for the displaced track and debt service.
Should revenues run short, OSU’s athletics department would have to find more donors or cut teams, said Bill Shkurti, OSU’s senior vice president for business and finance. "We would not permit a default."
At the University of Michigan, Athletics Director Bill Martin is facing the same kind of difficult choices that Geiger encountered.
Michigan Stadium, built in 1927, needs repairs to its concrete structure, plumbing and electrical systems, Martin said. Its seats are too narrow, and it lacks ample restrooms and concession stands.
Martin said he was embarrassed two years ago when Wisconsin lost to Michigan and the visitors had to fly home without showering because the plumbing was broken.
"Michigan’s stadium is functionally and economically obsolete," he said.
Brand said schools that find creative ways to expand programs and fund debt are an asset to collegiate sports — as long as they don’t become too commercial.
He recently lauded Michigan and Ohio State for eventually rejecting an offer by SBC Communications Inc. to buy naming rights to the schools’ annual football game for $1.1 million over two years.
Dispatch reporter Barnet D . Wolf contributed to this story
Paying to play
Ohio State leads nation with $203 million in sports debt
Wednesday, December 01, 2004
Curtis Eichelberger
BLOOMBERG NEWS
<!--PHOTOS--> <table align="right" border="0" class="phototableright"> <!-- begin large ad code --> <tbody><tr><td id="story-ad">
<script language=\"JavaScript1.1\" type=\"text/javascript\" src="http://adsrv.dispatch.com/RealMedia/ads/adstream_jx.ads/www.dispatch.com/businessindex@Position1"></script> <noscript>
Ohio State University has the country’s largest athletics program — and a debt to match.
OSU carries $202.7 million in athletics-related bond debt, according to a survey of 87 public schools with major sports programs. The figure eclipses the debt held by the secondplace school, the University of Wisconsin, in Madison, which owes $90.8 million.
Other schools carrying large debt include the University of Virginia, in Charlottesville, $88 million, and Virginia Tech, in Blacksburg, $81.7 million.
Private institutions aren’t required to disclose the information and were excluded from the survey.
The number of universities facing big bills is likely to grow.
At the University of Washington, for example, Athletics Director Todd Turner is facing a financial crisis. With football-ticket sales sagging, he’s drawing from a reserve fund and said he may need as much as $150 million, partly through a bond sale, to renovate the Huskies’ 84-year-old stadium in Seattle.
It’s the kind of budget crunch that Myles Brand, president of the National Collegiate Athletic Association, indicated may be looming at schools in the NCAA’s top division, I-A.
He said athletics expenses, including debt service, have risen so dramatically that any unexpected shortfall could derail some departments. The survey of 87 Division I-A schools shows total bond indebtedness at more than $1 billion.
"Where do we get the money to fix the stadium? That’s the challenge," Turner said. "It’s not millions. It’s tens to hundreds of millions. You can only borrow so much. How do you pay the debt service?"
Average athletics expenses have grown at 7 percent to 8 percent annually in the past six years, Brand said. That’s double the 3.7 percent average annual increase in university costs as a whole during the same period, according to the Higher Education Price Index published by Wilton, Conn.-based Commonfund, which manages endowments for nonprofit organizations.
"The growth we’ve seen in college athletics can’t be sustained," Brand said.
Tom McMillen, a former National Basketball Association player who represented Maryland in Congress for six years, said the priorities of universities that spend heavily on sports may be askew.
"We have to wonder if, as a country, we’ve lost our senses on all these public-funded stadiums," said McMillen, chairman of Washington Capital Advisors, a merchant bank based in Landover, Md. "If we could do it all over again, I don’t think this is the model of college sports that we would choose."
A turning point may not arrive, he said, until a university faces bankruptcy.
"Without it, the spending and borrowing will continue."
Twenty state-supported universities are carrying more than $40 million each in athletics debt, according to documents obtained by Bloomberg News. The average annual athletics budget in Division I-A is $27 million, the Indianapolisbased NCAA said.
At Ohio State, the sports debt does not include bonds for the $115 million Jerome Schottenstein Center, which was part of the athletics department when it opened in 1998 but was later switched to the Office of Student Affairs.
OSU financed its $200 million renovation of Ohio Stadium and the construction of other athletics venues by selling bonds in 1999 and 2002.
The Buckeyes’ stadium opened in 1922, and in recent years the concrete began to disintegrate, Athletics Director Andy Geiger said. The repair bill, he said, was $55 million, and the sports program didn’t have the money.
So the university lowered the field to add higher-priced club seats, built luxury suites to lease and added other amenities. The $15 million in additional annual revenues generated by the project paid for repairs, a new home for the displaced track and debt service.
Should revenues run short, OSU’s athletics department would have to find more donors or cut teams, said Bill Shkurti, OSU’s senior vice president for business and finance. "We would not permit a default."
At the University of Michigan, Athletics Director Bill Martin is facing the same kind of difficult choices that Geiger encountered.
Michigan Stadium, built in 1927, needs repairs to its concrete structure, plumbing and electrical systems, Martin said. Its seats are too narrow, and it lacks ample restrooms and concession stands.
Martin said he was embarrassed two years ago when Wisconsin lost to Michigan and the visitors had to fly home without showering because the plumbing was broken.
"Michigan’s stadium is functionally and economically obsolete," he said.
Brand said schools that find creative ways to expand programs and fund debt are an asset to collegiate sports — as long as they don’t become too commercial.
He recently lauded Michigan and Ohio State for eventually rejecting an offer by SBC Communications Inc. to buy naming rights to the schools’ annual football game for $1.1 million over two years.
Dispatch reporter Barnet D . Wolf contributed to this story
