Mon
Aug 27 2012
05:53 pm

The UT Athletic Dept. released financial statements today that revealed a nearly $4 million loss on revenues of $106,485,376. To cover the loss, UT dipped into reserve funds, which have only $2 million remaining.

The "financial model currently in place for athletics is not sustainable long-term," according to a statement released by UT.

Officials also said that "the athletics department has experienced a significant expense related to payments to former coaches in the sports of football, baseball and men's basketball as well as former directors of athletics."

Chancellor Jimmy Cheek and Athletic Director David Hart also cited "historical commitments" that include approx. $6 million in scholarships and millions more for other commitments such as facilities usage fees and licensing revenues. According to the statement, these "historical commitments were entered into in good faith by both the athletics department and University leadership but are currently being evaluated by the Chancellor and Athletics Director in order to determine if adjustments are necessary."

Other factors mentioned include $200 million in debt related to "construction of and improvements to multiple athletics facilities," and ticket taxes, which are presumably collected from buyers and passed on to state and local government.

59
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Tess's picture

This can't be good news.

This can't be good news for a lot of the athletic programs that aren't men's football, which sadly is where the major losses (buy outs) have come from.

jbr's picture

$alary $tructure: UT athletic department pay tops $20M

From News-Sentinel ...

a total of $20,860,006 in athletic department salaries to 195 employees, according to records obtained by the News Sentinel through a public records request in early June. Of that sum, $13.3 million goes directly to coaches and support staff.

$alary $tructure: UT athletic department pay tops $20M

Average Guy's picture

Love how "historical

Love how "historical commitments" need attention, not so much the apeshit construction fetish that truly caused this mess. Build, build, build - charge more, more, more - while people make less, less, less.

Saw my season ticket go up as quickly and as big as the new luxury suites in the early 2000's. I was finished with it then.

Still an at home fan, but have to say, UT is getting exactly what it deserves. Pricing yourself out of your traditional fan base is a recipe for disaster.

Ask NASCAR.

Rooster2's picture

There are limits. Even for

There are limits. Even for fans. I know many professional families where half of them go, because of cost.

More things to do in K-Town, fathers are more involved with raising and playing with their kids on a Saturday and moms expect them to, more expenses for food and gas, and just less leisure spending overall.

UT football isn't a necessity.

Average Guy's picture

From 1995 to 2005, ticket

From 1995 to 2005, ticket prices almost doubled.

Even at that time, there were people that would spend their "last dollar" to go see the Vols. For many of those fans, that last dollar is now going to keep the lights on at home.

Two years ago, my group went down to the stadium after a few drinks at the Cellar. Scalpers were asking $50, after kickoff. They didn't like being laughed at, but it happened anyway.

Roscoe Persimmon's picture

Couldn't happen to a nicer bunch

Hate it for the undergrad population that won't have the opportunity to experience a winner like the kids did in the late 90's, but Mike Hamilton (where is he the A.D. now?)was solely focued on counting money rather than overall accountability from the involved sports teams.

The SEC landscape changed rapidly while Fulmer was fooling around on autopilot and Hamilton was too distracted by the piles of money his peers in other athletic administrations were getting.

It will take 10 years to get this loser mentality out of the athletic department and correct the focus to winning and developing student athletes on and off the field.

Factchecker's picture

Heh

Sounds like they need some people who have been successful as business entrepreneurs in the private sector. Some job creators to run the A.D. like a small business. If they could only ask for some advice from people named Haslam, Moon, Alexander, Duncan, Overholt, Clayton, DeBusk, Classen, Greg Johnson, Baxter, Sansom, etc., I'm sure they could turn around the nonprofit liberals in charge of the A.D.

Average Guy's picture

To cover the loss, UT dipped

To cover the loss, UT dipped into reserve funds, which have only $2 million remaining.

Say the football team loses 4 or 5 games. That $2 million will be quickly consumed by the holes of empty stadium seating. How to correct? Making up the loss on the backs of fans that aren't there isn't an option.

Back to the release:

Agreements historic in nature. The UT Department of Athletics provides a minimum gift/philanthropy transfer of $6 million to the University each year based on agreements under prior leadership. This transfer provides for undergraduate scholarships, graduate fellowships, initiatives related to undergraduate student success, discretionary funds for UT Martin, UT Chattanooga, the Agriculture campus at UT Knoxville, and the UT Health Sciences Center in Memphis, and debt service on selected UT parking garages

So, what will the school's athletic department cut to sustain itself?

School.

Average Guy's picture

Priorities

(link...)

So now it's official.

rikki's picture

buyout backlog

Maybe this will give the new AD enough backbone to resist the asinine drumbeat to ditch Dooley. Speaking of which, whenever coaches are fired, it is implied but unspoken that some big donor has ponied up the buyout. I wonder if that has been untrue in some instances or if the accounting is just not that direct.

Rooster2's picture

The AD is basiccally Jim

The AD is basiccally Jim Haslam.

Rather than get a winning, independent, confident coach, we wind up with someone whose first obligation isn't to the fans, but to one person. Not donors, but A donor.

That's part of the problem.

EconGal's picture

Several problems with "the model"

In addition to the funding UTAD provides the campus and the amusement tax, the real budget problem is the operating cost of the non revenue sports.

Look at the debt service on the new fancy swim building. A million dollars annually. What in the hell was Mike Hamilton thinking? That is in additin to the higher operating cost of that facility ($275,000 projected; i dont know the actual.) Debt service for softball?

The UTAD is an example of the debt and fixed cost crisis.

This, on top of the fact that UT spends about $18 million on football, compared to $34 million at Alabama and $29 million at Auburn. UT now spends about what Kentucky spends on football, except Kentucky beat UT last year. (Sorry; cheap shot.)

metulj's picture

I love the "funding part."

I love the "funding part." Athletics pays the margins and gives $6 million to the University. What's that? 1/2 percent of the operating budget? It's a joke.

EconGal's picture

The funding part

I'm intentionally staying away from whether or not the athletics department ought to provide the campus $6 million a year, $60 million a year or recieve a subsidy. I am simply trying to explain the changes in the UTAD budget in the last few years that gave rise to the operating deficit.

metulj's picture

Ah, but that, in essence is

Ah, but that, in essence is the problem. It acts independently in a budgetary sense, but only makes the numbers work because it is a parasite on the system. The should change the team mascot to "The Remoras." Now, in a post-recession era with a lot of bad football being played, they are coming up short. No one ever questions the system, but the necessity of this farce is assumed to be the case.

Average Guy's picture

In addition to the funding

In addition to the funding UTAD provides the campus and the amusement tax, the real budget problem is the operating cost of the non revenue sports.

Yes, non-revenue sports piggy backed on the revenue producing sports during the boom times to capitalize on some of their own "needs".

But that's always been the equation. The only thing different in the equation are the empty seats in Neyland. SomethIng that has a real risk of getting worse before it gets better.

EconGal's picture

The only thing different in

the only thing different in the equation are the empty seats in Neyland.

That's simply not true. Football revenue has continued to increase in the last five years. football expenditures are lower today (in both nominal and real terms) than five years ago. Expenses for every other sport have increased.

General overhead has, very publicly, declined.

UTAD is still in the top 10 or 15 departments in terms of revenue.

Mike Cohen's picture

UTAD

The AD seemed to know this was coming. As I recall he has downsized the staff fairly significantly. That's a private sector style response.

The KNS story pointed out that according to data from a USA Today study, UT was 8th in athletic revenue and 8th in athletic expenses. While you would rather rank higher in the first group and lower in the second, it makes me think the spending is not terribly out of line.

Of course if revenue is dropping, that's an issue no matter what.

rikki's picture

they call algae blooms the crimson tide

Paying several guys lots of money to not coach a team and not run the athletic department is also a private sector response, if by "private sector" you mean elite corporate executives. It's always entertaining to watch people talk their way around reality in order to preserve cliched ideals.

There is at least as much room for waste and fraud in "private sector" operations as in government. Paying people not to coach is waste. Donors and trustees with big stakes in construction and concessions contracts is fraud. When Mike Hamilton decided to build a new swimming complex, he was thinking the same thing every member of Congress thinks: "I need to create a business opportunity for my donors."

Let's stop pretending there is any value in "private sector" mythology and just view the athletic system as it really functions. It's a labor force methodically precluded from profit-seeking, a consumer base that is not rational but tribal, and an ecosystem of parasites and predators feasting on the monetary flow.

metulj's picture

Let's stop pretending there

Let's stop pretending there is any value in "private sector" mythology and just view the athletic system as it really functions. It's a labor force methodically precluded from profit-seeking, a consumer base that is not rational but tribal, and an ecosystem of parasites and predators feasting on the monetary flow.

The crop is limbic system lubricants, the labor is the athletes, and the plantation house seats 100000+.

metulj's picture

Meanwhile, the professorate

Meanwhile, the professorate is among the lowest paid at any R1 university worth a damn.

Stick's picture

And small programs are being

And small programs are being squeezed out of existence.

Rooster2's picture

I think a cultural/economic

I think a cultural/economic shift is part of it.

The baby boomers no longer have the retirement security they thought they once had, even in government employment-rich Knoxville, the benefits are increasingly looking like they're not worth the costs (parking, concession costs, the time it uses up,etc), there are various issues.

And yeah, Hamilton thought, like a host of others, that the good times would continue to roll on.

John Neal's picture

UT Athletic Department shortfall

This is such an unfortunate fall from grace, and yet so predictable. This is the first time in 40 years that I have not had season tickets, and the first time I have ever failed to pay my annual donation. To me it is not simply about UT's dismal performance on the field. I think the Men's side of the UT Athletic Department is guilty of incredible arrogance, and it is a dreadful steward of our money. For example, the department has continuously made poor hiring decisions. As an attorney, I think they have written incredibly bad contracts with the coaches. The result is firing coach after coach (and one athletic director) for good cause, and then having to pay them millions to go away. And UTAD raises our prices so it is the supporters, not UTAD that pays for its poor judgment. Yes, the physical improvements are nice, but the fact is that UTAD spends money like there is no tomorrow, and they fail to recognize that in this economy, their supporters simply cannot afford to fund their spendthrift ways. I love UT sports, but I simply cannot continue to send money to a program that wastes my money.And, for the record, I do not view the current leadership as an imporovement.

Rooster2's picture

I think Derek Dooley is too

I think Derek Dooley is too smart to be a college football coach, but that's just between us. I don't think he has enough ruthlessness or brutality in him to be a decent coach.

EconGal's picture

John Neal's points are spot on

More mistakes, all related to the pricing of football seating/parking...

As the Department increased ticket prices during winning years, they slowly crowded individual donors out of the market and replaced them with corporate purchasers. The price of a skybox went from $18,000 to $50,000. That was fine until 2 things happend: the economy and the football team went to hell.

Football tickets were easy cuts for businesses to make. Unlike people, businesses generally aren't loyal. And when the tam is 7-5, your out-of-town customers don't flock to Knoxville to see the mighty Akron Zips.

$150,000 for Tennessee Terrace seats? What a joke, Mike. They can't give those things away.

Part of the coaches' buyouts was the result of poorly written contracts. But much of the buyouts was simply unrequired parting gifts. Pearl, Fulmer, Delmomico, Raleigh and Hamilton all received more severance than they were contractually entitled to. There are reasons for that, some of which are pretty ugly.

fischbobber's picture

In Delmonico's case

The university screwed up. He shouldn't have been fired to begin with, and the fact that Serrano at one time worked and was mentored by the guy only bears that out. Most goal oriented people can be difficult to work with at one point or another.

I got out of the habit of U.T. football about the same time my son began playing youth sports. In between the rising costs of subsidizing a four season ballplayer (even an elementary school ballplayer) and subsidizing the spendthrift ways of an out of control athletic department, only one could fit into my household budget. I picked my son, but there are others that stuck with U.T.

A U.T. baseball game under Delmonico was the best youth oriented entertainment event, dollar for dollar, in town.

Rooster2's picture

The baby boomers age, lose

The baby boomers age, lose their flexibility and mobility to climb all over the stadium...I'm afraid UT football really isn't aware of what's going to hit them a little longer down the road.

fischbobber's picture

Blocks of tickets

The beginning of the end was when Dickey changed the donation formula on blocks of tickets. Growing up, I can attest that several thousand fans and workers every game were pre-high school, there either working or on some kind of group outing with donated tickets. We were the developed demand during the eighties and nineties. It got to the point where I looked at my wife and said, "You know honey, by the time you figure the tickets, the donations, the parking, the tailgating costs and the babysitting and concessions, we're looking at 2500.00 a year. And if we have to change our routine to save nickels and dimes to the point where the experience ceases to be fun, what's the point?"

I didn't miss a home game for 20 years and followed the Vols on the road at least once during most of those. But you know what? I haven't been to five games in the last seven years, and really don't miss it.

It's just not worth what one is expected to pay.

John Neal's picture

UT v. Henry County High School

I think I realized how far UT football has fallen while I watched my home team, Henry County, win the state championship in Cookeville last fall. For $18 dollars, which included the ticket and the food, I had a lot more fun than at any of those games last season where UT charged me $500 a game to attend.

Factchecker's picture

That's a problem. Fun doesn't

That's a problem. Fun doesn't correlate so well to the size league you're paying into nor even to winning/losing. Besides lack of success at the end of the season being an issue, UT plays a lot of easy schools it expects to whup up on. Doesn't that ever get old?

Somebody's picture

bubbles

What we have is yet another economic bubble that has burst, a pin-prick of reality interrupting massive over-valuation based on grift and hype. Despite the alleged connection to education, the lesson will nonetheless not be easily learned.

The pattern should be quite recognizable by now. Too much money flooding into a hyped "business opportunity," much like a herd of cattle crowding around a single, puny tree in a field under a blazing sun. Someone said there was some really good shade over here. It won't stop until the entire herd begins to keel over from heat stroke.

The lesson they should be teaching in the Haslam Business buidling is that, left to their own devices, the smartest, craftiest people in business will create a focus for some old-fashioned irrational exuberance, the almost smartest, craftiest people will start to crowd around, and everyone else follows. The actual smartest people then collect as much money as they can and bail out, just before everyone else comes to the realization that there's no there there, and that their wallets are distinctly lighter.

Then there's the best part: the people with empty wallets, still in the afterglow of it all, then heap praise on those who just cleaned them out, demand that the process be unregulated and repeatable with impunity, and set about grousing how government should be run more like business.

The UT Athletic Department's predicament is not so much about the corrupt and ridiculous way that top-tier athletics departments are run; it's very much a microcosm of how top-tier businesses in America are run. There are a small few who make a fortune, subsidized by critically undervalued but aspirationally-motivated labor and financially sponsored by aspirationally-motivated consumers who are gladly bled dry of every last dollar until the whole scheme spins apart. While some will momentarily grumble about where all the money went, they will be most satisfied if the scheme can simply be re-started, and that great feeling of irrational exuberance put up for sale once again.

Tess's picture

Like!

Somebody, you pretty much wrote what I think too. Thanks for the post.

fischbobber's picture

Good analysis.

Good analysis.

Rooster2's picture

ESPNU? The Georgia

ESPNU?

The Georgia Dome?

Another part of UT sport's problem is its willingness to sellout its fans for a tv deal.

Well, tv deals won't fill the stands.

They run into late into the nights, and they generally screw over the real fans.

Just one more thing.

fischbobber's picture

ESPNU

That decision sucked. I came home ready to watch the game only to find out it would cost me thirty dollars at a pretty good bar b-q joint arguing politics with two good natured republicans and actually getting me out of the house and having a pretty good time. O.K. Maybe that decision didn't suck. But Maryville beating West did.

Rooster2's picture

ESPNU=another way to get more

ESPNU=another way to get more of our money.

I didn't see the game. I'm glad they won, although I'm not sure why.

I'd like to see Dooley do well, but I still think he's too intellectual for college football. Although Majors was pretty smart.

fischbobber's picture

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