Saturday, January 7, 2017

College Football’s Top Teams Are Built on Crippling Debt

Football’s critics often point to multimillion-dollar coaching salaries. They should be more worried about debt, which costs more and lasts longer



WASHINGTON, D.C. -- The business model of college football, long a financial boon to universities, is breaking down. A weeklong look at the pressures of rising costs, falling revenue and what, if anything, universities can do about it.  Read the rest of the series here.

By many standards, University of California, Berkeley has an incredible sports program. Its 30 sports are second only to Stanford in the Pac-12 Conference, and the school has won 22 national titles in the past decade. At the Rio Olympics, current or former Cal athletes collected 21 medals, including eight golds.

By another measure, Cal sports are in big trouble. After completing the most expensive college football stadium overhaul ever, the Golden Bears now owe more money than any other college sports program. Hobbled by debt service payments, the athletic department ran a $22 million deficit last year and expects to end this fiscal year deep in the red.

A university task force is looking for possible solutions, including reducing the total number of Cal’s sports programs. Any cuts could endanger some of the school’s most successful teams, which cost a lot more than they bring in, and Chancellor Nicholas Dirks recently gave the group more time. “Everything is on the table,” said Robert O’Donnell, a lecturer at Berkeley’s Haas School of Business who co-chairs the task force.

Football critics nationwide often point to multimillion-dollar coaches as emblems of excess. They should be more worried about debt, which costs more and lasts longer. A high-priced coach might earn $4 million to $5 million a year. Meanwhile, according to public records, athletic departments at least 13 schools in the country have long-term debt obligations of more than $150 million as of 2014—money usually borrowed to build ever-nicer facilities for the football team.



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