Red Raiders' debt service second-highest in Big 12 behind Texas
http://redraiders.com/filed-online/...ng-term-athletic-department-debt#.VX4dHvlVhBc
Kirby Hocutt wasn’t far removed from his days as a head-knocking linebacker at Kansas State when Texas Tech started an athletic facilities building boom at the dawn of the Big 12 Conference.
By the time Tech finishes paying off all those projects, Hocutt’s blond hair might have turned gray and he could be closing in on retirement.
“The Achilles heel of Texas Tech athletics is the amount of debt that we’ve accumulated as we’ve built our athletic facilities,” the Tech athletic director said last week.
The price of building the United Supermarkets Arena, Rocky Johnson Field and the John Walker Soccer Complex and doing major renovations to Jones AT&T Stadium, Dan Law Field and the Fuller Track Complex will have Tech paying off debt that’s on the books through 2035.
Tech’s long-term debt related to those projects and others currently tops $111 million, about $95 million of which is related to football.
Within Tech’s $76.1 million operational budget for fiscal year 2016, nearly $12 million — or 15.7 percent — will be debt service.
“That’s 12 million dollars that we’re using to pay off our debt, rather than investing into our athletics programs,” Hocutt said. “But it’s a double-edged sword. Thankfully, we have the facilities that we have today or we wouldn’t have the foundation upon which we stand today.”
Second-biggest payment
In the Big 12, only the University of Texas is making larger debt-service payments than Tech, according to Hocutt and Bobby Gleason, the department’s senior associate athletic director/chief financial officer. UT will pay $18 million in debt service for fiscal year 2015, Gleason said.
An amortization chart shows Tech’s $111 million debt will melt to about $70 million in 2020, to about $50 million by 2023 and to $20 million by 2027.
That’s if the department doesn’t take on more.
“That’s our challenge,” Hocutt said. “That’s our challenge as we look to the future and we try to build new facilities. We have to be very careful, because we can’t accept much more debt.”
Tech’s fiscal year 2015 debt service is $12,280,585. For fiscal year 2016, it’s $11,984,000. Tech will pay $2 million of that out of the annual operating budget with the remaining $9,984,000 transferred from funds containing major gifts, suites and club seats revenue.
Last year, Tech announced the Campaign for Fearless Champions, an attempt to raise $185 million in private funds for projects benefiting all 17 teams. Two of the projects under that umbrella are indoor facilities for football and track and field.
The price tag for those two buildings is projected at $45 million, and Hocutt says they won’t commence until all $45 million is pinned down.
The debt already accumulated is the reason why the indoor projects are on hold.
“That’s exactly right,” Hocutt said. “That’s exactly right.”
Big 12 bucks
The Big 12 announced another record distribution two weeks ago, this time $252 million to be shared by the league’s 10 members.
“Thank goodness for the Big 12,” Gleason said.
Tech’s $25 million share represents nearly one-third of the $76.1 million budget for fiscal year 2016, which starts on Sept. 1, 2015. For fiscal year 2015 that ends Aug. 31, the department’s initial budget approved by the Board of Regents was a little more than $69 million, of which $20 million was the annual Big 12 revenue distribution related to the conference’s television contracts.
The budget wound up growing to $72 million because of the seat-replacement project currently ongoing at Jones AT&T Stadium. That’s a $3.9 million venture with $2.9 million coming from athletic department reserves and $1 million from gifts.
“If we end up using 2.9 million, that means that, in essence, everything else broke even — revenue and expense — for the year,” Gleason said.
The biggest year-to-year change in Tech’s athletic budget — either on the revenue or expense side — is money from the Big 12 distribution.
“That’s the largest (variable),” Gleason said. “And the fact you have 10 (members). Divide by 10 instead of 12.”
The conference distribution normally comes about four times a year, Gleason said, with the last payment in June.
“They probably don’t distribute anything until about December,” Gleason said. “They distribute it as the funds are available. The board of directors of the conference approves those distributions. It’s not a mandatory (action). It is standard to try to distribute money as they have it, though.”
Trying to keep up
Tech athletic officials proudly boast of having invested more than $250 million over the last two decades to build new sports facilities and improve existing ones.
The boom began in 1996 with the first work on the United Supermarkets Arena, which opened in 1999.
“Really, it was the start of the Big 12 Conference when all our facilities (upgrades started),” Gleason said. “John Montford was our chancellor. Gerald (Myers) was the athletic director. We had no arena. The soccer (field) was within the track facility. We didn’t have softball. Of course, all the stadium renovation (since).
“We had the bubble (the Athletic Training Center, opened in 1985), and we had the basic stadium. But there were so many needed improvements, really, to be competitive in the Big 12 that we started out almost having to build everything.”
For major facilities such as United Supermarkets Arena, Tech issued bonds to provide the cash to pay for construction. Then the bonds are paid back over time, not unlike a home mortgage.
In separate conversations, Hocutt and Gleason describe the athletic department’s financial situation using the same terms: financially stable, but challenged.
“But we do manage it,” Gleason said. “We’ve managed it over the years.”
Football vital
Beyond the $25 million payout from the Big 12, next year’s budget projects $17.1 million in revenue from football, roughly 90 percent of that from ticket sales and seat options. That’s the department’s second-biggest source of revenue.
There’s a projected $6.5 million from donations to the Red Raider Club and $5.5 million from sponsorships.
Tech also will transfer the $9.984 million into the 2016 operating budget from multi-year funds. Those funds hold revenue from major gifts and premium seating from Jones AT&T Stadium suites and club seats and United Supermarkets Arena suites.
That balances the $76.1 million budget.
The Red Raiders averaged 6,623 in home attendance for men’s basketball last season, and the Lady Raiders averaged 3,804. Their projected revenue for fiscal year 2016 is $1.3 million and $288,000, respectively.
There’s not a lot of wiggle room, given the debt load.
“That’s why it’s so critical that we sell out Jones AT&T Stadium,” Hocutt said, “to help us generate that revenue to invest back into our 17 varsity sports programs. That’s why it’s so critical that we put people in the United Supermarkets Arena for men’s and women’s basketball. That’s our revenue growth opportunity is men’s and women’s basketball, growing our attendance there and continuing to maintain what we achieved in football last year.
“That’s our lifeblood is our support through our season-ticket holders and our Red Raider Club members.”
don.williams@lubbockonline.com
http://redraiders.com/filed-online/...ng-term-athletic-department-debt#.VX4dHvlVhBc
Kirby Hocutt wasn’t far removed from his days as a head-knocking linebacker at Kansas State when Texas Tech started an athletic facilities building boom at the dawn of the Big 12 Conference.
By the time Tech finishes paying off all those projects, Hocutt’s blond hair might have turned gray and he could be closing in on retirement.
“The Achilles heel of Texas Tech athletics is the amount of debt that we’ve accumulated as we’ve built our athletic facilities,” the Tech athletic director said last week.
The price of building the United Supermarkets Arena, Rocky Johnson Field and the John Walker Soccer Complex and doing major renovations to Jones AT&T Stadium, Dan Law Field and the Fuller Track Complex will have Tech paying off debt that’s on the books through 2035.
Tech’s long-term debt related to those projects and others currently tops $111 million, about $95 million of which is related to football.
Within Tech’s $76.1 million operational budget for fiscal year 2016, nearly $12 million — or 15.7 percent — will be debt service.
“That’s 12 million dollars that we’re using to pay off our debt, rather than investing into our athletics programs,” Hocutt said. “But it’s a double-edged sword. Thankfully, we have the facilities that we have today or we wouldn’t have the foundation upon which we stand today.”
Second-biggest payment
In the Big 12, only the University of Texas is making larger debt-service payments than Tech, according to Hocutt and Bobby Gleason, the department’s senior associate athletic director/chief financial officer. UT will pay $18 million in debt service for fiscal year 2015, Gleason said.
An amortization chart shows Tech’s $111 million debt will melt to about $70 million in 2020, to about $50 million by 2023 and to $20 million by 2027.
That’s if the department doesn’t take on more.
“That’s our challenge,” Hocutt said. “That’s our challenge as we look to the future and we try to build new facilities. We have to be very careful, because we can’t accept much more debt.”
Tech’s fiscal year 2015 debt service is $12,280,585. For fiscal year 2016, it’s $11,984,000. Tech will pay $2 million of that out of the annual operating budget with the remaining $9,984,000 transferred from funds containing major gifts, suites and club seats revenue.
Last year, Tech announced the Campaign for Fearless Champions, an attempt to raise $185 million in private funds for projects benefiting all 17 teams. Two of the projects under that umbrella are indoor facilities for football and track and field.
The price tag for those two buildings is projected at $45 million, and Hocutt says they won’t commence until all $45 million is pinned down.
The debt already accumulated is the reason why the indoor projects are on hold.
“That’s exactly right,” Hocutt said. “That’s exactly right.”
Big 12 bucks
The Big 12 announced another record distribution two weeks ago, this time $252 million to be shared by the league’s 10 members.
“Thank goodness for the Big 12,” Gleason said.
Tech’s $25 million share represents nearly one-third of the $76.1 million budget for fiscal year 2016, which starts on Sept. 1, 2015. For fiscal year 2015 that ends Aug. 31, the department’s initial budget approved by the Board of Regents was a little more than $69 million, of which $20 million was the annual Big 12 revenue distribution related to the conference’s television contracts.
The budget wound up growing to $72 million because of the seat-replacement project currently ongoing at Jones AT&T Stadium. That’s a $3.9 million venture with $2.9 million coming from athletic department reserves and $1 million from gifts.
“If we end up using 2.9 million, that means that, in essence, everything else broke even — revenue and expense — for the year,” Gleason said.
The biggest year-to-year change in Tech’s athletic budget — either on the revenue or expense side — is money from the Big 12 distribution.
“That’s the largest (variable),” Gleason said. “And the fact you have 10 (members). Divide by 10 instead of 12.”
The conference distribution normally comes about four times a year, Gleason said, with the last payment in June.
“They probably don’t distribute anything until about December,” Gleason said. “They distribute it as the funds are available. The board of directors of the conference approves those distributions. It’s not a mandatory (action). It is standard to try to distribute money as they have it, though.”
Trying to keep up
Tech athletic officials proudly boast of having invested more than $250 million over the last two decades to build new sports facilities and improve existing ones.
The boom began in 1996 with the first work on the United Supermarkets Arena, which opened in 1999.
“Really, it was the start of the Big 12 Conference when all our facilities (upgrades started),” Gleason said. “John Montford was our chancellor. Gerald (Myers) was the athletic director. We had no arena. The soccer (field) was within the track facility. We didn’t have softball. Of course, all the stadium renovation (since).
“We had the bubble (the Athletic Training Center, opened in 1985), and we had the basic stadium. But there were so many needed improvements, really, to be competitive in the Big 12 that we started out almost having to build everything.”
For major facilities such as United Supermarkets Arena, Tech issued bonds to provide the cash to pay for construction. Then the bonds are paid back over time, not unlike a home mortgage.
In separate conversations, Hocutt and Gleason describe the athletic department’s financial situation using the same terms: financially stable, but challenged.
“But we do manage it,” Gleason said. “We’ve managed it over the years.”
Football vital
Beyond the $25 million payout from the Big 12, next year’s budget projects $17.1 million in revenue from football, roughly 90 percent of that from ticket sales and seat options. That’s the department’s second-biggest source of revenue.
There’s a projected $6.5 million from donations to the Red Raider Club and $5.5 million from sponsorships.
Tech also will transfer the $9.984 million into the 2016 operating budget from multi-year funds. Those funds hold revenue from major gifts and premium seating from Jones AT&T Stadium suites and club seats and United Supermarkets Arena suites.
That balances the $76.1 million budget.
The Red Raiders averaged 6,623 in home attendance for men’s basketball last season, and the Lady Raiders averaged 3,804. Their projected revenue for fiscal year 2016 is $1.3 million and $288,000, respectively.
There’s not a lot of wiggle room, given the debt load.
“That’s why it’s so critical that we sell out Jones AT&T Stadium,” Hocutt said, “to help us generate that revenue to invest back into our 17 varsity sports programs. That’s why it’s so critical that we put people in the United Supermarkets Arena for men’s and women’s basketball. That’s our revenue growth opportunity is men’s and women’s basketball, growing our attendance there and continuing to maintain what we achieved in football last year.
“That’s our lifeblood is our support through our season-ticket holders and our Red Raider Club members.”
don.williams@lubbockonline.com
