Vols financially strapped but not alone

January, 29, 2013
1/29/13
7:09
PM ET
The financial health of University of Tennessee athletics looks grim on paper: $200 million in debt. A 2012 season that saw the worst football attendance since 1979. Just under $2 million in reserves.

Although it might sound like one of the SEC’s most storied programs is in a full collapse (SportsBusiness Journal points out the Vols’ $200 million in debt is the most in the SEC), the university’s financial status may not be that far out of line with other conference schools.

Comparing fiscal health between universities can be a tough task, as schools use vastly different procedures for financing and building new facilities. And every school has unique funding and expense circumstances.

For example, the University of Kentucky carries no outstanding debt or debt service on the facility where its teams play basketball. Rupp Arena is owned by the city, and the Wildcats pay rent and split revenue on parking and concessions instead. It’s a pretty good deal.

In addition, outstanding debt and debt service for athletic departments can fluctuate greatly from year to year. Just a year ago, Alabama and LSU carried more debt on their books than Tennessee. According to Alabama’s 2010-11 NCAA financial disclosure, it had outstanding debt of $207 million. LSU came in right behind at $202 million. Tennessee was third in the conference at $188 million. For the 2010-11 fiscal year, Tennessee was fifth when it came to annual debt service payments, behind Alabama, LSU, Georgia and Auburn.

The schools change positions in such rankings based on a few factors, with one being short-term financing that is later converted to long-term financing. This is the reason Tennessee saw its debt service payments jump from $7.7 million in 2010-11 to $13.5 million in 2011-12. According to the University of Florida’s University Athletic Association audited financials for the 2010-11 fiscal year, current debt payments of $6 million will balloon to $31 million in 2018.

Other factors when looking at the fiscal health of an athletic department:

•  How much a department must return to the university. Tennessee has returned $29 million the past five years under agreements from a previous administration, for example.

•  Tax expenses. Tennessee is in a unique position in relation to its SEC peers because it pays 9.25 percent in sales tax on tickets sold, and an additional 5 percent on tickets for football, and men’s and women’s basketball.

But no matter how it’s measured, amassed or counted, debt is money owed, and it has to be paid back.

Tennessee athletic director Dave Hart has asked Chancellor Jimmy Cheek for help.

“I asked him, would he consider when we’re done renegotiating the SEC [television] contract, could all the money stay in athletics, and he said, ‘Yes,’” said Hart. “Secondly, because we were in a football staff transition, I said, ‘Will you return some of that athletics money [currently committed under previous agreements to the university] so we can stabilize?’ and he agreed.”

Last year’s athletics budget shortage was covered by athletic reserves but depleted the fund to just $1.95 million.

“That was the biggest surprise to me, that our reserve had reached that level,” said Hart, who was hired 16 months ago. “In this conference, that’s unusual.”

The chancellor has agreed that funds of $6 million per year previously committed to the university will be suspended for three years, in an effort to rebuild the reserve fund.

Asked if any sports will have to be contracted in order to make ends meet, Hart said, “Absolutely not.”

Referring to the current situation as a “perfect storm” of financial events, Hart said, “We’ll be fine long-term -- no question in my mind.”

Kristi Dosh

Sports Business
Dosh covers sports business for ESPN. She is an attorney, founder of BusinessOfCollegeSports.com, and joined ESPN in October 2011.
Author of "Saturday Millionaires: How winning football builds winning colleges."

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