University of Tennessee in serious debt

[spuwho]

Poor performance in athletics has led the University of Tennessee into serious debt.



Per Sports Illustrated:

Like most athletic departments, The University of Tennessee faces monumental financial strain to remain competitive amongst the nation’s elite.

Their efforts to compete has led to nearly $200 million in debt and less than $2 million in reserves, reports the Sports Business Daily.

The Tennessee football program hired Butch Jones from Cincinnati after firing Derek Dooley in November after three seasons. The school still owes Dooley a $5 million buyout and $2 million more to his assistants.

    Now, after staggering to losing football seasons in four of the last five years and seeing attendance drop to levels last seen in the 1970s, the Vols find themselves mired in more than $200 million of debt, the most in the SEC, with reserves of just $1.95 million, the least in the conference.

    The athletic department spends a startling $21 million a year on debt payments, $13.5 million of which comes from the school’s stressed $99.5 million athletic budget and the rest from donations.

    “We’ve got to get football healthy,” athletic director Dave Hart said. “That’s our economic engine. When that program is successful, everybody wins.”

That’s easier said than done. In the past three seasons, the football team went 15-21 overall and 4-19 in Southeastern Conference play.

[fsujax]

Ouch.

[FSBA]

I would like to see a breakdown of how they managed to dig themselves a $200 million hole. You can't blame that on a bad stretch of football when for 20 years previously you were packing 110,000 people into your stadium.

[Gators312]

http://m.sportsbusinessdaily.com/Journal/Issues/2013/01/28/Colleges/Tennessee.aspx?

[CityLife]

There has been a major arms race for new facilities in bigtime college athletics in the past decade or so. I don't know the specifics of Tennessee's situation, but I imagine they issued bonds to pay for upgraded locker rooms, training facilities, indoor facilities, etc. In today's climate you have to spend big to be able to compete. It looks like Tennessee did the spending without the results, which have resulted in much lower than projected revenue and donations. If you looked around the country, most major programs would be "in debt" to their facilities bonds the same way that people are in debt to their mortgage.

I mentioned in the thread about UNF starting football that UCF and FAU are probably going to see some serious financial issues in the next few years if they can't get results after making major facilities investments. I have a family member with intimate knowledge of UCF's situation and was told that they are already struggling and anticipate it getting worse with probation over the next few years and fan apathy.

[Tacachale]

Money money money. Big time college football is really expensive. There's a big element of "building the church for Easter Sunday" in multiple ways here. If you start operating as if your peak will hold out forever, you don't have much leeway when things decline. Throw in a few bad years on the field and some unforeseen buyouts of employees making truly obscene amounts of money, and you've got yourself a predicament. This could happen anywhere.

What's really sad is that Tennessee is typically one of the relatively few schools whose athletics department actually makes money and adds to the school's budget. Looks like that won't be happening for a while.

[CityLife]

To add a little more onto my other post. Tennessee is not in a recruiting hotbed and has to have an added edge over rival schools like Alabama, Florida, and Georgia that are located in more fertile recruiting grounds. The only real way to do so is to upgrade facilities to a higher standard than competing schools. This is why places like Nebraska, Oklahoma State, and Oregon have such great facilities, because they have to in order to gain a competitive edge. In Okie State and Oregon's case, they have wealthy benefactors (T Boone Pickens and Phil Knight) and in Nebraska's they have some of the best fan support in the country win or lose. Tennessee took a calculated risk by issuing bonds to gain a competitive advantage and thus far it hasn't paid off. A good few years on the field would likely solve their issues. Also, Dave Hart is a pretty darn good AD and will right the ship in no time. He did a fantastic job at FSU.