Michigan Capital Projects

Michigan’s 2011-2012 Budget: Facilities

I’ve shown you snippets of budgets from Georgia, Louisville and Ohio State. Today I’ve got Michigan’s 2011-2012 budget, and I want to focus on what athletic departments spend on facilities alone.

As you’ll remember if you read this site regularly (and if you don’t, why aren’t you?), Michigan is on of the 22 self-sustaining athletic departments. In fact, they’re projecting an operating surplus (that’s operating revenue minus operating expenses, which means it does not include capital expenditures) of $11.4 million for the upcoming fiscal year.

However, because of renovations to Crisler Arena (basketball) and Yost Arena (hockey), they will have a net loss of $18.5 million for the year. That’s, of course, not a loss that reflects the athletic department operating in the black. It’s just a depletion in their overall fund balance.

Michigan has taken on quite a few capital projects in the past decade. Here’s a look at the budget for each project and the gifts from donors for each project:

As you can see, gifts help make these capital projects possible, but they only make a small dent in the total amount needed. The athletic department has incurred debt for a number of the projects and has budgeted $13.2 million in expenses for this debt service for the coming year. This is up $2.2 million from last year due to debt incurred for the Michigan Stadium and Crisler Arena projects.

In addition to this debt service, Michigan has another $14.4 million budgeted for “Facilities Expenses” and a “Deferred Maintenance Fund Transfer”. I should point out that $4.5 million of the $14.4 million  mentioned is for the “Deferred Maintenance Fund Transfer”. This is a fund set up during the 2003 fiscal year that is being built up to fund future “major repair and rehabilitation projects” for athletic facilities. Because Michigan turns an operating profit each year, they’re able to put aside for future capital projects in ways I’m sure many other universities cannot.

The $14.4 million I just detailed on top of the $29.9 million set aside for renovations to Crisler and Yost and $13.2 million in debt service on facilities adds up to $57.5 million Michigan is spending next year on facilities alone.

Over time, however, the money may be well-spent. First, there’s a lot of keeping up with the Joneses that happens amongst athletic departments. You don’t want to lose a recruit because another school had nicer locker rooms or a better lounge for student-athletes. Better athletes hopefully translates into better success on the field. The national attention that comes with success can mean more applications for the university. It can also mean greater brand recognition, which translates into additional revenue from licensing and advertising.

For a school like Michigan who sells out football games, adding additional seating areas generally pays for itself over time. In the first season of having new club level and suite seating areas in Michigan Stadium last year, Michigan saw a $5 million increase in revenue attributed directly to those seating areas.

What do you think? Are expenditures on facilities getting out of hand? What can be done about it? If you simply stop renovating or upgrading, will the university fall in stature both on and off the field? Are naming rights the wave of the future in terms of funding renovations and upgrades?

4 thoughts on “Michigan’s 2011-2012 Budget: Facilities”

  1. I wouldn’t say that expences are out of hand…. but your article shows just one of many MANY reasons why college football – even at the highest level – cannot afford to pay its athletes. Just because the football programs make big money doesn’t mean the athletic department is making a profit. I hate hearing these people talk about how we should just pay the players. First of all, a small (say $200/mo) stipend is NOT going to deter guys like Terrelle Pryor and his cohorts from taking extra benefits. But more importantly, these programs cannot run like “for profit businesses” because those gifts are charitable in nature and tax deductible. You don’t see people donating money to the Lions or the Tigers except in form of ticket sales and seat licences. College football is big business but it also funds every other sport at the university.

  2. For a copy of the Michigan Athletic Department’s FY 2012 budget, go to http://www.regents.umich.edu/meetings/06-11/2011-06-X-13.pdf

    There’s a couple of things to note when you look at this budget. On Page 4 in Section 16, you’ll note the debt service of $13.2M includes the projects being done at Crisler Arena. I believe your comment about Michigan losing money in FY 2012 because of that project is incorrect. The Athletic Department did say that the $14M Yost Ice Arena will be covered by athletic department funds (see http://www.annarbor.com/sports/michigan-regents-to-consider-14-million-yost-ice-arena-improvement-plan/). That project is not shown in this budget because it hadn’t been approved by the Regents when the budget was submitted, so there are no details on how it will be financed. If it’s done using athletic department reserves, then it could theoretically count against FY 2012 revenue. But all of Michigan’s projects have been done with a combination of gifts and loans, so the actual annual cost may still be less.

    Also note on page 2, Section 3 that the revnues for donations and additional ticket income for the suites and premium seating have been in approximately $15M. The stadium renovation debt is reported at $9.4M. This means the renovation project has produced around $5.5M in positive cash flow for each of the first two years it’s been in place. So yes, it does appear that this project will more than pay for itself. Keep in mind as well that the additional revenue paid by those individuals for premium seating and suite is paying off the debt on the entire stadium renovation project which included much more than just the new structures on the east and west sides of the stadium and benefit all the people attending games at Michigan–even those in the “cheap seats”.

    1. I received a budget directly from Michigan’s athletic department after Regent approval that was used to write this piece. It included what I believe to be a revised version of what you’ve linked to as well as additional documentation.

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