Recently Jon Wilner wrote an in-depth series of articles about the issues surrounding the financing of the University of California – Berkeley stadium renovation. Cal’s athletic director Sandy Barbour responded via letter to the editor in the same paper a few days later. There are a number of issues embedded in these stories, but one I found particularly interesting is the apparent shock the Board of Regents and other university constituents displayed when the latest financial report failed to meet expectations.
Before we get into this, let’s establish some context. Originally the Board instructed the athletic department to retrofit the football stadium due to safety concerns caused by the fault line that runs right through it. The rub was the funds had to come from outside revenue sources (i.e. a classic unfunded mandate). As Ms. Barbour’s letter points out, Athletics smartly recognized that a retrofit only project wouldn’t inspire the philanthropy and other revenue production needed to cover the cost, so it proposed a plan to improve the facility in additional ways that would benefit donors, sponsors and ticket holders. They would pay for these upgrades through a bond issue, with revenue from long-term premium seat licenses being used to pay off the debt.
While the project was still in the proposal stage and not yet approved by the Board, the athletic department collected “intent to purchase’ agreements from those who were interested in the licenses. As of one critical 2009 report to the Board, these letters of intent represented roughly 2/3rds of the total available licenses. This was seen as encouraging news and contributed to the Board approving the project.
Unfortunately, things have not gone as planned since that report. Oh the facility has been built and by all accounts it is fantastic. However the Recession hit full stride and not all those who committed to the licenses actually followed through, the on-field product hasn’t been great and interest on the loans is significant. That’s when questions really started getting asked, with answers being met with skepticism. And while the short term financial situation appears to be under control, there were and are valid concerns about the medium and long-term.
But what I find disingenuous is the apparent shock of some in and around the university to the recent “revelation” that when describing its progress at the time of the aforementioned 2009 report, the athletics department was referencing pledges or letters of intent, rather than actual sales. Well of course they were. The facility hadn’t even been approved yet. What athletics essentially had at the time was a survey result of their top prospects: Q: “If we built this would you buy one?” A: “Yes.” And we’re supposed to believe that brilliant and capable members of the Board of Regents, faculty and other university administrators were all confused or duped into thinking those were actual sales? I don’t buy it.
It appears much more like they were hoping for the best and are now trying to claim ignorance since things haven’t worked out as planned. Notice nobody is trying to claim anyone intentionally misled or falsified data; that would be going a bit too far. At most what you hear is that it was a misunderstanding or mix-up of terminology, as Mr. Wilner notes in his investigative reporting:
A review of dozens of stadium-related interviews, memos and reports from 2009-11 found no evidence that Cal engaged in fraud. Internal documents usually specified that sales figures were based on intent-to-purchase orders, but school officials were less specific in their public comments.
The bottom line is Cal’s decision makers and stakeholders either knew or should have known the figures being used by athletics were pledges and projections, not actual sales. They should also have been prepared for things to not go as well as the best case scenario. To claim otherwise at this point just makes them look silly.