$8 million loan to CU athletics

Part of money to help fill budget hole made by Barnett's buyout

Sara Burnett, Rocky Mountain News

Published June 2, 2006 at midnight

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DURANGO - The University of Colorado's Boulder campus will loan the CU athletic department $8 million to help it out of a budget hole created by years of overly optimistic revenue projections, plummeting ticket sales and the buyout of football coach Gary Barnett's contract, CU officials announced Thursday.

The $8 million will come from university reserves, an approximately $12 million "rainy-day fund" set aside for such problems, interim Chancellor Phil DiStefano said.

The loan will not result in cuts to any other departments or programs, officials said.

The athletic department will pay the money back at a rate of $800,000 per year, plus 2 percent interest, starting in the 2007-08 fiscal year.

DiStefano, CU President Hank Brown and several members of the Board of Regents described the loan as a new start for the athletic department, which has been hit hard by controversies over football recruiting, athletic department spending and mismanagement of Barnett's summer football camps.

Brown also said it's a more responsible approach than letting the department carry a deficit.

According to CU Athletic Director Mike Bohn, 86 percent of Division I-A athletic programs operate in the red.

However, Brown has required every department to have a balanced budget.

"The campus was left with little choice," Brown said of the decision to go with the loan. "You were at a point where there weren't a lot of options available."

Approximately half of the debt resulted from Bohn's decision to get rid of Barnett at a cost of $3.1 million to buy out his contract and to pay Boise State University $700,000 so that coach Dan Hawkins could leave that school for CU.

Bohn said that decision was necessary, however, to get the program on a new path and regain the support of alumni, donors and fans.

"Any time you change a marquee coach, it has negative consequences," he said.

Bohn, who inherited much of the money problems, said the loan doesn't alleviate any pressure because the money has to be paid back.

He takes issue with anyone who characterizes it as a bailout.

"It's not a gift," he said.

Bohn has been working for months on a business plan for the department, as well as more realistic revenue projections and a way to balance the budget while making payments on the loan.

His plan, though not finalized, calls for the department to cut expenses by $1.25 million per year, Bohn said Thursday. That would bring his 2006-2007 budget to about $36.6 million.

Bohn already has eliminated the men's tennis program and announced 12 positions - ranging from administrators to staff to two coaches - will be cut. The final decision on additional cuts will be made by the end of this month, when he presents the final draft of his plan to the regents, Bohn said.

The announcement came on the same day the regents approved a 2.4 percent increase in tuition for in-state undergraduates on the Boulder campus, and a 9 percent increase for graduate students.

But DiStefano said the two issues should be considered separately.

Tuition pays for ongoing expenses such as faculty salaries, while the loan is a one-time infusion for a department that is otherwise expected to cover its own costs, DiStefano said.

Faculty leaders said they were sorry to learn of the large deficit, but found it refreshing that Bohn was speaking openly about it.

"We think that the plan to seek a loan from the UCB campus is a clear plan. Yet we also want to be sure that the academic mission of the campus is at the center of the attention of all of us and that such a loan does not take our attention away from our academic mission," professors R L Widmann, Rod Muth and Jerry Hauser said in a joint statement.

Both DiStefano and Bohn traced much of the department's financial woes to scandals in the athletic department, though Bohn declined to discuss them specifically.

In 2001, he said, there were 26,000 football season ticket holders.

Then came a range of controversies, from allegations of sexual assault by recruits to Barnett's disparaging comments about a female kicker. While no one was charged with a crime, the department's reputation was dragged through the mud.

A highly critical state audit of athletic spending and Barnett's summer camps didn't help.

Neither the athletic director nor the chancellor at the time - both of whom have been replaced - seemed to understand the impact those controversies would have on donor and alumni support, or the extent of "the erosion of confidence in the program," Bohn said.

But as of this fall, the number of season ticket holders had dropped to about 20,000.

With football the only revenue- generating sport, that loss was a significant blow to the bottom line. Also damaging was a decision by the regents to postpone requiring each season ticket holder with choice seats to make a "donation" to the athletic deparment, ranging from $50 to $300 per ticket per season.

That decision eliminated about $1.3 million in revenue Bohn's predecessor had counted on for the 2004-2005 fiscal year, he said.

Former Athletic Director Dick Tharp also overestimated donor contributions and other revenue sources, such as concerts that were never booked, Bohn has said.

Bohn's new business plan calls for aggressive ticket sales and outreach to donors. He and his staff already are approaching the top 50 corporations in Boulder County to ask for their support, and plan to do the same in neighboring counties and other areas of the state.

He's also starting programs where athletes and staff will go into middle schools to rally young fans, and has gotten donors to buy hundreds of tickets for young people, such as the Boy Scouts, to fill stands.

Regent Steve Bosley, a former banker, said he contemplated the loan just as he did the thousands of small-business loans he reviewed in his career. He looked at three things: leadership, the market and the business plan.

"When I concluded, I said, 'I'd vote yes for this loan,' " Bosley said.

Buffs' budget woes

Here's how CU's athletic department accumulated $8 million in debt:

• 2004-2005

Regents' decision to delay mandatory season ticket holder "donations": $900,000

• 2005-2006

Shortfall in overestimated ticket sales and donations: $3.3 million

• 2005 buyout of former football coach Gary Barnett's contract: $3.1 million

• 2005 buyout of new coach Dan Hawkins' contract at Boise State: $700,000

Total: $8 million

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