While planning a loan program of up to $ 1 billion for sports departments struggling with cash during the coronavirus pandemic, the Pac-12 built the exit for its college football season.
It remains to be seen whether the conference will use it (or even cancel the season). However, the mere fact that it is designed and possible is threatening.
The word of the program, first reported on the San Jose Mercury News, caused a stir in a country where sporting directors are trying to save a season and entire departments depend on football revenue.
Almost everyone in college athletics wants a season, and not just because of the tens of millions of dollars at stake.
However, if this proves impossible – and the trendlines aren’t great – the Pac-12 loan program is the cushion to mitigate (or at least delay) what would otherwise have been a near-fatal financial blow to numerous sports programs.
“Heard something was in the pipeline,” said an ACC sports director.
“It would create some options,” said one of the Big Ten.
In general, the plan is pretty simple. The Pac-12 has organized a centralized loan program that allows each of its 12 member institutions to access up to $ 83 million to cover lost revenue.
The loans would be repayable over a 10-year period at an interest rate of 3.75 percent. That’s a heavy clue: the annual payments would be around $ 10 million if the full amount were borrowed. However, it is believed that due to the group nature of borrowing, it is comparatively beneficial for individual loans.
The Mercury News also reported that few, if any, of the schools would use the entire amount, and some – particularly Stanford and USC private schools – might not attend at all.
“I suspect all schools have looked into credit options in the event that the entire sports year is canceled,” said a sports director to the SEC. “Chances are the loan terms will be better with shared access to the Pac-12.”
That is the most important aspect in college athletics. By banning them together, the Pac-12 created the best possible financial situation (albeit one that is still not great). It could presumably be duplicated by every conference, and even wealthier leagues like the Big Ten and the SEC could get even better terms.
College athletics have been plagued by money problems since the cancellation of the lucrative NCAA men’s basketball tournament last March. Now everyone is staring at a football season (where the bulk of the revenue is generated) with fewer games and, if anything, far fewer fans in the stands. And that’s when the season is played at all.
The economic impact is overwhelming.
“Depending on what the football season looks like, we lose between $ 60 million and $ 100 million in revenue,” Wisconsin sports director Barry Alvarez wrote in a letter to season ticket holders requesting additional donations.
Losses can be less in the Pac-12, where attendance is never as robust, so lost ticket sales (plus parking fees and other game day earnings) make less money. It would still be massive if tens of millions were gone.
What is worse for the league, however, is that it is already outperforming the other Power Five leagues in terms of revenue and departments that routinely have a deficit. The Pac-12 needed financial paving even before COVID-19.
This money is used not only to fund football, but also the entire sports department, including the teams without revenue, the staff and the debt service for facilities. Large and small sports departments have responded by cutting back on sports, suspending construction projects, and lowering the pay of high-income employees, including head coaches and sports directors.
One of the main goals for setting up a football team this fall despite the pandemic is to stop some of the losses.
It is assumed that no one is going to do what they expected – the major conferences have reduced their schedule to just 10 games, knowing it might not take that long. And fewer or no fans at all mean not only less or no ticket income, but also parking spaces on matchdays, concessions and sales of goods.
Then there is the money-generating college football playoff that no one is sure will take place even if the semblance of a regular season is drawn.
No department wants to have to take out additional loans, especially if it is not certain when things will return to normal – for example, will there be a men’s basketball tournament in 2021?
However, this may be the only way to survive the storm when losses and significant commitments are wiped out. Or at least try.
With almost every university in the country struggling with lost revenue during the pandemic, the sports departments are trying to do as much as possible to save themselves. If nothing else, the decision is somewhat relieved by buying time.
“[It puts] set up a budget that is currently more flexible, ”said the ACC AD. “Reality sets in for these annual payments.”
That’s a headache for another day. This is an important step in solving immediate problems. It’s also a blueprint for the season’s closing, a decision that hasn’t been made but that ranks above all else.