Pac-12 builds escape hatch for schools to ditch college football — and pay for it later
In planning what could be as much as a $1 billion loan program for cash-strapped athletic departments during the coronavirus pandemic, the Pac-12 has built the off-ramp for its college football season.
Whether the conference chooses to use it (or even cancels the season) remains to be seen. The mere fact that it’s been laid out and possible is ominous, however.
Word of the program, first reported by the San Jose Mercury-News, turned heads across a country where athletic directors are trying to salvage a season and entire departments are relying on football revenue.
Almost everyone inside college athletics wants a season, and not just because of the tens of millions of dollars at stake.
Yet if that proves impossible — and the trend lines aren’t great — then the Pac-12 loan program is the cushion to soften (or at least delay) what would have otherwise been a near-fatal financial blow to numerous athletic programs.
“Had heard something was in the making,” said an ACC athletic director.
“It would create some options,” said one from the Big Ten.
In general terms, the plan is fairly simple. The Pac-12 has organized a central loan program that could allow any of its 12 member institutions to access up to $83 million to cover lost revenue.
The loans would be repayable over 10 years at a rate of 3.75 percent. That is a hefty note — annual payments would be about $10 million if the full sum were borrowed. However, it is believed to be comparatively advantageous to individual loans because of the group nature of the borrowing.
The Mercury News also reported that few, if any, of the schools would take the entire amount and some — especially private schools Stanford and USC — might not participate at all.
“My guess is all schools have looked at line of credit options should the entire athletic year be canceled,” an SEC athletic director said. “There’s a chance the loan terms would be better if accessed collectively a la the Pac-12.”
That’s the main takeaway here in college athletics. By banning together, the Pac-12 has created the best possible financial situation (albeit one that still isn’t great). It could presumably be duplicated by every conference and even wealthier leagues such as the Big Ten and SEC might be able to get even better terms.
Money woes have plagued college athletics since the cancellation of the lucrative NCAA men’s basketball tournament last March. Now everyone is staring at a football season (where the majority of revenue is generated) that will have a reduced number of games and significantly fewer, if any, fans in the stands. And that’s if the season is even played.
The economic implications for that are overwhelming.
“Depending on what the football season looks like, we are facing revenue losses of between $60-$100 million,” Wisconsin athletic director Barry Alvarez wrote in a letter to season ticket holders, which sought additional donations.
The losses may be less in the Pac-12, where attendance is never as robust and thus lost ticket sales (plus parking and other gameday revenue) account for less money. It would still be massive though, with tens of millions gone.
Worse for the league, however, is that it already trails the other Power Five leagues in revenue and departments routinely run a deficit. The Pac-12 needed a financial band-aid even before COVID-19 took hold.
That money doesn’t just fund football, but the entire athletic department, including non-revenue teams, staffing and debt service on facilities. Athletic departments big and small have responded by cutting sports, suspending construction projects and cutting the pay of high-income employees, including head coaches and athletic directors.
One of, if not the chief goal, for fielding a football team this fall despite the pandemic is to hold off some of the losses.
It’s understood no one is going to make what they expected — the major conferences have cut their schedule to just 10 games, with the knowledge that it might not last that long. And fewer, or no, fans don’t just mean fewer, or no, ticket revenue, but also gameday parking, concessions and merchandise sales.
Then there is the money-generating College Football Playoff, which no one is certain will occur even if some semblance of a regular season is pulled off.
No department wants to have to take out additional loans, especially when there is no certainty when things will return to normal — for example, will there be a 2021 men’s basketball tournament?
Yet in the face of crushing losses and significant obligations, this may be the only way to weather the storm. Or at least try.
Since nearly every university in the country is dealing with revenue shortfalls during the pandemic, athletic departments are looking to do as much as possible to save themselves. If nothing else, it takes some of the stress off the decision by buying time.
“[It puts] in place a financial plan that allows more flexibility for right now,” the ACC AD said. “Reality sets in for those annual payments.”
That’s a headache for another day. This is a significant step toward getting through immediate problems. It’s also a blueprint to shuttering the season, a decision that hasn’t been made, but looms over everything.
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