SBD/June 25, 2013/Facilities

Cal-Berkeley Seeking New Revenue Streams To Finance Stadium Renovations

Premium seating sales at Memorial Stadium fell $120M short of Cal's goal
The Univ. of California-Berkeley's renovated Memorial Stadium and "glistening new training center opened to rave reviews last fall, but the risky plan to pay for the facilities fared as poorly as the team itself," according to Jon Wilner of the SAN JOSE MERCURY NEWS. If the financing plan fails, the most expensive facility upgrades in college sports history -- the total cost is $474M -- "could cripple Cal athletics over time by draining tens of millions of dollars away from the operating budget." The school planned to "finance the projects through the sale of 40- and 50-year rights to approximately 2,900 high-priced seats in the renovated stadium." But with "sales lagging -- only 64 percent of the premium seats have been sold -- the school abandoned its June deadline to secure commitments for the long-term equivalent" of $272M. Cal is $120M "short of that goal." Cal officials "blame bad timing for lackluster sales: The financing plan was devised in 2007-08 and implemented during the heart of the recession." The revised plan "reduces Cal's reliance on selling high-priced tickets and attempts to generate" $5-10M per year from "previously untapped sources, such as renting out empty space in the stadium to the Haas School of Business." But in a "troubling sign, Cal officials have tentatively earmarked for long-term debt service more than" $50M that would otherwise have "gone to athletic department operations over time." The revised financing plan includes $2.5M annually "in television money from the College Football Playoff, which begins in 2014, and millions more from the sale of local media sponsorships." Cal AD Sandy Barbour did "not rule out the possibility of redirecting other revenue streams to stadium financing." One option could be "a portion of Cal's share" of the Pac-12's $3B TV deal (SAN JOSE MERCURY NEWS, 6/25).

CUSTOMER SERVICE GUARANTEE: Wilner noted Cal under the direction of Vice Chancellor John Wilton has "identified new revenue streams to help service" the renovation debt. Cal began by "hiring a dedicated sales staff." The new strategy is based on the Padres' "approach to customer service." Cal COO Solly Fulp said that the eight-person sales staff in the last 14 months has "made more than 60,000 outbound calls." The new approach includes "corporate bundles of two-year seat contracts and discounted 'perk' seats available to owners of the premium plan." Cal planned "all along to sell naming rights to the field," but the school has "combined that effort with an aggressive attempt to rent out empty space in the stadium" (SAN JOSE MERCURY NEWS, 6/25).

YOU CAN GO YOUR OWN WAY: Barbour said that she had "no regrets about the scope or the price tag" of the stadium upgrades and new training center. She said the renovation was a "no brainer." But Wilner asked, "Was the project overly ambitious?" Cal's project differs from the Univ. of Washington's stadium renovation "in more than cost." Cal partnered with Stadium Capital Financing Group to "create a high-risk financing plan in which fans purchase long-term rights to premium seats." UW listened to a pitch from Stadium Capital Financing Group, who partnered with Cal on its seat-purchase plan, but "ultimately opted for a more conventional approach" in selling luxury seats "on a year-to-year basis." UW AD Scott Woodward said, "I met with our donor groups and it didn't suit our sensibilities" (SAN JOSE MERCURY NEWS, 6/24).
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