SBJ/January 29 - February 4, 2001/Special Report

Wisconsin overcomes slump

When University of Wisconsin alum Pat Richter was hired from Oscar Mayer Foods to become the school's athletic director in 1990, he was faced with the task of re-establishing credibility to a program that had $2.1 million in operating deficit and more than $3 million in facility payments.

The financial loss was primarily because of plummeting football attendance — the result of five straight losing seasons on the field. From 1985 to 1989, average attendance fell from 71,613 to 41,734.

Something had to be done, and it had to be done quickly.

Immediate efforts to redirect the slumping program included hiring a new football coach, adding new revenue streams, such as a $10-per-semester student fee and staff parking fee, and cutting five sports: baseball, men's and women's gymnastics, and men's and women's fencing.

"That was especially difficult, but we had to do it because we couldn't financially continue to limp along and provide less and less resources to everyone else," Richter said.

Now, more than a decade later, the athletic department is in fine shape.

The student and parking fees are gone, football attendance is back in the sold-out category, the other revenue sports — basketball and ice hockey — are also prospering and corporate marketing dollars are up. The department has about a $44 million budget for the 2000-01 fiscal year. And according to projections, the department is likely to generate a profit that will be put into its operational reserve fund, which so far has more than $4 million.

The key to sustaining financial prosperity has been proper planning, Richter said.

"When I was first hired, we didn't have the luxury of coming in and asking ourselves, 'What will we look like a year from now or down the road?' We had to deal with the things that were happening the next week, the next afternoon or even that day," Richter said.

But the '90s were good to the department — from 1990 to 2000, operating revenue increased from $14 million to $42 million, allowing Richter to redirect some of the department's focus from immediate fiscal solutions to devote time in developing and implementing a long-term plan.

In the fall of 1999, Wisconsin's five-year strategic financial plan, dubbed "Keeping Big Red in the Black," was unveiled. The plan's goal: to increase its reserve fund to $10 million over five years (see chart).

The document detailed the athletic department's financial picture and its financial needs through 2004-05.

According to the plan, the department would need to increase revenue by more than $36 million over the five years in order to meet reserve-fund goals and keep up with the cost of inflation and the cost of planned facility improvements, the largest of which is a projected $100 million renovation of Camp Randall Stadium.

The plan explained how the department would pay for the added expenses without falling into debt through cost-containment initiatives and development of new revenue streams, including a preferential seating program for football, basketball and ice hockey. The seating program was projected to pump an extra $6 million into the program over five years.

Wisconsin officials developed the financial plan mainly as an internal guide for the athletic department, but decided to release it publicly in an effort to educate fans and alumni of the department's needs.

The public rollout included a press conference, letters from Richter to all Wisconsin season-ticket holders that informed them that the plan was available on the Badgers' Web site or by mail and more than 60 one-hour presentations made by Richter and other department officials throughout Wisconsin, Illinois and Minnesota to explain the plan.

"There was a perception out there that because we were in the Rose Bowl for two consecutive years and because our games were always sold out, that we were rolling in money, but that wasn't the case," said Jamie Pollard, the athletic department's chief financial officer and man behind the plan.

It's been a year since the plan was put in place, and already the actual numbers are much different from projected figures.

The department projected, for example, that last year it would lose $600,000 as a result of plans to add women's ice hockey.

As it turned out, the department ended up $1.9 million in the black — a swing of $2.5 million. The extra revenue came from better-than-expected return on cost-containment efforts, more corporate marketing dollars and additional revenue from the Big Ten Conference as a result of getting an extra team into a BCS bowl game.

Without a five-year plan, department officials may have been tempted to use the surplus and budget it elsewhere, Pollard said, but the plan keeps everything in check because anything that affects the bottom line is applied to the five-year formula.

For example, the athletic department, in response to requests from alumni and fans on the new preferential seating plan, decided it could afford to create a "kinder, gentler, softer" version by offering a phased-in payment plan, Pollard said. The financial effect of the change will be that "a little more than $2 million will be left on the table over the five-year period," he said.

Also, football coach Barry Alvarez's base salary was increased last year from $200,000 to $400,000. Once raises for his assistants are factored in, the total impact of salary increases on the five-year plan will be between $1.4 million and $1.5 million over five years, Pollard said.

Such examples show how dynamic intercollegiate athletics is, Pollard said.

"We realize things we didn't plan are going to happen," he said. "The benefit of having the plan in place and really trying to stick with it is that it makes us look at the effect of what any changes will do to the program years from now. The other thing is that the document has been adopted by our athletic board, so now it's here whether we like it or not, and we're held accountable to it."

EDITOR'S NOTE:

Major college athletic programs continually struggle with financial stability. The bottom line can drop as quickly as a quarterback fumbling a snap and rise as quickly as a kicker nailing an extra point. But the defense on the other side of the field is a small concern compared to the challenges a program faces off the field.

From facility needs to fickle alumni to balancing business with education and, in most cases, local politics, college athletic programs face a myriad of potential stumbling blocks. With that in mind, Street & Smith's SportsBusiness Journal set out to examine a select group of NCAA Division I-A programs. How do they maintain a profitable department? What is their game plan?

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