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Cal Memorial Stadium Financials For FY15: Let's Turn That Smile Slightly Towards Upside Down

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What do the numbers say about Cal's plan to pay off its stadium debt????

Ezra Shaw/Getty Images

Did you know that the tree-sit started a decade ago? Yes, in 2006 (the same year we started CGB), people climbed up into those trees. What fun we had? I climbed up there and chilled with them (before the cops came). We had a whole circus at our feet and it was the most Berkeley Berkeley to ever Berkeley! Well, now a decade later, we have gotten rid of the tree-sitters, upgraded its stadium/facilities, and are working on paying off the debt.

Annually, Cal releases its report on the Memorial Stadium financing update. To recap, for the people who have forgotten, Cal took on approximately $440 million worth of debt to update and upgrade their football stadium, Memorial Stadium. That is a lot of money and there was a debate at the time regarding the need for it. At this point, we are past that debate and years into the process of paying it off.

Pursuant to the terms of the debt plan, Cal has until 2112 to pay it off, which is a long time! I wish my creditors gave me 100 years to pay off debts. Cal has set up a framework to make mostly interest payments for the next few decades and then start chipping away at the principal with it all paid off by the 2050s or so.

Last year, Cal outlined its situation as such:

IA met its debt service payment of $16.16 million for FY14, and the FFE balance at the end of the fiscal year was $63.4 million. This is $7.9 million ahead of previously forecast base-case expected value as shown in the current financial model. If the FFE balance was to track the base case forecast then all debt service payments would be made up to 2053, when there would be a balance of $394.1 million in the FFE against an outstanding principal balance of debt of $75 million, which would fall due in 2112.

So, each year approximately $16 million is paid to the debt service. Cal has a "FFE balance," which is the balance of their endowment fund. At the tail end of FY 2014 (i.e. July 1, 2014), they had approximately $63 million in their endowment and they were ahead of their base-case (i.e. a reasonable likelihood case as compared to a best case). Under this base case, they would have approximately $400 million in their fund in 2053 with principal remaining of $75 million.

This is important, because approximately $16 million goes to pay this off on an annual basis. That is a lot of money that could be going to other sources (and in theory other schools that do not have to pay out this money each year are ahead of Cal in the collegiate arms race).

So, each year I like to check in and see where we are and what the progress looks like. This is a half-century long finger-crossing, breath-holding process, so we need to check in with it. Last year, that was not that difficult, because Cal put out a glowing press report when their FY14 numbers were ready:

BERKELEY - With four of the five revenue sources that support the financing plan for Intercollegiate Athletics facilities showing double-digit growth for the 2014 fiscal year, total proceeds for the 12 months from July 2013 through June 2014 exceeded $29.4 million - a 26.4% increase from FY13.

Yay! A 26% increase from FY13! GO BEARS!

However, it is now March 2016 and I had not heard anything regarding the FFE and the Pledge Seats and the Premium Seats etc etc. So, I did some poking around.   It took a bit of sleuthing at the CalBears site to find the information, but I managed to find it (link at top of post). They had updated all of the information, but without any John Phillip Sousa-esque report on the finances. I have been very busy and thought that I might have missed their press dealie, but I did notice that they link to their FY14 press item on the main page there, but have no such link for FY15. If you scroll down even further to FY13, they have a press thing linked there, too. So, in previous years, they were trumpeting their findings, but not this year. I wonder why that is? Do you want to make a guess?

Either way, let's dig in and see what we have. Here is their overall view of it:

Overall, IA again met its debt service payment of $16.98 million in FY15, and the FFE balance at the end of the fiscal year was $66.3 million.

And here is their annual chart with information:


*Category * *Revenue Collected in FY14* *Revenue Collected in FY15*
Pledge Seat Revenue $9,898,152 $8,176,394
Premium Seat Revenue (non-pledge seats) $885,166 $1,008,302
Philanthropy and Other Commercial Revenue $7,759,936 $6,744,286
Leasing & Rental Revenue1 $540,477 $1,098,553
Media Revenue 0 $2,500,000
Investment Earnings $10,285,049 $4,099,035
*Total FY Model Related Revenues* $29,368,780 $23,626,570


*2015 Cal Football Season (F15) - Premium Full Season Equivalents*
Pledge Seats 1,583 (1,7005)
Perk Season Ticket Seats Sold 104
Premium Group Tickets Sold 32
University Club Bundle Seats Sold 100
Field Club Bundle Seats Sold 18
*Total F15 Premium Full Season Equivalents Sold by End of FY15* *1,808*
*Other Metrics*
FY15 Number of Event Rentals Held (through Q4) 783
FY15 Total Square Footage Leased (through Q4) 8,006 sq. ft.
*Previous Fiscal Years Cash Received*
*Total Cash Received through June 30, 2015* *$96,512,8676*

Perhaps the reason why Cal was not as forthcoming with the numbers this year was that total revenue decreased by approximately $6 million dollars. That does not sound particularly good. They paid their $17 million to debt service and their FFE was $66.3 million. After FY14, their FFE was approximately $63 million, so cash on hand went up $3 million, which is good. But the rate of growth slowed considerably, which is bad. Cal cannot get the court jesters out to promote an overall increase (like in years past), so they seemed to have kept their heads down on this one.

Digging deeper into the numbers raises more questions than it answers.


PLEDGE SEATS

Pledge Seat revenue dropped almost 2 million. Pledge Seats are the 1% seats in the ESP section that are $$$$$$$$$$$$$$$$$$$$$$$$$, but you get them for 50 years. Keep in mind that FY15 is July 14-June 15. So, that includes a sub .500 and bowl-less 2014 football season and the run up to a potentially great 2015 season (which turned out to be pretty good). The Pledge Seats decreased from FY14-FY15. There are different numbers because Cal sometimes uses the June 30, 2015 date and sometimes they use an August 31, 2015 to squeeze in more Pledge Seats. No matter which cut off date they use, the seat sales went down.

FY13 includes a historically disastrous 2013 football season and the run up to the 2014 season. It does include a small part of the pre-2013 season, in which hopes were extremely high after the firing of Tedford and hiring of Dykes. Perhaps there were a substantial amount of people who bought Pledge Seats in the summer of 2013 who then bailed in late 2014/2015.

PREMIUM SEATS

Premium Seats revenue actually increased by about $150,000.00. Premium Seats are essentially Pledge Seats they could not sell that they sold off in individual games or package deals. People seem more interested in buying these fancy pants seats when they are not required to go all in for substantial periods of time.


PHILANTHROPY

Then, you have the philanthropy, which went down about a million. This includes the Kabam deal, so I am not certain why it went down. Perhaps donations were down.


LEASING AND RENTAL

Leasing and Rental Revenue went up. This should continue to go up as Athletics gets its death star fully operational. This is to say that they want to lease out space to organizations at the stadium for money. They want to rent it out for events (ie my friends got married there the other summer). This should increase, but may just be a drop in the bucket financially. All little bits help, though.


MEDIA REVENUE

Media Revenue went up by $2.5 million, which is great. This may stem from deals surrounding the Pac-12 network deal and other media sources. It went from 0-$2.5 million, so we may see that as a new sum in the ledger going forward.

INVESTMENT

So far, we have seen that there have been some fluctuations between various sections here, but they seem to even out some. One section goes down 2 mil, the next goes up 2.5 mil. So, how did Cal go down 6 mil over? Investment income.

If you look at that section, it went down over $6 million all by itself. Uh, that's bad. Just like when yogurt toppings contain potassium benzoate.

I cannot speak as to how Cal is managing its investment here. They have 60+ million cash on hand and I presume its not at their local Bank Of America account. I presume they have experienced financial managers investing it for them. I could easily be wrong. This is Cal, afterall. Having said that, this may not be Cal's fault altogether. 2015 saw extreme turbulence in the stock market. The Chinese economy is affecting the world economy. Everybody took a hit. So, this may be a situation where everything jumps back up when we look at the FY16 numbers. It does hit home on the unpredictability of the investments. Everybody was taking a hit last year and Cal may be no different. But Cal has a good ability to influence their pledge seat sales and their premium seat sales etc etc. They have a much less strong ability to influence the Chinese economy and other market forces that can create disastrous effects on the investments. The worst part is that the investment income is a major part of the growth of the FFE and the long term plan here.


CONCLUSION

So, where do we stand? I'm cautiously optimistic as we are hovering around a scenario where we pay off most of the debt decades prior to it being due and end up with hundreds of millions in the bank. However, these $17 million a year payments are challenging for the Department and put us behind the other teams in the Pac-12. The juxtaposition of the information provided between this year and last year highlights the potential concern or risk that Cal might face. Last year, Cal said that they were approximately $7 million ahead of their base case forecast, which is good. Now, they do not provide information regarding where they are. They are clearly much closer to base case itself than they were last year and that is not necessarily good news. While the numbers are still ahead of base case, there are clearly potential problems emerging.


If Cal does poorly, people do not buy the key tickets. If the market collapses, Cal loses out on important investment income. The plan seems to be working, but each year brings a fresh look at where we are and whether Cal is in a good position for 2112.


So what happens from here? What are your expectations for the Department's performance? Should we be happy to be above base case? Should we be worried that there wasn't a full report issued this year?