Maryland's athletic woes mirror those of the economy

December 05, 2011|Jay Hancock

Sport, said broadcaster Howard Cosell, is "human life in microcosm." Ain't it the truth at the University of Maryland athletic department, where the economic mood strikes approximately the same chord as that of the unemployment rate and the budget deficit.

University sports budgets, it turns out, can't grow forever any more than subprime mortgage originations or government spending.

In what President Wallace D. Loh called one of his "most painful and heart-wrenching decisions," the University of Maryland, College Park, is eliminating more than a fourth of its varsity teams, including men's and women's swimming and diving, men's tennis, and men's track and field.

The causes are complex and long-simmering, but they look a lot like the factors that led to the Great Recession beyond Byrd Stadium and Comcast Center.

Too much borrowed money? Check. Real estate projects struggling to pay for themselves? Yep. Deficit spending? Savings raided to pay current expenses? Those, too.

The program may not look so profligate if you compare it with intercollegiate rivals with much bigger budgets that receive millions in direct subsidies from state legislatures.

"Maryland athletics is expected to be self-sufficient," says university spokesman Brian Ullmann. "That is unlike over 90 percent of the athletic programs in this country."

But Maryland was subject to the same debt-fired exuberance that seized the rest of the country and now must be dealt with. Too bad the women's water polo squad and seven other varsity teams are getting evicted from the clubhouse as a result.

Before Loh decided to whack the teams, the athletic department's projected budget resembled charts for Medicare or Social Security that basically show that something that can't continue won't continue. Annual deficits would have approached $5 million by 2013. Between now and 2017, total red ink would have passed $17 million.

"Schools have been running deficits since the NCAA has been publishing these statistics, but they have been getting larger and larger," says Andrew Zimbalist, a sports economist at Smith College. "It has primarily to do with the fact that these are all not-for-profit institutions within a university, and they don't have any shareholders who are looking for quarterly profits.

"That means that whenever there is an increase in the revenue stream, rather than trying to get it to fall to the bottom line, they find some enhancement" to the program to finance.

The Maryland athletic department has been losing money since 2006 and paying bills only by siphoning dough from a foundation. Donations are down. Even football and men's basketball aren't generating revenue the way they used to.

Operating profit from football (which doesn't include capital costs such as the mortgage on the new luxury suites) fell from $3.5 million in fiscal 2006 to $1.8 million this fiscal year. Operating profit from men's hoops fell from $6.7 million in fiscal 2006 to $4.5 million this fiscal year.

Last season the Terrapins failed to make the top 10 in average home attendance for NCAA basketball for the first time in years. True, even ranking No. 14 during a so-so year for the team was an accomplishment. But fan spirit doesn't pay interest on the Comcast Center debt. And the naming-rights revenue from Comcast Corp. runs out in 2016, even though the name will stay there until 2025.

Empty seats on the basketball court, however, may not be the biggest problem.

The athletic department is responsible for about $65 million in debt, much of it attached to the construction of scores of luxury suites at Byrd Stadium. In retrospect, planning in 2006 for a $50 million renovation of the stadium's Tyser Tower doesn't look much smarter than commitments made for so many housing developments around the country at the same time.

Nearly a third of the 63 luxury suites are unsold even though they were available two years ago. Even the ability to drink alcohol in the suites (you aren't allowed to drink on the field) hasn't cleared out the inventory.

Last month my colleague Jeff Barker obtained documents that warned years ago against the expensive project. Consultants hired by the university in 2004 found a "very low level of interest" among potential corporate suite tenants, noting that with Verizon Center, FedEx Field, M&T Bank Stadium and Comcast Center the market for luxury boxes was pretty glutted.

A Maryland football team that went 2-10 this year isn't helping.

To its credit, Maryland athletics has not sought a state bailout. Instead, officials and athletes are seeking private donations to save the doomed teams.

Even that will be difficult. Until the overall economy comes back in earnest, even once recession-proof industries such as college athletics will suffer a downturn.

jay.hancock@baltsun.com

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