Two bricks shy of a load?
Maturi is breathing deeply because he and University President Robert Bruininks have raised the stakes considerably for Gopher sports during their five years together. Before they arrived in 2002 (the hiring of Maturi began with then-President Mark Yudof and concluded with Bruininks), Gopher athletics was split between feuding men’s and women’s departments and facing a projected $31 million operating deficit over the next five years. Maturi presided over the gender consolidation into a single athletic department and hired a CFO named Elizabeth Eull who helped eliminate the debt. “We said ‘no’ a lot,” Maturi explains. “It was a lot of little things,” adds Eull. “Getting a deal on travel, better use of office equipment, that kind of thing.” Ironically, the only significant deficit occurred this fiscal year, when the University had to loan the athletic department $5.2 million to pay off the contracts of the two fired coaches and their staffs.
Meanwhile, Maturi and Bruininks were leveraging the goodwill gleaned from the successful merger and their fiscal austerity into a push for a new on-campus football stadium. After making only minimal headway at the state Capitol for a couple of years, University lobbyists were able to cobble together a bipartisan majority and push through a funding plan in the spring of 2006.
But one look at the myriad financing mechanisms required to build the new Gopher stadium makes it apparent that it is going to cost dearly in more ways than one. For the next quarter-century, more than $10 million per year will be taken out of the general fund, the same pot of money used to pay for other state obligations such as health care and, ironically, education. It’s also probable that the stadium bill, at least temporarily, derailed more urgent funding priorities for the U at the Capitol. In the same session that the stadium legislation was passed, the U was also asking for $360 million to build a complex of five biomedical research buildings. This was, and remains, the centerpiece of the University’s grand plan to become one of the country’s top three public research institutions. But lawmakers approved funding for only one of the five buildings.
Another victim of the need for stadium dollars was a plan to resurrect the name of the last on-campus football field, Veterans Memorial Stadium. That idea was jettisoned in favor of an arrangement with TCF Bank that gives the bank naming rights for twenty-five years in exchange for $35 million. Thus TCF Stadium will become only the fourth college football facility in the country named after a corporation. And even with TCF’s lucre, the U needs to raise another $26.5 million by levying a $12.50 fee each semester from every student enrolled at the school. (The fee will be phased in to exempt students scheduled to graduate before the stadium opens in the fall of 2009.) The University also sold nearly 3,000 acres of land to the state in exchange for another $10 million; and $13 million more will be garnered from parking revenues around the stadium site.
Last but literally not least is the U’s private-sector fundraising drive. When the stadium’s price tag was $248 million, $86 million in donations from corporations and alumni was required to make ends meet—$51 million if you discount TCF’s $35 million contribution for naming rights. But now that the cost has swelled to $288 million, the private sector is the donor of first resort for the additional $40 million.
That will be a daunting task. The strategy for raising private funding has always been three-phased. First was the Legends Phase, soliciting contributions of a million dollars or more. Along with TCF’s big payment, Best Buy has donated $3 million, Target $2 million, and a few others $1 million. The U is currently near the end of its Champions Phase,
which asks for donations of $100,000 or more. As of October 8, the U says it has received $63 million from the first two phases, including the TCF naming rights, which would put it ahead of projections if the stadium cost were still only $248 million. But that extra $40 million is a huge hurdle, especially with only one phase to go. That phase will be initiated sometime in 2008, targeting “small” donors who will be asked to buy a brick for the stadium at a cost of $1,000. “Phase three is frankly more labor intensive,” Maturi admits in earnest understatement. “You need a lot more $,1000 gifts to match what just one person or corporation gave.”
So what happens if the U doesn’t sell the thousands of costly bricks necessary to make up the multimillion fundraising deficit? “We expect to make $5 million per year in additional profit once the stadium is open,” Maturi replies. “I’m hoping to use that money to enhance the twenty-five sports in our athletic program, but if I have to use it to pay off the additional debt service then that’s what I have to do.”
But those $5 million in additional annual profit are based on a very rosy scenario. It assumes that the U will draw capacity crowds of 50,000 people, filling its thirty-six suites, fifty-nine loge boxes, and 300 indoor club seats. That’s a realistic expectation for the first year or two, when the outdoor football experience will still be fresh. But what happens if Tim Brewster really can’t coach, or, God forbid, recruit? What if there is not enough profit being generated to satisfy the debt service? What if the brand-new stadium everyone is so excited about turns out to be a financial albatross?