Big relief: Cal to move a portion of stadium debt off athletic department’s books

In a move with sweeping implications for Cal’s athletic department, Chancellor Carol Christ said Thursday that central campus will assume a portion of crushing annual debt from the Memorial Stadium renovation, according to a campus spokesman.

Christ revealed her plans at a meeting of the university’s Academic Senate in which she also announced that athletics must balance its budget by 2020, a timeframe that mirrors the university’s plan.

Details of the debt transfer haven’t been finalized, said spokesman Dan Mogulof, who attended the meeting.

But the move is potentially a game-changer for the Bears in matters ranging from coaching salaries and recruiting budgets to the hiring of a new athletic director.

As such, it has the potential to impact the Pac-12:

Cal is the conference’s premier public university, with a huge alumni base and global reach. A fiscally stable and competitively successful athletic department (specifically, the football and men’s basketball programs) would carry far-reaching benefits.

There is no timetable for the implementation of the debt transfer, nor did Christ reveal the structure: Will it be raw dollars or a percentage? And will it come from the overall debt or the annual debt service?

But it figures to be a significant percentage.

While explaining her decision, Christ told the assembled faculty that no other department on campus would assume financial responsibility for seismic retrofitting.

She also echoed the conclusion of the Task Force on Intercollegiate Athletics (and this is the central, tangled dynamic):

It’s simply not possible for athletics to be responsible for the full debt load and balance its budget and maintain its current size (30 sports).

The assumption of debt by central campus is viewed by some in the Cal administration as a moral issue: The UC Regents ordered the Bears to retrofit the 95-year-old facility, which sits on the Hayward Fault, because of public safety concerns.

While the total debt of $438 million includes the cost of the Simpson training center and upgraded amenities to the stadium, the portion directly related to seismic improvements is believed to be at least $230 million.

The debt service payments of $18 million annually — the figure leaps into the $30 millions in later years — comes out of the athletic department’s operating budget.

Christ’s plan targets the debt devoted to the seismic upgrades for the stadium. Whether campus assumes 10 percent of the seismic debt or 20 percent or 33 percent, it will provide immense relief in athletics.

The Bears expected to close the 2017 fiscal year with a $16 million deficit, but that includes the $18 million in debt service.

During the two-hour meeting Thursday, Christ told the faculty that athletics will be treated like every other department in that it must balance its budget by 2020. Related Articles Cal to hire consulting firm to plot strategy for “long-term sustainability model”

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That’s is a far more manageable proposition with a chunk of the debt service removed and with approximately $7 million in new revenue arriving courtesy of the new apparel (Under Armour) and multimedia deals (Learfield/IMG)

The debt transfer seemingly makes it less likely that Cal will need to eliminate any of its 30 intercollegiate teams — more than any public school in the Pac-12, by far — in order to make the budget math work.

(Christ did not address that topic Thursday but is on record saying that eliminating sports is a last resort, Mogulof said.)

Additionally, the Bears are evaluating the future use of Edwards Stadium, their options for compliance under Title IX — there are three possible prongs — and have selected an outside consulting firm to assess the athletic department’s books and infrastructure.

(Details have not been made public, but the consulting fee will be paid by private donations.)

All told, the moves should lend clarity to Cal’s search for a new athletic director.

The candidate pool figures to have a different look with campus assuming a portion of the debt than if athletics were to remain burdened by $18 million annually. Get Pac-12 Conference news in your inbox with the Pac-12 Hotline newsletter Sign Up

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