BERKELEY (KPIX 5) — The $400 million price tag for renovating UC Berkeley’s Memorial Stadium could end up leading to cuts to Cal Sports, bleeding the athletics department dry and plunging into crippling debt.
For Cal Athletics, so far this season there have been big ups and big downs.
Perhaps none more daunting than the budget for Cal Athletics. For the second year in a row, it is facing a shortfall and needs $20 million from the Chancellor’s office to close the deficit.
In fiscal year 2016, the budget deficit was nearly $22 million.
A large chunk of it made up of an $18 million annual loan repayment deduction to pay for the $400 million financial albatross that is Memorial Stadium.
“There’s no university in the country that that has this kind of debt, because no other university in the country has spent this much money on a football stadium,” said Roger Noll, Stanford Professor Emeritus of Economics.
Professor Noll said Cal’s stadium financial deal was a gamble from the beginning.
“It was worse than a gamble. It was sort of betting your life savings on a turn of the roulette wheel,” said Noll.
But back in 2012, University of California at Berkeley spokesman Dan Mogulof told us there was nothing to worry about.
No financial issues here for at least 26 years, said Mogulof.
And somehow he still stood by that statement Friday, claiming the Cal Athletics deficit is separate and cannot be tied to the stadium.
“The stadium debt has little if any impact on that deficit,” said Mogulof.
He said 2017 numbers show the stadium made $26 million in revenue in 2017, an $8 million so-called “surplus.”
That math only works if you divorce the stadium loan from the athletic department deficit altogether.
And even the Chancellor’s intercollegiate athletics task force linked the Cal Athletics deficit to the $18 million stadium payment:
“When this charge is deducted from operating profit, it creates an excess of expenditures over revenues,” read a task force report.
The task force does not make a distinction between the stadium’s issues and with the deficit and Cal Athletics.
Professor Noll said he believes the Cal Athletics budget is suffering as a direct result of the stadium.
“The operating budget of the Department of Athletics is not horrific if you take away this huge capital cost that was unnecessary and unwise and created some white elephants,” said Noll.
Revenue from the new stadium was supposed to offset that excess.
In some ways it has, but ticket sales are down. Ultimately, the revenue hasn’t been enough. The athletic budget is not sustainable and the university may have to consider making big cuts.
“UC is going to face a $20 million a year payment for this huge hole for the next 25 years and it’s time to look forward. It’s time to think of a long-term plan to get you out of this hole,” said Noll.
The university is saying there could be cuts to teams or rosters to shore up the deficit. There is also the possibility of the university selling the naming rights to Memorial Stadium.
To be clear, none of this money covering the athletics deficit is coming from tuition or public money. The funds are from unrestricted investment income and does not include any support from the state or student fees.