Dave Brandon debunks top myths about Michigan's athletic department
University of Michigan Students enter Michigan Stadium to view the season opener against Alabama.
Daniel Brenner I AnnArbor.com file photo
"We're misunderstood a lot," Brandon said to a faculty senate committee on Monday.
Twenty-five years ago, the athletic department had a $16 million annual budget. Now, its budget is more than eight times larger and with that growth comes a lot of questions and, if you ask Brandon, misunderstandings.
Myth 1: The athletic department is subsidized by the campus community.
Although most university athletic departments lose money —105 of the 127 Division I schools that report their finances lost money last year— U-M's department is part of the minority that turn profits each year. The school's lucrative football and basketball programs bring in the money needed to finance the athletic department's $135 million budget.
Michigan athletic director Dave Brandon watches over open practice at the Georgia Dome in Atlanta on Friday, April 5, 2013.
Melanie Maxwell I AnnArbor.com file photo
Brandon said a lot of people assume the athletic department takes some money from the general fund or other university arms. That's not the case. In fact, Brandon said the athletic department gives $2 million to U-M's general fund annually toward scholarships.
"We're a completely self-supporting auxiliary unit," Brandon said.
That means that when you read about the $500 million poured into football, basketball and hockey facilities and the $250 million planned for other sports venues, the athletic department is independently securing the funds for those renovations.
"Whatever revenues we bring in, we have to generate," Brandon continued. "We get no support from the general fund."
Myth 2: The athletic department is highly profitable
While the department does average a $5 million to $10 million surplus each year, Brandon says that with a $240 million debt load and continuing costly construction projects —for example painting the Big House is expected to cost $6 million— the department is actually "an enterprise that struggles to pay for itself."
"There's also this notion that we're a highly profitable enterprise and that's certainly not the case," Brandon said. "The required expenses and the commensurate capital costs associated with running these athletic departments is such that there's no profit."
He added: "It's not a business model that you'd ever invest in."
Myth 3: The role of the student athlete
Michigan point guard Trey Burke will not be returning to Ann Arbor next year. Instead he is going pro.
Daniel Brenner | AnnArbor.com file photo
"Another myth is that student athletes are not really student athletes, that they're more athletes," Brandon said.
"I can tell you that we do get challenges in a couple of our sports where there is a highly commercial competition for our student athletes, primarily football [and] men's basketball," Brandon continued, saying that with a some successful students their desire to go pro outweighs their desire to finish college. Most athletes, however, know they'll never make a living in their sport.
"In our other 29 sports, for the most part ... student athletes come here knowing they need to have a life after athletics and they need a degree and they need a purpose after athletics."
Brandon did say that top athletes on the football and basketball teams are treated like celebrities on campus.
Myth 4: The athletic department is detached from the university community
"I see us as everything but detached," he said. Brandon said that while the department funds itself, it exists in large part to serve the university community. He highlighted charity partnerships the department has with the U-M Health System and discounted student ticket prices and university facility rentals as examples.
Brandon also underscored the recent uptick in student tickets for football games. The $7.50 increase, which is a 23 precent uptick over last year, is going toward gym renovations. Gyms are currently outside the purview of the athletic department, although they weren't always.
Bonus Myth: The department took a hit with the Michigan Stadium renovation
Brandon didn't mention this one as a myth, but he responded to concerns that the department is bogged down in debt because of the $227 million renovation of Michigan Stadium, unveiled in 2010.
Brandon said that while the renovation "is a major part" of the athletic department's long-term debt, it's critical to the school's current revenue model. After annual debt service, the department makes $14 million a year thanks to the 81 luxury boxes and club seating added in the renovation.
"We would be insolvent if it weren't for the stadium project," Brandon said.
Brandon said the athletic department received roughly $40 million in donations toward the renovation and was able to secure a lower-than-expected interest rate on its debt.
"The project really has become a positive aspect of how our model works," he said.
Kellie Woodhouse covers higher education for AnnArbor.com. Reach her at kelliewoodhouse@annarbor.com or 734-623-4602 and follow her on twitter.
Comments
Ed daggett
Fri, May 3, 2013 : 4:25 p.m.
Why give $2 million back to general fund & complain about making so little profit? Why is the AD taking huge pay increases when last AD was working for $1.00 a year? Canham figured out yrs ago that people will pay crazy amounts to support athletics thus --unlike other Big Ten schools---athletes pay the full out of state tuition. Administration would save about $10 million a yr for athletic dept if they did not charge out of state tuition costs to these revenue generating athletes. School can claim poverty & ask for donations & ticket price increases & fans will payout --thus university generates millions more.....and keeps claiming poverty to ask for even more
15crown00
Fri, May 3, 2013 : 11:57 a.m.
students pay the bill as usual.how about charging the faculty more?these non revenue producing sports make them have dinners,craft sale,sell magazines door to door.do anything and everything possible to fundraise.Start dropping sports that are money losers.
jcj
Thu, May 2, 2013 : 12:46 p.m.
There are plenty of people that could claim they make no money ( non profit ) in a given year. All they have to do is spend every dime on lets see... a new boat, car, vacation, hairdresser, face lift or football tickets. There you go now I am a non profit! Maybe I should not have to pay taxes.
blue85
Thu, May 2, 2013 : 8:29 p.m.
There are specific and stringent IRS rules that attach to not for profit entities: they cannot unduly enrich officers/employers; spending for some entities such as foundations are hard coded percentages and for endowments not hard coded but subject to review by guys like Grassley (sp?); income cannot be earned from unrelated business activities...I can sell postcards out of a university museum but not a set of tires. In other words, I think if you knew more you would complain less.
AllDownHill
Thu, May 2, 2013 : 2:09 a.m.
"The required expenses and the commensurate capital costs associated with running these athletic departments is such that there's no profit." I can remember when sometimes there were expenses like buying Cadillac's for outgoing AD's. I can also remember when the Athletic Department was made independent on the condition that all money made over the costs of running the department would revert to the General Fund. Wonder how much the General Fund has gotten over the years? As for student-athletes...when are we going to lay this nonsense to rest? Most of this is bunk. The athletic department writes and rewrites their annual budgets until every penny brought into the department is spent. This is no different than any other UM department.
15crown00
Fri, May 3, 2013 : noon
Student-Athletes?i think not.It's more like ATHLETE-students.the sport takes most waking hours 12 months of the year.
stinkywinkie
Thu, May 2, 2013 : 12:55 a.m.
So much hubris. So much fiat money.
EightySeven
Thu, May 2, 2013 : 12:55 a.m.
The caption to the lead picture is wrong. It reads M fans entering Michigan Stadium vs Alabama. That game vs Alabama was played at Texas Stadium.
eze
Thu, May 2, 2013 : 12:48 a.m.
Reading this article is like listening to Fox News - it just sounds like a regurgitated press release from Dave Brandon.
JRW
Wed, May 1, 2013 : 11:46 p.m.
OMG! Are we really able to comment on a "sports" article on AA dot com? How about restoring commenting for all sports articles, as was promised last summer.....having to set up a separate account on MLive is ridiculous. Why is it taking so long to restore commenting? AA dot com statement from last summer"-Future changes that will restore commenting directly on Wolverine sports articles and improve comment history are in development and coming soon on AnnArbor.com" Regarding the article by Brandon, ex Pizza Man: How about letting the public come up with a list of "myths" for Brandon to address, rather than having him address only the myths he wants to address in his spin-speak. "The required expenses and the commensurate capital costs associated with running these athletic departments is such that there's no profit." I think this statement is just a matter of "creative" accounting.....there is plenty of profit.
15crown00
Fri, May 3, 2013 : 12:01 p.m.
a BIG part of his job is to be a SPIN MASTER.
jcj
Wed, May 1, 2013 : 11:22 p.m.
How about some figures on how many people dropped their season tickets this year! I am one that dropped my 4 after 35 years. I could afford them but refuse to be railroaded into making additional "donations"
a2citizen
Thu, May 2, 2013 : 3:27 a.m.
Along those same lines I think two other questions are: How long was the wait list in 1990? How long is the wait list today?
glenn
Wed, May 1, 2013 : 11:19 p.m.
Kellie Could you please look at other universities in the country and find out how they do their priority point system? I would like to know if they value a donation to the athletic department with a 10 to 1 ratio over donations to the rest of the university because that is how it is done here at Michigan. I spoke to an administrator at Ohio State and they said they don't do it that way and he was very surprised that Michigan did this.
Frank99
Thu, May 2, 2013 : 1:52 a.m.
One more point that should be noted--It takes a minimal annual donation of $3000 to be a member of the OSU's President's Club, so a donation of $100 or $1000 or $2500 would get you zero points in the OSU system. Not true in the UM system. All UM donations are counted regardless of the amount. For academic donations to count in the OSU system you must be a member of the President's CLub.
Frank99
Thu, May 2, 2013 : 1:17 a.m.
Oops, meant to say past donations to the Presidents Club are rewarded points at a 2% rate and the Buckeye Club at a 4% rate.
Frank99
Thu, May 2, 2013 : 1:15 a.m.
Further research shows that past donations to the Buckeye Club are rewarded with points at a 2% rate and past donations to the Buckeye Club are rewarded at a 4% rate. http://www.ohiostatebuckeyes.com/sports/buckeyeclub/spec-rel/faq.html
Frank99
Thu, May 2, 2013 : 1:12 a.m.
One change to my post below, apparently it now takes a $3000 donation to the President's club at OSU to get football tickets, but it's still $1500 to the Buckeye Club to get the same privilege. http://www.osu.edu/giving/donorsocieties/presidentsclub/benefits.html
Frank99
Thu, May 2, 2013 : 12:59 a.m.
Then your OSU administrator was not informed of his own school's policy. It takes a $1500 donation to the Buckeye Club or a $2500 to the President's club to get on the list for tickets. While the ratio is different , the amount required is much higher at OSU and the principle is the same. I doubt many fans would prefer the OSU system. http://www.ehow.com/how_6585883_ohio-state-football-season-tickets.html
Goofus
Wed, May 1, 2013 : 11:15 p.m.
Myth #5: David Brandon has a soul and is not just a computer amalgam of UM sports' cliches generated by the Computer Science department.
glenn
Wed, May 1, 2013 : 11:05 p.m.
I would like to know why my annual donation to the University of Michigan engineering school is not counted the same as a donation to the athletic department. I have an affinity to the University of Michigan having gotten my bachelors degree there however I support the engineering school with my money because it goes to a scholarship in my father's name who was a professor at Michigan for 45 years. Why doesn't a donation to one part of the university show up as priority points for the athletic department? How many other universities have this crazy idea? This is one more way the athletic department separates itself from the rest of the university.
Frank99
Thu, May 2, 2013 : 5:05 p.m.
Sorry but you didn't divert the money, money is fungible. You made a choice and decided football was more important and the U would pay for it instead of a couple less rounds of golf, a few less nights on the town or something else and that was more important to you than the scholarship money for the engineering school. Academic departments don't subsidize the athletic department so there's no reason the opposite should be true. The athletic department funds itself through ticket sales, PSDs ,donations, etc. and the U funds itself through tuition, donations, grants and the like. Neither entity has dibs on the others funds.
heartbreakM
Thu, May 2, 2013 : 3:38 a.m.
Frank99: To get season tickets for football, you need to have a "personal seat donation". NO donation other than that PSD counts. The athletics (and the university in general) does not care what you donate to the university as it relates to the requirements for purchasing season tickets. That is why I lowered my donation to the university LSA emergency fund by 200.00--to cover the increase in the PSD, in a year in which the athletics sports a multimillion dollar profit. I have only so much that I wish to give to the UM, and since athletics does not count any other university donation, I did what I had to do to keep solvent. The shame of it is that I was essentially forced to divert money that might go to students who have emergency needs towards athletics. And as I indicated earlier, MSC, Dean McDonald, et al just did not care. The President's office never even responded, and Dean McDonald and Mr. May of development both said that they don't control athletics.
Frank99
Thu, May 2, 2013 : 12:34 a.m.
It does, just not at the same rate.
Daniel Green
Wed, May 1, 2013 : 8:44 p.m.
Changing times - football For faculty and staff at one time you could add your name to the wait list for free. Few year back, the wait list was $ 10, then $ 25, and then $ 100. Now to get on the "wait list" for a full season tickets to football cost $ 500 with no guarantee per year. I understand this is hard for students to pay this amount, it is also hard for most staff and some faculty.
15crown00
Fri, May 3, 2013 : 12:03 p.m.
So be it.the students pay more why shouldn't the OVERPAID faculty?
Frank99
Wed, May 1, 2013 : 10:03 p.m.
The amount of misinformation in all these posts is incredible. Students don't have to pay to be on any waiting list and never have. Any articles on the athletic department bring forth the usual anti-athletic suspects with tons of misinformation. In post after post people just pull things out of the air which are just plain factually wrong. The case these people try to make will never get traction when they are so obviously ill-informed.
a2citizen
Wed, May 1, 2013 : 7:33 p.m.
I'm indifferent to the price of tickets and other costs to attending a game. But this Saturday Dave Brandon and the other ADs should watch the Red Wings play off game on TV and notice all the empty seats. And those empty seats were PAID for. So if a team that has won four championships in the last 16 years cannot fill all of its seats while fielding the best talent in the world, how much more can game day prices go up before fans find something else to do.
a2citizen
Thu, May 2, 2013 : 8:30 p.m.
It's not a comparison of sports - it's a comparison of the economics of ticket buyers.
Frank99
Thu, May 2, 2013 : 2:16 p.m.
There's really no relationship between the Wings and the Wolverines situation. If it's true the wings have had empty seats for 10 years (something I doubt) the Wolverines sold out all their suites in the same time frame. Apples and Oranges. If tickets to the wings were bought and paid for and people didn't show up what's the problem? If they didn't buy tickets there might be a concern but apparently people are willing to buy tickets and bide their time waiting for the wings to get good again. Your example really makes no sense.
a2citizen
Thu, May 2, 2013 : 1:27 a.m.
Frank, If you have watched Red Wing play off hockey for the last 10 years you would have noticed empty seats. Detroit sports writers comment on it every year. Last years play offs didn't have anything to do with fan disgruntlement. Neither did the Stanley Cup runs of 2008 and 2009. And those empty seats in the first three rounds of the play offs? They were bought and paid for by the people that didn't even sit in them. If the atmosphere of NHL play off hockey cannot attract fans it's not a stretch to think that paying $300 to watch football against Indiana, Miami of Ohio or Appalachia St. will eventually get old.
Frank99
Wed, May 1, 2013 : 10:45 p.m.
I suspect fan disgruntlement with hockey can be directly attributed to the lockout and the conclusion you are trying to draw as it relates to Michigan athletics is quite a stretch.
UM Rocks
Wed, May 1, 2013 : 7:25 p.m.
First picture -- UM didn't play Alabama at Michigan Stadium.
A2Dave
Wed, May 1, 2013 : 6:10 p.m.
The U of M athletic department and programs are a model that almost every major State University would love to emulate. Go Blue!
Orangecrush2000
Wed, May 1, 2013 : 5:36 p.m.
"We would be insolvent if it weren't for the stadium project," Brandon said. This does not seem right. i've observed a solvent UM AD my whole lifetime. I've heard stories of greatness in prior years. How was it that all of a sudden, now, it was a crisis; and we need to pay for new box seats or else we'll go under? Again, I think that college athletics is overblown. There are many colleges that are successful without the best football team in the world, or without a football team, at all. I would be in favor of elminating sports scholarships, period, at all colleges - and for supporting that part of society, and the economy, towards more minor league or other level of professional sports operations, where so many of these "student-athletes" should really be - in a "school for sports," or otherwise earning money as an athlete, like any other job. I think that sports should still exist at college, but not at the cost of academics.
Frank99
Thu, May 2, 2013 : 11:18 a.m.
The fact that the suites were 100% sold out the first year in the worst economy since the great depression dispels your doom and gloom predictions. When they're paid off it's all gravy. The PSD's didn't finance the stadium renovations, it was all done by suites and and few major donors.
Orangecrush2000
Thu, May 2, 2013 : 3:56 a.m.
Frank, There are other ways of fixing "insolvency" than spending more. Cutting back on expenses, would be one. As someone pointed out, the costs are choices being made, not reqirements. We've chosen to build more, and create more risk. It's working now. But, we might face insolvency in the future, again, with even greater risk, if things don't work out down the road. As for the definition of insolvency, I was using it loosely, indicating that the team had been around for a long time. But, now, there seems to be a "crisis" and we have to build luxury boxes to solve the "crisis?". To me, that sounds one-sided.
Frank99
Wed, May 1, 2013 : 6:39 p.m.
If the athletic depart has been solvent your whole life you must be under 16 years old. We weren't turning a profit under Goss and Bill Martin turned that around. You aren't paying for the boxes unless you're sitting in one. The boxes paid for themselves with much left over, totally financed by those who lease them.
Nicholas Urfe
Wed, May 1, 2013 : 5:20 p.m.
Maybe he could tell us why profits and revenues need to be so maximized? I thought this was a non-profit state university, with a primary mission of education. What is their real mission?
blue85
Thu, May 2, 2013 : 8:20 p.m.
"Maybe he could tell us why profits and revenues need to be so maximized?" Here is one reason: the expenditures on the academic space at Michigan should run at a 40 year depreciation level of 2.5% on $5,000,000,000, or roughly (very roughly) about $125MM/year (before consideration of the substantial deferrals in "auxiliary" units like Residential Life). What does UM receive from the state? Roughly $25MM/year. In other words, state support of the capital base can only be described as derisory. Now consider the athletic campus where state support is zero, but donor support is $30MM/year or so...in effect, all capital improvements come out of that pool as well as the other revenue sources. In sum, with state support, UM is degrading at at a MINIMUM and the athletic campus is eroding at a faster relative rate. Walking the tightrope between junky facilities and irate fans is core to his job description. Clearly, the school is large enough that it is like running in front of a bulldozer to pick up nickels. Any one year of deferred maintenance inserts a huge wedge between inflows and outflows...there is a conservation principle here embedded in the fiscal realities...any monies not expended today compound with the cost of inflation in the building materials, the labor, and the cost of borrowing the money.
Larry Weisenthal
Thu, May 2, 2013 : 5:39 a.m.
It's more than a state university. That would be MSU. The M medical school gets only a minuscule percentage of its budget from the state and enrolls more out of state than in state students. The university's grad and professional schools are the true jewels of Michigan, which greatly add to the value of a UM degree. Football and basketball national championships don't add value to a college degree. Go Blue, but keep things in perspective.
teeters
Wed, May 1, 2013 : 4:49 p.m.
I thought the point of a not-for-profit is to come out even on your budget. If you have a surplus then you don't need to increase ticket prices or student fees. He states that this is not a business model that you would ever invest in. Well Brando, this is not a business, it is a University.
blue85
Thu, May 2, 2013 : 8:12 p.m.
"Indeed. Any we have to watch out for that "hollywood" accounting, where vast sums come in but the profits are obfuscated by accounting gimmicks." You should go out to Wikipedia and research FASB rules and the ways in which they differ from GASB rules. If you see the differences which reside therein, you might not use a phrase like Hollywood acccounting. If you look at the compliance departments/reports for research, the hospitals, grants and what not, the over all compliance burden is huge. The university is also audited by a national firm. Sure, stuff can slip through the cracks, but the numbers are small and typically caught. The university has a great control system.
Nicholas Urfe
Wed, May 1, 2013 : 5:23 p.m.
Indeed. Any we have to watch out for that "hollywood" accounting, where vast sums come in but the profits are obfuscated by accounting gimmicks.
Rob Pollard
Wed, May 1, 2013 : 3:39 p.m.
Myth 2 is ridiculous. He talks about the high debt load and facility costs like he, former AD Martin, & the regents didn't CHOOSE to undertake the vast majority of these projects. It would be like a family saying, "We don't make a lot of money - our "required expenses" including spending $100k to put in a pool, $50k on a kitchen renovation, $80k on adding a new rec room, $10k on landscaping, along with $75k on new 6-car garage. Oh, and we pay our head landscaper/contractor $4 million a year. Once you include all that, we're just an average, upper-middle class family barely scraping by."
johnnya2
Wed, May 1, 2013 : 4:40 p.m.
No, it is more like saying, we added extra space (luxury boxes) at a cost of $100k, but now the value of our home is now $250k more.
blue85
Wed, May 1, 2013 : 4:37 p.m.
"Myth 2 is ridiculous. He talks about the high debt load and facility costs like he, former AD Martin, & the regents didn't CHOOSE to undertake the vast majority of these projects. " I think his points are: 1) Michigan is a not for profit enterprise, yet some people, those who are charged more than they like, think this leads to profit, which is an oxymoron for an entity of this nature; 2) as a not for profit, the U has no profit or spending obligation, so the whole game is to spend to the point of legal reserves; 3) the spending rate is undertaken in such a way to leave reserves, subject only to adding to facilities such that the clientele/customers/students, however you characterize them, will continue to consume the product. You don't seem to understand these points and I don't think that Brandon's comments directly address the way budgeting is done in a not for profit. Yes, he and Martin spent the money, I don't think he denies that fact...which is probably too obvious in his cosmology to bear mentioning. Yes they undertook those projects to increase the student experience, to promote the university's footprint and profile, to attract future students, to attract future athletes and coaches. So, it is not a case of crying, it is a case of articulating the mission: Excellence. But excellence on a fiscal tightrope. Excellence costs money and in a not for profit context where "profit" is generally a 3% margin or so, it is VERY tough to schedule the ebb and flow of donations and ticket revenue and what not to get to that margin while still hitting a very hard to hit target. I think that is the larger point, which I believe you missed. You have to look at the context; context is everything. Without context, you analogy is apt; in context, it is completely inapposite.
Kafkaland
Wed, May 1, 2013 : 3:33 p.m.
As to the profitability of the Athletic Department: I keep hearing (but don't know first-hand for certain) that all revenue from licencing the block M goes to the Athletic Department. In other words, if you buy a T-shirt with the block-M on it that says "Michigan Anthropology" on it, for instance, the Athletic department gets the licencing fee for the logo, not the University of the Anthropology Department. without that revenue stream, the Athletic Department may not be profitable after all.
Frank99
Wed, May 1, 2013 : 6:30 p.m.
Let's see. Which is greater? Shirts that say Football or shirts that say Anthropology? So it's the Anthro Department that turns to corner and allows the athletic department to turn a profit? Thank you, Lucy.
Kellie Woodhouse
Wed, May 1, 2013 : 4:07 p.m.
You are right, royalties go to the athletic department. Michigan received $6 million in licensing revenue from June 2011 to July 2012. The school receives 10 percent of the wholesale sales of most licensed items. Interestingly, licensing revenue is growing quickly. It climbed 22 percent in fiscal 2012, rising $1.1 million from the previous year's revenue of $4.9 million. U-M's director of trademark licensing told me that a lot of that is due to sports performance. You can read more here: http://www.annarbor.com/news/university-of-michigan-raked-in/
aes
Wed, May 1, 2013 : 2:58 p.m.
Intercollegiate Athletics and the American University A University President's Perspective James J. Duderstadt A former Big Ten university president argues that the increased commercialization of college sports endangers our universities' primary goal http://www.press.umich.edu/script/press/16522
a2citizen
Wed, May 1, 2013 : 7:24 p.m.
It should also be noted that duderstadt voted to allow Penn State into the Big 10 because their academic model fit so well with the Big 10. The ADs were shut out of the process. Bo Schembechler didn't even know this was under consideration and that's why he quit. So who really is responsible for the increased commercialization of college sports?
Frank99
Wed, May 1, 2013 : 6:21 p.m.
It should be noted that Duderstadt wanted a weak AD beholden to him and he got that in a series of very weak AD's (Wiedenbach and Roberson). It was under Duderstadt and his appointed AD's that the basketball scandals took place. Ironic, huh?
Kellie Woodhouse
Wed, May 1, 2013 : 4:10 p.m.
Indeed, Duderstadt and Brandon have very different views on this. Duderstadt is outspoken against what he considers the over-commercialization of college football and basketball and says they can threaten the academic reputation of universities and take advantage of student players.
whojix
Wed, May 1, 2013 : 2:48 p.m.
The AD is neither profitable nor subsidized, it's in whatever state is most advantageous for Dave at the given moment.
UpperDecker
Wed, May 1, 2013 : 4:32 p.m.
Want to know what has changed since Dave Brandon has been hired? We get top talent for our majors sports. Keep it up Dave.
Kyle Austin
Wed, May 1, 2013 : 2:21 p.m.
Interesting that the first two myths seem to contradict one another. Is there a group of people that thinks the athletic department runs at a large deficit and must be subsidized, and another that thinks it posts a large profit?
johnnya2
Wed, May 1, 2013 : 4:38 p.m.
Being profitable and not taking general fund money is in NO WAY contradictory to saying they are a huge profit machine. If I ran the profit margins that the U does (based on the money left over after paying all the bills of the budget, I would be fired. Most CEO's would as well. The AD is designed to be self sufficient without necessarily making a huge profit. If you wanted the AD to be a pure profit model, they would raise ticket prices even higher.
Kellie Woodhouse
Wed, May 1, 2013 : 2:27 p.m.
Kyle, if you read our commenters I would say there are large contingents of people who think one or the other of these is true, and for understandable reasons.
heartbreakM
Wed, May 1, 2013 : 2:19 p.m.
Biggest thing missing from this discussion is the law of limits. Though the university donations appear to increase when there are successful football and basketball programs (as most development people will tell you), there is a limit to how much individuals of normal means can donate. If the donation is being forced to be given to the athletic department (in order to buy season tickets for football, bball, hockey), then there is less fungible money around to give to the university via donations. If football and other athletics tickets continue to rise, similar problem. For me, my decision to get season tickets is very tenuous, because it is becoming a bigger and bigger chunk of my annual income--despite the enjoyment that I derive from football game days. Last year, because of that obnoxious increase in seat license, I lowered my university donation by the same amount (200.00). Nobody--from the president's office to the VP of development to the LSA Dean (McDonald) to the athletic department--cared. I understand that there is a need for cash to make the university athletic programs elite and make us all feel proud, but I feel the proverbial gun being held to our heads, forcing us to support one small area of the university disproportionately if we want the "benefit" of season tickets. Sad for me, there are 100 people that will gladly scoop up my tickets if I cancel my season order, so my "protest" will truly be not felt. So in sum, I do think it's a total myth that university finances are not affected by athletic increased costs. And most sadly, I don't think anyone in the university cares. Even more sadly, the university would rather continue this blind eye than come close to making tuition affordable for anyone other than the extremely wealthy.
Frank99
Wed, May 1, 2013 : 6:58 p.m.
Since UM has the 2nd highest endowment of any public university and each fund raising drive seems to exceed its goal routinely, what is your evidence that this fungible money is being withheld from the university? While you chose to decrease your donation to the U, I increased mine because I couldn't be happier with the way things are being run both on the hill and on South State Street. The proof will come in the next major fund raising drive--and I bet I'm right. We shall see.
bluenella
Wed, May 1, 2013 : 5:12 p.m.
Very well stated, heartbreakM. I feel a public university should balance the need for "elite" improvements vs. keeping season tickets affordable for the public who support it. I also feel that squeezing senior citizen alumni-faculty (many on modest fixed incomes) with these yearly hefty increases is somewhat outrageous, given the decades of support they've given-- to hit them up at this late stage, in this manner, is poor policy, especially with something that gives them so much joy to participate in. Not everyone retires as a Rockefeller, they should not be priced out.
Kellie Woodhouse
Wed, May 1, 2013 : 2:30 p.m.
Thanks for the thoughtful comment. While it's true donations go up after successful seasons (I wrote about this a while ago... http://www.annarbor.com/news/winning-sports-bring-fundraising-boost-for-university-of-michigan-athletics/), I didn't think about how donations might dip when prices increase. That would be an interesting angle to explore in further coverage.
raccity
Wed, May 1, 2013 : 2:08 p.m.
It is time to replace the NCAA banners won by the Fab 5. Like Now!!!
tgw
Wed, May 1, 2013 : 1:10 p.m.
Please debunk these additional myths: 1) Some employees of the athletic department (coaches, athletic director) earn more than Coleman. 2) The design for the renovation of the stadium was done by Pioneer High vocational students. 3) The Athletic Department does not pay the University a hefty licensing fee for use of the M symbol. 4) The prestige of our great research university is diminished by association with a crass commercial enterprise otherwise known as the Michigan football program.
Larry Weisenthal
Thu, May 2, 2013 : 5:31 a.m.
Harvard has more Division I varsity sports teams than any other university. more than 20 % of Harvard undergrads are varsity athletes. With a comparatively tiny student body, they still have way more Division I athletes than does Michigan.those who denigrate college varsity sports might consider why these sports play such a prominent role on Ivy League campuses. From my iPad.
stinkywinkie
Thu, May 2, 2013 : 12:57 a.m.
I though Albert Speer was the architect.
blue85
Wed, May 1, 2013 : 4:26 p.m.
1"Please debunk these additional myths: 1) Some employees of the athletic department (coaches, athletic director) earn more than Coleman." That's easy: most of the compensation of the people that you refer to comes from non-general fund sources. Further, as is well understood in economics, a football coach who can build a winning and thus profitable program is worth more in hard dollars than a dozen economics professors...who actually use this example in textbooks. 2)"The design for the renovation of the stadium was done by Pioneer High vocational students." Easily done: this renovation was done by a professional firm. Oh, I get it, that was humor...that said, revenue is up and box seats are actually being bought more by individuals than corporations...so you are arguing with success...good luck with that approach to life. 3) "The Athletic Department does not pay the University a hefty licensing fee for use of the M symbol." It is the Athletic department logo wear that the university depends on for brand/marketing and the university benefits. In a logical universe, the university would pay the athletic department, not the other way around. Besides, that would be like you paying your son to mow the lawn, it is all endogenous and nugatory at the bottom line. 4)"The prestige of our great research university is diminished by association with a crass commercial enterprise otherwise known as the Michigan football program." The university's rankings in top ten programs in the nation exceed all except a handful of schools...in approximate order: Berkeley, Stanford, Harvard, Michigan. Guess what: Cal has a very successful athletic program; Stanford wins the directors cup nearly every single year and has for 20 years; even Harvard has begun to place a renewed emphasis on sports excellence. Michigan, as noted in these pages, was recently denoted a top 10 dream school. So, aside from being substantially incorrect on nearly all of your points, g
Roy Munson
Wed, May 1, 2013 : 1:22 p.m.
#4....Really? lol You should have gone to an Ivy League school then with that thinking.
Lou Perry
Wed, May 1, 2013 : 12:15 p.m.
Since the athletic department is separate and a profitable enterprise it should pay taxes and pay the city more to handle traffic, etc. I wonder how UofM athletic costs compare to other profitable programs.
A2Dave
Wed, May 1, 2013 : 6:15 p.m.
Having positive cash flow does not equate to profitability. Did you actually read the article and Brandon's comments regarding profits, rather than revenues re-invested in capital projects?
johnnya2
Wed, May 1, 2013 : 4:24 p.m.
I bet there is a stadium in Detroit that would HAPPILY take the UM business if the city does not want the "bother" of having the game. By the way, then we should stop running events through downtown streets, art fairs that cost city workers time and money. End all parades. Midnight madness OUT. ALl of these things attract business to A2. If you think the cost of running UN fotball game days does not MORe than pay for itself, you are deluded.
B2Pilot
Wed, May 1, 2013 : 3:34 p.m.
So they can buy another 750K monument for city hall? yea great idea give the city more tax money
hail2thevict0r
Wed, May 1, 2013 : 12:22 p.m.
Or the city could just be thankful that something is bringing in 110,000 people and their families to a city of 120,000 people to spend money, eat at restaurants and buy other goods and services. The money generated in taxes from those 7 or 8 home games FAR outweighs the money spent servicing the traffic control on those events.
GoNavy
Wed, May 1, 2013 : 12:04 p.m.
Of the myths, only one was actually "debunked" (as in, refuted with factual information). That myth being #1. Regarding the department's profitability, the AD downplays (i.e. "does not mention") the fact that nearly every other athletic department in the country is actually unprofitable. For the University to be among the top 10 that actually produce a profit indicates "high profitability" by most any measure. Furthermore, the Athletic Department operates under the University's outstanding credit rating. As a free-standing institution, the Athletic Department is nothing, as opposed to the University - which could stand on its own without issue. In the business world, this is known as an "intangible asset" which has real value. Myth #1 - "athlete students" - was not debunked. The AD will parade out statistics citing graduation rates (that is, in an article where myths are debunked with facts), but you will seldom read the quality of the graduates that come out of the athletic program. You'll hear a story about the hockey-player-honor-student-engineer, but you won't hear about the basketball player who reads at the level of a 7th grader. Myth #4 - "community detachment" - again was not debunked aside from Mr. Brandon's belief that the myth was "untrue". The athletic campus itself is almost completely separate from the main campus. Most athletes generally live in the same dorm, and take the same watered-down classes together. Facts "debunking" this myth might have been useful here, rather than the rhetoric provided. I have to say - this interview was something of an underhand softball throw to the Director. I doubt he broke a sweat as he went through these rehearsed talking points. Maybe in the future the interviewer will approach the AD with some uncomfortable facts, rather than giving him a venue to rehearse the same tired statements we've all heard before.
blue85
Wed, May 1, 2013 : 4:18 p.m.
1) "Regarding the department's profitability, the AD downplays (i.e. "does not mention") the fact that nearly every other athletic department in the country is actually unprofitable." What do you mean does not mention? The article clearly mentions this. Do you think Brandon is unaware of this fact or concealing it? Does the article itself, which mentions this fact explicitly, somehow confuse you? 2) "Furthermore, the Athletic Department operates under the University's outstanding credit rating. As a free-standing institution, the Athletic Department is nothing, as opposed to the University - which could stand on its own without issue. In the business world, this is known as an "intangible asset" which has real value." The above assertion is false for the reasons I've noted above. I doubt you have studied accounting because your definition of both intangible asset and real value are suspect. I'd also love to see your citation of a rating agency document which ties those attributes to a UM athletic department bond rating as other than a marginal comment. 3) "Myth #1 - "athlete students" - was not debunked. The AD will parade out statistics citing graduation rates (that is, in an article where myths are debunked with facts), but you will seldom read the quality of the graduates that come out of the athletic program. You'll hear a story about the hockey-player-honor-student-engineer, but you won't hear about the basketball player who reads at the level of a 7th grader." There are 900 student athletes, if you have an obsession with the so-called money sports, you are talking about 1/10 of that total and managing to tar all athletes with the same brush. There is also a certain hypocrisy exercised by folks who will play to see athletes play professionally but believe in some sort of divine conception...ignoring the fact that they have to start honing their skill somewhere.
Frank99
Wed, May 1, 2013 : 4:01 p.m.
1) Name the basketball player with the 7th grade reading ability. You can't because he doesn't exist. 2) The athletic campus has never been physically integrated with the main campus. The heart of the athletic campus, the Big House, Yost Field House, Fisher Stadium and the track have been in for 80+ years. Pretty hard to put the stadium at the corner of State and South University. 3) Athletes have never lived in the same dorm and like most university students they tend to move out of the dorms after their freshman year. 4)"Most" athletes don't take the same watered down classes. We have over 900 student-athletes and I'm quite sure you're uninformed about the breakdown of classes these students take. When you throw in the word "most" you're making it up.
Kellie Woodhouse
Wed, May 1, 2013 : 2:05 p.m.
@interested: I see what you mean. Reporting comes in a lot of different forms. Sometimes articles are based off an event and, while they include facts, they won't include as much information as a comprehensive enterprise piece. Since you're asking, there are 28,000 undergraduates enrolled at the university and here's an article we wrote about graduation rates: http://www.annarbor.com/sports/um-football/michigan-football-teams-graduation-rate-lags-behind-other-sports-but-performance-at-all-time-high/
interesteda2
Wed, May 1, 2013 : 1:47 p.m.
So Ms Woodhouse, was this an interview or a free advertisement for Brandon? As GoNavy notes having facts, ie graduation rates for athletes compared to other schools and the general student population would be useful. This seems to be stenography vs reporting.
Kellie Woodhouse
Wed, May 1, 2013 : 12:55 p.m.
GoNavy, Brandon was speaking for faculty and addressing things he's heard on campus an in A2. I try to make it very clear in the article that these are things Brandon considers myths.....
golfer
Wed, May 1, 2013 : 11:47 a.m.
keep raising prices at the football games. you will hit a peak and people will say no more and watch it on tv. the average family only has so much to layout for entertainment. then it will cap out.
Tom
Wed, May 1, 2013 : 8:50 p.m.
Golfer, I'm already there. With the restrictions of what you can bring to the stadium (basically your clothes), ticket prices, parking rates, and highly excessive prices for food, it's a no-brainer. I might add I can afford to pay these ridiculous prices but now prefer watching it on TV with a group of friends where there is no wait for the bathrooms, and drinks and food are a few steps away. Eventually, the goose laying the golden egg will be choked to death. If I were a student, I'd defer or sell my tickets.
UpperDecker
Wed, May 1, 2013 : 4:29 p.m.
That is the balance for finding the perfect ticket price. You want to be sure that everyone that wants a ticket can get one. Until you hit that peak and it goes backwards unfortunately they will keep raising the prices.
cinnabar7071
Wed, May 1, 2013 : 2:22 p.m.
The U doesn't want the average family at the games. This is for people with money, just donate money and watch how you get pushed to the front of the season ticket waiting list.
jpud
Wed, May 1, 2013 : 11:30 a.m.
The atheltic department uses the University's debt rating to borrow money. The large debt load such as the one to renovate the stadium prevents other initiatives on campus which require debt. If the University borrows too much, interest costs go up for everyone. The athletic department is like a child that requires mommy and daddy's co-signature on a loan, and then braggs about how they are independent. Mom and Dad cannot borrow as much if their credit rating is tapped out by junior. The rec sport renovations are necessary in part because of maintenance that was neglected when the athletic department was responsible for rec sports. It is nice that they are now making a contribution, as many other athletic departments around the country do run their University's rec sport units to high standards. Equating the costs of rec sport contributions to student ticket price increases is a bit contrived. The atheltic department has many streams of increased revenue, such as raising ticket prices, seat licenses, University brand licensing and TV contracts, and many streams of increased cost such as raises for the AD, coaches and staff. Raising student ticket prices is one example of increasing revenue, and contributing to rec sport renovations is one example of increased costs. Equating the two is a marketing decision that the atheltic department is making, they could equate other sources of increased business revenue with other sources of increased cost. The atheltic department should be acknowledged for contributing to the cost of rec sport facilities, such renovations were neglected in the past.
jpud
Fri, May 3, 2013 : 9:38 p.m.
Now there you go again, blue85, anyone can say an independent atheltic department would have a AAA bond rating, but you need to listen to David Brandon. The athletic department is a lowsy business that no one would go into to make money. They spend most of the donations, very little endowment, and they really only have one revenue stream , football, that is vulnerable to societal changes in viewing / attending habits, spending habits, as well as both spectator and player safety. What happens if concussion risk turns it into a flag football game? This is what bond underwriters consider when awarding a bond rating, how strong and durable is the revenue stream, what are the expenses, liabilities, cash reserves, etc. When you only have one vulnerable revenue stream and 30 other sports with at least 28 losing money, the bond rating would not be AAA, sorry. There will never be a public website that says a new football stadium is more important than a new nursing school, dorms or rec sport facilities. To put relative value judgements like that in public would be poor leadership. Just look at the timing and facts though if you want to see the reality of the situation.
blue85
Thu, May 2, 2013 : 8:03 p.m.
""The atheltic department uses the University's debt rating to borrow money. Correct, the athletic department does not have a separate bond rating. Individual bond issues do need to cash flow, but the fact that they cash flow does not change the fact that they are using the same bond rating. My comment above is about apples, and you are talking about kiwis." I agree that the rating is the university's rating. Your response fails to recognize that my refutation of your point is not merely semantic: yes the projects use the university rating, but the projects would not proceed without identifiable cash-flows; if the department were "spun out", it would probably receive the same rating. In other words, you are making a distinction without a difference: if the university rating is AAA before the bond issuance and AAA after, the delta impact to the university rating is zero. As a factual matter, we don't know what a stand alone rating would be, but absent some "cross-collateralization" theory, given the zero delta change to the university rating, it is reasonable to assume a pari passu AAA rating for the stadium financing. 2) "The large debt load such as the one to renovate the stadium prevents other initiatives on campus which require debt Correct, the bond rating is based in part on the sum total of cash owed. Many worthwhile projects that cash flowed have been put off for years in order to protect the AAA rating." Sure, anyone can make bald assertions, but let's see some facts. Show me the site/link to university deliberations which support your assertions: a) the specific debt load induced by the stadium obviates the assumption of additional debt; b) that specific projects were crowded out by the stadium project in order to protect the debt rating; c) as to the sum total of cash owed being a driver, that is subsumed under the zero change to the AAA rating which I adduce above...if the total cashflows owed induce a AAA and inc
jpud
Wed, May 1, 2013 : 11:39 p.m.
"The atheltic department uses the University's debt rating to borrow money. " Correct, the athletic department does not have a separate bond rating. Individual bond issues do need to cash flow, but the fact that they cash flow does not change the fact that they are using the same bond rating. My comment above is about apples, and you are talking about kiwis. 2) The large debt load such as the one to renovate the stadium prevents other initiatives on campus which require debt Correct, the bond rating is based in part on the sum total of cash owed. Many worthwhile projects that cash flowed have been put off for years in order to protect the AAA rating.
blue85
Wed, May 1, 2013 : 4:06 p.m.
Your post betray a misunderstanding of public finance in several important regards: 1) "The atheltic department uses the University's debt rating to borrow money. " Wrong: Project finance is ear-marked to project revenues, not to a GO status or general obligation status. When bonds are underwritten, the underwriter tags project cashflows to bond redemption. 2) "The large debt load such as the one to renovate the stadium prevents other initiatives on campus which require debt." Wrong: the university's rating is AAA, which is awarded on the strength of the amount of debt carried, and the university's ability to pay interest and redeem principle. The AAA rating indicates there is no constraint. Further, I've never seen a single word indicating that such a constraint has been approached. 3) "If the University borrows too much, interest costs go up for everyone. True: conditional on the "if"...however, there is no current violation of the implied volumetric limit and the rates applied to university financings are among the lowest in the world. So you are postulating a fact not in evidence. 4) "The athletic department is like a child that requires mommy and daddy's co-signature on a loan, and then braggs about how they are independent. Mom and Dad cannot borrow as much if their credit rating is tapped out by junior." Wrong: as noted above...the tone is also unnecessary and not conducive to adult discussion. 5) You are concerned that the athletic department neglected the rec facilities, but are now concerned that they are paying for them? Seems a tad inconsistent. As to the equation you suggest, I seriously doubt you have seen the university budget and how revenues are tagged to expenses. I don't know if this equation is false and the result of "marketing" and also doubt that you have any such knowledge. Where is your support for the contention? Please describe the budget line items and their failed correspondence in thi
B2Pilot
Wed, May 1, 2013 : 12:11 p.m.
Wasn't rec sports under part of the Division of Student Affairs previously? And; how do you measure the impact of having 16 million+ people watching and hearing the University's name for hours or weeks when they play on New Years day & NCAA tournaments? Night games, games of the week- Corporations pay hundreds of millions to get a mention for 30 seconds during the superbowl, and the University gets free mega advertising all over the world through Athletics- that directly results in not only increased donations but international brand recognition- priceless
kzookm
Wed, May 1, 2013 : 11:17 a.m.
I am sure that a vast majority of university presidents will tell you that a successful athletic program increases the general revenue of a university through increased alumni contributions and increased student enrollment.
kzookm
Wed, May 1, 2013 : 4:46 p.m.
Go Navy, I believe those schools you mentioned all field athletic teams that compete on the Division 1 level, and some quite successfully. I believe your own Navy team recently had a three game winning streak against Notre Dame and Harvard just completed a very successful basketball season. If those athletic teams did not have a positive impact, including financial, on the universities they would be dropped. Pride in your university for their accomplishments on and off the athletic fields leads to increased donations and enrollment.
Frank99
Wed, May 1, 2013 : 3:50 p.m.
It should be noted, GoNavy, that the two public schools with the highest athletic budgets are also the two schools with the highest general fund endowments for public universities--Texas and Michigan.
GoNavy
Wed, May 1, 2013 : 12:06 p.m.
So all of those Ivys, all of those Service Academies, all of those elite private liberal arts colleges where students are dying to pay full fare despite the lack of "successful" (in the context of the University of Michigan) athletic program are all just languishing? Perhaps Brown University should beef up its football program in order to attract more students and increase contributions.
ChelseaBob
Wed, May 1, 2013 : 11:05 a.m.
The Alabama game was in Dallas, not at home (picture). And I'll bet Dave said commensurate not commiserate.
bluemax79
Wed, May 1, 2013 : 11:58 a.m.
they had the video boards going for the students to watch the game bob
stan
Wed, May 1, 2013 : 11:24 a.m.
There was a viewing party at the Big House: http://www.annarbor.com/sports/um-football/fans-pack-michigan-stadium-for-go-blue-in-the-big-house-pep-rally/
Kellie Woodhouse
Wed, May 1, 2013 : 11:24 a.m.
Yes, the game was in Dallas but the university opened up the Big House for a watch party. And thanks for pointing out that spelling error.
EasyArray
Wed, May 1, 2013 : 10:41 a.m.
Re: "the athletic department gives $2 million to U-M's general fund annually toward scholarships" Do these scholarships go exclusively to student athletes or do they also fund non-athletes? And do athletes get any scholarships not funded by athletic department?
M-Wolverine
Wed, May 1, 2013 : 3:35 p.m.
Maybe someone can check to see if it has changed, but it used to be that the Athletic department paid the out of state tuition rate whether the student was in state or not.
Kellie Woodhouse
Wed, May 1, 2013 : 12:52 p.m.
A little more information about that $2M contribution: It goes toward "the university's fund for need-based financial aid for Michigan students who are not athletes." Read more: http://www.vpcomm.umich.edu/pa/key/understandingtuition.html
Kellie Woodhouse
Wed, May 1, 2013 : 12:51 p.m.
I was told by a university spokesperson that the $2M goes into the general financial fund of the university. Also Bluemax- good point. The department does pay for in-state and out-of-state tuition, depending on where the athlete hails from. Roughly 73 percent of student athletes are from out of state....
bluemax79
Wed, May 1, 2013 : 11:58 a.m.
they go to the athletes of course, they are the ATHLETIC department. the point that was not made in the story is that Michigan unlike other AD's does not take a discount and pays full price for their scholarships. if a student comes from out of state the AD pays the full out of state tuition, not so at other AD's around the country.
Kellie Woodhouse
Wed, May 1, 2013 : 11:11 a.m.
That athletic department gives more than $18M in athletic scholarships, which it funds, each year. Just over 350 of the 900 or so student athletes receive that aid, and the other 550 have equal access to U-M's centrally-awarded financial aid —some of which is for merit and some of which considers socioeconomic class and other factprs— as other non-athlete students. I will check about exclusivity.
A2comments
Wed, May 1, 2013 : 10:24 a.m.
The 23% uptick in student ticket prices is way too much for a year. Plus a 50% increase in the processing fee. Plus open seating. Students are very upset. When we were students, moving closer to the 50 each year was very important. Sitting on the 46 yard line as a grad student was amazing. Dave made several decisions that impacted students adversely all at once.
Tag
Wed, May 1, 2013 : 8:49 p.m.
$7.50 is less than the price of a decent 6 pack of beer. Support your team!
hail2thevict0r
Wed, May 1, 2013 : 12:08 p.m.
I wish this was a policy when I was a student. I would have loved taking a group of 10 friends to the game an hour early to sit in the first 25 rows together. The price increase is what it is IMO. Regular fans are being hit with the same cost increase and when you compare it to other schools, like rival OSU, Michigan is still charging less in both areas. Heck, OSU charges to attend their spring game. I guess if I was a graduating senior and waited 3 years to sit in the front, I'd be a little annoyed, but outside of that I think it's a good move (as someone who still shows up an hour early to the games to enjoy the football atmosphere you only get 7-8 times a year).
bluemax79
Wed, May 1, 2013 : 11:56 a.m.
your lucky you ever got to sit at the 46 yard line a smart business person who cared about having an intimidating student section would put ALL the students in the North AND South end zones in the first 50 rows so no matter which end zone the opponent was coming into the students would be going crazy and making their life miserable. but NOT at Michigan, the students gets primo seating at a discount and some still don't bother to show up on time or at all.