The University of Virginia enjoys a broad-based and successful athletics program, but the type of success that Virginia achieves comes at a price. In this special feature, we present a look at the Virginia athletics department finances for the 2007-08 academic year, the most recent year for which data is available. The numbers show an athletic department that runs slightly in the red and, like many athletic departments around the nation, is feeling pressure to increase revenues and hold down costs in the face of an economic downturn.

The following information for Virginia, Virginia Tech, and other colleges presented is derived from the published NCAA reports on the Virginia Auditor of Public Accounts web site. I have also provided information for the three out-of-state conference teams that UVa plays in the 2009 season to allow a comparison of the athletic budgets and other data of those schools.

This report presents the past three years for both UVa and Virginia Tech. In the first presentation the UVa numbers are presented for the past three years and a report of the changes between the 2008 and 2007 years are also reported.

With regards to the reports, the following standard caveats and comments are made:

• The 2008 data includes the 2007 football seasons and the 2007/2008 basketball season.
• There can be various differences between current and prior year numbers within the same school depending on how the school chooses to present its reports.

The reported finances for the University of Virginia indicate that revenue from football season ticket sales and guarantees increased by over $2 million in the 2007 football season when compared to the 2006 season, and increased only approximately $760k from the 2005 season. The 2007 football season was Chris Long's senior season and the Wahoos had Virginia Tech as a home game. Those two events, plus their winning season were probably the primary reasons for the increase in revenues. In 2007 (2006 football season) UVa had a losing football record.

The men's basketball revenue increased by approximately $800k in 2008, or approximately 24% over 2007 revenues. 2007 was the second year of operations of the new basketball arena. The cost of athletic grants in aid decreased 9% and salaries, benefits and bonuses increased approximately 9% in 2008.

Additional information indicates that football made approximately $2 million in 2008 compared to a loss of over $2.9 million for FY 2007. In 2008 UVa allocated conference distributions and post season revenues in the amount of $5.5 million in 2008 (2007 football season -- played in the Gator Bowl), but did not allocate any conference distributions and post season revenues for the 2006 football season. The reason is probably due to the fact that the 2006 team did not go to a bowl game. Approximately $958k was allocated in the prior year when they went to the Music City Bowl.

UVa paid out $1.35 million in football guarantees for out of conference opponents for the 2007 football season and $1.25 million for the 2006 season. This is an average of $675k for each opponent, as opposed to Virginia Tech's average of $702k. So, both schools are fairly close in payment for out of conference football opponents to play at Tech and UVa.

There have been various newspaper articles and discussions on the message boards relating to guarantees paid by various schools for out-of conference opponents escalating to amounts approximating $1 million or more. Adding those costs plus potential additional travel costs for intersectional games (Jim Weaver of Virginia Tech reported that Tech's travel costs to Nebraska cost an additional $500+k over budget in the 2008 season) will cause more stress on college athletic department budgets. It appears that both and Virginia and Tech will be paying more in the future to quality (or maybe not so quality) out of conference opponents, which will result in higher football and probably basketball ticket prices. It also appears that if you can secure a home and home game with a quality opponent, this cost may be kept under control. However, the travel element can also be volatile as happened in the Hokies' trip to Nebraska this past season and could happen when UVa plays at Southern California in the future.

If this pace keeps up, the playing of an additional conference opponent will appear to be even more appealing by the various BCS leagues. If the ACC and other BCS leagues (PAC 10 already does this) decide to go this route, I believe the some of the FCS (1-AA) league schools may have problems supporting their programs because there will be fewer out-of conference games scheduled by the BCS schools. N.C. State is playing two 1-AA teams this year, and I believe several ACC schools played two 1-AA schools in the 2008 season.

It is also interesting that UVa's men's basketball is finally reporting a net income on operations for 2008. UVa played nine out of conference opponents in the new facility in FY 2008 and 2007 and paid guarantees totaling $773k and 710k, respectively, or an average of approximately $85k and $79k, which is very close to Virginia Tech's average payout per team of approximately $78k in 2007, but way less than Tech's average of 2008 ($116k). UVa did have Syracuse play in Charlottesville in 2007.

Student activity fees allocated to athletic operations at UVa continue to be much higher than those at Tech. This is probably directly related to the funding of 4 more "Olympic" sports than Tech (primarily related to Title IX issues) and probably more out-of-state athletic scholarships. Plus, the UVa tuition, room and board costs are higher than Tech's. Of UVa's 13,636 full time undergraduate students, approximately 55% are women. Of Tech's 22,502 full time undergraduate students, approximately 42% are women. That is a significant percentage variance between the schools.

UVa's conference and NCAA revenues have averaged approximately $10.7 million over the past three years, while Tech's has averaged $10.6 million. However, Tech's overall share has increased more than UVa's primarily because of the winning of the ACC football division title, the respective reimbursements for costs for higher tier bowl games and the payment of a full share of conference revenue distributions beginning in 2007.

When UVa opened its new basketball arena the increase in operating costs for its sports facilities increased substantially. And I believe the UVa athletic department is still responsible for the operating costs for U-Hall, which is reportedly full of asbestos, which will likely be very costly to remove when and if they decide to raze the facility. Although the athletic department is not directly in charge of the operations of the new basketball facility, it does appear that the athletic department pays a substantial amount of the operating costs of this facility.

If you look at the overall debt as reported in UVa's NCAA reports, a substantial amount of debt has been added to the athletic side of the equation over the past few years, plus there was an additional issuance of approximately $3.6 million in debt in 2008. The overall debt increased over $33 million from FY 2006 which is net of debt service paid over the past two years.

I am not sure why there is a substantial increase, unless the new basketball arena debt was on a draw-down basis where a ceiling is set on the total amount of the debt and loan proceeds are only drawn as needed to the ceiling amount. In most cases, the debt is sold to an investor and the total debt proceeds are placed in a trust or similar fund. The payments on the construction bills are then generally made from that fund. Another scenario is that approximately $48 million or more in debt may have been transferred from the University side to the athletic side in 2007. Regardless, if the athletic side has to pay all of the debt, that is a tremendous burden to bear.

If you look at the total bottom line of UVa's athletic report you will note net loss of over $1.4 million for 2008, and net loss of approximately $800k for 2007. That's a net loss of over $2.4 million over the two year period.

As most of you know, UVa charges admission fees to some of its Olympic sports; notably lacrosse, soccer and baseball. In 2008 UVa began charging admission for its volleyball games. However, there are other schools that charge admission to most of their sports (e.g. wrestling, softball, track and field), and this will probably be a trend if economic conditions get tighter.

Prior to the reseating of Scott Stadium the Virginia Athletics Foundation (VAF) made what I consider to be an unprecedented widespread public disclosure of information detailing the number of donors to the Foundation, the amount of funds donated by specific groups of donors, and the number of season football season tickets held by the respective groups of donors. The primary purpose of this disclosure was to inform the football season ticket holders that Scott Stadium seating was going to be realigned to more closely match the donor giving levels, giving levels required to maintain or obtain prime seats, and to detail the reseating process. Before the reseating process began the VAF staff visited and consulted with Virginia Tech to obtain details of Tech's 2005 Lane Stadium reseating process.

To compare the basic processes of the two schools, Virginia Tech gave substantial credit to season ticket holders based on longevity in addition to giving levels, while Virginia essentially said it would cost at least $6,200 to obtain seats between the 30 yard lines, with little if any credit provided to long-standing season ticket holders. Virginia Tech did have some season ticket losses due to people being upset about the reseating, but those losses were few and were purchased by others. Virginia had a nightmare. However, some of the financial damage was negated by the fact that the Southern California folks purchased a lot of the mini season ticket packages that included their game, plus apparently also purchased some entire season tickets. This, in my opinion, seems to be evident by the lack of fans in some of the upper regions of Scott Stadium after the Southern California game.

After some significant resistance to the reseating of the football stadium for the 2008 football season, it appears that a fair number of those former football season ticket holders that also had men's basketball season tickets also elected not to renew their basketball season tickets. Plus, overall attendance at the men's basketball games declined significantly this past season. In March 2009 U.Va. jettisoned their basketball coach to the tune of a $2.1 million buyout, and hired another for $1.7 million per year plus a signing bonus of $500k.

It has been rumored that the buyout was funded by the folks that pledged the major funds for the new basketball arena. My guess is those folks told Craig Littlepage that such funding was in jeopardy if Dave Leitao was not fired, and probably agreed to fund the signing bonus and maybe some of the pay of the new coach. But, that is just my guess. If you figure that UVa averaged approximately 4,000 empty seats per game at an average ticket price of $30, that amounts to $120k a game, plus losses on concessions and related revenues. That would approximate $2 million a season.

In February, 2009 there were newspaper reports of UVa's athletic administration requesting donors to contribute additional funds to support the athletic programs. After the fallout related to the reseating and the current economic conditions, it could be a very rough fiscal 2009 and possibly an even rougher fiscal 2010 year for UVa athletic finances. UVa has just recently offered season football tickets to the general public with some basically good seats to be had by those who are not VAF members. If the public response is not good for the season tickets, the athletic department will have to rely on mini-packages of tickets and/or game-by-game sales. A reasonably good season would help sales. A bad season could be financially disastrous under a game-by-game scenario.

You will notice in the prior table that Tech's football ticket revenues decreased in FY 2008 (2007 football season) due primarily to the playing of 7 home games in the 2007 season as opposed to 8 home games in the 2006 season. Although not specifically reported in the schedule, the football guarantee expenses for the 2007 season were $2.106 million, the 2006 season expenses were $2.235 million and the 2005 season were $.537 million. The average per team in the 2007 season was $702k, the 2006 season average was $581k and the average for the 2005 season was $268k. That is a substantial increase per team, and most likely what we will be seeing at in the future, if not more.

For a bit of additional information, I have included the out-of conference football opponents Tech played in the 2007, 2006 and 2005 football seasons. Six out of conference basketball opponents (those visiting Blacksburg) were paid a total of $694k, or an average of approximately $116k. In the 2006/2007 season the average was $78k. I am not sure why there was a substantial increase in the FY 2007/2008 season. There were seven out of conference games played in Blacksburg in the 2006/2007 season (including Iowa of the ACC/Big Ten Challenge).

Student activity fees applied to athletics increased in 2008 by approximately 2%, but still remain relatively stable when compared with the prior two years. There was a substantial decrease in contributions in 2008 (approx $5 million) and an increase in conference/NCAA revenues in FY 2008. The decrease in contributions is likely related to the flow of contributions related to the West Side Expansion of Lane Stadium, since a lot of the payments on the construction were concentrated in prior years and the application of contributions to the payment on that project. It should be noted here that the box rentals and personal seat licenses for the various club seats are included in contributions.

FY 2007 was also the first year for Virginia Tech to receive a full share of ACC conference revenue distributions. Also remember that these revenues include reimbursements for travel expenses to bowl games. The 2006 year (2005 football season) includes the Gator Bowl against Louisville, the 2007 (2006 football season) year includes the Peach/Chick-fil-A bowl against Georgia, and the 2008 (2007 football season) year includes the Orange Bowl against Kansas.

On the expense side, the cost of athletic student grants-in-aid increased 9% in 2008 and 35% in 2007. I am unsure why there was such a substantial increase in 2007 other than possibly an increase in the number of out of state students receiving scholarships in the athletic programs. Tuition and fees have increased from year to year, but not 35% in one year. Team travel expenses increased 19% in 2008 and 27% in 2007 when compared to the prior year. Although not shown in the table above, in 2008 team travel for football increased approximately $459k or 38%, men's basketball travel decreased approximately $23k or 5%, and women's basketball decreased approximately $11k or 3%. The football travel is primarily related to the bowl game in Miami as opposed to Atlanta, plus there was the trip to LSU. Salaries, benefits and bonuses increased by 2%, which appears reasonable.

I have also reported revenue and expense summaries for the three revenue generating sports, which indicate the financial success of the football program and the men's basketball program. And there are comparative amounts for debt owed on facilities and the corresponding change, in this case decrease or payment, of debt service form 2007 to 2008. For 2008 the principal payments alone were over $4.6 million and the scheduled interest payments were approximately $3.3 million. So, in 2008 the total debt service requirements were approximately $8.0 million. That's a fair chunk of change to pay out of a $64 million operating revenue budget.

Also, if you look at the total bottom line, the Virginia Tech Athletic Department reports an excess of revenue over expenses of over $5.2 million for $2008 and $9.5 million for 2007.

The above information includes a comparison of current year financial activity for UVa, Virginia Tech, James Madison and William and Mary. As noted previously, James Madison and William and Mary are presented to show the larger Virginia Public College Division 1-AA programs in comparison to Virginia and Tech. As usual, there is a very significant financial difference between the 1-A and 1-AA programs. The presenting of non-football schools, such as George Mason and VCU, is not, in my opinion, relevant to the overall presentation.

The season ticket prices and number of games for all of the ACC schools and UVa's out-of-conference opponents is presented with the following caveats and comments:

• Some schools have various ticket pricing scenarios that include sideline seating ticket prices, end zone seating prices, club seating and other arrangements. Clemson, for example, has a higher seat price for club/suite seats ($355) than normal season ticket prices ($299).
• The prices shown in this schedule do not include personal seat licenses, which can substantially increase the cost of individual seats.
• In cases where there are significant variances in season ticket costs by location at the various schools, I have attempted to equate the "normal" season ticket cost as comparable to what is charged at Virginia. Generally, this means I used sideline seating ticket prices as the norm since I believe that price to be comparable to UVa. Others with degrees in quantitative analysis or similar disciplines may arrive at different amounts.

Visiting another school's official web-site when looking for season ticket information can be an interesting endeavor. This information was easily found on most sites. The N.C. State site took substantially more effort than the others. And, there can be interesting information regarding charges for other sports at the various schools.

Florida State is charging $65 for the Miami game, N.C. State has two 1-AA schools on the schedule this year (trying to buy two wins I guess -- Murray State and Gardner-Webb), Miami, Georgia Tech and N.C. State have personal seat licenses which vary according to the seat locations.

It was decided to present this information so you can compare UVa to its Division 1-A out-of-conference opponents' athletic operations. This schedule indicates that Virginia has a larger undergraduate enrollment than two of its three out-of-state out-of-conference opponents; however, it also shows that its football revenues are substantially more than TCU and Southern Mississippi, and comparable to Indiana (although UVa's total athletic budget is larger). The discrepancies among the schools are probably due to stadium size, school enrollments, conference payouts and fan and donor support. The element detail for the three Division 1-A out-of-conference opponents (as is available for UVa) is not available to fully document this assessment.