Pac-12 loan program gives schools the option to pay later

While planning a loan program of up to $ 1 billion for financially weak sports departments during the coronavirus pandemic, the Pac-12 built the ramp for its college football season.

It remains to be seen whether the conference will use them (or even end the season). However, the mere fact that it is designed and possible is ominous.

The news about the program, first reported by the San Jose Mercury News, caused a stir in a country where sporting directors are trying to save a season and entire departments are dependent on football revenue.

Almost everyone in college athletics wants a season, and not just because of the tens of millions of dollars at stake.

However, if that proves impossible – and the trendlines aren’t great – then the Pac-12 loan program is the cushion to mitigate (or at least delay) what would otherwise have been a near-fatal financial blow to numerous sports programs.

“Heard something was being prepared,” said an ACC sports director.

“It would create some options,” said one of the Big Ten.

In general, the plan is pretty simple. The Pac-12 has organized a centralized loan program that could allow each of its 12 member institutions to access up to $ 83 million to cover lost revenue.

The loans are to be repaid over 10 years at an interest rate of 3.75 percent. That’s a hefty note – the annual payments would be about $ 10 million if the entire sum were borrowed. However, due to the group nature of borrowing, it is viewed as comparatively beneficial for individual loans.

Stanford QB Kevin Hogan (8) falls back against Oregon via the Pac-12 logo at Stanford Stadium on November 7, 2013. (AP)

The Mercury News also reported that few, if any, of the schools would take up the full amount, and some – especially Stanford and USC private schools – may not attend at all.

“My guess is that all schools have checked lines of credit in case the entire sports year is canceled,” said an SEC sports director. “Chances are that credit terms will be better if they are pulled together like the Pac-12.”

That is the most important aspect of college athletics. By sharing the ban, the Pac-12 created the best possible financial position (albeit one that is still not great). Presumably it could be duplicated by every conference and even richer leagues like the Big Ten and the SEC could get even better terms.

Money problems have plagued college athletics since the lucrative NCAA men’s basketball tournament was canceled last March. Now everyone is staring at a football season (where most of the revenue will be generated) that will have a reduced number of games and, if at all, significantly fewer fans in the stands. And that’s if the season is played at all.

The economic consequences of this are overwhelming.

“Depending on what the football season looks like, we lose $ 60 million to $ 100 million in revenue,” Wisconsin sports director Barry Alvarez wrote in a letter to season ticket holders asking for additional donations.

Losses may be lower in the Pac-12, where attendance numbers are never as robust and therefore lost ticket sales (plus parking and other game day income) make up less money. It would still be massive, however, with tens of millions gone.

What is worse for the league, however, is that it is already lagging behind the other Power Five leagues in terms of revenue and the departments are routinely in deficit. The Pac-12 needed a financial patch even before COVID-19 caught on.

This money finances not just football, but the entire sports department, including the non-revenue teams, staffing, and facility debt servicing. Sports departments large and small have responded by cutting sports, stopping construction projects, and cutting the salaries of high-income employees, including head coaches and sports directors.

One of the, if not the main, goal of putting a soccer team together this fall despite the pandemic is to stop some of the losses.

It is clear that no one is going to do what they expected – the major conferences have reduced their schedule to just 10 games, knowing that it may not take that long. And fewer or no fans mean not only less or no ticket revenue, but also game day parking, discounts and merchandise sales.

Then there are the cash-making college football playoffs that no one is sure will happen, even if it gives the appearance of a regular season.

No department wants to have to borrow extra, especially if there is no certainty when things will return to normal – for example, will there be a men’s basketball tournament in 2021?

However, with crushing losses and significant commitments, this may be the only way to weather the storm. Or at least try.

With almost every university in the country struggling with lost revenue during the pandemic, the sports departments are trying to do as much as possible to save themselves. If nothing else, it frees up the decision by buying time.

“[It puts] a financial plan that allows more flexibility for the moment, ”said ACC AD. “Reality sets in with these annual payments.”

That’s a headache for another day. This is an important step in overcoming immediate problems. It’s also a blueprint for the end of the season, a decision that has not yet been made but towers above anything.

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