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September 28, 2009 - Concerns about college debt from athletics facilty construction

The recent boom in construction of major athletics buildings has had a significant impact on college debt loads, according to an article published on September 28 by the Chronicle of Higher Education.  According to the Chronicle, from 2003-2008, the nation's largest athletic departments raised nearly $4 billion in private donations to finance capital projects.

Although there are no definitive sources on the amount of athletic-related debt, some financial experts are concerned about the fiscal strain that facility construction has placed on athletics departments. "We could be entering a period when we don't see these big projects anymore," said Mary Peloquin-Dodd, a managing director at Standard & Poor's.  The article states that many colleges, particularly those in smaller NCAA Division I conferences, may struggle to make their athletic debt payments in the current economic climate as private donations, ticket sales, and seat-license revenues decline.

New athletic facility construction includes projects at the University of Minnesota ($289 million), Oklahoma State University ($288 million), the University of Michigan ($226 million), Rutgers University ($102 milion), and the University of Akron ($62 million).  Planned building includes $378 million at the University of Arizona for a dozen athletic projects and a $47 million renovation of the basketball arena at the University of Iowa.  The University of Central Florida, which recently completed a $60 million project, including a new football stadium among seven new athletic facilities, has seen its debt payments increase from $400,000 in 2006 to $3.7 million this year.

However, the current economic climate has presented obstacles for athletic construction. Oklahoma State University's football expansion and athleics complex project was to be funded in part by a $300 million loan secured with an initial, $165-million gift from T. Booke Pickens; the value of the gift has since dropped, forcing the university to delay the project and issue a bond to pay off a $38 million football stadium exapansion. Kansas State University has delayed a $70 million athletics facility improvement.  At the University of Oregon, a $200 million basketball arena was prioritized over other projects, according to biology professor Nathan Tublitz, who is a co-chair of the Coalition on Intercollegiate Athletics. "The dorm-renovation project was set aside because of a higher priority of the basketball arena," said Tublitz.

Conversations about institutional priorities may become more difficult on every campus.  "If you're able to find a school going ahead with [an athletics project] and able to articulate the value of it, that struggle between those choices is going to be interesting," said Roger Goodman, a Moody's vice president. "It was easier in the past because you weren't laying people off and had some ability to pursue a good number of your priorities. Now the debate is tougher internally."

Listen to an audio clip about college athletics facility construction from a Chronicle interview with John R. Thelin, a professor of Higher Education at the University of Kentucky.