MINUTES OF THE MEETING OF THE
FINANCE AND BUDGET COMMITTEE
UNIVERSITY OF LOUISVILLE ATHLETIC ASSOCIATION, INC.
June 20, 2002
The Finance & Budget Committee of the Board of Directors of the University of Louisville Athletic Association, Inc. met Thursday, June 20, 2002 at 2:00 p.m. in the Jefferson Room of Grawemeyer Hall, with members present and absent as follows:
Mr. Robert P. Benson, Jr., Chairman
Mr. Joseph Beyel
Mr. Carlton Brown
Ms. Ginger Brown
Professor Robin R. Harris
Dr. Richard Miller
Mr. Larry Owsley
Mr. Sam Rechter
Mr. Mike Seebert
Professor Elaine Wise
Mr. Ulysses L. Bridgeman, Jr.
Judge Olga Peers
Professor Paul Weber
Mr. Tom Jurich
Ms. Glenda Neeley
Dr. William Pierce
Mr. Pete Cautilli
Mr. Kevin Miller
Ms. Angela Koshewa
Ms. Alicia Clark
Dr. Gene Gilchrist
Mr. Gary Friedman
Mr. Mike Mangeot
Ms. Julie Hermann
Mr. Kenny Klein
Mr. Dave Barker
Mr. Jeff Spoekler
Ms. Rae Goldsmith
Ms. Trisha Wolf
Ms. Kathleen Smith
- Convene Meeting
Having determined a quorum present, Chair Benson called the meeting to order at 2:05 p.m.
- Minutes of the previous meeting held January 24, 2002
Ms. Brown made a motion, which was seconded by Mr. Rechter, to approve the minutes of January 24, 2002. The motion passed.
Information Item: Update on Financial Planning
Dr. Gilchrist reported that a year ago Athletics decided to refine its projecting of expenditures and become more aggressive about forecasting revenues. The department has carried out long term planning and compared the athletics program to other programs throughout the nation. Dr. Gilchrist informed the committee that UofL is in the same spending category as the top athletic departments in the country. At the University of Louisville, however, Athletics pays maintenance and overhead costs for its facilities. This is a distinct disadvantage and reduces revenue. Dr. Gilchrist also noted that UofL is 4.95 percent behind the national average for public institutions in student fees and 9.44 percent behind in Postseason/NCAA conference earnings. Financial support for athletics programs will increase over the next four years as the University adds general funds to support athletic programming.
III. Information Item: April 30 Report for Fiscal Year 2001-2002
Mr. Miller reviewed the April 30 report for fiscal year 2001-02. Although football attendance increased, ticket sales were off target by $256,749 because ticket discounts and other marketing incentives under-realized income. Media revenue budgeted at $800,000 for TV, exceeded budget by approximately $400,000. Concessions and parking revenue also exceeded budget.
Papa John’s Cardinal Stadium (non UofL football) missed its target by $132,000. Mr. Miller explained that the September 11th tragedy adversely affected concert bookings and associated parking projections. At the same time, lifetime seat sales exceeded budget by $337,444. Mr. Miller reported to the committee the Department no longer projects concert revenue and uses a much more conservative formula to forecast revenues and expenses.
Mr. Miller reported that Men’s Basketball achieved budget in category. Coach Pitino has generated excitement and financial interest in UofL Basketball.
Mr. Miller noted that annual seat donations are on target. Although marketing did not meet its budget, mainly because of an insufficient number of floor sponsors, floor sponsors will continue to be recruited for next year’s revenues.
Mr. Miller reported that the expense side was on target. He also reviewed a listing of budget initiatives and implemented policies in the Department since December 2000 that have helped balance the budget.
Action Item: Approval of 2002-2003 Operating Budget
Chair Benson commended Athletic Director Jurich and his staff for the budget cuts and difficult decisions made during the fiscal year. He noted that he would like the ULAA Finance & Budget Committee to meet again in early fall to talk about a five year fiscal plan for athletics.
Mr. Miller reported that total football revenue, budgeted at $8,214,500, includes 6 home games. He observed that the ticket cost for Kentucky and Florida State are slightly higher than other home games because demand for these games is more intense. The budget is based on constant attendance data from previous years. Mr. Miller pointed out that guarantees are budgeted at only $800,000 this year.
Mr. Miller reminded the committee of the marketing agreement with Nelligan Sports Marketing. With this change, the marketing category reflects all media revenue related to Nelligan. Media revenue from TV and radio is projected at $750,000. Concessions and parking are budgeted at $786,000 because of the additional game this year. Suite revenue remains constant.
Mr. Miller noted that the Department was more conservative with the projections of Papa John’s Cardinal Stadium regarding non-UofL football revenue. He omitted revenues from parking of Ford trucks and concerts. Only revenue based upon signed contracts were included.
Basketball revenue is projected at $7,875,000. Coach Pitino hopes to host a tournament in late December. To improve its revenue position, he has solicited sponsorship for the tournament to defray the expenses.
Mr. Miller noted that on the expense side the cost of insurance continues to increase. He also pointed out that salaries and financial aid cover almost 50% of the budget.
Mr. Rechter made a motion, seconded by Prof. Wise, to approve
The Athletic Director’s recommendation that the Board of Directors approve the 2002-2003 Operating Budget for the University of Louisville Athletic Association, Inc. in the form attached.
The motion passed.
Action Item: Approval of Ticket Price Adjustment
Mr. Miller reported that the recommendation would raise the price of Men’s Basketball tickets in the amount of $1 per game. The increase will generate approximately $16,000 per game in additional revenue. Mr. Rechter made a motion, which Prof. Harris seconded, to approve the
Athletic Director’s recommendation that the Board of Directors approve for Men’s Basketball, a ticket price increase from $20 per game to $21 per game.
The motion passed.
VI. Action Item: Approval of Infield Synthetic Turf System
Mr. Jurich informed the committee that the practice facility needs artificial turf to allow the team to practice in the fall and spring regardless of weather. Mr. Jurich asked Mr. Cautilli to update the Board on the proposed turf system.
Mr. Cautilli reported that synthetic turf has advantages for several university athletics facilities due to its durability and reliability. In recent years the quality of the products has increased dramatically.
Mr. Cautilli informed the committee that the athletics department issued a Request for Proposals on April 2, 2002 seeking proposals for a synthetic turf system for three specific projects: Papa John’s Cardinal Stadium, Football Practice Field and the proposed baseball stadium. The objective was that the packaging of these three facilities would produce a more competitive price as opposed to bidding the projects separately. proGrass submitted a proposal that addressed the cost for the three facilities, essentially, equivalent to the price of two (assuming that the baseball stadium would be one of the projects). A committee reviewed the proposals and selected the timeline and pricing listed below:
- Football Practice Field: Cost $498,000; Construction period July 2002
- Papa Johns Cardinal Stadium: Cost $734,000, Construction period of 2003 or 2004 pending satisfaction with the practice field
- Baseball Stadium: No cost; Construction as early as 2004.
Mr. Cautilli reported that funding for the project would come from $1.5 million generated by the football program in the early 1990s and deposited into UofL Foundation as a Quasi Endowment on behalf of football. As of March 31, 2002, the market value of this account was $2,710,680. The request is to allocate $498,000 of this fund toward the purchase of the turf. Mr. Frazier made a motion, which Mr. Rechter seconded, to approve
The Athletic Director’s recommendation that the Board of Directors approve the allocation of accumulated earnings on athletic funds held by University of Louisville Foundation to be used to purchase a synthetic turf system for the UL Football Practice Field in 2002. The cost is estimated at $498,000.
Mr. Jurich noted that the current recommendation is only for the practice field. proGrass will hold the price for Papa John’s Cardinal Stadium for five years.
The motion passed.
VII. Action Item: Approval of Cardinal Hall Proposal
Mr. Miller reported that the athletic department has begun planning for a housing facility for student athletes. Men’s Basketball players would occupy 49% of the facility with the remainder filled by non-student athletes.
Mr. Owsley noted that the project would take the form of a leasehold improvement over a twenty-year period at which time the facility would revert to the university at nominal cost. The university would operate the facility or contract for operations during the twenty-year period. The university would collect rent and pay the developer from its net profits to offset debt service. Mr. Owsley reported that construction for the project will begin late Summer 2002 for occupancy in the Fall semester 2003. Mr. Rechter made a motion, seconded by Mr. Frazier, to approve
The Athletic Director’s recommendation that the Board of Directors approve the construction of a residence hall (“Cardinal Hall”) for student athletes and non-student athletes. The use of this facility will be in compliance with NCAA Legislation. As a part of the overall financing of the project the ULAA is being asked to guarantee occupancy of 35 (or 36) beds annually.
In response to a question by Ms. Brown, Mr. Owsley reported that the dorm will be built on the fourth street parking lot and will take up approximately 110 spaces. Mr. Jurich noted that a donor for the facility has been secured so the dorm will be at no cost to the University. Ms. Hermann reported that because over half of the facility will be occupied by non-student athletes there are no gender equity issues.
The motion passed with one objection and one abstention.
VIII. Information Item: Update on Internal Audit
Mr. Dave Barker, Director of Audit Services, reported that earlier in the year Audit Services took a look at internal operations within the athletics department. He reported that the report was very healthy. Authorization and adequate support for expenditures were tested on sample transactions and no problems were found. Mr. Barker and his staff interviewed coaches and staff and they all commented on the improvement of the communication process within the athletics department. Mr. Barker reported that there were some opportunities to improve budgetary processes within the department. He commended the department on the great improvement over the past year and a half.
Mr. Beyel made a motion to adjourn, which Prof. Wise seconded. The motion passed. The meeting adjourned at 3:20 p.m.