Texas running back Roschon Johnson runs out with the U.S. flag ahead of last year's regular-season finale against Texas Tech at Royal-Memorial Stadium. (Ricardo B. Brazziell/American-Statesman)

Football

How would Texas athletics hold up financially in an economic downturn?

Texas donors may adjust in an economic downturn, but ‘we’re all in this together’

Posted March 21st, 2020

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Story highlights
  • “Our commitment to UT remains in place, it remains strong,” Ross Moody told the American-Statesman.
  • Texas athletics has about 525 athletes and more than 300 staff members. As of now, there are no staff furloughs.
  • Del Conte: “If you buy a season ticket, a T-shirt or are a million dollar donor, we’re all in this together.”

In this environment where people are pulling back financially, Ross Moody is leaning in.

This week, the trustee of the Moody Foundation announced $2.25 million in gifts to various non-profits in Austin, Dallas and Galveston. Locally, organizations like Mobile Loaves & Fishes and the Central Texas Food Bank got critical funds to keep going.

Moody even gave $25,000 to the Jeremiah Program, a non-profit that helps single mothers. It was for diapers. “I think it’s enough for now. It’s enough for today,” he said.

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Moody also owes $130 million to Texas athletics for naming rights on the Longhorns’ new basketball arena. The Moody Center, a multi-purpose facility that will replace the Erwin Center, is scheduled to open for the 2022-23 season.

It’s still unknown what kind of financial damage the COVID-19 pandemic will do to major companies nationally. UT athletics is a $220 million operation that relies heavily on fan donations, season tickets and merchandise sales. It also spends more than $200 million annually, too.

What happens to Texas athletics — and other major self-sustainable athletic programs — if those donations slowed or even dried up? No public money is used in the UT athletic department. It is totally self-sufficient.

As a state entity, the university and athletic department cannot go bankrupt. The school also has a bulletproof AAA credit rating. But it is possible Texas and other schools may have to tighten their belts in the months ahead.

“Our commitment to UT remains in place, it remains strong,” Moody told the American-Statesman. In fact, he plans on doubling down. The agreement calls for UT to receive $130 million over 20 years. He wants to pay it off in 10 or even less.

Texas’ Jordan Windle’s teammates react to one of his dives during the 2019 NCAA men’s swimming and diving championships at the Texas Swim Center. (Steve Lewis/For Statesman)

“I think my message is that donors, corporations, individuals need to take a longer-term approach in their thinking to this issue,” Moody said. “This too will pass. We’ll learn a lot of lessons from the experience of this virus, but it will pass. And I think we’ll be back to normal.”

Of course, its easy for any trustee of a $14 billion investment portfolio to keep the faith. The Moody family has been one of the state’s largest benefactors for decades. UT has donors large and small, including some heavy hitters that rely on oil and gas revenues. Crude prices dipped into the low $20s last week. It was $54 on Feb. 20.

Oil goes up and down, Moody said. The university, founded in 1883, has made it through multiple wars, pandemics and civil unrest.

“I can’t say what that means for the athletic programs, but I think students will be back, classes will be open,” Moody said. “I think this is a temporary, a very unfortunate and temporary, blip for the county, Austin and the University of Texas. They’ve weathered the storm before, they will weather it again.

“Donors are loyal,” Moody added. “Donors want to make sure the athletic and the educational programs succeed at UT, and they will.”

Funding growth, expansion

Nobody knows Texas fundraising better than Amy Folan, who oversees the Longhorn Foundation, the athletic department’s fundraising arm.

The school announced it had 18,703 Foundation members in its latest annual report. Of that total, only 14 gave more than $1 million. Twenty-two had gifts of between $500,000 and $1 million.

“I’ve talked to everybody in various forms and we have not talked about finances,” Folan said Friday. “It’s all about how are you, how is the family, people are asking about me. Financial conversations are ones that we’re not even having.”

Folan acknowledged that nobody knows how this economic downturn will impact the athletic department’s finances. Still, “this isn’t unique,” she said.

“Texans are known to be leaders through challenges and tough circumstances,” Folan said, “and I believe our Longhorn family will be able to pull through this and answer the call no matter what we face.”

Texas athletics has about 525 athletes and more than 300 staff members, an operation that spent almost $70 million on coaching and staff salaries during the 2018-19 academic year, according to the most recent audited figures.

Texas’ Ashtin Zamzow celebrates winning the women’s heptathlon at last year’s NCAA outdoor track and field championships in Austin. (Nick Wagner/American-Statesman)

Ten years prior, Texas athletics ran on a shoestring by comparison. The athletic department generated $138 million in revenues during the 2008-09 athletic year, according to data submitted to the U.S. Dept. of Education. Fast forward one decade, the Horns brought in $224 million.

Surprisingly, UT’s donation numbers have remained steady. From 2010-14, the athletic department reported around $37 million annually in donations, although there was a one-year blip in 2012 that pushed it up to almost $41 million.

Major gift giving rose into the mid-$40 million range for a few years and hit $48.3 million during the 2018-19 season. An explosion in Big 12 TV revenue, an annual $15 million infusion from Longhorn Network and booming merchandise sales expanded the bottom line.

It’s unknown how the cancellation of the NCAA Tournament will affect the overall payout to leagues like the Big 12. That, in turn, clouds the projections for each payout to schools. After the Big 12 tournament was canceled, commissioner Bob Bowlsby said, “It’ll be negotiated.”

Texas got $4.2 million in NCAA distributions and $38.8 million from the Big 12 distribution during the 2018-19 school year.

That’s all fine and well when the economy is humming along. But Texas President Gregory L. Fenves is also mindful of the athletic department’s mind-boggling debt load.

Former UT athletic director DeLoss Dodds paid for the east side expansion of Royal-Memorial Stadium with long-term debt. That’s how every athletic department funded the facilities arms race in the 1990s and 2000s. Texas athletics still owes its creditors $181.6 million with principal and interest payments stretching out to 2044. The annual payment due in 2020 is $14.6 million, according to audited data.

Bevo XV walks in the Bevo Parade before last year’s Big 12 opener against Oklahoma State. (Stephen Spillman/For Statesman)

Texas’ current athletic director Chris Del Conte is a salesman unlike any other. But Fenves made clear that the football stadium’s $175 million south end zone expansion could not begin without getting donations in hand. Athletics was responsible for $125 million of that total.

Del Conte and his fundraising team have essentially gathered enough pledges to pay for the expansion — key word “pledges.” But the total money is not in house yet. All that’s certain is eight families pledged $10 million each to have one of the eight new suites being built alongside the new video board.

Through intermediaries, two suite holders declined to comment but both said they had spoken with Del Conte directly.

“We are not putting that on our balance sheet,” Fenves told the Statesman on Feb. 27 about the stadium expansion. “We needed to have the commitments to go ahead with the construction.”

Fenves and Del Conte struck a deal with the California-based Oak View Group to build the new Moody Center. OVG will build and manage the $340-million facility while UT will own the land underneath it and take sole ownership in 35 years.

Construction on the football stadium and basketball arena has not stopped during this national crisis.

Texas officials like to tout they are getting a “free” basketball arena, but Del Conte still must raise money to pay for the new $60 million basketball practice facility.

Asked if he gave Del Conte explicit instructions to get that facility paid off, Fenves said, “I told him he needs to raise the money for the basketball facility.”

What happens if donors pull back?

Focused on ‘here and now’

The north end zone of Royal-Memorial Stadium, where Texas athletics is housed, is now empty. Del Conte sent all non-essential staff members home. As of now, nobody is expected to be furloughed or laid off.

“You walk around the office, it’s like ‘The Shining.’ No one’s here,” the always-upbeat Del Conte joked. “You’’ll hear a noise and you’ll freak out. Hey, who’s there?! It’s just the wind!”

But Del Conte has had a phone glued to his ears this week, talking with athletes, parents, donors and reporters. “Just spending time making sure we’re spending our time with constituents in all phases,” he said.

The university has closed the campus and will finish the semester in an online learning environment. UT has more than 40 foreign-born athletes, and Del Conte said some were given NCAA-eligible money to go back home.

“If my mom was in Italy and said get your butt home, you gotta go home,” Del Conte said. “Some parents said just stay there. It’s better there. It all depends on what regions of the world you are from, too.”

Texas fans cheer during last year’s game against Kansas State at Royal-Memorial Stadium. (Ricardo B. Brazziell/American-Statesman)

Del Conte insists he’s focused on the here and now. Financially speaking, that means addressing some key issues first. The ticket office extended 2020 football season ticket renewals another month to May 1. Other key dates for Longhorn Foundation donations were pushed back, too.

Ticket office staff also spent time with baseball and softball season ticket holders now that spring sports have been canceled. It examined each account holder’s “remaining value,” meaning upcoming home games, and offered various options.

UT fans must contact the box office by April 3. Refunds will be processed April 6. Or fans can direct their “remaining value” to football tickets, another sport or to a donation.

As for when sports return, it’s unknown. “Today is different from yesterday and different from the day before that,” said Drew Martin, who oversees external operations. “We’re trying to deal with here and now and what we know.”

Football ticket sales are an incredible revenue source for UT. The Horns took in $42.5 million in football ticket revenue alone during the 2018 season, according to the most recent audited figures. Overall, the football program generated $157 million in revenues against $43 million in expenses.

The $114 million surplus is what funds the rest of the athletic department. Football, men’s basketball and baseball are usually the only sports that are net positive for the most financially lucrative athletic department in America.

That surplus is also how Texas pays fired coaches, too.

Del Conte has a massive decision looming about men’s basketball coach Shaka Smart’s future. Smart is owed $10.5 million on the remaining three years of his deal, should Del Conte make a change. Assistant coach Luke Yaklich has another year on his contract, too.

Texas head coach Tom Herman waves to fans as he arrives at the Alamodome for the Alamo Bowl matchup with Utah on Dec. 31. (Ricardo B. Brazziell/American-Statesman)

What if football tanks in 2020, Tom Herman’s fourth season at UT? His contract runs through 2023 and tops out at $6.75 million annually. It’s fully guaranteed. Herman also just hired seven new assistant coaches with multi-year deals.

Would donors be angry enough to step up and write these kinds of checks just to change coaches? In a recession?

To steal one of Del Conte’s favorite phrases, Texas operates in an emotion-based business. All donations are made with one’s heart.

“This is what I tell everybody,” Del Conte said. “Oil prices, depending on where you’re at, donors will adjust their giving, but they still give. That’s the tremendous impact of the Longhorn nation. That’s what’s awesome. That’s what is inspiring.”

Obviously, Del Conte can’t contact all 64,000 football season ticket holders individually by phone. But he’s asked staff members to send thank you notes and always respond back when fans call in.

“If you buy a season ticket, a T-shirt or (you’re) a million dollar donor, we’re all in this together,” Del Conte said. “They may adjust what they’re doing, but it’s awesome.”

Contact Brian Davis at 512-445-3957. Email bdavis@statesman.com.

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