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The Daily Wildcat

The Daily Wildcat

 

    The cost of a new coach

    As the U.S. government spent an unprecedented $787 billion on an economic stimulus package in an effort to relieve the current recession on Wall Street, UA athletics director Jim Livengood looks to stimulate his own athletic department by hiring a big-name men’s basketball coach in the next month.

    Despite the false perception that sports are immune to economic troubles, the UA athletics department is still feeling the effects of America’s current recession.

    The money-making program Lute Olson built for 25 years has endured difficulties parallel to America’s plunging economic situation over the past year. Olson, who abruptly retired in October, left the basketball program in its second consecutive season with an interim head coach – both Kevin O’Neill and Russ Pennell were promoted assistants.

    The 74-year-old Hall-of-Famer’s contract made Olson the state’s highest-paid employer with an $737,790 annual base salary at the time of his retirement. That would be considered a bargain in today’s big-business college basketball culture.

    As the program heads toward a crucial crossroad, Livengood wants long-term stability with a permanent successor who can turn heads around the college basketball realm and boost the program’s image nationally.

    But buying out an established coach’s contract and agreeing to a new lucrative contract comes at the most difficult economic time in almost 80 years. “”I don’t know that we’re recession-proof at all,”” Livengood said. “”Whether it’s capital fundraising or fundraising based on our day-to-day operating expenses, most of that comes from people that could have investments in the stock market … I look at the stock market more times a day than I’d like to share.””

    Although McKale Center sold out for men’s basketball games this season, Livengood still feels the reeling economy through a ripple effect, as private donations and corporate sponsorships tighten excess spending.

    Balancing the checkbook

    The 2009 fiscal year will end on June 30, and Livengood is keeping a close eye on expenses and anticipates a balanced budget.

    According to the financial report the UA filed with the U.S. Department of Education, the Arizona athletics department netted $3.03 million for the 2008 fiscal year, earning $46.99 million in total income with $43.96 million in expenses.

    The UA men’s basketball program, traditionally one of the nation’s most profitable basketball programs, carried the 2008 fiscal year with a net revenue of $12.03 million – earning $16.42 million in total income with $4.39 million in team expenses.

    According to a Daily Wildcat report last year that analyzed national athletic department trends from 2003 to 2007, the UA basketball program only trailed the University of Louisville in net revenue generated over that 4-year span.

    Meanwhile, the UA football program expects an increase after the team’s first bowl berth since 1998. The program netted $8.21 million in the 2008 fiscal year – earning $16.73 million in total income with $8.52 million in team expenses.

    Although basketball and football largely support the other 17 varsity sports financially, Livengood insists he does not want to cut a non-revenue generating program if ends don’t meet.

    “”The last thing we’re going to give up on in any way is trying to lose one of our 19 programs,”” Livengood said. “”That’s kind of the bottom line.””

    While the department closely monitors day-to-day expenses, Livengood has put a temporary hold on capital expense long-term projects, like the expansion of Arizona Stadium’s north endzone and other renovations in Phase II of Campaign Arizona.

    With this year’s completion of the Richard Jefferson Gymnasium, the new gymnastics facility and diving well, Livengood said he couldn’t imagine the difficulties the UA would face if the those projects began this summer rather than the summer of 2007.

    “”The good news is, thank goodness we completed Phase I when we did,”” Livengood said. “”I don’t want to even shudder to think of what would happen if we started it later.””

    For new hoops coach, ‘the worst possible time’

    There’s a balance Livengood must establish when opening the checkbook for UA’s next basketball coach. It’s about finding the line between overspending on a big name and not finding someone big enough to fill Olson’s shoes.

    “”We’re not going to go out and buy a coach,”” Livengood said. “”That doesn’t make any sense.””

    Added CNBC sports business reporter Darren Rovell: “”People don’t want to hear the economy as an excuse, so you have to be able to play it well. People don’t want to hear, ‘We got this coach, because we couldn’t pay someone else, because of our financial situation.’ No one wants to hear that.””

    In terms of today’s bad economy and lack of privacy with Internet rumors and speculation, Livengood said this could this be the worst possible timing to hire a high profile, highly-paid head coach.

    In today’s economy, Rovell said he thinks it’s possibly easier marketing a school’s decision to hire an up-and-coming coach, rather than spending millions on an established big name.

    But the package still needs to be portrayed correctly. A coach can’t be introduced as somebody who was hired for his bargain value, but because the universities feel the coach is a good fit.

    “”I think that schools are willing to take a more up-and-comer than a high profile coach because they can explain it to boosters better,”” Rovell said. “”I don’t think a high-profile coach, unless it’s his alma mater, is going to take a pay cut yet.””

    Private donations

    Disposable income typically becomes the first area of expenses affected by a down market – meaning less spending money on sports and entertainment.

    From every end of the sports fan spectrum, less extra cash could keep fans at home watching the game on television, hesitant to renew season tickets or unable to pledge significant donations to athletics departments.

    In an effort to relieve the financial hardship that regular donors may face, Livengood said an open line of communication goes a long way, showing the UA cares about the individual, not just the contribution.

    “”We need to (look at donations) on a daily basis understand and realize what’s happening,”” Livengood said. “”Because it can happen that fast. If we’re not paying attention, things could slip away way too fast.””

    Livengood has given donors different options in coping with the recession, whether that’s different payment plans or spreading donations out over a longer period of time.

    His personal outreach has received positive feedback, he said, giving flexibility and loyalty to the donors that have showed long-time support.

    “”I think we’ve done a pretty good job with managing money, and making sure that we know even if it’s the desert, rainy days will come.””

    Corporate sponsorships

    A quick glance around McKale Center might not reveal the current financial situation of Wall Street’s struggling industries.

    The auto industry, one of the hardest hit during the 2008-09 current recession, asked the U.S. government for multiple bailouts, enduring hundreds of thousands of job cuts from domestic companies. But Jim Click Automotive group continues to be one of the UA’s leading donors.

    Jim Click sponsors the UA Hall of Champions, a pre-paid long-term contribution Click paid off years ago.

    Click said he’s trying to weather out the current economic conditions and maintain the amount of donations as in years past, but realizes other companies may not have such luxury.

    As a leading power auto dealer in southern Arizona, Click owns 13 dealerships in the metro Tucson area.

    “”I can’t think of anything that we’re committed to that we’re not going to be able to give to,”” Click said. “”We are looking very closely at our charitable giving. Right now, we have no plans to cut back in our long-term commitments.””

    Click said Livengood hasn’t discussed the next head coach situation with him yet.

    When asked whether he would be more apt to maintain, if not increase donations to UA athletics in anticipation that the next basketball coach will earn more money, Click said he’ll wait and see who Livengood hires, and not put “”the carriage in front of the cattle.””

    He declined to estimate how much his foundation donates annually.

    “”Will I help Jim (Livengood) if he came to me? I’d do my very best,”” Click said. “”I know Jim is going to hire a good coach.””

    An adjustment in value

    Since sports became such a big-money venture around the mid-1980s, ticket prices have historically maintained a gradual increase with inflation while resisting the affects of Wall Street.

    Rovell, a blogger for “”Sports Biz with Darren Rovell”” on CNBC.com, said amidst today’s tough economic times, schools must adjust to an unprecedented market correction by lowering the standards that universities expect from private donations.

    If athletic departments lower their donation standards in correlation to how far the stock market has fallen, it would be a 50-percent decline, Rowell said, based on how much 401k’s have lost in value over the past eight months.

    “”Sports are recession resistant, but not recession proof,”” Rovell said. “”Colleges are not only going to have to figure out the ticket price, but really what’s the required donation everywhere. They have to reset the basketball arena and the football stadium.

    “”They’re going to have to work with the boosters and figure out what people are willing to pay,”” Rovell said. “”You don’t ask someone, ‘What are you willing to pay?’ The hardest thing is now figuring out how you reset everything, because otherwise everyone is going to walk away.””

    Since sports ticket prices and private donations are set months in advance, athletic departments haven’t taken drastic measures to sell tickets in this economy – even though they’ve already felt the impact financially.

    Rovell said an appropriate adjustment to a coach’s salary should follow as the market adjusts.

    “”They’re not doing it yet because I think the nerve-racking time is now,”” Rovell said. “”When you don’t have the boosters out there, it’s going to be a little bit harder to raise money. And there’s going to be a correction in coaching salaries, you would think. We’re waiting for that.””

    Sensitivity needed when spending millions

    While states across the country, including Arizona, look to close billion-dollar deficits with budget cuts, the public perception might naturally question why a state employee – a basketball coach – can make millions of dollars annually.

    That’s what one reporter did at a post-game press conference to Connecticut Huskies head coach Jim Calhoun, who makes a $1.6 million annual base salary – which doesn’t include sponsorships or endorsements.

    The freelance reporter, Ken Krayeske, sparked a heated argument when asking Calhoun if he would give back any of his salary to close the state’s budget crisis.

    “”Quite frankly, we bring in $12 million to the university, nothing to do with state funds,”” Calhoun said. “”We make $12 million a year for this university. Get some facts and come back and see me.””

    While some disagree with the way Calhoun handled the situation, in terms of his tone and reaction to the question, the exchange shows how careful coaches and athletic departments must be with handling state funds.

    The state of Arizona faces a $3-billion shortfall based on $11 billion of spending in the next fiscal year.

    “”Sports certainly has its place, but sports is going to get marginalized from people who look at the entire state budget,”” Rovell said. “”I understood the point (Calhoun) was making, that he has value. He might have value that’s worth 10 professors. The reason it didn’t go down well because it was at least the appearance of an insensitivity.

    “”I just think that person has to be personally responsible and realize the weight at getting all this money at this time,”” he added. “”Sure, it can be worth it. You just have to make sure you’re sensitive to what’s going on with everyone else.””

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