It was a little less than a year ago when Jennifer Cohen, not yet a month into her tenure as the University of Washington’s athletic director, presented a concerning series of numbers in her first meeting with the school’s Board of Regents.
The athletic department, Cohen told the board last June, was projecting a $14.8 million deficit for the 2016 fiscal year, with a roughly $5.6 million deficit projected for 2017. Her presentation enumerated several reasons for the shortfall. Football ticket sales were down. Student-athlete welfare costs were up. Debt service payments increased on the bonds that funded the renovation of Husky Stadium and Husky Ballpark. When previous athletic director Scott Woodward left the school in January 2016 for the same job at Texas A&M, UW’s administrative staff didn’t even include a chief financial officer (CFO).
“When you’re finding some financial challenges, and you don’t even have the resources and the right people to support you,” Cohen told the News Tribune in an interview earlier this month, “that can be challenging.”
And yet there was Cohen – along with Kate Cullen, Cohen’s eventual choice for CFO – at a regents meeting in April, not quite a year later, presenting a financial forecast far more optimistic than before.
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That nearly $15 million projected deficit in 2016, Cohen and Cullen told the board, actually wound up at about $5.8 million. And while the 2017 fiscal year doesn’t end until June 30, the department expects to break even, rather than operate at the $5.6 million deficit it originally projected.
When you’re finding some financial challenges, and you don’t even have the resources and the right people to support you, that can be challenging.
UW athletic director Jennifer Cohen
As Cohen noted initially, the financial stability of any collegiate athletic department is a volatile, long-term proposition. Even a traditionally solvent outfit could encounter budget troubles due to potential NCAA legislation regarding student-athlete compensation, and salaries for football and basketball coaches continue to escalate at a staggering pace.
UW isn’t quite in the clear. The athletic department projects a surplus of a little more than $2 million in 2018, but still forecasts deficits for 2019, 2020 and 2021, though it does anticipate it will identify roughly $4 million in revenue enhancements by 2019 to help close that gap.
Still, Cohen knows how fortunate the school is to have improved its financial fortunes as much as it has in the past year.
“We’ve been able to get our arms around it pretty quickly,” Cohen said. “And thanks to great fans and great donors and a great staff – and a great football program – we feel really comfortable with where we are now.”
FOOTBALL PAYS THE BILLS
The fans, donors and staff all play a part, for sure. But if you seek a truncated explanation for how UW so quickly shored up its finances, here you go: the Huskies are winning a lot of football games again.
In the midst of a 12-win season and the program’s first Pac-12 championship since 2000, UW generated $2.8 million more in football gate revenue during the 2016 season (2017 fiscal year) than it had projected. Attendance for UW’s seven games at Husky Stadium averaged 64,589, up from 61,919 during the 2015 season. And season ticket sales are up for the 2017 season, Cohen said, with a 96 percent renewal rate plus 2,500 new sales so far. That gives UW roughly 42,000 season tickets sold, with a goal of 44,000 by the start of the season.
UW generated $2.8 million more in football gate revenue during the 2016 season (2017 fiscal year) than it had projected. Attendance for UW’s seven games at Husky Stadium averaged 64,589, up from 61,919 during the 2015 season.
The school also made an additional $2.6 million from the Pac-12, most of that due to the football team’s appearance in the Peach Bowl (though Peach Bowl expenses totaled about $900,000). That success couldn’t have hurt with donors, either; the athletic department’s fundraising team reported donations exceeded their goal by $3 million, and that an additional $1.1 million in seat-related contributions are expected for the 2017 football season (which falls in the 2018 fiscal year).
Cohen also noted that a significant chunk of Don James Center renewal money came in sooner than expected. Those who purchase season tickets in the Don James Center – the indoor premium seating area on Husky Stadium’s north side – pay for the price of their seat, plus their required donation, for a five-year period.
However, each buyer is given two fiscal years to make their payments, meaning UW knew it would receive full payment for the sold-out seats in the 2017 and 2018 fiscal years, but it had no way of knowing how much of that money would come in the first year and how much would come in the second.
As it turned out, Cohen said, the school received about $1.5 million more than it projected in Don James Center renewal money in 2017, and that “was one of the reasons why we were able to absorb the men’s basketball buyout and not operate with a deficit.” (Former coach Lorenzo Romar was due a buyout of $3.2 million upon his March 15 termination.)
So the department projects its 2017 operating revenue to be $125 million (nearly $11 million higher than originally projected), with operating expenses around $106 million ($5 million higher than originally projected). Despite debt service and capital expenditures totaling nearly $19 million, the department should at least break even, and perhaps manage a negligible surplus.
“There’s still been a management of efficiencies,” Cohen said, “but really, fundraising and football were the two swings in our ability to close the gap this year.”
A BETTER STRUCTURE
Organizational changes, Cohen said, have also helped immensely. A little more than a month after being hired as athletic director, Cohen found her CFO: Cullen, who holds a master’s degree in public administration from UW and had worked for five years as the assistant dean of finance and administration in UW’s Foster School of Business.
When Cullen interviewed for the position, Cohen was still working as the interim athletic director – she was named to the full-time position in May 2016 – which Cullen said created a sort of kinship.
“I just felt really ready for the move,” Cullen said. “This job was definitely a step up for me, but I felt really ready for that, and it was nice to be able to talk to Jen about that. During the interview process, she hasn’t been named AD yet, but was in a similar situation. She was ready.”
As CFO, Cullen said she communicates regularly with upper campus regarding their hopes and expectations for the athletic department’s financial picture, and has a regular presence at meetings with the department’s revenue team. Her official bio also lists responsibilities in human resources, travel and business analytics, along with Aramark relations, country club memberships and housing and food services.
Her presence, Cohen said, helps hold UW accountable to its top stated priority – returning the athletic department to financial solvency.
“I’m scared of Kate,” Cohen said with a laugh. “I am. I think that’s a good thing to have. She’s on it. There’s just a lot of structure in place to make sure we’re held accountable to our budget.”
Cohen said she streamlined the revenue team by eliminating a senior-level position and putting the team under one person – Roy Shick, the senior associate athletic director for external affairs, whose hire was announced last summer in conjunction with Cullen’s.
I’m scared of Kate. I am. I think that’s a good thing to have. She’s on it.
Jennifer Cohen, on Kate Cullen
“In doing that, you have one person that understands all the buckets of the revenues,” Cohen said. “They’ve been meeting every week since the fall about our revenues. There’s been a collaborative effort across the revenue teams to be communicating weekly about our revenue production.”
It is in part because such a structure was not in place, Cohen said, that the department’s financial shortcomings were not made clear to the board during the 2015 fiscal year. UW reported a relatively negligible deficit of fewer than $900,000 that year, but a much larger shortfall was masked by a one-time multimedia rights payment from the Pac-12 in the amount of $7.3 million – a fact Cohen included in her presentation last June, but not one fully apparent to the board before then.
This didn’t sit well with UW’s regents. The board’s vice chair, Jeremy Jaech, criticized Woodward for “an attempt to make the numbers look better than they really were,” according to a June 9 report by The Seattle Times.
According to the Times, Jaech told Cohen that Woodward had handed her “unwelcome gifts” as he departed.
“I think that what we learned through that process is that transparency and communication on campus is essential, and that needs to be a No. 1 priority for us,” Cohen said. “What we also have to recognize, though, is college sports is very volatile and very unpredictable. … If you’re not dedicating your time daily to that and continuing to communicate that to all people on campus, then people will feel surprised.”
Jaech told the News Tribune this week that he’s been “very happy” with the department’s direction under Cohen.
“Even more so than the results, what I really appreciate since Jen has come into the role is that she is way more transparent about what’s going on,” Jaech said. “She’s much more willing to communicate. She’s just created a lot more confidence between the board and (the athletic department) with regard to not only their finances, but just the way they operate down there, generally.
“It’s a difference in people, and the way they make themselves available to the regents to discuss anything. There’s no defensiveness. It’s very straightforward. I think they realize that the regents are on the same team, as opposed to the opposing team.”
FUTURE RISKS, OPPORTUNITIES
There still could be bumps ahead, Cohen said, particularly in the form of NCAA deregulation and the rising costs of football game-day overhead, such as security, and cash guarantees paid to nonconference opponents.
Plus, the department’s projections – particularly as they pertain to ticket sales – are based on numbers, Cullen said, “that are very much goals for us. They are not numbers that we’re just assuming are going to be super easy to achieve.”
If the football team continues to win, Cohen hopes season ticket sales could return to what she termed “historic levels” – ideally as high as 55,000, compared to the 45,000 the school is currently projecting. If that happens, the department could realize an additional $4 million per year in revenue. And if the men’s basketball team improves and returns to relevance, UW believes it could generate as much as $3 million in additional revenue from “gate and seat-related contributions.”
If the football team continues to win, Cohen hopes season ticket sales could return to what she termed “historic levels” – ideally as high as 55,000, compared to the 45,000 the school is currently projecting.
“I think it’s important to note that we’re going to be doing great things if we’re hitting these numbers,” Cullen said.
The presentation to the regents also noted that while the department is pleased with fundraising efforts in 2017, maintaining such lofty donation levels in the future will be challenging.
Still, UW is optimistic it will find new sources of revenue. A big one could be the school’s next apparel contract. Its current, 10-year deal with Nike expires in 2019. Considering the rise of UW’s football program and a recent push by Adidas and Under Armour to expand their reach, the Huskies could benefit from a bidding war between the three companies. The school’s current projection – perhaps conservatively – estimates it could net an additional $1 million in cash revenue from a new apparel contract beginning in 2020, to say nothing of a possible increase in product compensation.
Other potential revenue sources include more money from the Pac-12 Networks (as much as $6.5 million per year, UW hopes); expansion of fan and hospitality areas throughout Husky Stadium; and a new transportation management plan that would allow the school to host – and profit from – one or two non-athletic events at Husky Stadium per year.
Cohen said last summer that UW had a lot of work to do to balance its budget, and it still does. They’ll break even this year, but must continue finding new ways to make money in order to remain solvent into the future. (As it stands now, for example, the school still projects a $6.5 million deficit in 2021, optimistic as it might be about erasing that shortfall in the years to come.)
But for a department that only a year ago projected a deficit of nearly $15 million, breaking even in 2017 still qualifies as a significant accomplishment – and is a testament to just how badly the school needs its football team to continue winning.