The University of Colorado athletic department received a $10 million bridge loan from the campus and the CU System this school year to help cover a $16 million budget shortfall created by switching from the Big 12 Conference to the Pac-12.
In addition to the loan, the Boulder campus and the CU system each gave the athletic department $3 million that doesn't need to be paid back to help cover the cost of the move because it benefited the entire CU community, affiliating the school with esteemed academic peers such as Stanford, Cal and UCLA.
Frances Draper, CU vice chancellor for strategic relations, said the loan is scheduled to be paid back in six years at 2 percent interest. Draper said the loan did not have to be approved by the Board of Regents because eight years ago that panel gave schools the discretion to make internal loans without regent approval.
Draper said no tuition dollars were used for the loan or the $6 million in gifts. She said the funds come from interest earnings. Draper said faculty groups were made aware of the assistance the campus and system gave to the athletic department and they raised no objections to it because there was widespread approval by the faculty for the switch in conference affiliation.
"The campus and system saw the overall value of going to the Pac-12 because it is much more consistent with our alumni footprint and with our research collaborations," Draper said.
"The faculty overall were pretty darn supportive of moving over to the Pac-12."
Draper said the loan and gifts were approved last summer.
The shortfall was created over two years. The athletic department forfeited nearly $7 million in conference distributions from the Big 12 in 2010-11 as a penalty for leaving that conference. CU joined the Pac-12 for the 2011-12 school year but only received its share of revenue from the conference championship game in football. It is scheduled to begin receiving Pac-12 money this coming school year.That means CU went from averaging about $9.5 million in conference money over its final few years in the Big 12, to not having that revenue in the budget for its first year in the Pac-12, thus creating the need for the loan and gifts.
While the conference switch initially created a shortfall, it should prove to be a huge boost to the athletic department's bottom line over the long haul. Pac-12 commissioner Larry Scott announced last spring a landmark $3 billion media rights deal that will pay each school more than $20 million each year over the life of the 12-year agreement.
The conference is also starting its own national television network as well as six regional networks in August and those endeavors are expected to add millions more to the total revenue distributions the Pac-12 doles out to its schools each year.
A recent study of athletic department budgets by Bloomberg showed CU ranked third in the nation in receiving university funds to support the athletic department. CU officials said that is a one-year sample that reflects special circumstances created by changing conferences. In a normal year, the CU athletic department receives very little in direct university support.
The athletic department continues to pay back an $8 million loan it received from campus in 2006. That loan was needed following the firing of former coach Gary Barnett and his financial settlement. A drop in football season-ticket sales and overstated fundraising projections by the former athletic department administration headed by former athletic director Dick Tharp also contributed.
The department has been making payments each year of nearly $800,000 to the campus. Both loans should be paid off by 2019, Draper said.