About that massive UGA reserve fund ...

semerson@macon.comFebruary 7, 2014 

Georgia athletics director Greg McGarity, center, speaks with since-retired UGA president Michael Adams, left, and associate athletics director Carla Williams, right.

JOHN KELLEY

When it comes to the spending habits of UGA athletics, there is a clear difference of perception inside and outside the school, and that was on full display Thursday evening.

The UGA athletic board met, and approved the spending of $12 million to renovate baseball's Foley Field. When the news was tweeted out by this reporter, a member of the football team, cornerback Sheldon Dawson, immediately responded.

“And we can’t get no indoor (practice facility),” he wrote, the disgust hard to miss.

And indeed, there proved to be no discussion of an indoor practice facility for the football team on Thursday, other than when athletics director Greg McGarity was asked about it afterwards by the media. He made clear it’s not an immediate priority.

But for many fans, and apparently some players and coaches, the lack of a full-length indoor practice facility (because Georgia does has a smaller one) is more a symbol of what they see as a stingy athletics department.

And it’s true, UGA does not throw money at sports like a drunken sailor. But to school officials – board members as well as McGarity – it’s about prudence, not stinginess. And there is one key fact that the fans miss, or perhaps UGA hasn’t been good at conveying. On that point, there was finally an effort to do so on Thursday.

The subject of the Georgia athletics department’s massive reserve fund came up about midway through the meeting. An accountant with Ernst and Young had just presented his annual audit of the athletic association, reporting that as the new fiscal year began Georgia had $67.1 million in that reserve fund.

Yes, $67.1 million. Seemingly a lot of money to throw around, and build four-and-a-half indoor practice facilities.

But it's not that simple.

Board member Bill Archer, a retired executive with Georgia Power, spoke up. Yes, that’s a lot of money, but UGA has almost twice that in debt, Archer pointed out.

“We got that money there. But we got a lot of that money there because we took out bonds to get it,” Archer said.

Across the table another board member, Bob Bishop, chimed in with agreement.

“That’s what I like to call unallocated funds,” Bishop said.

The exact figure on the debt wasn't available to the media, but it's believed to be about $123 million. The point is that the $67 million in the reserve fund – minus the $12 million now going to Foley Field, and $1 million more for other projects – isn’t just sitting there. Which got to McGarity's point about spending on projects.

"We have a long list, a laundry list, of things we'd love to do. But you can’t do it all at one time," McGarity said. “We have probably $120 million in debt. We don’t want our debt service to increase. We want to use our reserve whenever we can, because we’re not adding into our reserve like we have in the past.”

Not adding to the reserve was translation for this: We’re not raising football ticket prices, and haven’t for six years.

“We haven’t raised ticket prices, we haven’t raised contributions. Our revenue is pretty much at a standstill right now,” McGarity said. “So our expenses continue to creep, and we continue to be in the black. But it just causes us to manage our funds a lot closer, and do things like this. (The Foley Field renovation). That’s a $13 million hit to our reserve. I can promise you we’re not adding $13 million back this year.”

(It does bear noting that the school has raised nearly $5 million through private funds for the Foley Field renovation. So in the long run it’s not quite a $12 million hit.)

But this does lead to a basic question about Georgia’s fiscal management strategy: Since there is more than $123 million in debt, but a large reserve fund, why not chip away at the debt via the reserve fund?

That’s a discussion that UGA’s finance committee has been having, McGarity said.

For the moment, the school is investing that reserve money to try and grow it, and hopefully then would chip away at the debt. The gamble is that any gains from the investment will outweigh the debt service.

Georgia’s annual debt service is $12 million, or $1 million a month.

“That’s what gets lost in the shuffle,” McGarity said. “You see that big reserve there, but our margin’s right now are not very strong, because of our revenue. Think about it, we haven’t raised ticket prices since ’08. … The only way we can really generate more revenue is to raise ticket prices. We don’t want to do that.”

But it is a possibility. It wouldn’t happen until 2016 at the earliest, McGarity said, and will depend on other factors, such as how much more money the SEC Network brings in.

“The only way we would do that (raise prices) is to help us make ends meet,” McGarity said. “We can’t be like the federal government with the deficit, and just: ‘Here you go,’ and just keep digging deeper and deeper in the red. We can’t operate like that. So we have a $93 million budget, that’s probably going to be $93 million again next year.”

Maybe some of this will allay the concern of fans. Maybe not. But the people who pull the purse strings, who were inside that conference room on Thursday night, did not appear as concerned. Many of them made a lot of money in business by being careful with their money, and are fine with UGA taking a similar approach.

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