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Flawed from the beginning

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SEPTEMBER 24, 2013

The recently renovated Memorial Stadium’s new foundation may stand rock solid, but the same could not be said for the financing plan to cover the project’s roughly $320 million in costs. In spite of Cal Athletics’ and the campus administration’s best efforts to bring the stadium’s finances back onto a sustainable path, tough obstacles remain.

According to a report released last week, sales of luxury seats from the Endowment Seating Program declined during the March-to-June quarter, falling by 77 seats. Fewer than two-thirds of the 2,902 available ESP seats have been sold since the initiative was launched.

Despite a year-to-year improvement from June 2012, the low figures represented a deeper problem underlying the Memorial Stadium project and held serious ramifications for what the funding plan aimed to do going forward. This has since changed, as the renovation funding plan is now ahead of schedule. More broadly, however, the paltry receipts from the ESP symbolized many of the stadium retrofit’s initial  flaws.

To begin with, the idea of spending hundreds of millions of dollars on an athletics facility and a football stadium for a school that has won a division title exactly once since 1975 was perhaps too lavish. When the decision to move forward with the project was made in 2009, lowered interest rates (a result of the 2007-08 financial crisis) and the glory days of the Tedford years of Cal football lent the Memorial Stadium retrofit a sense of optimism.

In that light, making the stadium as seismically sound as possible was not only a worthy goal — particularly because the structure sits directly on top of a fault line — but it also reflected the hopefulness of the moment. Yet was it really a wise decision to spend the rough equivalent of the GDP of a small nation on a top-flight athletics compound?

New UC Berkeley Chancellor Nicholas Dirks and Vice Chancellor for Administration and Finance John Wilton (who came to campus in 2011) recognize this and have taken steps to mitigate some of the damage that has already been done. Wilton reached out to professors from the Haas School of Business to evaluate a new plan developed by Intercollegiate Athletics for the stadium’s finances. The report the Haas professors released in March of this year addressed the previously grim fiscal reality and outlines creative steps the campus can take to generate alternative revenue.

The Haas report outlines many of the administration’s new tactics to bring the renovation funding plan back onto the path of financial sustainability. These include utilizing the stadium’s capacity as a rental space and revamping the ticket sales strategy. The new direction Dirks and Wilton seem to be taking is a positive one, to be sure, but the stadium’s financial future is far from certain.

Former UC Berkeley chancellor Robert Birgeneau and former vice chancellor of administration  Nathan Brostrom were ambivalent about providing the details that were the basis of their initial revenue estimates — projections that have proven to be excessively optimistic, as the Haas report acknowledged. Disconcertingly, the authors of the Haas report note they were “unable to obtain detailed explanations of the process by which the original (revenue) forecasts were made.”

The current administration appears poised to pursue a different strategy.

Whereas Birgeneau and Brostrom’s picture of the Memorial Stadium renovation contained rosy revenue forecasts, Dirks and Wilton should be upfront with the campus community about the size of the obligation we need to meet. As stakeholders in the university, we are owed further explanations about the colossal debt obligation that our campus faces and what the options are available to tackle the problem.

At present, the quarterly reports on the stadium are easily accessible only by clicking through the clunky CalBears.com website, and Dirks has yet to fully address the students directly about the stadium’s muddled finances.

Publicly engaging the student body and making resources such as the quarterly reports more readily available would go a long way toward bringing the campus up to speed on the issue.

A previous version of this editorial should have included the fact that the Memorial Stadium renovation funding is ahead of schedule, according to the new funding plan. It also made it seem as if the report from Haas School of Business professors developed the current stadium funding model. In fact, the report reviewed the model developed by Intercollegiate Athletics. Additionally, a previous version of this editorial also made it seem as if the UC Berkeley administration had not explained the options available to meet the stadium’s debt obligation. In fact, such options are detailed in the Haas report.
A previous version of this editorial could have been read as claiming that the current stadium funding model is a “grim fiscal reality.” In fact, that statement referred to the previous funding model.

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SEPTEMBER 30, 2013