Friday, April 20, 2012

UC Berkeley Capital Projects, Stadium Edition

The Wall Street Journal reports on the UC Berkeley administration's disastrous plans for financing the renovation of the football stadium. In short, the brilliant idea was to raise $270 million from the sale of seats, presumably to its hyper-rich, 1-percent alumni. As one might expect, things didn't quite work out as our highly-paid financial managers imagined: only $31 million (about 11 percent of the total) was raised over a period of three years, leaving us about $240 million in the hole.

Wonder who's going to get stuck footing the bill...
Although its $321 million price tag would make it one of the most expensive renovations in college sports history, the university said the project would be funded privately, largely through long-term seat sales and naming rights.

But three years into the fund-raising effort, a projected $270 million from the sale of seats has failed to materialize. At the end of December, the school had collected only $31 million in the first three years of the sale. Now it has become clear that the university will have to borrow the vast majority of the money.

In recent interviews, university officials acknowledge that if revenue projections fall short and won't cover the bond payments, the shortfall "would have to come from campus."

The idea that money for the football stadium could come from campus funds, which include student fees, is an admission likely to stir outrage at a school that's already facing possible double-digit tuition increases. "It is disconcerting that the university may be gambling with student fees and other academic funds to cover a massive financial commitment for a football stadium," said Cal computer-science professor Brian Barsky.


The nearly half-billion-dollar Cal athletic project encompasses a $321 million renovation of Memorial Stadium that opens Sept. 1 and $153 million for a new multisport training facility. That's far more than Stanford University spent building a new stadium in 2006.

In public pitches for the project starting in 2006, university officials talked about raising hundreds of millions through an "Endowment Seating Program" that was to endow all 29 of Cal's varsity sports and more yet by selling naming rights to various components of the stadium. The official name will remain Memorial in honor of war veterans. But the economic downturn hindered sales and by November 2010, [Sandy] Barbour [Cal's athletic director] had posted online a letter to fans saying she was "heartbroken that the program's intentions will, in all likelihood, not be fully realized."

The total bonded debt for the project, including the training center, will be $447 million. That's apparently an unprecedented amount of borrowing for a college-sports project, far above the $220 million that Minnesota borrowed to build a new stadium in 2009, the $200 million that Washington has borrowed for its stadium renovation and the $148 million that Michigan took out to add luxury seats that opened in 2010.


  1. you can thank Mr. Nathan Brostrom, among others.
    Formerly of JP Morgan, then CA Treasury, he's the embodiment of everything wrong in America: lauded as a genius money man, but in reality utterly lacking both common sense and the capacity for shame.

  2. Thanks for the reminder. We covered Brostrom's background here as well as also an earlier "episode" (debacle) regarding the financing of the new athletics facility here.

  3. Another example of inept leadership by University of California Berkeley Chancellor Birgeneau. I love University of California having been a student & lecturer. Like so many I am disappointed by Provost George Breslauer’s ($306,000 salary) and Chancellor Birgeneau’s ($450,000 salary) failure to arrest escalating costs/tuition. Birgeneau/Breslauer doubled instate tuition. On an all-in cost UC Berkeley (UCB) is the most expensive public university; more expensive than Harvard, Yale. The tuition increases have forced students to take on more debt to finance their education. In 2010, two-thirds of college seniors graduated with loans, and those loans averaged $25,250
    UC Berkeley ranked # 2 in faculty earning potential. Paying more is not a better university. Birgeneau/Breslauer dismissed: increasing the number of classes per faculty; eliminating courses with too few students; refraining from exorbitant salaries, bonuses; doubling the time between sabbaticals; freezing all vacant positions; freezing pay, benefits & reforming pensions, health costs. Birgeneau believes fiscal efficiency is not healthy for Cal. Exodus of faculty, chancellors, and administrators: who can afford them?
    An American Enterprise Institute study found that UCB can operate well on much leaner budgets. Californians agree it is far from the ideal situation.
    More recently, UC Berkeley Chancellor Birgeneau’s ($450,000 salary) and Provost George Breslauer’s ($306,000 salary) campus police rammed baton jabs on Cal. students protesting the doubling of tuition/fees by Birgeneau. Clean sweep: Birgeneau resigned; fire Breslauer.

    Send a forceful message that this simply isn’t acceptable. UC Board of Regents