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April 19, 2012 10:00 AM Berkeley’s $447 Million Mistake

By Daniel Luzer

MemorialStadium

UC Berkeley will probably have to borrow money to renovate its football stadium, a lot of money.

Two years ago, when the University of California regents approved a $321 million renovation of Berkeley’s Memorial Stadium (right), UC officials said “the project will be funded mainly by sales of long-term rights to about 3,000 stadium seats and that no state money will be used.”

But, according to an article by Rachel Bachman in the Wall Street Journal:

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. The total bonded debt for the project, including the training center, will be $447 million.

And it looks like this stadium, and significant interest on money to facilitate that stadium, will be financed by student tuition. This is what your debt is paying for.

The University of Minnesota borrowed $220 million to build its new stadium in 2009. The University of Michigan borrowed only $148 million to renovate its stadium in 2010.

The stadium, which is listed on the National Register of Historic Places, opened in 1923. The university funded construction from public contributions, as a memorial to Californians who died in World War I. The total cost was was $1.4 million ($18.6 million in today’s money). [Image via]

[Update: The Wall Street Journal has issued a correction, explaining that “The University of California-Berkeley always intended to borrow most of the $474 million needed to renovate its football stadium and build an athlete-training facility. An earlier version of this article implied that Cal was taking on more debt than originally planned. Also, in noting that Cal had raised $31 million of a proposed $270 million endowment for the stadium, the article failed to mention that the school had gained nonbinding commitments of an additional $113 million, the majority of which will be paid over 30 years.”]

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • spazzy mcgee on April 19, 2012 8:56 PM:

    Daniel, this article is deeply misinformed. $144 million has been pledged, not $31 million, and the $270 million fundraising effort was designed to take place over several decades, not two years.

    There are zero indications that any tuition money will need to be spent on renovating the stadium. I repeat, zero.

    In addition, the costs of Minnesota's and Michigan's renovations are not fair comparisons, as Minnesota built from scratch on public land, and Michigan simply upgraded some luxury boxes. The California Memorial Stadium project involved taking a 90-year old national historic landmark, sitting on the Hayward fault and _literally_ cracking in half, and retrofitting it to modern standards.

  • PQuincy on April 20, 2012 8:33 AM:

    Well, the issue was raised in a WSJ story -- but in the hard news, not opinion section, so there's some credibility. According to the reporter: "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."

    That's pretty vague. More specficially, "John Wilton, the school's vice chancellor for administration and finance, said the stadium project is "a fairly complex project and financing model that has many moving parts" that should be judged over the long term. He said that under most projections, the school won't have to."

    If you trust a vice chancellor for finance talking about athletics and their cost, I have some great bridge shares I'd like to sell you, frankly.

    The fact that Berkeley's AD is the best paid public employee in the state of California -- by far -- is already an outrageous scandal. That potentially millions of athletic entertainment costs will be dumped onto tuition at a time the UC system is staggering under huge and ongoing permanent cuts in state support -- another $200m a year coming soon! -- makes the possibility even more disgusting.

    Given the record of honesty and transparency at the NCAA and university administrations on athletics, vigilance and concern are certainly justified, here.

  • LMM on April 20, 2012 7:28 PM:

    PQuincy: You may choose not to believe what the University has to say, but what about the "corrections" which the Wall Street Journal has made to its story on its website, which amount to a virtual retraction of the main points of the original article? So much for the "hard news" section of Rupert Murdoch's rag.

    And wherever did you get the story that Cal's AD is the highest paid state employee? That is completely ridiculous. Cal's head football is one of the highest paid state employees -- but that money comes entirely from private funding. The AD earns nowhere close to as much as that.

    Your vendetta against Cal is very misplaced and based on false information.

  • PQuincy on September 12, 2012 2:45 PM:

    Sorry for a delayed reply, but the salary information for Cal AD is available at the SacBee state salary database. (http://www.sacbee.com/statepay/)

    John Tedford, Head Coach, Berkeley, is far and away the best payed public employee in California. If I have confused a coach with and AD, I apologize: the point that a manager of athletic entertainment is bringing in nearly $3m a year. To say that the money comes from 'private funding' is also disingenuous at best: it is a public institution that raises that funding, that puts its name on the work, that defines the job and so forth. Without going into questions of fungibility and whether football pays for itself through incremental donations, the fact is that a Berkeley athletics employee is the best paid public employee in the state.