Big Red Business: How to pay for the new athletics complex

The financing gap: About $70 million.

That’s how much money Nebraska’s athletic department may need to cough up as its fiddles with the financing formula for the massive 350,000-square-foot athletics training facility and football locker room that will be built adjacent to the north side of Memorial Stadium.

When the $155 million expansion project was unveiled Sept. 27, athletic director Bill Moos said the goal was to raise at least $100 million from donors. That would leave about $55 million to come from other sources.

So far, donors have written checks or committed to about $35 million to $40 million for the complex, set for groundbreaking next summer with a scheduled 2022 opening.

A related project -- relocating the Ed Weir outdoor track and field facility to make way for the new athletics complex -- will cost $10 million to $15 million, with donors expected to fill part of that need. That price tag is not part of the $155 million.

So the two projects could leave the athletic department with a $70 million funding gap -- big enough to drive a fourth-string fullback through.

Where will the money come from? Is the donor base deep enough and what happens if the fundraising comes up short of projections? Will an athletic department -- considered the only one among NCAA Division I Power 5 programs without debt on its books -- be willing to borrow money? Is this project important enough to warrant tapping the rainy day fund?

While there are many moving parts and many more to come, the athletic department is counting on funding the new facility and the track through a combination of private gifts, trust funds sitting in accounts held by the University of Nebraska Foundation, and through short-term borrowing in the form of revenue bonds, said John Jentz, the department’s chief financial officer.

“The amount of private gifts, which has been extremely encouraging during the quiet phase of the campaign, will determine the final mix of trust funds and revenue bonds needed to fund the project,” Jentz said. Those pieces won’t fall into place for many months, and it is not unusual for major building projects to get off the ground before all the money has been sorted out.

The financing formula is similar for the new track and field. Jentz said he is confident that there will be interest in private donations for that project.

Jentz said the “tremendous support” from Nebraska fans over the years has placed the athletic department in a “unique financial position today and prepared it well to invest in its future.” The department is profitable, receives no student fees, or university and state funding, and gives about $29 million back to the university through goods and services and scholarships for non-student athletes.

The last time Nebraska undertook a big price-tag project was in 2006 with the expansion to the north side of Memorial Stadium. The approximately $50 million project, which added private suites and a HuskerVision jumbo board, was financed through about $30 million in private donations, with the balance in the sale of revenue bonds. Repayment on the bonds was scheduled to stretch out over 20 years.

But, the bonds were actually paid off early in 2015, Jentz said, meaning the department has been debt-free for more than four years.

The new project was described by University of Nebraska Chancellor Ronnie Green as the biggest investment ever made by the university in an athletics project.

“This was done with a great deal of research,” said Jim Rose, an Omaha marketing executive and former football play-by-play announcer for Nebraska and fundraiser in the athletic department. “You don’t invest $100 million-plus in a knee-jerk reaction. This is an investment in the Nebraska brand, the entire university, its athletes, and Nebraska fans.”

Here’s a look at Nebraska’s three-pronged financing strategy for the project.

Chancellor Green did not pull any punches on the day the facilities project was unveiled.

“We have to raise a lot of money,” he said.

Here’s one way to measure the scope of the fundraising: The $155 million price tag equates to about $80 per person in the state of Nebraska, if you divide the cost by the state’s population of about 1.929 million.

One of those making the ask is Hank Bounds, who stepped down as the university system president in August. A former football player and coach, Bounds is widely respected in the donor community.

While Bounds’ exact role with the development team is unclear, he has been and will be “a huge piece of this whole thing,” Matt Davison, an associate athletic director for football said at the Sept. 27th news conference.

Bounds could not be reached for comment.

Boosters are excited about the project, said Rose, based on conversations he’s had with them.

One of the keys to getting more donors on board, and keeping them enthused, he said, will be to hold lots of one-on-one conversations, and provide as much access as possible to the decision-makers in athletics, such as Moos, head football coach Scott Frost and others. That requires an all hands on deck mentality among the development officers and Moos’s senior management team.

Omaha native and University of Nebraska graduate Warren Buffett is a very generous man who has donated money in the past to his alma mater. Is he in on the athletics project like a Phil Knight at Oregon?

There’s no way of telling at this point whether one of the world’s richest men has or will be writing a check. But it is safe to assume that some Nebraska boosters who have made fortunes in Buffett’s Berkshire Hathaway stock will be making financial gifts to the athletic department.

Rose said he has “every bit of confidence” the athletic department will hit or exceed its fundraising target.

“As the old sales axiom goes, there’s no such thing as a money problem,” Rose said. “It’s an idea problem.” And in this project, there’s nothing wrong with the idea, he said.

“Donors are very aware of the level of competition out there” in terms of facilities. “If you are a Nebraskan, you want (their facilities) to be the best.”

The amount of money the athletic department has in reserve at the University of Nebraska Foundation has been described as being “significant,” and “well north of $100 million.”

But the exact amount? It can’t be found by reading the latest foundation financial report as of June 30, and foundation and athletic department spokesmen declined to provide the number.

The foundation is a 501c3 nonprofit organization that has about $2.5 billion in total assets under management. It manages about 11,000 donor funds.

In addition, the foundation holds and invests money in a fiduciary role on behalf of the University of Nebraska and “other related entities.” There was no further description.

Those funds amounted to about $339 million as of the foundation’s June 30 independent auditor’s report and financial statement.

Rose said the athletic department has “saved up diligently” over the years, and the money has been “stewarded properly”

That’s not always the case at athletic programs, as some are poorly managed and running deficits.

As the athletic department mulls over its financing options for the 3-story athletics facility and new track stadium, revenue bonds will be part of the mix.

Indeed, issuing revenue bonds is one of the most common ways to pay for college stadium improvements and other big-dollar facilities projects. The bonds often carry interest rates that are lower than what it costs to borrow money in a conventional bank loan.

Jentz said the athletic department is willing to take on debt for this project “because of the strategic decision a few years ago to eliminate all other debt, as well as current favorable market conditions for financing.

He said all other details about a revenue bond package will be sorted out as the building project moves through the process. Better-than-expected donations from boosters or a decision to take more money out of foundation accounts could reduce the amount of debt financing needed.

Typically, athletic department revenue bond financing is supported, in the case of default, by future ticket revenue or future television revenue from the conference.

The University of Missouri, for example, is paying for its recently opened $92 million, 200,000-plus square-foot athletics training and locker room complex partly through the sale of revenue bonds backed by future ticket revenue.

Rose said Nebraska is in a good position to take on a little bit of debt, and this option shows donors that athletics “has skin in the game…everybody wants to make it work.”

Moreover, he noted, Nebraska has the financial resources to pay off the bonds. “It’s an enviable position,” he said.

Steve Rosen covers the business of sports for HuskerOnline. Questions, comments, story ideas? Reach Steve at sbrosen1030@gmail.com.