Froggie Accounting 101

[MrMustang1965]

On Line 12 of its Internal Revenue Service form for 2002, the Mountain West Conference listed $4.4 million in revenues, including $250,000 in membership fees from each of its eight schools.

On the same line of the same year's form, the Southeastern Conference listed $122 million in revenues. Its membership fee: $50.

As a politician might say, it's a revenue gap that shows "two Americas" in college sports. But when Utah faces Pitt in the Fiesta Bowl on Saturday, the 5-year-old Mountain West can at least act like one of the nation's most powerful leagues – at the bank and on the field – if only for a few more months. Other things could happen, too, thanks to the Utes' $14 million berth in the Bowl Championship Series.

"I think the single biggest result for us is that we can now go into a recruit's home and say we have the national TV package, the facilities and if you come here and have the season Utah did, you can play in a BCS bowl," Mountain West Commissioner Craig Thompson said. "The ultimate goal is to make that BCS berth automatic every year. Our schools have spent or allocated $300 million on facility improvements over the last six years. Soon, our people are going to say, 'Look, we need to get a return on this.' "

It's Thompson's most important project and one that he plans to pitch again at a BCS meeting in January. If it happens – 2008 at the earliest – bills could be paid by as much as $1 million worth per school, including San Diego State. Deficits could shrink (there are at least four of those at Mountain West schools). The breakthrough might even help desegregate a system that can be defined by at least two different lines on a conference's yearly tax-exemption form: membership fees and investment revenue.

Both figures show just how big the financial gap is in college football, making Utah's looming BCS berth seem all the more miraculous. A second BCS "miracle" also almost happened for eighth-ranked Boise State, a member of the Western Athletic Conference. The Broncos (11-0) instead will play Friday at the Liberty Bowl, where the payout is $1.3 million.

To win an automatic at-large berth in a lucrative BCS game, a team from the WAC or Mountain West must be ranked sixth or higher in the official BCS rankings, a $93 million bowl conglomerate that comprises the Rose, Orange, Sugar and Fiesta bowls. The champions of the Southeastern, Big 12, Big Ten, Pac-10, Big East and Atlantic Coast conferences automatically get six of those eight berths. The other two berths go to at-large teams or Notre Dame.

On its 2002 tax-ememption form – the most recent form available to The San Diego Union-Tribune – the WAC reported that it required $400,000 in membership fees from each of its 10 schools. That fee has increased since 1997, when the WAC had 16 schools and charged each $168,000 for membership.

Consider it a sign of need. Though conferences essentially return the money when they disperse the year's revenues to their members, membership fees gauge just how disadvantaged a conference can be when trying to cover its costs upfront.

Southeastern Conference bylaws require a $50 membership – a mere formality for a league that doesn't need to rely on membership fees to cover conference operations. A big reason is its automatic yearly participation in the BCS – a bonanza worth at least $14 million annually. The Mountain West and WAC have no such automatic yearly boon. It's why the rich can get richer – through investment portfolios – and the poor consider a BCS berth to be manna from bowl heaven.

Showing what a BCS conference can do for a school of similar size, Texas Tech's budget has grown from $9.4 million in 1994, when the Red Raiders played in the smaller Southwest Conference, to close to $40 million now in the Big 12. Ohio State and Texas have giant athletics budget well over $60 million. Though many BCS schools also struggle sometimes to finish in the black, it's mostly because of the vastness of their operations – not because they have trouble raising money like non-BCS scho

[MrMustang1965]

not because they have trouble raising money like non-BCS schools.

"The best thing that could happen to the Mountain West Conference would be automatic BCS participation," said Jim Andrus, the Mountain West's associate commissioner for business and finance. "Then you could bank on that money. Right now, it's falling out of the sky, and there's no way you can plan on it."

Planning on it can help an investment portfolio, perhaps the truest apples-to-apples measure of how much money a conference has to play with during a year. Just ask the Southeastern Conference. On its 2002 IRS form, the Southeastern Conference reported $484,000 in investment revenue from its portfolio with Trustco Capital Management. Any money a conference has on hand during a year is grown through investments and then distributed to its member schools at year's end.

The WAC has an investment portfolio with Wells Fargo. Its investment revenue for 2002 was $19,711 – more than 25 times less than the Southeastern Conference. The Mountain West, which invests its money with American National Bank, reported $61,146 in investment revenues in 2002 – about eight times less than the Southeastern Conference.

"When rates were better, we were making better returns and were able to send some checks back to schools," said Steve Macy, WAC associate commissioner. "As low as rates have been recently, we haven't been able to do that."

Athletic directors have been facing revenue disparities and other economic problems for decades. At issue in recent BCS meetings is how the BCS seemingly makes them worse – unless a team such as Utah "falls from the sky" like a winning lottery ticket.
Conference IRS forms bear this out – and give substance to the campaign by the WAC and Mountain West for New Deal-like reform in the BCS.

The Southeastern Conference distributed at least $8.2 million to 10 of its 12 member schools in fiscal year 2002, according to its IRS forms. The distribution was funded in large part by television deals ($45 million) and postseason bowl revenue ($22 million).

In effect, it combines to create a monstrous cycle: More prestigious bowl bids mean more TV exposure, which means better TV ratings, which means bigger future TV contracts, which creates a bigger incentive for BCS conferences to keep the system just the way it is.

Meanwhile, the WAC listed $793,000 in bowl revenue in 2002. In normal years, without a BCS berth, the Mountain West has contractual berths in three bowls: the Liberty, Emerald and Las Vegas. Their combined payout is $2.9 million.

"Typically, there's not any money to distribute from bowl games for us," said Macy of the WAC. "By the time you get done paying expenses, there's not much money to go around, if any. It's expensive to send a team somewhere."

The disclaimer on the IRS figures is that different conferences have different accounting procedures, making a true apples-to-apples comparison impossible. For example, unlike the Southeastern Conference, television deals with the WAC and Mountain West aren't listed on their tax-exemption forms, mostly because it's largely up to conferences how they report that money on their yearly IRS Form 990 – a required form for nonprofit organizations.

Shortly after noon on Nov. 14, Thompson and WAC Commissioner Karl Benson sat on a couch talking in the third-floor lobby of the downtown San Diego Marriott. Across the lobby, inside a conference room, a meeting was getting ready to start with the BCS oversight committee, which comprises the top executives of the six BCS-member schools, Notre Dame and a representative for the five non-BCS conferences (San Diego State President Stephen Weber).

Benson's and Thompson's goals were similar, their place together somewhat ironic. In 1998, the eight current Mountain West schools seceded from the WAC to form their own superior conference. Five years later, both conferences still sit outside the braintrust of the BCS and share nearly identical economic concerns.

Only two of of the Mountain West's seven public schools have finished with a budget surplus in the last year. Only one – Wyoming – has shown steady growth with its budget in the last five years. The average size of a public-school Mountain West budget in athletics is about $19 million.

In the WAC, the budgets are smaller – averaging about $13.5 million – but the schools have made do. Nevada and Boise State, recent WAC additions, have been in the black for at least the last 20 years. On the other side of the ledger, at least three WAC schools finished in the red last year or covered shortcomings with transfers from the university or auxiliary funds.

Both conferences also recently agreed to television deals, each with relative flaws. The Mountain West agreed to a seven-year, $82 million deal with College Sports TV, a fledgling network that's not carried by cable providers in a large part of the conference's territory. The WAC agreed to a six-year deal for a reported $8 million with ESPN.


An automatic BCS berth is something Mountain West bean counters can barely imagine.
"It's the ability to be able to count on and plan for and project this kind of revenue stream every year," Andrus said, wistfully.

Last year, in an effort to gain better access to this money, non-BCS conferences even organized and threatened the BCS with antitrust hearings in Congress. They've earned concessions in result, including more probable at-large bids to the BCS. But the struggle continues.

The chancellor of Nebraska, Harvey Perlman, told the Senate Judiciary Committee that the "the differential in athletic budgets among Division I-A schools has nothing to do with the BCS, but rather with the differential commitments of fans and donors and the investments schools decide to make in their athletic programs."

"Football drives athletic revenues, and football revenues are largely dictated by the size of the home stadium and the willingness of fans to pay to sit in it," Perlman said.

The BCS recently added a fifth game to its conglomerate, creating two more possible openings for non-BCS schools. BCS coordinator Kevin Weiberg said there wouldn't be more than seven automatic qualifiers for the 10 future BCS berths. That means a current non-BCS conference, such as the Mountain West, could earn an automatic bid or have access to at least one more at-large berth within the new five-game BCS.

At issue is how to determine which conferences are worthy of the automatic berths. It's something the BCS committee will discuss at its January meeting, where Thompson will make a pitch for Mountain West inclusion. In a perfect world, he favors having no automatic qualifiers for BCS bowls, thereby letting teams earn them year by year, no matter which conference. But he knows there's too much money wrapped up in the power conferences to ever let that happen.

The six current BCS conferences will retain their automatic berths at least through 2007.

"I hope the Utah berth whets our appetite," Thompson said. "After that, we're going to have to look at this and say, 'What else can we do?' "

[MrMustang1965]

Only two of of the Mountain West's seven public schools have finished with a budget surplus in the last year. Only one – Wyoming – has shown steady growth with its budget in the last five years. The average size of a public-school Mountain West budget in athletics is about $19 million.

In the WAC, the budgets are smaller – averaging about $13.5 million – but the schools have made do. Nevada and Boise State, recent WAC additions, have been in the black for at least the last 20 years. On the other side of the ledger, at least three WAC schools finished in the red last year or covered shortcomings with transfers from the university or auxiliary funds.

Both conferences also recently agreed to television deals, each with relative flaws. The Mountain West agreed to a seven-year, $82 million deal with College Sports TV, a fledgling network that's not carried by cable providers in a large part of the conference's territory. The WAC agreed to a six-year deal for a reported $8 million with ESPN.


An automatic BCS berth is something Mountain West bean counters can barely imagine.
"It's the ability to be able to count on and plan for and project this kind of revenue stream every year," Andrus said, wistfully.

Last year, in an effort to gain better access to this money, non-BCS conferences even organized and threatened the BCS with antitrust hearings in Congress. They've earned concessions in result, including more probable at-large bids to the BCS. But the struggle continues.

The chancellor of Nebraska, Harvey Perlman, told the Senate Judiciary Committee that the "the differential in athletic budgets among Division I-A schools has nothing to do with the BCS, but rather with the differential commitments of fans and donors and the investments schools decide to make in their athletic programs."

"Football drives athletic revenues, and football revenues are largely dictated by the size of the home stadium and the willingness of fans to pay to sit in it," Perlman said.

The BCS recently added a fifth game to its conglomerate, creating two more possible openings for non-BCS schools. BCS coordinator Kevin Weiberg said there wouldn't be more than seven automatic qualifiers for the 10 future BCS berths. That means a current non-BCS conference, such as the Mountain West, could earn an automatic bid or have access to at least one more at-large berth within the new five-game BCS.

At issue is how to determine which conferences are worthy of the automatic berths. It's something the BCS committee will discuss at its January meeting, where Thompson will make a pitch for Mountain West inclusion. In a perfect world, he favors having no automatic qualifiers for BCS bowls, thereby letting teams earn them year by year, no matter which conference. But he knows there's too much money wrapped up in the power conferences to ever let that happen.

The six current BCS conferences will retain their automatic berths at least through 2007.

"I hope the Utah berth whets our appetite," Thompson said. "After that, we're going to have to look at this and say, 'What else can we do?' "

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