Memorial Stadium premium seat sales see decline in quarterly report

Recent report prompts questions about debt repayment plan for renovation costs

A construction worker walks between the rows of seats in Memorial Stadium during its retrofit. A recently-released report shows that the number of premium seat sales, part of the funding model for the renovation, is lagging behind predictions.
Derek Remsburg/File
A construction worker walks between the rows of seats in Memorial Stadium during its retrofit. A recently-released report shows that the number of premium seat sales, part of the funding model for the renovation, is lagging behind predictions.

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UC Berkeley’s new Memorial Stadium has emerged from retrofit and modernization efforts ready for its first Big Game Saturday and equipped to withstand California’s notorious quakes. But a recently released report indicates that the stadium’s finances might rest on less sound financial foundations.

Plans for the retrofit were put in motion after the UC Board of Regents declared in 2008 that continuing to play football in the stadium would amount to a safety hazard. In order to finance the project, the university borrowed $276 million of the $321 million projected total cost of the project through the sale of bonds. In addition to revenue from ticket sales, philanthropy, naming rights and a yet-to-be-determined sum from PAC-12 broadcasting contracts, the campus is counting on its Endowment Seating Program to pay for about $272 million of that debt.

The seating program was designed so it would raise money parallel to the debt’s 40-year repayment schedule, which stipulates that Cal Athletics must attend to interest payments of around $11.6 million annually for 20 years beginning in the 2012-13 fiscal year. After 20 years, Cal Athletics will begin paying off the principal in addition to the interest. The annual payments are expected to increase once the university issues the remaining $44 million of debt in the spring, according to campus spokesperson Dan Mogulof.

Nestled on the western rim of Memorial Stadium between the 30-yard lines, about 3,000 specialty seats come with price tags ranging from $2,741 a year for 30 years for those located by the midfield to $15,421 a year for 30 years or a one-time upfront fee of $225,000 for plush, padded University Club seats. Participants can elect to pay the upfront fee or to spread their payments over five or 30 years, just enough time for Cal Athletics to service the debt.

At the start of the program, there was positive response from donors, though critics were wary of a slowdown in the rate of incoming pledges since 2011. But now, most recent financial figures may represent the beginning of what critics have long said would result from the university’s $321 million gamble.

A quarterly financial report released in September shows that the number of sold ESP seats in last fiscal year’s fourth quarter between March 31 and June 30 actually decreased by 51, from 62 percent of the final goal in the third quarter to 60 percent in the final quarter.

However, those numbers do not include funding from 71 additional seats that the campus secured after the close of the fiscal year as well as 60 seats that are currently in the process of being finalized.

Empty seats

Since the Cal football team’s first home game in September, UC Berkeley alumnus and season ticket holder Hank Gehman can’t help but notice what he calls the  “shocking” number of the empty luxury seats. He is concerned that ESP sales have dropped off because the pool of potential donors has already been exhausted.

“If you’re going to drop $80,000 for a seat, you want the best seat around, and you’re going to do this as soon as possible,” Gehman said. “It’s not all these people sitting on the fence.”

Roger Noll, a Stanford University professor emeritus who studies the economics of sports, said the ESP prices are “extremely optimistic.”

“The prices were higher than was charged at some much bigger football schools, such as Texas and Michigan, and even high compared to pro teams,” Noll said.

At the University of Michigan Ann Arbor, the most expensive press box seats cost $4,400 annually, and the University of Texas at Austin asks for an annual donation of $5,000 for seats in its Centennial Suite — both far cries from the University Club’s $15,421.

Adding to the uncertainty of the ESP is that participants who have signed on to the ESP may terminate contributions on an annual basis without penalty, according to the donor agreement. UC Berkeley computer science professor Brian Barsky — a longtime critic of the plan — has been vocal about the risk that such an arrangement could pose to the feasibility of the funding model.

“Careful examination of the recently released ESP figures as of June 30, 2012, reveals that donors reneged on millions of dollars of pledges during the fourth quarter of fiscal year 2011-12,” Barsky said. “This demonstrates why it is irresponsible to consider nonbinding pledges to the ESP that span a long 30-year period as if the donors and their heirs were legally obligated to pay them.”

A revised game plan

Still, campus Vice Chancellor for Administration and Finance John Wilton said he remains convinced of the viability of the funding model because it was made to be adaptable to unforeseen circumstances, such as stagnating ESP sales.

“We can’t wake up next year and find out we can’t make the debt payments,” Wilton said. “So it does mean that you can plan for it, and you can take action to avoid it.”

In an effort to steer the ESP back on track, this fall, Cal Athletics transferred the responsibility of seat sales to a newly established professional sales team that aims to increase marketing efforts to corporations. Unlike regular patrons, businesses that participate in the ESP would have to purchase a minimum of six University Club seats at $5,000 per seat per year and would have to commit for at least two years.

The ESP has also recently implemented a “perk” pricing feature that allows current program participants to purchase seats in the ESP section for the price of regular-season tickets.

Campus officials also hoped that as football season began, the experience of being in the new stadium would provide a much needed boost to seat sales. Recovering from a rocky takeoff in the season’s first three games, Cal’s recent triumphs against UCLA and Washington State University also gave fans and administrators a reason to be optimistic.

“There’s no doubt that success of the team has an impact,” said Sandy Barbour, director of athletics. “It’s one of the challenges we have in athletics in terms of our dependence on our revenues is that it can be pretty volatile.”

Barbour said she remains confident that fans who choose to participate in the ESP will commit in the long run without a binding obligation and regardless of how well the team performs on the field. She’s counting on Cal’s most dedicated fans.

“We’re talking about 3,000 of our most loyal, passionate and generous fans,” Barbour said. “They tend to maybe display disappointment at lack of performance in a pretty vocal way, but they don’t walk away.”

Both critics and supporters of the ESP await the completion of an independent evaluation of the financial model by a group of professors from the Haas School of Business. Their analysis will consider the new marketing strategy and other sources of revenue and will be available to the public in “some months,” according to Mogulof.

In the coming weeks, Cal Athletics will release an updated ESP financial report that will include data collected since the start of the season. Until then, the campus community can hope that a good performance on the field against Stanford University on Saturday will result in similar successes in seat sales.

Senior staff writer Jonathan Kuperberg contributed to this report.

Justin Abraham covers academics and administration. Contact him at [email protected].

Clarification(s):
A previous version of this article should have included that the campus secured funding for 71 additional seats after the time period included in the September report. Sixty additional seats are also currently in the process of being finalized.

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  • http://www.facebook.com/georgeforberkeley George Beier

    OK, I love the Bears. Went to Cal. Twice. Was in the marching band on the day of the “play”. (Guess that makes me 49, how the heck did that happen?)

    But… but… I know this is heresy…but…sometimes one shouldn’t hit the send button… is this one of those times?

    I don’t need Cal to be a football powerhouse. There, I said it. I want Cal to be an in-your-face, no holds barred, never say die ACADEMIC powerhouse. There are already plenty of private and public institutions who can play great football. But how many of them are producing Nobel laureates? How many of them are public institutions with still-somewhat-affordable tuition? (of course, we call these “fees” at Cal. Are the financial aid lines still as long as ever?)

    I’m still a big fan of football and will always be a fan of Cal. But if they don’t win the Pac 12? Meh, that’s OK by me. Go Bears!

  • Stunned

    And furthermore, it’s a DISPOSABLE stadium. It’s designed to break into four discrete sections in an earthquake. It’s not designed to be put back together. What were they thinking?!?

    • Whattheywerethinking

      “If I can push this project through ASAP the contractor has promised to pay me a kickback under the table!”

      –VP Breslauer

  • Jamo11

    I prefer the Oak Tree grove and the old stadium.

  • Failure

    “The campus community can hope that a good performance on the field against Stanford University on Saturday will result in similar successes in seat sales.”
    Will the dismal performance (Cal 3, Stanford 21) result in a similar total failure of ESP?

  • francis

    $15,000 a year for 7 games?

  • AnSu

    Prof. Barsky says “Careful examination … reveals that donors reneged on millions of dollars of pledges during the fourth quarter of fiscal year 2011-12,”

    But Daily Cal doesn’t provide the numbers or link to the report to check that. Is such an extreme claim that it is the real story. Daily Cal should dig in and see, once and for all, whether Barsky is right or not.

    • Millions

      Since the price of each seat is between $40,000 and $225, 000, and the article says the number of seats declined by 51, this comes to millions of dollars.

      • AnSu

        “reneged … on pledges” omitted from your reply why?

    • Five Million

      It’s right. The Cal Athletics web site shows the value of the sold seats went down by more than 5 million dollars.

  • http://rdframe.tumblr.com/ RD

    Realize that critics will never stop pounding their drums, and fervently want to be “proven right” — especially Barsky, who seems to revel in the attention drawn to himself, inviting the media to write articles which subscribe to his point of view (the latest being a hollow critique of donor programs which are needed to fund stadium financing). There is nothing wrong with this behavior, but it accomplishes absolutely nothing for the common good.

    Let’s face facts — It’s a done deal, the stadium has been retrofitted, there is no going back. If this problem is really so great, then I would love to hear suggestions on how to “fix” it. Seems to me like there are too many folks acting like children in this debate. I want to hear from the adults.

    Thank you for your time.

    • Matthew Weber

      RD, the point is that these cautions were raised time and time again while the renovation was being planned, and they were hand-waved aside with over-optimistic predictions of the money the premium seat program would raise, and all the cash that would pour in once our grateful donors saw that the stadium had been renovated.

      To nearly no-one’s surprise, those assurances have evaporated, and we are left holding the bill. Criticizing the imprudent actions of the IA Department and the administration of this university seems damned appropriate to me in this light.

      How to fix it? Hell if I know. Most likely what will happen is that the IAD will come crying to UCOP for money, they will get it, and the core mission of this institution will be further impoverished. The “common good” has, once again, been forcibly pedicated by a sideshow. Enjoy your circuses.

      • Guest

        So here we have an empirical test: When, exactly do you expect that to happen?

        Barsky predicted an intercollegiate athletics deficit of more than 10M$ for 2011-2012. Funny that he’s not talking about that now.

        You’re now convinced that “we are left holding the bill” and “IAD will come crying to UCOP for money”. When, exactly, do you predict that will happen? And if it doesn’t happen by that date, will you have the integrity to please shut up?

      • http://rdframe.tumblr.com/ RD

        Matthew, the facility has been operational for less than one year. As we both know, the country is just (arguably) starting to recover from the worst economic recession since the great depression. It shouldn’t be a huge shock that year one receipts are below projections, which were not informed by the current economic situation. Potential calamity to the university won’t come tomorrow or at years end, but 20 years in the future,

        Don’t you think it’s a bit premature to be forecasting doom and validating your own hypothesis?

  • Glum Alum

    It starts with the quality of the product and, yes, expecting a Tedford-branded product to attract butts in the seats — especially well-heeled butts — IS optimistic. Too optimistic. Cal has borrowed itself into the big-time now and it has no choice *but* to put a competitive product on the field. “Competitive product”, by the way, does NOT mean a coach who has never beaten $C, Furd, Washington or Oregon. “Competitive product” does NOT mean a coach who has lost 2/3’s of his games played against Oregon State or a coach who has a losing conference record over the last 6 years.

    A “competitive product” means competing for the conference title, year after year and THAT means a team regularly in the national top 10 rankings. That will *never* be a Tedford-coached team; after 11 years with the man, we know that much.

    Replace Tedford with a competent coach, one who doesn’t have to ask ‘what do you want me to do?’, and see what happens. It is the only alternative.

    • Get your facts straight

      “”Competitive product”, by the way, does NOT mean a coach who has never beaten $C, Furd, Washington or Oregon.” Tedford has beaten all of those teams. Obviously it’s been a while since the SC win, and that is itself problematic, but it’s outright incorrect to imply that our current coaches haven’t beaten SC, Furd, Washington, and Oregon. Looks like you’ve only started following Cal football over the last two years.

  • Calipenguin

    UC administrators, faculty, and students all seem to be asking for higher state income taxes to finance higher education. Those opposed to Prop 30 are in the minority. Who are the targets of Prop 30? Which alums are able to afford premium stadium seats? Any chance the top 1% of alumni feel a bit unappreciated?

  • Nunya Beeswax

    C’mon, all you Oski-suckers out there–tell us again how IA is going to pay for this with premium seat sales.

    I’m waiting.

  • Papa Bear

    Interest only for 20 years and then begins paying down the principal? Yikes.

  • notbitter

    Again unfortunately Cal students and California tax payers will end up paying for the poor decisions made by the elite. Who most like have taken their bonus and live on a tropical island far far away.

    • Guest

      Do you have _any_ examples of ” have taken their bonus and live on a tropical island far far away” to point to? It looks like you’ve destroyed your own credibility in your own post? Thanks for saving the rest of us the trouble!

  • UC.failure.unceasing

    UC ADMINISTRATION IS INCOMPETENT:
    Critics predicted from the outset that UC would fail to raise the money for this project from season tix/luxury boxes. Critics were correct.

    UC is now deeply in debt, predicable debt, for a structure sitting on an active fault line, for a structure unrelated to the institutional missions of discovery and dissemination of knowledge.

    Barbour, Birgeneau, Brostrom, Lenz, Blum, Gould: worthless, arrogant, incompetent… MALIGNANT TUMORS, CANCER UPON SOCIETY

    • Guest

      Dude, you’ve got some serious anger issues.

      The institution’s mission is teaching, research and public service. Plain and simple, and those three dimensions encompass a great deal more than just discovery and knowledge.

      Let us all know what your qualifications are for making your judgements so we can all evaluate how much credence to give your as yet unsubstantiated claims. Do you have the knowledge, expertise, correct and comprehensive information needed to back up your claims, or are you just angry and/or full of hot air (and full of yourself)?

    • I_h8_disqus

      Your the same guy who was making paranoid statements about the police yesterday. In today’s rant, you blame the UC Administration, but they are just trying to deal with issues that were caused by the California legislators and governors over the last half century. There wouldn’t be any money issues if education was a priority to the people running our state, and they would spend money on education. California is in the top 10 for per capita taxation in the nation. However, California is in the bottom 10 percent in per capita spending on education. As a result, the UC administration is trying to find what money they can.