Despite revenue record, Arizona State athletics is reporting a $13.1-million deficit for the 2017-18 fiscal year largely due to buying out football coach Todd Graham.
The entire $12.8 million buyout due Graham is reflected in the FY2018 report even though Graham is being paid in installments through June 2021.
The deficit is ASU athletics’ first since FY2012. ASU reported a $2.7-million surplus for FY2017, down from $5.6 million for the previous year.
Frank Ferrara, ASU senior associate athletic director/chief financial officer, expects the 2018-19 fiscal year, which ends in June, to be close to break even when the Graham buyout technically is off the books.
Graham was fired after his teams went 18-20 from 2015-17, a drop-off from 28-12 in his first three seasons.
The newly renovated Sun Devil Stadium before a game against USTA in Tempe on Sept. 1, 2018.
(Photo: Patrick Breen/The Republic)
Arizona athletics also is reporting a $7.4-million deficit for 2017-18 because of $8.2 million due in severance payments. The majority of that ($6.2 million) goes to former football coach Rich Rodriguez, who was under contract through May 2020, with the rest for assistant coaches, said Derek van der Merwe, UA athletics chief operating officer.
Rodriguez was abruptly fired in January 2018 after his former administrative assistant accused him of sexual harassment.
UA last reported a fiscal year surplus in 2014-15 ($6.4 million) and in FY2017 ran an $800,000 deficit.
ASU revenue up 11.9 percent
ASU exceeded $100 million in revenue for the first time in FY2017 then was up 11.9 percent to $113.6 million for FY2018, ending June 30.
With seven home football games in 2017 and a school attendance record for men’s basketball in 2017-18, ticket revenue climbed to $12.4 million, up from $10 million in the previous year.
Other significant revenue increases were in contributions ($19.0 million to $24.2 million primarily for the Sun Devil Stadium renovation), media rights ($21.3 million to $22.4 million), licensing ($16.6 million to $18.0 million) and bowl game (zero to $1.4 million).
Direct institutional support — largely for athlete tuition waivers — was up from $8.8 million to $10.3 million in part because of the additions of men’s tennis and women’s lacrosse and an additional $1 million budgeted by the university for athletics.
The licensing increase was due largely to a renegotiation of ASU’s apparel sponsorship deal with Adidas, which took effect in July 2015 and runs through June 2023.
“The market had moved considerably when you look at what other schools are signing for,” Ferrara said. “Adidas to their credit agreed, and we adjusted our deal. This was a way to recognize the fact we were bringing more to the table with men’s basketball, football and our other new sports.”
ASU’s distribution revenue from the NCAA and Pac-12 decreased from a combined $10.3 million to $9.1 million. Several factors contributed, including an additional one-time $860,000 NCAA payment to all Division I schools in FY2017 for athlete well-being. Also the Pac-12 did not make a supplemental distribution to its members in FY2018 and, unlike in FY2017, the conference did not make higher football bowl revenue from having a team (Washington) in the College Football Playoff.
ASU reported $1.4 million in bowl revenue from the 2017 Sun Bowl and $1.2 million in bowl expenses.
Facilities debt service, support staff costs up
ASU expenses for FY2018 were $126.7 million with the largest increase other than for severance payment being facilities debt service tied primarily to the $300-million Sun Devil Stadium renovation and for support staff.
Football debt service rose from $5.7 million in FY2017 to $11.4 million in FY2018, taking total debt service up 59 percent to $15.0 million.
Support staff expenses rose 14.2 percent to $19.2 million, partially including increases in the ticket sales department and additions in sports medicine, sports performance, dietitian and Office of Student Athlete Development.
ASU spent $350,000 of its FY2017 NCAA additional distribution on a Wednesday night family meal for all of its athletes.
AAF revenue coming in FY2019
The Alliance of American Football Arizona Hotshots playing five home games at Sun Devil Stadium, in the first year of a three-year contract, will boost revenue by more than $1 million in FY2019.
That money will be transferred to the university, Ferrara said, to reduce university indirect institutional support of athletics.
ASU had just six home football games in 2018 so ticket revenue will drop from FY2018. That will correct in FY2020 when there are seven home games and a projected increase in football season ticket sales.
Ferrara said men’s basketball revenue will be up for FY2019 because of home games against Kansas and Arizona and that hockey revenue is growing in FY2019 with a nationally ranked team in contention for the NCAA Tournament.
Hockey will become ASU’s third-largest revenue sport once it moves on campus in a multi-sport arena to be built adjacent to Wells Fargo Arena. Ground breaking for that facility and the Wells Fargo Arena renovation could be later this year. ASU hockey currently plays home games at Oceanside Ice Arena.
UA tickets sales down, revenue up
Arizona’s total revenue is up 5.3 percent to $95.8 million for FY2018. The department’s revenue high was $99.9 million in FY2014.
Ticket sales were down 11 percent to $13.7 million in FY2018, but that was offset by a 28.1 percent rise in contributions to $23.2 million. Also media rights revenue increased to $27.1 million.
“Giving continues to be very strong,” van der Merwe said. “Generally there is a lot of support for the (athletic) program and people continue to be engaged.”
UA expenses, including severance payments, were a school high $103.3 million, up 12.6 percent over FY2017. Van der Merwe said athletic department legal expenses relating to men’s basketball ramifications from an FBI investigation that led to the arrest of a former assistant coach is included among $6.2 million in other operating expenses for FY2018.
Cost for student aid actually decreased from $14.2 million to $12.9 million.
In addition to severance, expenses rose for coaching salaries (to $18.9 million) and direct overhead/administrative costs ($6.6 million). UA also reported $1.0 million in expenses for playing in the 2017 Foster Farms Bowl and just $84,000 in revenue.
Van der Merwe said football revenue improved in 2018 under first-year coach Kevin Sumlin and is forecasting for the FY2019 report to show a surplus.
USA Today reporter Steve Berkowitz contributed to this report.
Athletic 2017-18 fiscal report highlights
Total revenue: $113.6 million.
— Ticket sales: football, $8.8 million; men’s basketball, $2.0 million; total, $12.4 million.
— Student fees: $10.8 million.
— Contributions: $24.2 million.
— Media rights: $22.4 million.
— Royalties, licensing, sponsorships: $18.0 million.
Total expenses: $126.7 million.
— Student aid: $15.7 million.
— Coaching salaries: $20.3 million.
— Support staff: $19.2 million.
— Severance payments: $12.8 million.
— Facilities debt service: $15.0 million.
Total deficit: $13.1 million.
Total revenue: $95.8 million.
— Ticket sales: football, $5.7 million; men’s basketball, $6.9 million; total, $13.7 million.
— Student fees: $1.1 million.
— Contributions: $23.2 million.
— Media rights: $27.1 million.
— Royalties, licensing, sponsorships: $8.8 million.
Total expenses: $103.3 million.
— Student aid: $12.9 million.
— Coaching salaries: $18.9 million.
— Support staff: $15.7 million.
— Severance payments: $8.2 million.
— Facilities debt service: $7.6 million.
Total deficit: $7.4 million.