UM athletics has $7.9M budget deficit
Ann Arbor— Michigan's athletic department had a deficit of nearly $8 million this year, marking the first time in about a decade it operated with a loss, according to interim athletic director Jim Hackett, but he assured the budget for 2016 will be balanced.
Hackett, addressing University of Michigan president Mark Schlissel and the Regents during the regularly scheduled meeting Thursday at the Michigan Union, said he projects a $153.6 million budget with operating expenses. The athletic department's operating budget for the 2014-15 fiscal year was $151 million.
As expected, Hackett did not make any public comments to the Regents regarding the work he and his 10-person team have done regarding Michigan's future apparel contract. He has had informal discussions with the Regents regarding the contract and is sticking to a ballpark date of July 1 to have a decision whether the athletic department will remain with Adidas or move to either Nike or Under Armour.
Regarding the budget, though, the firing of former Michigan football coach Brady Hoke and his staff in addition to the resignation of former athletic director Dave Brandon — Hackett became interim last Oct. 31, the day Brandon's resignation was announced — the Michigan athletic department had to absorb costly contract compensations.
Additionally, Michigan hired Jim Harbaugh as its head coach and will pay him $7 million this year, including a $2 million signing bonus.
"There's a good news, bad news story," Hackett said Thursday at the Regents meeting. "The good news is, next year we're going to have a balanced budget. The bad news, this year, we had a deficit. The result of football ticket sales being down (and) added compensation for settlements this past year caused us to have a deficit of about $7.9 million. We covered that with operating reserves, but we've got a balanced budget proposed for next year."
The hiring of Harbaugh has spiked interest in the football program, which is the cash cow and revenue generator of the athletic department. Season ticket sales will be at an eight-year high, Hackett said.
"We have a revenue picture for next year that's very healthy, primarily because our football program rebounds," Hackett said. "We can tell you today, season ticket sales, which are just a portion of the stadium, will probably hit an eight-year high. We just started selling our packets, with combined games (Wednesday) online, (and) we've had almost 18,000 tickets that were sold for some of the single games. We're very optimistic about our fall and what promises there."
He said the increased expenses resulting from the hiring of Harbaugh and his staff "won't be an issue" because of increased revenue.
"There were a lot of one-times in there, but the group worked really hard because it wasn't just higher costs, we had to get the revenue line moving back up," Hackett said of the deficit. "Some of the things a little misleading about that, you take out the adjustments for the settlements of salaries, Dave's and the coaches and the increased salary of the football coach that came in, we probably would be showing a surplus. It's really that narrow set of issues that explain it."
Harbaugh, he said, has been a huge boost for the athletic department even without coaching a game.
"I'll tell you one of our core strategies was getting a special football coach in here," Hackett said. "That's paying dividends already."
Probably more on the minds of Michigan fans is the apparel contract.
Michigan's contract with Adidas, signed in 2007 and worth a $8.2 million annually — $4.4 million in apparel and $3.8 million in cash — expires at the end of July 2016. Typically, negotiations regarding apparel contracts begin a year in advance of the contract completion.
Hackett said he has begun the process of getting the Regents, in his words, up to speed on where he stands with regards to evaluating the proposals.
"We're still in the middle of that discussion," Hackett said. "In informal session (with the Regents) we covered the process we're going through. We're on our target to make a decision this summer. Look for an answer soon."
Two weeks ago he told The News he wanted a decision by July 1. He said that dates remains a fair deadline, but also suggested he has some wiggle room.
"I'm not going to hold literally to that because I want to make sure we get some of the best terms and details worked out, so I'm just beginning to talk now to the manufacturers about the last-minute pieces of this," Hackett said. "The way the process works, you kind of invest in final land right now."
There are last-minute details to finalize from the manufacturers, but Hackett said he has a handle on the evaluations.
"I would say I own the process from the assessment, the determination, the plan to implement, which is once we decide what we're going to do we're going to have all that thought out at the time we announce," Hackett said. "It's a complete series of gates that we've got to go through, and that includes discussions with all them."