Charge 1: Determine the baseline for financial viability based on the original documents.
In preparation for the new arena, plans for the initial construction costs, and on-going operation and bond payments were developed.
Of the $67 million construction costs, $30 million came in the form of a gift from Mr. John Q. Hammons and another $7 million came from other private gifts. Since the construction came in under budget, there were bond proceeds and bond interest available to use as one-time funding in the first year of operation.
A pro forma was developed for on-going expenses and bond payment. These were conservative estimates based on research that had been completed. For example, “Letters of Intent” received from Bears Fund members and season ticket holders were used to map out the annual seat assessment chart for both men’s and women’s basketball (See Addendum 1). For the Prime Overtime Club, the experience at other schools such as Wichita State University, and the University of Missouri, University of South Carolina and University of Virginia were factored into the pro forma. At the $2,000 annual seat assessment level, $500 was to be transferred to the Prime Overtime Club line for membership because all $2,000 seat assessments were automatically enrolled in the Club.
Here is a summary of the results:
- All suites were sold and the revenues exceeded the pro forma. Predicted suite revenues on the pro forma for the first year were $617,500. The actual amount received was $685,334.
- While Letters of Intent exceeded the men’s basketball annual seat assessment pro forma and were slightly under the women’s basketball annual seat assessment pro forma, these Letters of Intent were not binding and were allowed to be altered in the summer of 2008 – in the end, some ticket holders lowered their annual seat assessment, others increased their seat assessment – in 2008-09, the first year JQH Arena was open, the Bears season tickets and seat assessments were slightly above the pro forma while the Lady Bears basketball tickets and assessments were $500,000 below the pro forma.
- Even though memberships were priced significantly lower than at other arenas, the Prime Overtime Club memberships were overestimated in the pro forma, which led to a shortfall of approximately $540,000 in estimated revenues.
- Estimated revenues of $50,000 in signage were not realized because signage monies remained in the athletic budget, not the JQH Arena budget.
- Prior to JQH Arena, Annual Seat Assessment money could be dedicated to a specific sport. In 2008, ASA money was specifically for a seat assessment account and could not be designated to a specific sport. Most donors made their ASA gift and did not pledge a gift amount to a specific sport, thus a shortfall in athletic operating funds.
For the first year, the JQH Arena budget was balanced. FY09 was not. The $1.3 million shortfall in season ticket sales, seat assessments, and Prime Overtime Club memberships was offset by the excess revenue from the bonds because the project was under budget, as well as interest earnings on JQH Arena bond.
Charge 2: Determine the true state of the financial condition and operations of the arena.
Here is a summary of the financial conditions for Fiscal Year 2011.
- The operating revenues and expenses budgeted for JQH Arena for Fiscal Year 2011 are expected to meet budget. Non-operating revenues will come in as budgeted as well.
- The shortfall will occur in the athletics budgets – annual seat assessment revenues were used to fund the bond payments for JQH Arena and donors did not make extra gifts for specific sports.
- Prime Overtime Club sales did not meet budget. The Prime Overtime Club revenues were greatly reduced from the original budget. In FY11, $50,000 was budgeted, but the actual amount received was $33,350.
- Women’s basketball sales continued to decline even further with a shortfall of $727,000 from the pro forma.
- A decrease in the sale of men’s and women’s basketball season tickets in Fiscal Year 2010 and Fiscal Year 2011 also contributed to what is now a $2 million shortfall in athletics.
Charge 3: Assure the policies dealing with the arena are fair, complete and sensible considering the financial condition.
An Operations Policy Manual was drafted by the JQH Arena staff. The Task Force has reviewed the manual and determined policies are appropriate and consistent with other athletics and entertainment venues. The manual now includes proposed rental rates for non-athletic University users.
Charge 4: Develop a plan to specifically address any deficiency discovered in financing, ongoing operations, policies and scheduling.
Based on its research and discussion, the Task Force offers the following recommendations for implementation by the University and the Department of Intercollegiate Athletics. The Task Force recognizes the solution is a multi-year effort and the Department of Intercollegiate Athletics may develop additional and/or complementary solutions to the recommendations.
- Increase efforts in the sale of annual seat assessments and season ticket campaigns. The task force is pleased a new position - Director of Ticket Sales - will be hired to increase sales.
- Additional positions in Development will assist in increasing private gifts for athletics.
- Because JQH Arena is an asset to the entire University, explore the possibility of having the university pay for utilities on an annual basis, much like other buildings at the university – this would result in an annual savings to the JQH Arena budget of approximately $100,000.
- Explore the feasibility and possible implementation timeline to initiate a student fee for athletics.
- Maximize arena sponsorship opportunities.
- Maximize season ticket sales by rescaling annual seat assessment areas for men’s and women’s basketball.
- Consider charging a parking fee for non-athletic events held at the arena, as well as re-evaluating fees for parking at athletics events.
- Combine the JQH Arena, Hammons Student Center and Plaster Sports Complex budgets into one in order to create “true” financial picture of athletic venues – combining the budgets will recognize the shared personnel and other resources among the three facilities.
- Review suite lease pricing and potential sub-leasing.
- Increase the number of concerts and special events.
- Explore the advisability of and interest in selling alcohol at men’s and women’s basketball games.
- Increase and market special packages for membership in the Prime Overtime Club, including food and drink for each game.
- Explore the possibility of increasing the facility fee surcharge on each ticket sold for an event in JQH Arena.
- Re-examine online ticketing, ticket software and distribution to enhance ticket sales.
- Charge a rental fee to university departments, except athletics, for use of JQH Arena. We have suggested a $2,000 daily fee; however, athletics already pays for usage of the Arena for men’s and women’s basketball.
- The University should recognize and acknowledge JQH Arena and intercollegiate athletics budgets are inter-related, so they must be viewed together to gain a complete and accurate view of revenue and expenses – since the first year of JQH Arena, annual seat assessments and ticket sales have declined for several reasons, including the teams’ success and the economy....increasing annual seat assessments and ticket sales will have the most profound long-term impact on improving the athletics budget....Athletics will need to further investigate its revenues and expenses to decrease the current $2 million shortfall.