Governing board for KU Athletics approves requests to refinance debt, apply for emergency line of credit; department forecasting 14% less revenue for current budget year
The board overseeing Kansas Athletics on Wednesday unanimously approved two measures intended to shore up the department’s financial situation as the COVID-19 pandemic continues to strain revenue streams.
The first measure gives Athletics Director Jeff Long and CFO Pat Kaufman the authority to refinance $30 million in department debt through new bonds issued at lower interest rates. Kaufman told board members Wednesday that current rates of around 3.5% interest are much more favorable, and will also allow the department to defer paying any principle on the bonds for two years — a key during the current uncertain financial times.
Secondly, the board authorized Long and Kaufman to apply for a $20 million emergency line of credit with U.S. Bank in case unforeseen circumstances related to the COVID-19 pandemic cause further dramatic reductions in the department’s revenue streams — such as the cancellation of a season. Kaufman said the line of credit is a “liquidity backstop” and is something the department is considering only to be prepared for a worst case scenario.
“If the year plays out the way we think it will, we won’t have to draw on a penny,” Kaufman said.
If Kansas Athletics indeed doesn’t have to use any of the line of credit, it will cost them only 0.125% of the line of credit when it matures on the last day of 2021 — meaning that in a best case scenario, it will cost the department $25,000 to be prepared rather than having to scramble to find millions of dollars at a moment’s notice. If the department does have to draw from the line of credit, the interest rate sits at around 1.4% for what must be paid back.
Kaufman also highlighted some of the budgeting struggles the department has faced due to the pandemic. In a normal year, he said, Kansas Athletics would have operated in Fiscal Year 2021 on a $108 million budget. In June, the state of the pandemic forced that projection down to $101 million, and ultimately, Kaufman said the department had to settle for a budget that assumes only $89 million in revenue.
Compared to FY 2020 when the department brought in $104 million in revenue, the $15 million reduction amounts to a 14.4% reduction year-to-year. Kaufman said Athletics expects to spend roughly $94.5 million in the current fiscal year, and the budget will be balanced using a remaining $5.5 million surplus from FY 2020.
Long and Kaufman both indicated that the relatively shoestring budget will mean departments are essentially reduced to “mission critical spending,” and Long again said that department staffers have been informed of future furloughs and salary reductions. The specifics have not been publicly announced, but Long said Wednesday that it will involve some combination of six weeks of furloughs and salary reductions up to 13% for certain employees. Those making under $50,000 will not take a pay cut, he said.
Long also said that KU’s athletes are currently in a “really good place” with regards to COVID-19 testing and that no positives have emerged from the first week of competition last week (though the virus can incubate for up to 14 days). The department remains hopeful, he said, that local officials will sign off on a certain percentage of fans to be allowed into sporting events in October.
“We have a good plan in place if they’re permitted,” Long said.
KU’s next home football game is scheduled for Oct. 3 against Oklahoma State. A kickoff time has not yet been announced.
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