Regents to hear budget update

By Ferd Lewis
Advertiser Staff Writer

University of Hawai'i-Manoa athletic director Herman Frazier likes to tell people that he will retire when he balances the department's $20 million-plus budget and pays back its loans.

So far, the gold watch is on hold as the 50-year-old Frazier tries to rein in what auditors tabbed as a net $4.4 million deficit through the end of the last fiscal year.

This week Frazier, who is heading into the final two months of the contract that brought him to UH, is scheduled to go before the school's Board of Regents to provide an update on the five-year financial recovery plan.

In the plan, mandated by the regents in 2003 following a critical audit, Frazier said he has pledged to put the department in the black by 2006 and pay off more than $1 million in loans by 2007.

The athletic department has run at a deficit for three consecutive years, believed to be the longest string of losses in its 30-year Division I-A history. It lost $1.9 million in 2002, $2.47 million in 2003 and $545,000 last year.

Last month, Frazier told the regents the athletic department would come in somewhere between a $300,000 loss and breaking even for the current fiscal year, which ends June 30.

To hold back the tide of red ink, the school's auditor, PricewaterhouseCoopers, said in a report to the regents last week UH has had to rely on "advance ticket sales of $3.1 million" a "($1 million) note payable to the university" and "other borrowings from the university of $2.4 million, up from $1.1 million" the previous year.

The auditor's report said, "outstanding net borrowings from the university in the form of notes and advances amounted to $3.4 million at June 30, 2004 ... an increase of 26 percent."

Manoa chancellor Peter Englert said the department has been granted flexibility rarely accorded "other units" on the Manoa campus, but added, "My thought is that we're providing a service to the people of Hawai'i who love this program and, for whom, it is unimaginable it would — or could — go away."

In addition, Englert said, "through the external world we are known through our (H) logo like the one (on his shirt). We're getting exposure that helps to give an image to the university."

James P. Hasselman, audit partner at PricewaterhouseCoopers has characterized "the department's situation as very fragile" and the audit report recommends, "that the university administration play an active role in the development and implementation of the plan and closely monitor Manoa athletics' progress."

Kitty Lagareta, regents' vice chair, said, "I think that's why Herman's plan is so important because we've been told that you're always borrowing from Peter to pay Paul so you're always going to have to use these monies from next year's revenues.

Lagareta said, "But, with some of the changes they are making, we're hoping to break that cycle. So, that's what I think the regents are expecting to hear."

Board chair Patricia Y. Lee said it will be a "follow-up" to last month's questioning, and an update on efforts to secure a better deal at Aloha Stadium, its football home.

Englert said he expected UH "to become self sufficient and pay back the money borrowed."

"When we do get in the black, we'll be the only team in this conference (WAC) that is," Frazier said.

"I can think of a whole lot of schools that would like to have (only) a $500,000 deficit after one year," said Tom Sadler, UH associate athletic director.

Robert Frank, a Cornell University professor of economics and authority on college sports for the Knight Foundation Commission, said, in general, UH is not alone in its financial struggles. "The trend is definitely in that direction (losing money). These budgets are in deficit more and more."

Frank said, "(athletic) programs are spending more than they are taking in revenue and universities are, in many cases, making up the differences by tacking on transfers financed out of student fees and other sources."

Rising costs have been blamed on the "athletic arms race" in which schools seek to maintain or raise their competitive positions. "Of course, you can't all move forward in a hierarchy," Frank said.

Filings by 13 current and soon-to-be members of the Western Athletic Conference, of which UH is a member, show five schools operated at a deficit for the period ending June 2004. A more exacting look, minus loans, some say, would reveal fewer actually operate with balanced books.

UH interim president David McClain said, "It is the case that many universities try to have their athletic departments be completely on their own bottom (line). But very few succeed. I don't know the hard numbers but my impression is about a fifth of Division I programs are able to be completely on their own bottom."

A UH official said Manoa athletics annually receives $1.366 million in state funds, exclusive of the $1 million loan and other borrowings, or less than one percent of general funds that go to the campus.

McClain said he supports using school funds for athletics. "The reason I do think there is a role for general funds — or public money — here is that, first of all, values that are represented in athletics, when it is at its best, competition, teamwork, discipline and commitment to excellence are good examples for the university as a whole."

To bring balance to UH athletic accounts, Frazier's plan "is contingent upon significant revenue growth from ticket sales, private gifts, corporate sponsorships and television contracts as well as strict cost containment," according to the auditor's report.

The forecast is for a 34 percent increase in revenues between 2004 and 2009 "while expenses are only projected to increase by 11.5 percent," the auditor's report notes.

In recent months UH has announced significant hikes in premium ticket charges, the price paid above the face value of tickets to sit in the most desirable locations. It is due to announce, possibly as soon as this week, a new local television deal replacing the $700,000 in guaranteed rights fees the school currently receives from KFVE/KHNL.

Reach Ferd Lewis at flewis@honoluluadvertiser.com or 525-8044.

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