The Value of a Powerhouse Athletic Department

Olivia Clifford |

Johnny ManzielAs the saying goes, "Everything’s bigger in Texas," and Texas A&M’s new stadium project is no different. With an approximated cost of around $450 million, it is the costliest collegiate stadium project to date. The university, which has decided to sell taxable municipal bonds, projects to raise around $320 million of the $450 million through 30-year bonds. The university believes that there will be no real problems with raising the money based solely on the support and enthusiasm that surrounds the football team and athletic department and the cash flow that the fans will bring. In fact the project has an AA+, which was given by the Standard & Poor's. 

The projects funding it projected to come through by selling $320 million worth of 30-year bonds that are not going to be back by the permanent university fund. Since the project itself is a university project the large alumni base and student tuition can be tapped into in order to reaching the fundraising goal, but since the project isn’t technically educational the permanent fund is out of the question. By issuing taxable bonds to attain the money needed for the stadium, it allows the new facility to then be used for other purposes that are not strictly university related. This then allows other options for the stadium to be leased or rented out to outside parties, which in itself can derive a substantial profit.

The heart of this project lies in the understanding that Texas A&M fans and alumni are not only loyal but also giving. One of the most valuable aspects of attending a university where the athletic department reigns supreme is that you become branded. It allows for you to be able to be associated with a larger picture and group of people where pride and loyalty is given freely. This is what Texas A&M is maximizing on for their funding. 

The university stated that they expect to receive around $125 million in private donations along with the money that will be derived from the $72 increase in student tuition starting in 2014. Coming off of a highly publicized season where they finished fifth in the Associated Press poll and a Heisman Trophy by famed quarterback Johnny Manziel, the university is striking while the iron is hot. There was a 98-percent retention rate off the 45,000 season ticket holders have already renewed their tickets. 

The university plans to pay back the bonds through a few different methods the most lucrative being the seat licensing where they are expecting to make around $232 million over the first 5 years. As of June 2013 Texas A&M had already leased 142 of the 144 suites. On top of the lease prices the holders are required to make a annual contribution of $80,000 to $100,000 with the tickets for a suite seat being $75 a person along with a 24-percent increase in stadium seats and increased ticket prices. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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