Empty feeling at college football stadiums after bond boom

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After years of bond-financed stadium expansions, college football is downsizing amid waning demand for seats, experts say.

“Everyone is going smaller,” said Darin W. White, executive director of the Samford University Center for Sports Analytics in Birmingham, Alabama. “It’s definitely not smart to invest in larger stadiums because attendance across virtually all sports has been declining for the last several years. No one knows for sure when we are going to hit bottom.”


Even the University of Alabama, a perennial powerhouse playing in Monday’s national championship game, is reducing capacity in 101,821-seat Bryant-Denny Stadium in Tuscaloosa, White said.

After years of bond-financed stadium expansions, Alabama will replace some student seating with a massive video board as part of a 2020 capital project. The video board will sit on an upper deck built within the last decade.

Despite the Crimson Tide’s remarkable string of victories under coach Nick Saban, the university has faced the same challenge as others in trying to keep the student section filled.

After a poorly attended game against the University of Louisiana-Lafayette, Saban criticized students for not showing up.

"I can honestly say I was a little disappointed there weren't more students at the last game,” Saban told reporters in October. “I think we're trying to address that."

Elsewhere, falling attendance has been a more significant problem.

“We practically have to kidnap kids off the street to get them to the game,” joked Ohio University economics professor Richard Vedder, who calls himself “bearish on stadium bonds.”

Vedder said that lesser known conferences like the Mid-American Conference that Ohio University competes in are squandering fortunes trying to keep up with the big boys like Michigan and Ohio State in the Big Ten.

“They have these wildly optimistic beliefs that if we build a new stadium it’s going to revitalize our athletic program or that we’re going to move to the next level. Well, they haven’t moved anywhere. In fact, they’re moving down,” Vedder said.

“My guess is that the risk factors associated with stadium bonds is going to be moving in the negative direction,” Vedder said. “There will be a general rise in bond yield along with a perception of increased risk.”

About $3 billion of bond-financed college football stadium projects are underway or completed over the past five years, according to a Bond Buyer review. That’s down about $300 million from the height of the “stadium arms race” in 2013.

A report from Moody’s Investors Service five years ago found that on average, the athletic operating expenses of Division I universities had nearly doubled since 2004 compared to growth of 58% for total expenses. In that report, Moody’s itemized risk factors for college football, including the threats of lawsuits over head injuries, rising coaching salaries, the threat of disciplinary measures over recruiting and demands for player pay, among others.

Five years later, report author Dennis Gephardt, a Moody's analyst, says that major colleges and universities have managed to maintain athletic revenues through sales of luxury boxes and premium seating along with lucrative television contracts, factors that make empty student seats a less urgent concern. Even the so-called Power Five Conferences — the Atlantic Coast Conference, the Big Ten, Big 12, Pac-12, and Southeastern Conference — have seen attendance fall in recent years.

Moody's rated the University of Arkansas’ athletic revenue bonds for stadium expansion Aa2 with a stable outlook in 2016, citing 200% revenue coverage of the debt service. Since then, Razorbacks football attendance has slumped. The university saw a dramatic drop in attendance in 2018, a 2-10 season that ranks competitively as the worst in the team’s history.

“Something has changed,” said Gephardt, an Arkansas native. “In a state like Arkansas where there is no professional team, the Razorbacks are the major attraction. To see attendance down like that is tough. It could squeeze them a little bit in a very competitive conference.”

Ticket sales for all University of Arkansas sports account for 34% of the overall $125 million athletics budget for fiscal year 2019. Of that, football ticket sales represents nearly 80% of the total ticket sales, said Arkansas Athletics spokesman Kevin Trainor.

“Therefore, maintaining a strong season ticket holder base and attracting new ticket customers is vitally important,” Trainor said. “This was an important consideration with the recent football stadium project, providing new and upgraded premium seating options for fans.”

The university’s Athletics Department in 2016 issued $25 million of tax-exempt and $90 million of taxable bonds to expand Donald W. Reynolds Razorback Stadium by more than 4,000 seats to a capacity of 76,212. The once-rabid Razorbacks fans never came close to filling the stadium in six home games in 2018, hitting a maximum of 50,988 for the team's loss to the University of North Texas.

Like other major universities, Arkansas recorded major gaps between announced attendance and scanned tickets. Scanned tickets reflect the actual numbers in the stands.

“While many of those tickets have been sold, fans not coming to the game impacts game-day revenues such as concessions and merchandise sales,” Trainor said.

Razorback Athletics remains in a strong financial position, Trainor said, totally self-supporting, with no student fees or university support, while contributing over $3 million back to the university each year for classroom buildings and university initiatives.

“In addition, Razorback Athletics remains well above the required debt service ratios and has no debt beyond the next 19 years,” he said.

The 2016 bond issue will be amortized entirely with athletic revenues, including revenues created by the addition of the new suites, loge boxes and club seats in the North End Zone.

“The department was successful with gift support and ticket sales for the new premium seating, and those revenues will be used to fund the annual debt service over the remaining 19 years,” Trainor said. “Total athletic revenues are currently well above, and projected to remain well above, the required debt service ratios for these bonds.”

A 20-year amortization on the 2016 bonds cost about $40 million less than a 30-year payoff, Trainor said.

“In anticipation of this stadium project and bond issue, the department structured other bond issues for athletic projects over 10 and 15-year periods,” Trainor said. “The department will retire over $60 million in debt over the next eight years.”

Elsewhere in the Southeastern Conference, Tennessee's Volunteers had the lowest home attendance in six years at Neyland Stadium, one of the largest stadiums in the nation with 102,000 seats.

The University of Tennessee’s Board of Trustees approved a two-phase, $340 million renovation in November 2017. The work was to be completed by the start of the 2021 season, when Neyland celebrates its 100th year.

The $180 million first phase of the project was to be funded with bonds, fundraising, athletic department revenues and partnerships. Construction was to start this year, but Tennessee’s new director of athletics hit pause on the project.

On Nov.1, Athletics Director Phillip Fulmer, who’s been on the job less than a year, announced that his department is continuing to review the Neyland Stadium Master Plan Renovations.

“To be very clear, I am super excited about the Neyland Stadium project going forward in the near future,” Fulmer said at the time.

Construction on the first phase of the renovation project has been delayed to provide more time for two classes meeting in the south stadium hall to move out, Fulmer said, adding that renovation plans were also under review.

“We simply need time to study all ideas of scope and design as we seek to maximize the fan experience and our return on investment for the next 100 years of Neyland Stadium,” he said.

Attendance at games wasn’t mentioned as a factor that caused the project to be delayed.

Tom Satkowiak, assistant athletic director for communications, declined to answer in-depth questions about the project, although he did address the issue of attendance.

“I will confirm that football attendance did not at all play a role in Phillip Fulmer’s decision to hit pause on the Neyland Stadium Master Plan renovations,” he said in a Dec. 7 email to The Bond Buyer.

UT, however, is considering a new inducement to goose live attendance and/or revenue: booze.

UT is a dry campus, meaning the sale of alcoholic beverages is prohibited. In July, an Alcohol Policy Task Force Recommended that the university adopt a policy allowing the distribution, possession, and consumption of alcohol by individuals of drinking age at pre-approved, registered on-campus events.

“This policy creates the opportunity for the university to generate revenue from the sale of alcohol at certain events, if desired and deemed in the best interest of the university,” the task force concluded.

Satkowiak declined to say what the status of the policy is.

For the nation’s colleges and universities, the stadium issue is just one aspect of a growing demographic problem, Vedder said.

“It goes beyond football stadiums. College enrollments are down, and debt is up. They’ve gone on these building sprees. Intercollegiate athletics, which until now have been able to do any damn thing they want, I think that’s beginning to be scrutinized. If I were a university president I would be very cautious about building a new stadium.”

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