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A dissenter: Trustee votes on the side of caution in Razorback stadium project

Why one UA trustee voted against the largest stadium construction project in state history

Buoyed by lucrative Southeastern Conference membership, Razorback football appears to operate in a perpetual bull market. For the most part, year after year, demand remains high enough that the program can afford to charge higher prices for more seats. By and large, merchandise sales and licensing fees continue to climb. Even in years when the on-field product is subpar (think 2012-13, the John L. Smith Era(rror) and Year 1 of Bret Bielema), and attendance dips, the program’s revenue still improves because it still receives its share of SEC revenue, which continues to soar so long as the Alabamas, Auburns and Floridas play for national titles.

Cliff Gibson

Cliff Gibson

In this context, it’s no surprise that on Thursday morning six of eight voting University of Arkansas System trustees approved a bond issue of up to $120 million to enclose the north end zone and other updates for Reynolds Razorback Stadium, part of an overall $160 million construction project. The interest on the $120 million will require $186 million in revenue to pay the bonds and interest off in full, the Arkansas Times Max Brantley writes.

Did university officials provide sufficient reasons to support the allocation of this much money to upgrade a football stadium and enlarge it by 4,000 extra seats?

The two dissenting trustees, former U.S. Senator David Pryor and Monticello lawyer Cliff Gibson, didn’t think so.

“What was missing in my mind was a careful, thoughtful study of other potential uses of the funds,” Mr. Gibson said in a telephone interview Thursday afternoon. Specifically, he wanted more thoughtful answers to the question of whether resources could instead be routed toward relief of constantly rising tuition for UA students. Or whether more dorms could be built more quickly to handle early-semester crowding, which temporarily put some freshmen in hotels. Or whether “very low paid” faculty receive raises “to bring them more in line with peer institutions.”

Mr. Gibson also fears UA students may one day end up bearing some of the cost of the stadium expansion and upgrade in the form of higher student fees for athletics. Currently, the UA athletics department makes enough money, thanks to football, that it doesn’t need support from student fees. Jeff Long, the Razorbacks athletic director, assured Gibson they do not intend to have a student fee. The athletic department itself has flatly stated, in boldface:  “No university funds, state funds or student fees will be required to complete this project.”

Much of the optimism here, of course, assumes the continual growth of revenue. Mr. Pryor and Mr. Gibson both brought up the possibility that future losing seasons could significantly cut into that anticipated stream. On Wednesday, Mr. Long countered: “We’ve had years when we were not successful, and we’re selling these [luxury] suites at this time coming off a series of years that were not really successful. We think our best days are ahead of us.”

Mr. Long mentioned gate receipts as a primary source of revenue to pay off the debt, according to the Arkansas Democrat-Gazette. If for any reason, the school needs a “safety net,” Mr. Long added, university  could tap into the the $13 million the SEC Network pays annually. 

The twine of this net, though, could be thinning. 

Cable “cord cutting” is eroding the broadcasting dominance of ESPN Inc., which owns the SEC Network. ESPN’s family of channels has lost more than a billion dollars and nearly 12 million subscribers over the last five years, and the losses appear to be accelerating, writes Clay Travis of Outkick the Coverage. Based on Mr. Travis’ projections, it will take five years to reach the point where ESPN roughly breaks even with the amount of money it pays for sports rights and the amount of money it brings in via subscriber revenue.

Consumers who cut traditional cable and shift to a more a la carte model tend to hurt ESPN’s bottom line. In traditional cable packages, they have been paying $6.60 a month for ESPN whether they watch it or not. But on-demand Internet streaming packages allows viewers to choose only the channels  they  want. 

Plus, the U.S. Federal Communications Commission on Thursday might have accelerated the rate of cable cutting down the line when it unveiled revised proposed rules to allow tens of millions of Americans to drop expensive rented pay-TV set-top boxes. These trends may indicate the lucrative “TV sports bubble” is destined to pop in coming years, which would have significant ramifications for the ESPN and SEC networks, and, by extension, the Arkansas Razorbacks’ revenue.

In short, there are signs that within the sports cable TV industry, the growth of previous decades is unsustainbable. What has been a bull market for the Hogs could tip the other way, and this concerns Cliff Gibson. He voted “no,” he says, in part because UA officials may not be able to follow through on their sales pitch that the stadium project “won’t cost the students anything.”

Mr. Gibson grew more concerned on Thursday morning when he learned of a statute the legislature passed  in 1991 that stipulates “any athletic deficit of a [postsecondary] institution shall be funded by a student athletic fee authorized by the board of trustees of the institution.”

“I truly believe that there is no intention to have student fees pay for this. But that’s an intention. Sometimes, things go wrong,” he said. “I have to consider the possibility that the pain will fall on the students.”

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