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WVU's athletic debt not as bad as expected

MORGANTOWN, W.Va. - Oliver Luck is a firm believer that the financial ramifications of West Virginia's entrance into the Big 12 shouldn't be viewed through the narrow prism of a one-year balance sheet.

No surprise there, right? I mean, really, just the run-up to entry into the league cost the school's athletic department almost $13 million. That was the hit WVU's athletic department took during the 2011-12 school year. A department that for nine of the previous 10 fiscal years had shown a profit was left with that $12.9 million loss.

And that was before a single game had been played or team flight chartered to some faraway outpost in Texas or Oklahoma.

So of course Luck, the school's athletic director, would rather you concentrate on the long term. The school will get its first check from the Big 12 this summer, and even though that one will be half of what most of the other members receive, within the next four years those checks will grow to the point where not only will yearly expenses be covered, but the current deficits will be repaid.

"We knew going into the Big 12 that the first couple or three years would be a financial hardship. And so far it has been,'' Luck said. "But you have to look at it mid-term to long-term. Last year was difficult. This year and the upcoming year are still going to be tough.

"But when you crunch the numbers you have to recognize that those tough years will disappear.''

Well, don't look now, but the toughest of those years is already in the rear-view mirror.

No, Luck isn't dancing in a pile of money in his office at the Coliseum, but if the numbers that his department has crunched are correct then perhaps he should be.

Luck appeared before the school's faculty senate on Monday to answer questions about the department. The questions posed were primarily about the Big 12 and the financial and academic ramifications of the move.

Here's the most illuminating of his answers: When the books close on the 2012-13 fiscal year on June 30, Luck says the athletic department's loss will be in the neighborhood of $50,000.

Not $50 million. Not $5 million. Not even $500,000. The last two of those numbers might seem plausible, even optimistic, given that $12.9 million loss from the year before and the added expenses incurred during the first year of travel though the Big 12.

But no, he's expecting a loss of just $50,000, which for you and me might be catastrophic. For an athletic department with an annual budget of more than $80 million, it's nothing.

Is Luck simply being optimistic? He doesn't think so.

"I tend to be a glass-half-full guy. I'm just naturally optimistic, I guess,'' he said Tuesday. "So I've learned through the years to leave budgets and projections like this to [chief financial officers] and the money guys because not only do they know more about it than me, they tend to be more pessimistic.''

In other words, Luck's projection of just a $50,000 loss - essentially a wash - isn't his. It comes from Michael Szul, the athletic department's associate athletic director for business operations.

Yes, it comes with a caveat or two. Revenues for the year are not all in, nor are expenses. The biggest variable is what happens the rest of this month and next in regard to football season ticket renewals and Mountaineer Athletic Club donations. Those could tilt the scales.

"A lot of it does depend on May and June,'' Luck said. "Those [sales and contributions] could be up or down. But historically, if you look at the numbers, there's a fairly narrow range where those fluctuate.''

Here's the thing, though: Even if the numbers do fluctuate, and even if it is significant in the wrong direction, what's that going to mean? Maybe a loss of a few hundred thousand? A million even?

Didn't you expect it to be much worse in light of last year's loss? There was a full year of travel in the Big 12. Coaching salaries - especially those of football coach Dana Holgorsen and his staff - increased significantly. The department's debt to its own university - in the form of internal loans for capital projects, not operating expenses - is now up to $30 million.

I know I wouldn't have been surprised to see another multi-million dollar splotch of red ink.

Why it won't happen is at once both simple and fairly complicated. The simple part is this: Last year the department got nothing in revenue sharing from the Big East, instead returning its nearly $10 million slice of the pie to the Big East as part of a $20 million exit fee. This year, the school stands to receive anywhere from $11 million to $13 million as its 50 percent share of revenue disbursements from the Big 12.

Voila, an extra $13 million that would have essentially wiped out last year's debt.

Yes, it's a bit more complicated than that. Last year, for example, the department's huge deficit included non-cash items like depreciation on its buildings (to the tune of almost $7 million) and a government accounting change regarding employee benefits that came in at over $1 million. This year, there are the significant added travel costs and salary bumps.

But the reality is that all of those things -and more that we won't get into - will pretty much balance out. So perhaps the simple answer is the right one: The department lost almost $13 million last year and will get a similar sum from the Big 12 this year.

Thus a balance sheet that shows virtually no loss.

That, however, still doesn't explain Luck's insistence on looking at the bigger picture - perhaps a five-year profit/loss window rather than just one year. After all, there will still be losses this year and probably next. There are the deficits to recover from and the loans to repay, which will be done over several years. The school has to begin repaying $5 million to the Big 12 in 2016.

But as Luck is quick to point out, the $30 million in loans the department has outstanding ranks it well below the other public schools in the Big 12 in that regard. So even with the hit taken last year, the department is still not in bad shape.

"When you look at it over the mid-term, say five years, it's probably all going to break even,'' he said. "But remember, we're also guaranteed this revenue stream for 12 years [the length of the grant-of-rights that binds the Big 12 schools together, along with the television contracts that mirror it]. So when you look at the long term, I think you have to feel it's a great situation.''

Reach Dave Hickman at 304-348-1734 or dphickman1@aol.com or follow him at Twitter.com/dphickman1.


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