UNC-Chapel Hill’s largest athletic booster club asked a state agency to approve $98 million in bonds for renovations to the Dean Smith Center and Kenan Stadium and construction of multiple new sports facilities. Skeptical members of the state board controlling the debt said not so fast.
N.C. Treasurer Dale Folwell, board chairman of the N.C. Capital Facilities Finance Agency that operates out of his office, anticipated delaying the vote until February might spark a lobbying blitz from the UNC faithful and alumni. He issued a pre-emptive advisory that university loyalties and athletic rivalries wouldn’t influence a decision.
“The board doesn’t need to be suffocated with people who are connected to the Rams Club,” Folwell told representatives of the Rams Club — formally called the UNC Educational Foundation — at a Tuesday, Jan. 8 finance agency meeting.
“I can tell you that that heat will not be well received,” Folwell said. “The board just needs to do their own work, and come to their own conclusions. We understand what your needs are, and why you’re here.”
The finance agency offers tax-exempt public bonds to nonprofit institutions providing elementary and secondary education, private institutions of higher education, and other entities whose special purposes serve a public good.
The Rams Club request is the first of its type in a decade, and is by far the largest ever for a university foundation, board members said.
The finance agency has issued just two bonds for athletic facilities since 2004, and this request is 75 percent more than those two combined. They went in 2002 and 2004 to the Wolfpack boosters organization at N.C. State University, agency documents show. The agency approved eight requests totaling nearly $157 million from foundations at five universities for student housing between 2001 and 2009.
The Rams Club has provided more than $200 million to UNC-Chapel Hill for athletic scholarships, and more than $100 million for athletic facility renovations. It has a cash balance of $35.6 million, and total net assets of $285 million. This is the first time it has sought tax-exempt public bond financing from the state.
It hopes to use the bonds to pay off higher interest bridge loans it secured for the projects, and to complete work in progress. A new indoor practice field, new field hockey stadium, new track complex, and a new field soccer/lacrosse stadium are being built. Kenan Stadium would get new natural grass and synthetic turf borders, and locker rooms would be renovated at the Dean Dome.
Folwell told Carolina Journal after the meeting it’s unusual for the finance agency to deal with athletic booster organizations for sports facilities based on pledges of future capital campaign proceeds to pay off the debt. Normally the agency deals with requests such as water and sewer projects repaid through utility rates, municipal projects tied to tax rates, or airports that use landing fees for repayment.
He said he was not sure why university booster clubs were written into the law governing the agency’s lending authority, and declined to say whether it’s wise public policy.
“I’m not the subject matter expert,” he said.
But during the meeting he said approving this request could trigger a ripple effect.
“A lot of people look at what we do for Chapel Hill as a standard, or a benchmark, or a hurdle for what we do for a lot of things,” Folwell said. “When you come before us and get $100 million approved for The Rams Club, this board just needs to anticipate … it’s not going to be the last [request].”
Diane Scobie Aldridge, chief financial officer and general counsel for The Rams Club, said the total project cost is $116.3 million, but the organization already collected $27 million in cash. None of the money would be used for athletic scholarships.
Nor would it be used to buy out salaries of fired coaches, or pay penalties for NCAA violations, Aldridge said about concerns over the fungible nature of foundation money.
The funding request is so large because the requests are the top priorities of athletic officials, and the proximity of the facilities created a domino effect, Aldridge said. Working on some affected the ability to use others, so a decision was made to do them en masse.
“Why would the agency approve debt financing for assets that are going to be immediately transferred off the borrowing entity’s balance sheet?” board member John Reid asked. “Now you have tax-exempt financing on an unsecured basis with no assets, nor obligation for support afterwards” because the university is not legally obligated to step in if The Rams Club defaults on payments.
Aldridge said she understood concerns about The Rams Club not owning the assets even though it would hold the debt.
“That’s something that troubles our board, quite frankly. But that is something we have no control over, unfortunately. All of the schools in the system operate that way” with their numerous affiliated foundations, Aldridge said.
BB&T, which would buy the bonds, has worked with The Rams Club for years on other projects, and is comfortable with the boosters’ ability to repay because of their proven fundraising prowess, she said.