UGA’s Athletic Association in solid financial position, reports Moody’s Investors Service
By David Pendered
A new credit report on the association that oversees UGA’s athletic program maintained an investment-grade rating on the association and showed it had operating revenues of $121.5 million in 2015 and 418 days worth of cash on hand at the end of June 2015.
Moody’s Investors Service awarded the University of Georgia Athletic Association a rating of Aa3, with a stable outlook. The rating is third from the top on Moody’s scale. Moody’s issued the report Feb. 5.
The rating action was generally bullish on UGAAA:
- “The Aa3 reflects the close and longstanding relationship between UGAA and the University of Georgia (lease revenue bonds of the University of Georgia Real Estate Foundation rated Aa2 stable), with UGAA serving a strategically important role administering the university’s athletics program.
- “The rating also incorporates UGAA’s healthy unrestricted liquidity and expectations for continued strong operating performance.”
Moody’s deeper dive into UGAAA’s strengths show highlights including:
- “Long history of administering intercollegiate athletics for the University of Georgia, the flagship public university of the Aaa-rated State of Georgia;
- “UGAA and the university share a highly integrated governance structure;
- “Strong unrestricted liquidity at UGAA with 418 days cash on hand at the end of [Fiscal year] 2015;
- “Conservative budgeting leading to consistently strong operating performance, as evidenced by a three-year average (FY 2013-15) 14 percent operating surplus.”
A bearish section of the report references the variables inherent in big time collegiate sports:
- “These strengths are counterbalanced by relatively high financial leverage, ongoing capital needs, potential variability of athletic revenue and expenses, as well as exposure to demand debt.”
Capital needs are addressed in another section. Moody’s notes that UGAAA is building a facility as it seeks to raise funds from donors to cover construction costs:
- “UGAA is currently in the midst of the $30 million construction of an indoor athletic facility, for which it is seeking to secure donor funds. While the association will use its reserves for any portion of the project costs not covered by fundraising, continued strong donor support will likely lead to successfully raising a large portion of the total $30 million project cost.”
On a different note, the report underscores the varying degrees of financial stress within the broader realm of higher education.
Just two months ago, in December 2015, Moody’s released a fairly bearish report on higher education overall.
Moody’s said the outlook for higher education is stable. But Moody’s predicts “contentious” discussions as institutions seek to further reduce expenses.
In addition, Moody’s predicts tuition will increase by 2 percent to 3 percent as state funding rises by 2 percent to 4 percent, nationwide.
In Georgia, students and their families have already been hammered by tuition hikes as the state cut funding for higher education, Taifa Butler, executive director of the Georgia Budget and Policy Institute, wrote in a guest column published Feb. 7 on saportareport.com:
- “State funding per student plunged an inflation-adjusted 51 percent from 2001 to 2016. From 2008 to 2015, tuition and fees spiked an average of 75 percent across the University System of Georgia’s 30 schools.”