The Finances Behind A Potential Buyout - Understanding the Information


Boy, if their was ever a time to use the term "stuck between a rock and a hard place" now would be the time to use it. The Boulder Daily Camera published the financial details of Colorado Buffaloes head coach Dan Hawkins' potential buyout yesterday and it was certainly a number bigger than many expected and a true sign that this storm might be far from over.  More and more, this looks like a helpless situation that was exponentially magnified by the poor move of the athletic department to give Dan Hawkins a contract extension based on little success shown on the field. Compounding the confusion, Mike Bohn admitted after the Toledo loss that the department painted a delusional picture of the current situation regarding the football program:

"We maybe have been guilty of building a façade that maybe didn't reveal the hole that we were in and the severity of the situation we were in associated with the program."

Based on the facade, it was decided that Dan Hawkins deserved an extension, I guess. Let's do the math and breakdown the different pieces of the puzzle and highlight the monumental mistake that was made by the athletic department if the ship doesn't get righted by the current staff. The original term of the contract was set to run through December of 2010. The extension signed by Hawkins in 2008 now makes him the head coach of the Colorado Buffaloes until January 2013. So what is the buyout for each year terminated before January 2013 according to the Daily Camera: $850,000.

Maybe (doubtful) Dan Hawkins turns this ship around and all of this conversation is nullified but if the current level of play continues, the University of Colorado may have a potential $2.5 - $3.0 million buyout to consider (or not consider) depending on the date of termination.  I am not suggesting Hawkins be fired, that isn't my call but the main story here is the extension given by the athletic department to Dan Hawkins. If the University wanted to make a change even after the 2010 season when the original contract would have expired, it would cost them 25 extra months of the buyout clause at $70,833 a month or a total of $1,770,833. Simply put, the athletic department may have made a $1.8 million dollar mistake based on little results on the field back in 2008.

If the Buffs wanted to buyout Hawkins tomorrow, assume September 1st, at $70,833 a month and 41 months still to go, the University would have to fork over just under $3.0 million. I don't know which number is more depressing: 41 months or $3.0 million? 

 

Start End # of Months Total Yearly Buyout Monthly Buyout Total Buyout
Original Contract Sep-09 Dec-10 16  $               850,000  $                   70,833  $     1,133,333
New Contract Sep-09 Jan-13 41  $               850,000  $                   70,833  $     2,904,167
Difference  $     1,770,833

 

According to the Boulder Daily Camera, the athletic department is also broke, explaining the reason for the odd scheduling this season to obtain more television revenue:

The athletic department remains in deeply in debt with the majority of an $8 million loan from the campus and the CU system in 2006 still to be paid off. Part of that debt was caused by the last coaching change when Bohn fired Gary Barnett at the end of the 2005 season and hired Hawkins.

The past debt coupled with the economic times makes a potential buyout seems almost impossible especially given the extension portion would cost the Buffs an addition $1.8 million compared to what it would have if Hawkins was operating under the original contract.

Even if they did buyout Hawkins contract at the end of the season, costing them 37 months of buyout payments or $2.6 million, you have to doubt the administration would allow Colorado to go out and sign a new coach for an average Big 12 salary to make the Buffs competitive again. Can you imagine the scenario for the proposal to the administration? The administration will see a piece of the $4.0 million still owed to Gary Barnett, $2.6 million owed to Dan Hawkins, the large portion of the previous department debt unpaid and add another couple million a year for a new coach; they will probably throw up all over it. Who knows what Mike Bohn's contract buyout will be, if he has one, but based on the numbers above, I doubt the administration would let his department make another $1.8 million mistake so throw that cost on top.

On the flip side of the argument, how will the program look in 2013 if the current level of play continues? It is a scary thought but weighing the financial ramifications of what will happen in 2013 compared to lets call it, $5.0 million of cost right now is a task that probably has to be done. The kicker for the administration here is $5.0 million of cost is much more defined than the assumptions that would have to be made for lost season ticket holders, lost television revenue, lost donations due to a poor product on the field today until 2013.

What does this all mean? I think you can put away the coaching wish lists and the thoughts about getting the next guy in Boulder. If the Buffs go 1 - 11 or 2 - 10 this year and a buyout was necessary, buying out a contract that ended in 2010 compared to 2013 would obviously be easier to discuss. But I struggle to find a logical thought for the administration approving $2.9 million of additional debt plus whatever a new coach costs on top. I don't blame them either considering the financial times we are in. I do blame the parties involved for allowing an extension after two years that would have the potential to cost the University an extra $1.8 million especially considering they were judging success on a "facade", as Mike Bohn puts it.

I understand repairing an image, repairing what Gary Barnett left, re-establishing yourself as a model University to the nation and in potential recruits' home but the days Mike Bohn and Dan Hawkins were hired, they would have told you that rebuilding off the field was important but they were ultimately brought in to win football games and that is how they were to be judged. Any indication of winning football games not being the goal is unacceptable in it's own right.  I assume Dan Hawkins didn't take a supposed step up from Boise State to a be in public relations but instead to win national championships at the Big 12 level.

Somewhere along the line, it is easy to conclude that people lost sight of the goal to win football games.

So where do we go from here? We support the players of this team. Coming from a guy who played a little ball in his day and lost the opportunity in college because of injury, the ability to play collegiate sports is very short. You have only so much eligibility and time to play before it is over. The kids deserve the support of the fans even if you don't support how the operation is being run. They chose Colorado to use their four years of eligibility here when they could have gone a multitude of other places.

We have to continue to call out quotes and invalid excuses made by the people who run this program in a constructive manner. Making $1.8 million mistakes leaves you free game in my book, I would certainly lose my job. We are going to do it constructively, though. 

Sooner or later, people will form together and money will talked about being raised if it gets to that point. That is probably the only hope for a change if one is warranted and based on the two first games, it may be overdue. 

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