UNC Boosters Want Tax-Exempt Bond Approval for Sports Infrastructure

CHAPEL HILL – The problems with the incestuous relationship between government and education are myriad, but one that sticks out is mixing the privileges of state-sanctioned non-profits and money-making college sports interests.

That uncomfortable dynamic is in focus, currently, of the Republican State Treasurer Dale Folwell, in his role as chairman of the N.C. Capital Facilities Finance Agency. UNC boosters, specifically the ‘Rams Club,’ are asking the agency board for $98 million in tax exempt state bonds to build and/or renovate a host of sports facilities on the Chapel Hill campus. State law dictates the hierarchy of approvals for university booster clubs top out with the Finance Agency, though the board typically deals with things like municipalities financing water and sewer projects backed by utility rates – not sports stadiums at specific schools, backed by alumni donations.

The Carolina Journal’s Dan Way pulled back the curtain on the possible conflicts and unintended consequences of approving $100 million in state bonds for the Ram’s Club, talking with Treasurer Folwell for color on how the request will be handled.

“[…] 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. […]

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.[…]”

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The board is delaying a decision on the bond approval until February to consider all the implications of one of the more rare issues they deal with. In the interim, Folwell reportedly cautioned against the Ram’s Club members or UNC faithful hounding members of the board to push for approval.

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His worry is that approving this type of state bond for athletic boosters at a specific school will incite more such requests from other school’s boosters that want in on the action.

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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].”

Considering the healthy level of sports rivalries between multiple schools across the state, specifically the Tobacco Road triumvirate, this is a reasonable. But when it comes down to more dollars and cents issues, board members displayed discomfort with approving state bonds for an entity that then immediately turns the assets over to the universities, and thus gives way their ultimate collateral.

““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.”

So, should the Ram’s Club be availed the unique privileges of state bonds? Or should a message be sent to booster clubs that this is an improper request, not to be repeated?

Read more from the Carolina Journal here.

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