Brian Gregory: Georgia Tech Can’t Afford To Fire Him!
Despite all the talk among Georgia Tech fans that head basketball coach Brian Gregory should be fired, I’ll argue that the Yellow Jackets can’t afford to do that just now.
I’ve read many articles this week on why Brian Gregory should be relieved of his duties as the head basketball coach of Georgia Tech Yellow jackets.
Many of you know me as a UGA grad, so you’ll immediately dismiss my opinion on this issue. For those of you that can actually accept an outside viewpoint of the situation, mainly from a financial standpoint, hear me out.
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I realize that Brian Gregory’s record is awful, and that one simple fact tends to overrule all others in college sports, but the simple fact as I see it is that Georgia Tech can’t afford to fire Brian Gregory.
Many people believe that Paul Hewitt’s buyout package is off the books at Georgia Tech, but that’s simply not true. Hewitt is still making $130,000 a month not to coach, and he will continue to make that money until 2016.
The question is whether the clock started ticking right after his firing in March. If so, that means Georgia Tech still owes Hewitt approximately $1.5M to pay off the remainder until the end of next season in 2016.
Why is that important? Because Georgia Tech can’t afford to pay three coaches at once. If they fire Brian Gregory now, they’ll have to pay his buyout, plus Hewitt’s buyout, plus the new coach’s salary and any buyout it takes to get that coach.
Gregory’s initial buyout from Dayton cost $750,000 in 2011 when he took over the job. That’s already sunk money in terms of what it cost to get him, but any good coach is also going to have that type of clause.
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Georgia Tech’s finances aren’t great. As a CPA I can tell you that when you read their 2013 Form 990, which is the most recent tax form you file as a non-profit entity, I can see how things went horribly wrong.
2014 Forms won’t be filed for another month or so, but that will give us even more insight into the program. In the meantime, let’s just compare the two big programs in the state.
Georgia Tech’s expenses in 2013 outstripped their revenues to the tune of $13M, and in 2012, they overspent by $7M. Put simply, if you look at it from a business standpoint, the program isn’t “making money” on operations.
Georgia Tech’s total equity has dwindled to $68M, which sounds like a lot of money until you realize that it was $83M two years ago. Even worse, they have $223M in tax-exempt debt which they have to pay off.
The smart part about the debt at the time was that Georgia Tech got their bonds for 1.25%, which is absurdly low in comparative interest rates. The bad news is they still have to pay it off at some point. So while the interest on the books is only half a million dollars, they had to pay over $700,000 in principle as well.
That’s $1.2M of the budgeted revenues going to debt payments. Also the revenues from sports for Georgia Tech last year were $51M across both tickets and broadcasting. Donations were only $3.8M
Compare Tech now to Georgia. In 2013, Georgia had revenues greater than their expenses of $1M. Their equity is over $188M, more than 2.5x as much as Georgia Tech. Georgia carries only $102M in bond debt, less than half of Georgia Tech.
But what is the biggest difference? Georgia’s income from athletics and broadcasting is $66M, and their donations were $25M in the same year. In essence Georgia donors are donating 6.5x as much money to their programs as Tech.
Why bring that up? Because donor rates aren’t just about alumni bases, they are about confidence. In 2011, Georgia Tech’s contributions were $19M. Now they are below $4M. That’s your swing. That’s the difference.
Georgia Tech was on par with Georgia in donations until these last couple years when they dried up. That’s why Georgia Tech can’t afford to continue buying out coaches. Brian Gregory’s buyout would likely cost another $3M as he’s contract through 2018. No business advisor would tell Tech to eat that money.
Tech needs to weather the storm and wait one more year when Hewitt’s money falls off the books.
From a basketball standpoint, Georgia Tech went 0-11 in games decided by less than 5 points or OT in the ACC. That’s almost statistically impossible to happen again. Georgia Tech was wildly unlucky and terrible at closing, but they still managed to beat Georgia at the beginning of the year, a fact I can’t get over as a Bulldog fan.
The reality is that Georgia Tech would be making an even worse financial decision than they’ve made in the past if they fire Gregory. And they’ve made some hideous financial decisions.
How much further can donations really drop over one more year? They are practically at rock bottom right now. It will be better for Georgia Tech to wait it out, hope for some better luck, and take the Atlanta Braves approach to 2015.
Better days are on the horizon for Tech basketball when it gets the financial situation sorted out.