A committee of University of California regents endorsed a new funding plan Tuesday to hasten construction of UC Berkeley's proposed athletic training center next to Memorial Stadium and at the same time usher the Cal campus across a historic threshold of creative financing. The committee's accelerated funding strategy could not only speed up construction, but also would mark the first time the campus will use a lucrative endowment leveraging technique that private universities have been tapping for years. The Grounds and Building Committee's action assumes the controversial project is not blocked by lawsuits that go to court today. As explained by UC Berkeley Vice Chancellor Nathan Brostrom, a former investment banker with JP Morgan, the leverage strategy involves borrowing money at 5 percent, earning 9 percent on endowment investments and using the 4 percent gain for the athletic department. The committee unanimously endorsed the new funding approach and tossed out its old budget plan for the $117 million athletic center. The committee's vote is expected to win full board sanction on Thursday at the three-day regents meeting this week on the UC Davis campus. Among those opposing the sports-training complex are the city of Berkeley and a group of tree-dwelling protesters at the site. Three lawsuits against the project have been consolidated and will begin two days of hearings in Alameda County Superior Court today. The new funding formula permits the university to borrow $100 million in outside financing for the $117 million building, designed to relocate training facilities for the Cal football team and other athletes from their dangerous, cramped quarters in the stadium, which straddles the Hayward Fault.
The original idea for funding the complex was largely through private gifts and contributions. Under the new approach, money would be borrowed through bonds at about 5 percent in the tax-exempt capital market, while gifts that would have gone directly to the project will instead go into an athletic department endowment expected to earn around 9 percent, Brostrom said. Such an arrangement would not only provide access to funds more quickly, but also furnish a 4 percent margin that could be spent on athletic programs. "Donors get a great deal," Brostrom told The Chronicle after the vote. "They realize we're leveraging their money not only for bricks and mortar, but also for the programs of the athletic department." He said that he helped arrange such financing for cultural institutions like the Asian Art Museum, San Francisco Ballet and Getty Trust when he was in banking, and that such an approach is used also by private universities.
But UC Berkeley, a publicly funded university, has not taken such a route, he said. However, weakening state financial support has left Berkeley and other UC campuses desperately seeking funding from other sources. "I think what happened is that UC had always seen itself as a state institution," he said. "We have to think much more as a hybrid. We're building up an endowment, and we have to leverage that endowment in the same way as Harvard, Yale, Stanford or Princeton."
He said Cal's endowment now stands at about $2.5 billion. Harvard's endowment, the largest of any university in the country, is about $35 billion. UC officials said they expect a court decision on the athletic training center within two weeks. The UC president's office told the regents in a report that approval of the funding revision was urgent and needed "to allow the project to proceed without further delay if the court rules in the University's favor." "The potential cost of waiting until after the court rules to seek regents' approval would place an otherwise avoidable high financial burden on the project and jeopardize the estimated completion date scheduled to coincide with the start of the fall 2010 football season," the UC president's staff said. The city of Berkeley is challenging the seismic safety of the new center and asserting in its lawsuit that the facility shouldn't be built until a solution to retrofitting the historic but crumbling and dangerous stadium is found. Some critics argue that the stadium should be relocated. Other plaintiffs include the California Oak Foundation, which supports the tree-sitters, and the Panoramic Hill Association representing neighbors near the stadium.