1. Author name here for Edited books chapter 11 Finance and Budgeting 11 Finance and Budgeting chapter

2. Financial Concepts Do you prepare a budget? How do you know how much money you have to spend each month? Look at the income statement or balance sheet of a publicly traded sport business and determine if the company is in a good or bad financial position and why.

3. Revenue Revenue is any income derived from any source: Tickets Concessions Parking Naming rights Advertising

4. Expenses Expenses are any payments made by a business: Player salaries Inventories Concession items Maintenance expenses Office expenses

5. Metrodome Revenue and Expenses for 2005 The following slides show the actual revenue and expenses as highlighted on the facility’s financial statement.

6. Metrodome Revenues Concessions $22,172,245 Admission tax 7,547,144 Rent payment 4,465,850 Charges for services 3,146,331 Advertising revenue 2,396,461 Novelty sales 156,625 Parking revenue 144,630 Other revenue 347,528 Investment earnings 523,089 Total revenue $40,899,903

7. Metrodome Expenses Concession costs$12,276,504 Tenant’s share of concession revenue 6,572,428 Facility cost credit 7,116,138 Personnel costs 3,453,431 Professional services 474,359 Contractual services 3,965,868 Audiovisual costs 234,594 Travel and meetings 44,238 Repair maintenance and supplies 1,113,391 Utilities 3,237,338 (continued)

8. Metrodome Expenses (continued) Insurance 539,870 Communication 75,092 Facility planning/research 4,865 Event costs 472,767 Marketing/advertising 484,334 Miscellaneous 163,011 Depreciation 5,198,157 Loss of disposable capital asset 753 Total expenses $45,427,138 Total loss (4,527,235) Comprehensive annual financial report, 2006

9. Revenue and Expenses Two family events held at an arena in 2008 and 2009 show how financial numbers can be compared to examine revenue and expenses. Category20082009 Attendance4,4373,219 Avg. ticket price$13.38$15.78 Gross ticket revenue$59,346$50,806 Rental Income$2,578$9,715 Concession per cap$2.37$2.37 Concession gross$10,525$7,635 Concession income$6,244-$1,454 Novelty per cap$3.10$2.81 Novelty gross$13,738$9,050 Novelty income$3,426$2,489 Parking gross$3,141$2,013 Parking income$2,826$1,751 Total event income$21,060$15,084

10. Financial Analysis Income statements Balance sheet

11. Income Statement An income statement highlights the revenue and expenses generated over a given period, normally one year. Through accounting, all the revenue and expenses are calculated and then inserted into the income statement to determine whether the facility generated any profit.

12. Sample Income Statement Sales $5,000 Material costs 500 Labor costs 250 Gross profit $4,250 Depreciation 150 Selling expenses 300 Profit before taxes $3,800 Taxes 1,000 Profit after taxes $2,800

13. Balance Sheet A balance sheet lists the assets and liabilities of a facility as of a given date. –The assets range from the land and building itself (real property) to any personal property such as televisions, computer systems, and ticketing machines. –Liabilities are all the financial obligations owed on that date. This could include moneys owed to repay a bond used to finance the building of the facility and salary obligations that have yet to be paid.

14. Sample Balance Sheet Assets Liabilities Cash $10,000 Accounts payable $5,000 Inventory 4,000 Salaries owed 4,000 Assets 30,000 Current liabilities 9,000 Total current assets 44,000 Depreciation 4,000 Owner’s equity 39,000 Total assets $48,000 Total liability $48,000

15. Budgeting A budget is a financial road map for a business. Capital budget examines the revenue and expenses associated with building a facility or facility-related repairs. ZBB (zero-based budgeting) forces each unit that produces a budget to examine what they are doing and prove the value they’ll provide or they will receive nothing. Thus you must justify your existence and financial needs.

16. New Facility Financing Where can you find the funds? –Private financing: parents, investors –Collateral financing: banks, credit cards –Private investors: wealth investors –Corporate bonds –Partnerships –Public offerings: stocks –Public financing: bonds

17. Types of Bonds General obligation bonds (GOBs) –Among the instruments most commonly used to fund facilities. –These bonds are often called full faith and credit obligations because the city, county, municipality, state, or other government unit pledges to repay the obligation with existing tax revenues or by levying new taxes. Revenue bonds: Revenue from the facility helps repay the loan.

18. Selling a Facility If a facility faces financial hardship, it might need to be sold or closed down.

19. Summary Finance is one of the most important topics for a facility manager to master. A manager needs to understand these things: All revenue and expenses How to develop and analyze financial instruments such as income statement and balance sheets How to create and stick to a budget How to find money for growth

20. Discussion Questions and Activities Develop a list of revenue and expenses for an athletic program on your campus. Share the results with someone in athletics to get their feedback. Research several recently built major sport facilities to see what financing methods were used. Try to develop a one-month budget for next month based on all the money you expect to receive and all the expenses you expect to pay.