For many Olympic-related sports bodies in the USA, surviving fiscal impact of pandemic would be like winning a gold
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(The beginning of USOPC chief executive Sarah Hirshland’s letter outlining impacts of the pandemic.)
U.S. Olympic and Paralympic Committee chief executive Sarah Hirshland sounded the storm warning last week, in a virtual staff meeting as well as a letter and Q-and-A fact sheet to the USOPC’s constituents.
Hirshland did it again Tuesday in an athlete town meeting call that a person who listened to it described as “pretty much the same doom and gloom.”
She told of USOPC budget cuts of 10-to-20 percent that could include staff cuts and already include voluntary salary cuts of 20 percent (Hirshland) and 10 percent (the other eight top executives). And then there was the ominous passage, about the impact on the USOPC if the postponed-until-2021 Tokyo Olympics have to be cancelled because of the coronavirus pandemic.
“The impact of a cancellation would be devastating to our athletes, first and foremost, but also to our financial health and stability,” said the FAQ sheet, a copy of which was obtained by Globetrotting. “We would survive such a scenario, but the impact would be severe.”
The USOPC can survive because it has an endowment in excess of $200 million it could use in a “`worst-case’ scenario.” That has not yet become the situation, the FAQ said, but it reach that level if Tokyo 2020 does not take place – a possibility evoked by two prominent members of Japan’s medical community in the last 10 days.
Cancellation would create a much more dire situation for the National Governing Bodies that help train and support the athletes who become part of U.S. Olympic and Paralympic teams. Many would go from weathering the storm to rearranging deck chairs on the Titanic.
For now, many NGBs are (or have) applied for short-term help from Paycheck Protection Program loans under the federal stimulus act. Like the USOPC, the NGBs are looking for ways to maximize efficiencies and cut expenses, including staff and salary cuts. Such reviews are a constructive response to the crisis that could also be beneficial long-term, but they won’t keep NGBs fully afloat if it gets worse.
“The real depth of the damage will depend a lot on what happens in the coming six and 18 months,” said Max Cobb, chief executive of USA Biathlon and president of he NGB Council.
“If sport can’t happen in the next six months, that will be devastating. If the Olympics/Paralympics don’t happen in the next 18 months, NGBs will be shells of their former selves.”
USA Biathlon’s Max Cobb
Cobb, whose NGB has annual revenues of just under $3 million, received a PPP loan of $140,000 to help cover the salaries of nine employees.
(Revenue and salary numbers here are from 2018 tax returns or financial statements.)
Among the 18 NGBs – some in non-Olympic sports - who responded to a Globetrotting email survey of 45 such national bodies, 16 said they had applied for PPPs, and 13 said the loans had been approved as of Wednesday. Only three of those 18 have cut or furloughed staff so far, but some have cut salaries and voluntary retirement plan (403b) contributions. Others said salary reductions remain a possibility.
The USOPC, which has a staff of some 500 and a four-year budget near $1 billion, said it expects to complete its expense reduction plan by the end of May. In the short term, it is saving “$40-to-$50 million” in 2020 because of the Tokyo Games postponement, but those expenses will be incurred in 2021 should the Games take place as re-planned.
Many NGBs, like biathlon, get the big piece of their annual revenue from the USOPC. Others, like swimming and triathlon, get at a majority of their revenue from membership fees - $22.8 million of $34.8 million for USA Swimming, $8.3 million of $15.8 million for USA Triathlon.
Another NGB, USA Track & Field, got $22 million of its $34.4 million revenue from sponsorships. It did not apply for a PPP loan.
USATF chief executive Max Siegel’s compensation for 2018 ($4.2 million, including $3 million in four years of deferred bonuses included in the latest available tax filing) caused an uproar when it was made public last week – days after the organization laid off seven of its 65 employees. Few are mollified by Siegel’s having agreed to take a 20 percent (pro-rated) cut from his $675,000 base salary in 2020.
Siegel’s payoff was part of the 22-year (2018 through 2040) deal with Nike at an estimated value of $500 million that was negotiated in his first year as USATF CEO. That deal was widely criticized at the time by those who felt its length precluded more lucrative deals later, but having chosen guaranteed long-term reward over risk now looks prescient.
“There is no way I sat here and saw a disaster coming,” Siegel said. “The personal commitment to each other (by Nike and USATF) was a big part of our risk calculation.”
Like the USOPC and many international and national federations, USATF is extending the terms of its sponsorship agreements, allowing sponsors to activate them for two years. That will almost certainly mean less sponsorship revenue in 2020.
Some sponsors, large and small, will undoubtedly decide future sponsorships need to be cut back or cut off after 2020/21 because of the financial losses they have sustained during the pandemic. It’s simple bread-and-circuses math: how do you justify expenditures on the extraneous when the bottom line is crumbs?
USA Triathlon, which has 60 FTEs, received a PPP loan of $907,400 and is advocating on behalf of the endurance sports community to have it included in future phases of the stimulus package. That group includes race directors of many of the 4,300 events USA Triathlon sanctions annually as well as coaches, all of whom “are struggling to keep their businesses afloat,” said USAT chief marketing officer Chuck Menke.
Triathlon CEO Rocky Harris and his wife have pledged to match the first $10,000 raised for a USA Triathlon Foundation relief fund to help the financially endangered race directors and coaches. (The foundation has pledged another $10,000.)
The governing body has not instituted staffing or salary cuts but has offered voluntary furloughs to those employees who want them, especially those who need to be home with children. Menke said just two have accepted the offer, one on a full-time basis and the other part-time.
“Our approach throughout this situation remains prioritizing people (staff, athletes, members, and constituents) and that’s guided our decision-making process for all budget cuts,” Menke said.
Max Siegel of USA Track & Field.
US Swimming, which did not respond to the email questions, announced Tuesday it was pledging an initial $1 million to swim clubs and local swimming committees, beginning with those that are the most financially imperiled. The clubs are the backbone of swimmer development, and many will not be able to have lucrative camps this summer because of the pandemic.
“The crisis has been less impactful on the winter (sports) NGBs so far,” said Ted Morris, executive director of USA Speedskating. “We were able to make it through the majority of our (2019-20) competition season both at the elite and grassroots levels, and the majority of our revenue was in house.”
In its most recent annual financial statement (ending May 31, 2019), U.S. Speedskating got $1.94 million of its $4.3 million in revenue from the USOPC. It received a PPP loan for $225,000 and has not released any of its 21 employees or made salary reductions for 2020-21 “although I’m sure that (salary cuts) will be considered,” Morris said.
USA Lacrosse, which gets $14.5 million of its $20.7 million in revenues from membership dues, already has taken significant personnel-related action to cut expenses: 11 layoffs from a staff of 92; twenty furloughs to four days a week; across-the-board. tiered compensation reductions of 10 percent to 25 percent; release of all six part-time staffers; and suspension of voluntary retirement contributions. Its PPP loan has yet to be approved.
USA Baseball, which got a PPP loan of $650,200, received voluntary salary cuts of 20 percent from its chief executive, chief financial officer and chief operating officer. US Sailing, which got a PPP loan for $810,000, has made salary cuts of 12.5 percent staff-wide and suspended retirement contributions.
USA Archery and USA Water Ski, have said staffing and salary decisions would partly depend on the fate of their PPP loan requests. USA Water Ski’s loan, for less than $100,000, was approved Wednesday.
“Staff are all incredibly busy having to plan around event and program cancellations and redo basically all we had planned for 2020 and 2021,” said Rod Menzer, CEO of USA Archery, which has 17 FTEs. “Having to reduce staff now would only hamper the efforts to serve our members and mission as an NGB.”
USA Pentathlon, which has nine FTEs, said it would not cut staff even if its $26,000 loan request is not approved.
“A loan would be helpful but not critical,” said Rob Stull, pentathlon CEO. “We manage our expenses ($466,000) and revenues ($537,000) well and have built up a reserve while not exposing ourselves to too much risk.”
Phil Andrews, chief executive of USA Weightlifting, is taking no salary from Mar. 18 until his federation’s offices reopen and then taking a 30 percent cut until “it is fiscally responsible to restore my salary” ($118,000 in 2018.) Andrews said he and the USA Weightlifting board agreed the priority was to retain staff (14 FTEs) and keep funding athletes. It received a PPP loan of $218,000.
USA Artistic Swimming (which governs synchronized swimming,) also received a PPP loan ($110,500) and has no current plan to reduce its staff of eight. It gets some 25 percent of its $1.6 million in revenues from memberships.
Membership-reliant Summer Olympic NGBs could be hit twice by coronavirus impacts. They may not get the typical post-Olympic membership boost, and renewals could be down.
And then there is a small, non-Olympic NGB like USA Racquetball, with four FTEs and membership-driven revenues of $1.34 million. It asked for and received a PPP loan of $49,200.
“It’s not much, but we cannot afford to take on debt,” said Mike Wedel, executive director of USA Racquetball. “We have not cut staff at this time. We are evaluating the impact for the remaining (part of the) year and will make a decision to ensure the survival of the organization.”
Survival, in all senses of the word, is the bottom line for everyone during this pandemic.
