The recovery plan leans heavily on institutional support, increases in contributions, maximizing gate revenue from football and basketball, and perhaps, in the near future, beer sales at Martin Stadium and a student fee.

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At the end of June, the Washington State University athletic department will likely close out the 2017 fiscal year with a budget deficit of $10.6 million, making this the fourth-consecutive year it has finished more than $10 million in the red.

University officials say this grim financial situation resulted from a calculated gamble to upgrade athletic facilities and coaching talent at WSU.

But the deficit spending must stop, officials say, and WSU has devised a plan to do that by 2021.

The recovery plan leans heavily on institutional support, increases in contributions, maximizing gate revenue from football and basketball, and perhaps, in the near future, beer sales at Martin Stadium and a student fee.

Continued athletic success would help too.

“We’re intent on getting our operation back in the black by 2021. We’re serious about it,” WSU athletic director Bill Moos said. “It was part of our overall game plan when we invested in athletics earlier on after I got here, knowing full well we’d create some debt and that we’d have to have a plan from the beginning to pull out of it. … I really like the direction we’re going.”

The $10.6 million estimated deficit for 2017 exceeds the $9.7 million deficit WSU projected in September, when Moos and WSU President Kirk Schulz first presented the WSU board of regents with a recovery plan to get the athletic department solvent. But it represents some progress, university officials say.

The previous three years the deficits were $12.9 million, $13.2 million and 13.7 million.

The university has covered the athletic department’s deficit over the last few years, but Schulz says athletics is expected to eventually pay back the money it has borrowed. The debt will not be forgiven.

“We’ve got to show some progress,” Schulz said in December. “We can’t have another year where we come out and go, ‘Well, we’re another $13 million in the hole.’ ”

Reducing the deficit is “important for our credibility,” Schulz said.

How department got so far in hole

When Moos, a WSU alum, succeeded Jim Sterk as Cougars athletic director in April 2010, the football team was coming off 2-11 and 1-11 seasons and WSU had fallen behind conference opponents in the facilities arms race.

So Moos and then-President Elson Floyd devised a plan to revive WSU athletics in the form of big-name football and men’s basketball coaches – Mike Leach makes $2.95 million per year, Ernie Kent makes $1.4 million per year – $65 million in renovations to the south side of Martin Stadium and a $61 million football operations facility.

These facilities improvements in turn resulted in hefty annual debt service payments – about $9.38 million in 2016 and an estimated $9.25 million for 2017.

Related: Q&A with WSU Athletic Director Bill Moos on facilities upgrades, coaching evaluations for 2016-17

But around the time the athletic department got facilities plans approved, it lost an estimated $5 million in annual institutional support from WSU, and were further hit by additional expenses from NCAA rule changes focused on student welfare. The department’s financial woes were compounded by the Pac-12 Network’s annual revenue falling more than $8 million short of initial estimates.

“The university decided to shift all these expenses to athletics that they used to pick up,” Schulz said. “If you look back, they were kinda even (accounting-wise) and then, boom, they were $13 million in the hole.”

Last September, Moos and Schulz publicly presented a draft of the recovery plan that has since been refined to reflect hard numbers.

The updated recovery plan acquired by The Seattle Times in late May shows the WSU athletic department hopes to lean on significant increases in gate revenue, private contributions and institutional support, and projected increases in student fees and concession revenue to get the department to a $100,000 surplus by 2021, and a $1.36 million surplus by 2024.

Help from various sources

Institutional support from WSU to the athletic department — which totaled $7.86 million in 2011, when the Cougars finished with a $633,611 deficit at the end of Moos’ first year — has decreased annually over the last five years, and was down to $3.73 million in 2016.

Under the new financial recovery plan, this is expected to increase to a peak of about $7 million in fiscal year 2020 as WSU gradually resumes payments for things such as custodial support for athletic facilities, funding for academic support and partial coverage of Pac-12 conference dues.

There have also been talks about introducing a student fee, but the student body strongly opposed this element of the plan when it came to light last fall. It has now been tabled and does not factor into WSU’s recovery plan until 2019.

“We’re very sensitive to students and their cost of attendance,” Moos said, adding that he discussed the proposal last fall with student leadership. “We’re going to continue to have those conversations and see what the climate is down the road. We’re hopeful down the road it will be considered again.”

Another potential moneymaker in the works is the sale of beer at Martin Stadium.

But this, too, is a work in progress, Moos said.

WSU submitted a proposal to the Washington State Liquor and Cannabis Board last summer seeking permission to expand beer sales in the stadium from the club and suite level to the general concessions level.

The Cougars estimated that this would generate an additional $600,000 annually, but since approval has not been granted, the projected revenue isn’t factored into budget projections until 2019.

Still, the Cougars expect to close out 2017 with an added $760,000 in concessions revenue after they brought concessions in-house this year instead of outsourcing it.

“We took it over and ran it ourselves rather than just taking a percentage (of profit) after the fact,” said Matt Kleffner, WSU athletics’ chief financial officer. “We ran it ourselves and did a very good job.”

“Football rises, all boats rise”

Five years into Leach’s tenure, the football program appears to have turned the corner.

WSU goes into the 2017 season on the strength of back-to-back bowl seasons, and is hoping to set a program record by making it to a fourth bowl game in five years.

The Cougars hope the revitalized football program can help lead the athletic department out of its financial hole.

“We’ve said in the very beginning, even before I hired Mike (Leach), that football had to be strong,” Moos said. “When football gets strong, all boats will rise, and certainly, that has been the case.”

Football’s recent success has led to a strong increase in ticket sales and donations.

WSU outsourced ticket sales operations to IMG Learfield Ticket Solutions last fall, and the results are already evident — WSU is on track to break the record of 14,200 season tickets sold last season.

Football-related Cougar Athletic Fund contributions hit a record high of more than $5.7 million in 2016, and WSU is also on pace to surpass that in 2017.

WSU typically saw a decrease in season-ticket sales and football revenue in years when the Apple Cup is played in Seattle.

“That, more than anything, really points to the fact that fans are fans to support the Cougars, and not one particular game,” Moos said. “The culture of the fan base now has changed and changed for the better.”

Football-related revenue came in at just under $10.7 million in 2016, and the Cougars estimate they’ll finish 2017 at about $11.75 million.

Total WSU athletics gate revenue for 2016 was $5.53 million and the athletic department is hoping to almost double that to $11.05 million by 2021.

But how do you do that when 35,117-seat Martin Stadium is already operating at 96 percent capacity?

The Cougars have no immediate plans to expand the stadium, the smallest in the Pac-12.

“We’re not going to add more seats until we can prove there’s true supply and demand,” Moos said.

Instead, WSU hopes to convert more single game ticket buyers into season-ticket holders. Season-ticket holders generally pay a required donation to the Cougar Athletic Fund to secure the best seats in Martin Stadium for the season.

“When we talk about 96 percent capacity and you take out the (8,000) students (seats), a lot of those are single-game tickets that are sitting at pretty good seats at Martin Stadium, that, if we were able to sell as a season ticket and get that contribution from the donor seating area, would give us a boost,” Moos said.

The Cougars would stand to make an extra $1 million if they sold out the entire stadium with season tickets.

For 2017, the Cougars also raised the Cougar Athletic Fund donation tied to season-ticket packages. This year, the best club seats at Martin Stadium, priced at $430 for all seven home games, will require a CAF donation of $2,000 instead of the $1,700 in 2016.

On the lower end, the cheapest season ticket for the 2017 WSU home slate costs $235 (compared to $210 in 2016), and does not have a required CAF membership donation.

Moos said the athletic department’s gate revenue projections for the next five years included small built-in ticket increases, but that any real change in season-ticket price would depend on the football team’s performance the previous year.

“We don’t want to price ourselves out of the market,” Moos said. “It’s always been my philosophy everywhere we’ve been that you make your event affordable to everyone.”

Basketball success is also part of the master plan. Basketball revenue in 2016 was $350,000. In contrast, the basketball program brought in about $1.4 million annually during its heyday in the Klay Thompson era from 2008-11.

“We just have to find another Klay Thompson,” joked Kleffner, WSU athletics’ chief financial officer. “We would like to see (basketball revenue) come to about $700,000 in the recovery plan.”

Raising revenue will only help so much. Moos is also focused on increasing contributions to the athletic department. The goal is to hit the $10 million mark in contributions by 2022.

“We need to continue to appeal to our donors that it’s important for Cougars everywhere to invest in Cougar athletics,” Moos said. “It benefits the campus and the university, and every bit counts.”