It was July 31, 2012, and Marge Stewart, finance director of the Bluewater Football Association for Lambton County, Ontario, was looking forward to the summer football season's final weeks. After the playoffs, she would have a chance to look ahead to the club's next season.

Stewart had been receiving numerous requests from the association's players and their parents to support a varsity team for players aged 17 and 18. Stewart wanted to identify the cash requirements to operate a varsity team and determine whether it was financially feasible to add a fourth team to the Bluewater Football Association. She had to report her findings to the other five members of the executive next week so the organization could make a decision.

BLUEWATER FOOTBALL ASSOCIATION

The Bluewater Football Association (BFA) originated in 2006 as a not-for-profit organization in Lambton County. Lambton County's population was nearly 130,000, and it included 11 municipalities and covered a 100-kilometre radius1in Southwestern Ontario; however, the county's high school football program had seen a decline in participation, and only four to five schools had fielded football teams in recent years. The largest city in Lambton County was Sarnia,2and BFA fielded one travel football team, the Sarnia Sturgeon, for Lambton County youth aged 13 and 14.

The BFA operated for a seven-month period, February to August, every year. The club's mission was to provide a safe and productive environment that enabled youth to learn and apply the principles of teamwork, discipline, dedication and sportsmanship.3The organization began to flourish by its third year when the team reached the provincial championship, finishing second in Ontario. In 2010, the BFA added two more Sturgeon teams; the club now had a peewee team for ages 11 to 12, a bantam team for ages 13 to 14, and a junior varsity team for ages 15 to 16. The Sturgeon teams competed in the Ontario Football Sarnia, Ontario, is located approximately a three-hour drive west of the city of Toronto.

Conference (OFC) against other travel teams from the province's cities including London, Toronto and Sudbury.

The BFA relied on community support and operated entirely on a volunteer basis. Home games were played at the Norm Perry Memorial Field in Sarnia. The City of Sarnia had recently announced major renovation plans for the field, including a new score clock, updated grand stands, and artificial turf, all to be installed by April 2013.

VARSITY TEAM PROPOSAL

Demand

The Sarnia Sturgeon football program had increased the popularity of football in the Sarnia area, and as a result, many players who were graduating from the program still wanted to play competitive football. Chatham, Ontario, approximately a one-hour drive from Sarnia, was the nearest city offering a varsity football team, so many former Sturgeon players began travelling to Chatham three to four times a week to play on that city's varsity team. These players, along with many others, strongly supported the BFA adding a varsity team to the Sturgeon organization. Stewart recognized the demand for the program, but several costs would be incurred by adding another team, and the existing revenues generated by the association would not likely cover all of these additional costs. Stewart set out to determine how much financing would be needed and how the BFA should go about raising these funds if it decided to add a varsity team.

Registration Fees

The BFA charged each player $425 to join the Sarnia Sturgeon football team. After researching other varsity teams and surveying player interest in the Sarnia area, Stewart estimated that 35 players would register for the new varsity team.4Registration took place every February with all monies collected at the time of registration. BFA's registration cost per player was among the lowest in the province, resulting in a strong need for fundraising by the players and their families. The BFA had sold chocolate bars and cash calendars5as past successful fundraisers. The new varsity team would be expected to raise a total of $2,500 from fundraising, and these funds would be collected in May prior to the regular football season commencing in May.

Game Day Revenues

The regular football season consisted of eight games,6and half of these games would be played at the team's home field. During home games, the BFA charged admission of $5 per person and operated its own concession stand. Stewart projected a total of $2,000 in admission revenue for the varsity team over the regular season. Although the schedule was not yet finalized, Sarnia's home games would likely be split evenly between June and July.

4A youth football team could operate with as few as 25 players, but the BFA believed an ideal team should consist of around 40 players. 5A cash calendar was a raffle in which ticket holders' names were drawn each day of the month, and cash prizes were awarded to the winning ticket holders.

6One game in late May, four games in June and three games in July.

BFA volunteers operated the concession stand during home games. The concession stand sold a variety of food, including hamburgers, hotdogs, pop and chips. Concession revenues averaged $500 per game, and food costs typically averaged 45 per cent of sales. Food costs were paid in cash during the month in which they were incurred.

Equipment Costs

The BFA would need additional equipment for the new varsity players since the association provided all protective equipment, game jerseys and equipment bags to its players (see Exhibit 1). Since sizing was difficult to estimate, the BFA typically purchased five more sets of equipment than the number of registered players per team. All equipment was purchased on credit in March and paid for one month later. The equipment was expected to last multiple seasons; therefore, it would be depreciated using the straight- line method, with no salvage value, over a five-season useful life.

Practice Facilities

Following registration, the Sarnia Sturgeon commenced indoor practices and workouts. The team used high-school facilities on weeknights. Once the weather was warm enough, outdoor practices were held at a privately owned practice field. Adding a varsity team would increase the maintenance costs at the practice field due to the additional usage. These maintenance costs included grass seed, field repair and grass cutting. Projected annual costs for the new varsity team's practice field maintenance totalled $1,500. This cost would be spread evenly from April to August when the practice field was in use.

Other Costs

The OFC charged each team a league enrollment fee of $500 per team and an insurance fee for liability of $900 per team. BFA paid both costs in March.

Home games required the rental of the Norm Perry Memorial Field. The City of Sarnia charged the BFA $200 per game for use of the field and the announcement system. The BFA paid this cost in the same month of the rental. The BFA also paid referees to officiate the home games. Referees cost $200 per game and were paid the day of the game(s).

When the Sarnia Sturgeon team played games out of town, the team was transported by coach bus. Busing costs varied, depending on the distance to each game. In 2012, the average bus trip cost was $2,300 per game. The BFA paid these busing costs one month following each game.

Sturgeon players and coaches were provided bottled water at games and practices. Additionally, the BFA purchased pizza for the players to eat on the bus ride home following every away game. Total food and water costs for a varsity team were projected to be $1,600. Fifty per cent of these costs would be incurred and paid for in June and July (split evenly between these two months). The remainder of the food and water costs would be split equally among the other months in the operating period.

The BFA provided all players with matching Sarnia Sturgeon shirts for game-day. The coaching staff was also provided with similar golf shirts and hats. This apparel for a new varsity team was projected to cost $1,000. The BFA would order and pay for the apparel in March.

The varsity team would begin the operating period with no cash. The BFA had been approved for a line of credit with a $15,000 limit. Interest would be charged at an annual rate of 6.5 per cent based on the outstanding balance at the end of each month, and payment would be due 10 days after the end of the month. Since the organization's inception, the line of credit had been used minimally, but Stewart wondered whether the line of credit could provide the initial necessary funding for a varsity team. She planned to use and repay the line of credit as needed on a month-to-month basis. She also knew that some members of the executive were against using debt financing to start up a fourth team. Stewart wondered whether the BFA could seek corporate sponsor donations to finance the team.

Other Options

Stewart thought she would also evaluate other options to increase funding. One option was to raise registration fees to $550 per player; however, Stewart believed that player registration might decline to 30 players at this higher fee. With fewer players, the team's food and water cost would be reduced to $1,400. Stewart projected fundraising revenues might also decline to $2,100 with fewer players registered.

Another suggestion was to have varsity players purchase their own protective equipment, which would save the BFA much of the equipment costs for the varsity team: the BFA would supply players with game jerseys, pants, belts, socks and equipment bags only. Stewart believed this option would not have a noticeable effect on registration numbers since players could keep the equipment and resell it in the future. Stewart wanted to know the amount of funding needed under each of these options, as well as a combination of the two options.

CONCLUSION

Stewart realized that a varsity team could benefit the organization and also help satisfy the area's demand for a team in the local community; however, her experience of adding a second and third team to the BFA had taught her that a significant amount of funds would be required. She wanted to work on a monthly cash budget specifically for a new varsity team for the 2013 operating period to identify the funding requirements. If a new varsity team were added, she would have to recommend a registration fee and an equipment policy. Stewart sat down at her computer to project a cash budget and to analyze the results.

This document is authorized for use only by Gregory Shields in 2020.

Exhibit 1 PROJECTED EQUIPMENT COSTS PER PLAYER

Helmet. $ 200

Shoulder pads $125

Belt $2 Pants $50

Thigh/knee pads $40

Girdle. $25 Game jersey $43

Socks $5

Equipment bag $20

Total. $ 510

Questions

1. As Marge Stewart, what will be a projected cash budget (base case) (use excel) for a new varsity team for the 2013 seven-month operating period (February to August). 2. Based on your projected cash budget, how much funding is required to field a new varsity team? 3. Revise your cash budget (base case) to reflect an increase in registration fees. Based on these results, would you increase registration fees? 4. Revise your cash budget (base case) to reflect the decision that the new varsity team's players must purchase their own equipment. Based on these results, would you implement this change?