Slowtwitch Features

(PUBLISHER'S NOTE: This article is the third in a trilogy on the legal liability associated with our sport. The first is On Waivers, by Greg Hitchcock, who also writes most of our articles on running.) The second is on USAT's specific approach to its waiver. This is the third, on the liability insurance USAT pays, what it charges when it resells that insurance, and the difference (in cash) between the two.

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I found Steve Locke, USA Triathlon’s chief executive, in his office in Colorado Springs. I asked him some pointed questions, and he answered them very openly.

‘How much money will you take in in 2003 in annual licenses?” I asked. My guess is that you’re going to take in $1.35 million?”

“How did you figure that?” he replied.

“Thirty bucks [the license fee for 2003] times forty-five thousand annual members.”

“We’re budgeting revenues of one-point-two million, which is that same price times forty-thousand,” he said.

“But you had over forty [thousand annual members] this past year, up from only twenty-nine [thousand] last year. You think you’re going to have zero growth after growing 35-percent the prior year?

“That’s what we’re budgeting. It was my recommendation, and the board agreed.”

“How much will you take in on the one one-days?” I asked, changing the topic slightly.

“We’re counting on $1,125,000,” he replied.

“Come on, that’s a decrease in participation from the year before?”

“Yes, 125,000 is the budget number, down from 140,000. We don’t know how people are going to react to the increase in fees from seven dollars to nine.”

This—reselling insurance—is how USAT makes much of its money. Most of it, as a matter of fact. It will take in at least $2.5 million dollars next year, and as much as $4 million. If it takes in $4 million, that'll just about equal what it paid in total expenses in 2002. And this insurance revenue is only that part which is collected from individual race entrants—that’s not counting what it collects in insurance revenues from race directors, coaches, camps, clubs, and whatever and whomever else to whom provides its insurance. What does this insurance cost USAT? Perhaps a half-million dollars in 2002, and as much as double that in 2003. Any way you slice it, the federation is going to make millions in administering insurance for athletes and events.

The insurance revenues generate more money for USAT than every other revenue source combined. Sponsors, grants from the USOC, sanction fees, and all other revenue sources don’t equal what comes in via the roughly 100,000 people who’re going to do a USA Triathlon-sanctioned event this upcoming year.

This money isn’t going into anyone’s pocket, however. It pays for coaching certification, officials who flag you and I for drafting, rankings, congresses, race director support programs, and of course all the elite athlete programs. It pays the office expenses. And, frankly, there’s money left over after all of that is paid.

There is over one million dollars in cash and equivalents on USA Triathlon’s balance sheet. One-point-two, to be precise. That might seem like a lot, but the outside auditors that look over this non-profit corporation recommend six months worth of liquid reserves, and the federation requires, as previously stated, about $4 million to run (and that sum will go up in 2003, probably to $4.5 million). That means the rainy day fund is just over halfway to the goal, with $1 million left to raise.

Perhaps this is one reason why Locke remains so conservative in his estimates. On the one hand, asa non-profit it is considered bad form to show expense and revenue budgets that don’t match. On the other, your rainy day fund will never grow unless you take in more than you spend.

Our federation is quite good at getting and staying healthy, better in fact than its “father” U.S. federation. The USAT’s cash reserves are, according to Locke, greater that the USOC’s.

Back to insurance. USA Triathlon is raising its license fees for competitors because there is an insurance crisis. Obviously, the above numbers do not quite support that claim. At the same time, USAT doesn’t yet know what it’s new premiums will be for 2003, and with carriers leaving the sports liability marketplace in droves, USAT is braced for a large increase.

That increase is not due to triathlon loss ratios, however. USAT’s is under 50-percent for 2002, which means that its insurance carrier pays out less than 50 cents for every dollar in premiums it collects. Plus, USAT’s losses were less than 10 thousand dollars for the entire year before a sizable settlement was paid out close to year’s end. If one considers triathlon’s loss ratio over a several year period, the loss ratio is lower yet.

What happens when USAT reaches its goal of six months worth of operating expenses on hand? “It would not be responsible for us to be warehousing money,” Locke offers.

At that point the question would arise, do you fund more programs, or lower annual and one-day license fees?

“I don’t know what the board would do,” Locke responds. “Maybe a little of both. We’re not there yet, so I don’t have an answer for that.”