Pony up, beams

[EMAWzified]

Editorial from the LJWorld. http://www2.ljworld.com/news/2010/oct/04/athletic-debt/?opinion

Figures gleaned from Internal Revenue Service documents indicate Kansas Athletics Inc. is out on a pretty long limb when it comes to its financial liabilities and debt.

In IRS documents filed to maintain its tax-exempt status, the KU athletics department reported financial liabilities for 2008-09 of $93.67 million, an increase of about 57 percent from a year earlier. The report also showed long-term debt of about $46.56 million for 2008-09. That figure is more than triple the $15.06 million debt listed the previous year.

The jump in liabilities comes from debt incurred in connection with more than $32 million worth of major construction projects at Allen Fieldhouse, the Horejsi Family Athletic Center and the Wagnon Student Athlete Center/Parrott Athletic Center.

How does Kansas Athletics plan to pay off its huge debt? Basically through the generosity of its friends.

The department gets ticket revenue from KU sports events, but the bulk of the construction debt is slated to be retired by contributions from what Associate Athletics Director Jim Marchiony called the department’s “very loyal and generous donors.”

That has proven to be a relatively reliable funding stream for Kansas Athletics in the past, but it’s not exactly money in the bank, especially given the current fickle stock market. There also are indications that even if the nation’s economy takes a turn for the better, donor dollars may be harder to come by in the future. Athletics officials had planned to use donor pledges to build a new Gridiron Club atop the east side of Memorial Stadium, but those plans — along with the $40 million that was to be given to academic and research programs — had to be put on hold when that particular revenue stream failed to materialize.

It’s hard to imagine that the size of the athletic department’s debt won’t be an issue as KU begins its search for a new athletics director. Recently departed AD Lew Perkins was known as a strong fundraiser, but he also committed the university to a huge debt that his successor will be responsible for paying off — whether or not KU’s “very loyal and generous donors” are able to fulfill their funding pledges. It’s an issue that should be of no small concern to anyone considering an application for the KU job.

[pissclams]

on the flip side, any potential  new AD will benefit from Lew's creation of the debt and by enjoying all of the new facilities that Lew built.

[06wildcat]

on the flip side, any potential  new AD will benefit from Lew's creation of the debt and by enjoying all of the new facilities that Lew built.

To an extent. Except Sweet Lew built a bunch of shiny buildings that don't increase revenue. If KU goes 0-fer in conference that ticket revenue is going to shrink pretty fast, as are donations.

[pissclams]

on the flip side, any potential  new AD will benefit from Lew's creation of the debt and by enjoying all of the new facilities that Lew built.

To an extent. Except Sweet Lew built a bunch of shiny buildings that don't increase revenue. If KU goes 0-fer in conference that ticket revenue is going to shrink pretty fast, as are donations.

Maybe not directly increasing revenue but it's hard to argue that the buildings don't increase revenue indirectly.   The new offices, weight room, hoops practice facility etc should result in better recruiting that will result in a better team which should result in more fans which should result  in more $$.

[06wildcat]

on the flip side, any potential  new AD will benefit from Lew's creation of the debt and by enjoying all of the new facilities that Lew built.

To an extent. Except Sweet Lew built a bunch of shiny buildings that don't increase revenue. If KU goes 0-fer in conference that ticket revenue is going to shrink pretty fast, as are donations.

Maybe not directly increasing revenue but it's hard to argue that the buildings don't increase revenue indirectly.   The new offices, weight room, hoops practice facility etc should result in better recruiting that will result in a better team which should result in more fans which should result  in more $$.

KU has maxed out basketball revenue for the foreseeable future. New buildings etc. for b-ball could slightly elevate revenue, but not enough to justify the costs. On the other side, Lew built all that stuff for football, then fired the best coach KU ever had for no cussing, no phones and no women Turner Gill. So those better be some awfully nice facilities to lure the 18-year-old Mormons away from Utah.

[kcchiefdav]

All this financial crap is a non-issue. We're about to take out 50 million in "long term" debt via bonds ourselves. Debt is how the world works folks. I hate KU as much as the next guy. But lets make fun of them for being bad at football rather than handling their books the same way everyone does.

[sonofdaxjones]

Agree with Dav . . .

There's nothing wrong with debt.   

The bigger issue for ku will be the whole ticket fraud-money laundering operation.

[Sugar Dick]

All you financial whiz bangs need to Wiki "Debt service coverage ratio"

If it's less than 1 (uk) then you're f*cked

If it's greater than 1, you're okay

[CHONGS]

I sure hope KU can find those envelopes scattered across the house.

[sonofdaxjones]

I think 06 needs to go read ku's last financial report and then get back to us.

You can't really say they're in a bad situation until the FY 2010 reports start coming out . . . but going by the FY 2008 and 2009 reports, if those revenue streams continue they'll be fine.   Provided Lew wasn't completely cooking the whole deal, which is more than just slightly possible.

[Dugout DickStone]

Agree with Dav . . .

There's nothing wrong with debt.   

The bigger issue for ku will be the whole ticket fraud-money laundering operation.

But isn't our debt going to be directly tied to revenue producing products?  If it even goes "average" can't we expect a zero sum gain on the debt?

While ku has some debt directly tied to non-revenue construction i.e. practice facility.

And I completely borrowing for capital projects is done at even the smallest institution.

[sonofdaxjones]

It's true about 80% of ku's debt went to things that by themselves don't generate any revenue. 

[06wildcat]

Agree with Dav . . .

There's nothing wrong with debt.   

The bigger issue for ku will be the whole ticket fraud-money laundering operation.

Never said debt was a bad thing, but there's good debt and bad debt. I'd classify KU's debt as similar to buying a car on credit. Yeah, you need it to get to work/stay competitive but it's also a depreciating asset.


Everything I've read/heard is that KSU's debt is going to be spent on projects that will directly increase revenue while non-revenue projects will be financed with upfront donations.

$50 million at KU isn't going to put them into Colorado territory or anything, but Lew was also banking on continued, high-level athletics to generate the donations to pay it all off in a timely manner.

[Dugout DickStone]

Agree with Dav . . .

There's nothing wrong with debt.   

The bigger issue for ku will be the whole ticket fraud-money laundering operation.

Never said debt was a bad thing, but there's good debt and bad debt. I'd classify KU's debt as similar to buying a car on credit. Yeah, you need it to get to work/stay competitive but it's also a depreciating asset.


Everything I've read/heard is that KSU's debt is going to be spent on projects that will directly increase revenue while non-revenue projects will be financed with upfront donations.

$50 million at KU isn't going to put them into Colorado territory or anything, but Lew was also banking on continued, high-level athletics to generate the donations to pay it all off in a timely manner.

I don't think Lew was counting on anything except his $6 million over 20 months.

[sonofdaxjones]

Agree with Dav . . .

There's nothing wrong with debt.   

The bigger issue for ku will be the whole ticket fraud-money laundering operation.

Never said debt was a bad thing, but there's good debt and bad debt. I'd classify KU's debt as similar to buying a car on credit. Yeah, you need it to get to work/stay competitive but it's also a depreciating asset.


Everything I've read/heard is that KSU's debt is going to be spent on projects that will directly increase revenue while non-revenue projects will be financed with upfront donations.

$50 million at KU isn't going to put them into Colorado territory or anything, but Lew was also banking on continued, high-level athletics to generate the donations to pay it all off in a timely manner.

I understand and pretty much have addressed all that . . . like I said, we'll have to see what ku's 2010 Financial Reports look like.   It's the season for that, I am pretty sure the EADA financial disclosures are due to the DOE this month.   Plus as I've said elsewhere, I've seen no other school with anywhere close to the variances in the financial reporting; EADA, NCAA, Annual Reports, USA Today Athletics Financial database, than what ku has had over the last 3 or 4 years. 

[kcchiefdav]

You can't point at KU's debt and say "but it's non-revenue generating" and then say ours is "revenue generating" and leave it at that. All of KU's debt and all of our debt is directly tied to viability of our our athletic programs. We can build $20 million worth of fancy new luxury boxes, but no one is gonna pay full price for them if the football team isn't winning. So the revenue generating isn't a given. Also, you have to remember that a large bulk of the AD's income is from TV money. So while you can say that KU's debt  funded things that don't directly generate income, but they are things that are supposed to improve the football team which will then increase TV appearances and then generate income. Now, I hope that their terrible at football and that Self leaves and they never win in hoops again and then the dept crumbles under its own debt...however, at this point, the debt is a non-issue.

[pissclams]

You can't point at KU's debt and say "but it's non-revenue generating" and then say ours is "revenue generating" and leave it at that. All of KU's debt and all of our debt is directly tied to viability of our our athletic programs. We can build $20 million worth of fancy new luxury boxes, but no one is gonna pay full price for them if the football team isn't winning. So the revenue generating isn't a given. Also, you have to remember that a large bulk of the AD's income is from TV money. So while you can say that KU's debt  funded things that don't directly generate income, but they are things that are supposed to improve the football team which will then increase TV appearances and then generate income. Now, I hope that their terrible at football and that Self leaves and they never win in hoops again and then the dept crumbles under its own debt...however, at this point, the debt is a non-issue.

this + the fact that KU could potentially negatively impact their AD revenue stream by not expanding their facilities.  overall just a really shitty job of BBS'n by 06 and EMAWZified. 

[06wildcat]

ZOMG the electric bill is revenue generating because it's directly tied to the viability of our athletic department.  

[Dugout DickStone]

You can't point at KU's debt and say "but it's non-revenue generating" and then say ours is "revenue generating" and leave it at that. All of KU's debt and all of our debt is directly tied to viability of our our athletic programs. We can build $20 million worth of fancy new luxury boxes, but no one is gonna pay full price for them if the football team isn't winning. So the revenue generating isn't a given. Also, you have to remember that a large bulk of the AD's income is from TV money. So while you can say that KU's debt  funded things that don't directly generate income, but they are things that are supposed to improve the football team which will then increase TV appearances and then generate income. Now, I hope that their terrible at football and that Self leaves and they never win in hoops again and then the dept crumbles under its own debt...however, at this point, the debt is a non-issue.

I read that to mean they were counting on generous and loyal donors to service the debt, not television revs.

Obviously, it is an editorial so not the gospel.  It's fair to say ku has borrowed themselves in to a fairly leverage position.

[OregonSmock]

You can't point at KU's debt and say "but it's non-revenue generating" and then say ours is "revenue generating" and leave it at that. All of KU's debt and all of our debt is directly tied to viability of our our athletic programs. We can build $20 million worth of fancy new luxury boxes, but no one is gonna pay full price for them if the football team isn't winning. So the revenue generating isn't a given. Also, you have to remember that a large bulk of the AD's income is from TV money. So while you can say that KU's debt  funded things that don't directly generate income, but they are things that are supposed to improve the football team which will then increase TV appearances and then generate income. Now, I hope that their terrible at football and that Self leaves and they never win in hoops again and then the dept crumbles under its own debt...however, at this point, the debt is a non-issue.

boom, roasted