College football's financial woes

coit

coit

Persecuted for his beliefs
Joined
Nov 29, 2007
Messages
88,495
 
I still wish we never expanded the stands at BDS - save that $$ for the AA

(and also they were building it during finals week so I still have a grudge from living in the fraternity house across the street)
 
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Nice bit of bad statistics here:

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Somehow, P5 schools have gone down 0.6%, G5 down 3%, but "All FBS Schools" are down 4%. That's because FBS expanded from ~115 teams in 2009 to 130 teams in 2016. The low attendance of new schools like Georgia State brought down the FBS average more than the G5 average.

Even the 0.6% decline in P5 schools is partly from additions from Big East and other conferences over that timeframe. Meanwhile, the first article also cherry-picked Kansas, a clear outlier from BCS team to basement-dweller.
 
well thats depressing. Guess I will force myself to like soccer since that's apparently all I will get to watch in the near future.
 
floridajacket said:
Somehow, P5 schools have gone down 0.6%, G5 down 3%, but "All FBS Schools" are down 4%. That's because FBS expanded from ~115 teams in 2009 to 130 teams in 2016. The low attendance of new schools like Georgia State brought down the FBS average more than the G5 average.

Even the 0.6% decline in P5 schools is partly from additions from Big East and other conferences over that timeframe. Meanwhile, the first article also cherry-picked Kansas, a clear outlier from BCS team to basement-dweller.
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Yea this analysis is meaningless without the raw numbers.
 
It's worth noting that GTAA's balance sheet also has $110 million in financial assets. I don't mean fixed assets net of depreciation, but financial assets held by the Georgia Tech foundation.

So the net financial debt is $115 million. The balance sheet also has $9 million in long-term pledges to the foundation as a noncurrent asset, which includes allowance for uncollectible pledges receivable. That brings down the financial debt to $106 million.

The book value of the GTAA is $77 million, but book value is kind of worthless for valuation. Book value is how much is paid for your capital minus depreciation. The depreciation schedule is guesswork. Are the north stands going to be good for 25 years or 50 years?

I would compare the $106 million in net debt to how much the GTAA would be worth if you could buy the athletic assets free and clear (not including the investments). Operating income was $2.8 million in 2015, only $150k in 2014 and -1.7 million in 2013 (peak of paying coaches not to work). I'm including depreciation because as the free and clear owner of the GTAA, you would have to replace depreciated assets. All of the operating income includes a $900k payment to Hewitt through 2019:

Contract agreement-current portion consists of short term contractual payments due to the former Head Men’s Basketball Coach whose employment with the Association ended in April of 2011. As required by contract, the Association will make payments totaling $906,250 each fiscal year through the end of FY 19.
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The increase in operating income from 2014 in 2015 was mainly due to $8mil more from ACC revenue distributions. Without Hewitt, the operating income would have been $3.8 million. Being charitable, I'll use that number dividend of perpetuity. I'll also only use 5% discount rate. (3.8)/(5%) = $76 million.

So that means the GTAA with $106 million of net debt has a worth of -$30 million. Over the long-run, it will be made up with two different things:

1. Financial arbitrage. The bonds are long-dated and, I think, are tax-deductible municipals. The investments are part of the ~$1.8 billion GT Foundation endowment. There theoretically should be long-term returns from this leveraged, low-cost portfolio.
2. Possible higher future endowment contributions. The operating income includes endowment contributions.

Ultimately, there is a backstop by GT itself and GT will subsidize the GTAA like how most AA's are subsidized. GT had $1.2 billion in operating revenue a year and a $1.8 billion endowment. So the $30million negative net worth could certainly be absorbed in the end.
 
Debt isn't as much of a problem as the ability to service the debt.
 
TampaBayJacket said:
Inquiry minds wanna know
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Assuming the last post was tl;dr:

1. $111 million is the 2001 bond issuance.
2. $20 million variable rate bond renewed annually by Northern Trust from 2008.
3. $89 million bond issuance in 2011 ($50 mil. for McCamish Pavillion, $9 mil. for practice facility).
4. $9 million bond from SunTrust to purchase golf practice facility.

Then there is the $100 million portion of the endowment managed by the Georgia Tech Foundation, which should be netted from the total debt.
 
If colleges and universities were being build from the ground up today attaching these big bloated athletic programs to them would make no sense whatsoever. In fact I doubt anybody would think to do it if it wasn't already an ingrained part of the culture. It's like if sheet metal work was something people really liked to watch we'd get a really good group of sheet metal workers to compete against other groups of sheet metal workers.

Colleges would be interested in developing the whole student and do something in that regard for the whole student body, like they do, but putting so much into getting a bunch of independent contractors to beat somebody else's independent contractors wouldn't make any sense.

All the moving around to leave for the NFL or go somewhere else because the ball isn't working out proves it is a charade. Players almost exclusively transfer due to issues with their sport. You almost never hear of a successful athlete transferring because his major isn't working and another school offers something more to his liking. Transferring and getting the courses you have already passed to work in a new degree program is usually a bitch.

That all being said, come football season I will be as irrational about it as anybody else, may as well, it ain't changing and it is entertaining.
 
floridajacket said:
It's worth noting that GTAA's balance sheet also has $110 million in financial assets. I don't mean fixed assets net of depreciation, but financial assets held by the Georgia Tech foundation.

So the net financial debt is $115 million. The balance sheet also has $9 million in long-term pledges to the foundation as a noncurrent asset, which includes allowance for uncollectible pledges receivable. That brings down the financial debt to $106 million.

The book value of the GTAA is $77 million, but book value is kind of worthless for valuation. Book value is how much is paid for your capital minus depreciation. The depreciation schedule is guesswork. Are the north stands going to be good for 25 years or 50 years?

I would compare the $106 million in net debt to how much the GTAA would be worth if you could buy the athletic assets free and clear (not including the investments). Operating income was $2.8 million in 2015, only $150k in 2014 and -1.7 million in 2013 (peak of paying coaches not to work). I'm including depreciation because as the free and clear owner of the GTAA, you would have to replace depreciated assets. All of the operating income includes a $900k payment to Hewitt through 2019:



The increase in operating income from 2014 in 2015 was mainly due to $8mil more from ACC revenue distributions. Without Hewitt, the operating income would have been $3.8 million. Being charitable, I'll use that number dividend of perpetuity. I'll also only use 5% discount rate. (3.8)/(5%) = $76 million.

So that means the GTAA with $106 million of net debt has a worth of -$30 million. Over the long-run, it will be made up with two different things:

1. Financial arbitrage. The bonds are long-dated and, I think, are tax-deductible municipals. The investments are part of the ~$1.8 billion GT Foundation endowment. There theoretically should be long-term returns from this leveraged, low-cost portfolio.
2. Possible higher future endowment contributions. The operating income includes endowment contributions.

Ultimately, there is a backstop by GT itself and GT will subsidize the GTAA like how most AA's are subsidized. GT had $1.2 billion in operating revenue a year and a $1.8 billion endowment. So the $30million negative net worth could certainly be absorbed in the end.
Click to expand...


Don't you think all of the other schools have financial assets as well?
 
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