Athletic Programs Limited by Debt

jwsavhGT

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Debt can be a tool to grow—especially when interest rates are low—but only if it’s used properly, according to the Georgia Tech athletic director Todd Stansbury. In September, he inherited a department with $226 million of debt. Most of the $13 million annual debt service, however, is linked to pledged donor contributions. “When it’s done that way, it’s both healthy and sustainable,” Stansbury said. “When it starts to eat into your operations budget, then it becomes highly problematic.”

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Gotta spend money to make money

While true, a large amount of money we have spent over the last several years has gone to places where we will get very little money back in return. We spent $50M on McCamish, $9M on the football practice facility, a bunch renovating Bobby Dodd - but outside of that I see little chance of getting a return. We spent nearly $1M per acre to buy 11 acres to develop a golf practice facility. And millions on the women's softball field, Russ Chandler baseball, $12M on the Byers Tennis facility. Dan Radakovich is doing the same thing at Clemson now that he did here. Will be interesting to watch how that all plays out.

Now having said this, I don't think its healthy to have a shiny state of the art football facility and have everything else in shambles. There are arguments to be made spreading money around among the sports.

Also, the $225M in debt (or whatever it is) has to be looked at a little differently than with a normal company. First, the source of this debt are valuable assets, like a mortgage on your house. Your house may not be a source of income for you, but it is an asset with value to back up the debt. This may be dated information, but I believe the value of the assets the Athletic Association owns is about equal to the debt. Furthermore, (again may be dated), I think the Athletic Association's endowment/investments is somewhere around $120M.

My personal opinion (and probably not very well informed, so take it for what its worth) is that this level of debt based on all information is that this is manageable. We have largely finished our major capital investments. But we should work to gradually lower this down over time - servicing the debt gets much more expensive in the out years, so we should turn the spigot off at this point unless funded with private donations and pay our bills.
 

Techster

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We also have to deal with "dead money"....paying coaches off.

Imagine what CPJ could do with the $$$ we used to pay off Hewitt? That's 2-3 extra staffers for recruiting. I would expect to see more movement to help our coaches out once "dead money" is off the books.
 

pinglett

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We also have to deal with "dead money"....paying coaches off.

Imagine what CPJ could do with the $$$ we used to pay off Hewitt? That's 2-3 extra staffers for recruiting. I would expect to see more movement to help our coaches out once "dead money" is off the books.
When does that happen? When do the contracts/buyouts end?
 

Skeptic

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Interesting article about programs that are struggling with huge debt ratios. GT is among the most indebted of all programs.

https://www.bloomberg.com/news/feat...tball-s-top-teams-are-built-on-crippling-debt
On the other end of that, I gather, might be Clemson. I read a piece the other day regarding their NC appearance that the program draws so much cash and enrollment, that even with sticking to a 70-30 freshman class SC balance and not using student fees at all, they fund other programs and improvements. Pretty remarkable for any school to do that in these times. My local college, without a football program, which ain't all bad, is really soaking students with fees to fund their basketball program, and still losing money.
 

MikeJackets

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Interesting article about programs that are struggling with huge debt ratios. GT is among the most indebted of all programs.

https://www.bloomberg.com/news/feat...tball-s-top-teams-are-built-on-crippling-debt
ESPN is bleeding subscribers badly and wont be able to bankroll College Football very much longer. Disney wont be able to stomach ESPN's subscriber losses and very well could sell ESPN off to whoever is willing to take the money losing franchise off their hands. It's also very possible in the future that the SEC Network will be cut lose or ended outright.
 
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Old School

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I seem to recall that when we expanded Bobby Dodd and the baseball stadium that the money was raised ahead of the construction (estimated to be 75 million at the time). So they had the money and chose to finance the debt at low interest. I could be wrong about that but there was big fundraising prior to expansion.
 

Animal02

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I seem to recall that when we expanded Bobby Dodd and the baseball stadium that the money was raised ahead of the construction (estimated to be 75 million at the time). So they had the money and chose to finance the debt at low interest. I could be wrong about that but there was big fundraising prior to expansion.
Money in hand or commitments? Lots of time with fundraising, the actual dollars coming in is spread out over years.
 

Skeptic

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ESPN is bleeding subscribers badly and wont be able to bankroll College Football very much longer. Disney wont be able to stomach ESPN's subscriber losses and very well could sell ESPN off to whoever is willing to take the money losing franchise off their hands. It's also very possible in the future that the SEC Network will be cut lose or ended outright.
I am of mixed mind about ESPN, leaning toward. Only because ESPN has GT games or most of them and other than Fox Sports South on occasion, and the Raycom network in NC (at least at one time) there is no way to see them otherwise. I do not like the fees because I think they are rapacious because they can hook you as they have hooked me, with just one team of interest.

But it has been years since I watched Sports Center for more than a couple of minutes and never any of their shouting and yelling shows that pass for, well, something, but it is not sports. I consider their anchors to be buffoons and too many of their broadcasting teams completely untutored in football as odd as it sounds. In nine years or so of GT on ESPN I bet there haven't been more than a couple of analysts who knew what they were talking about with Johnson's offense. So one side says good riddance and lower fees and the other, winning, side says I'll put up with them given the alternative. I'll even pay more if they can coherently explain why a Stephen A. Smith is allowed on television.
 

MikeJackets

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I am of mixed mind about ESPN, leaning toward. Only because ESPN has GT games or most of them and other than Fox Sports South on occasion, and the Raycom network in NC (at least at one time) there is no way to see them otherwise. I do not like the fees because I think they are rapacious because they can hook you as they have hooked me, with just one team of interest.

But it has been years since I watched Sports Center for more than a couple of minutes and never any of their shouting and yelling shows that pass for, well, something, but it is not sports. I consider their anchors to be buffoons and too many of their broadcasting teams completely untutored in football as odd as it sounds. In nine years or so of GT on ESPN I bet there haven't been more than a couple of analysts who knew what they were talking about with Johnson's offense. So one side says good riddance and lower fees and the other, winning, side says I'll put up with them given the alternative. I'll even pay more if they can coherently explain why a Stephen A. Smith is allowed on television.
I watch the games on ESPN with the sound turned down and the Sports Network of what ever team i'm watching turned up on the computer. I would watch ESPN a lot more if they weren't trying to be MSNBC light.
 

Papa Doc

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Incurring debt for capital expansion or improvement is not a bad thing, but the looking at the revenue sources supporting the debt service speaks to the strength of the deal. Most collegiate capital projects are funded by municipal bonds or other like instruments and secured by revenue pledged over time from direct income of pledged gifts. This is done knowing that a percentage of pledges will not mature for many reason: loss of expected income by a donor, contested wills, just changed their minds, etc. Variances in revenue, regardless of the source, strains other resources.

Side note: In terms of an asset, new or improved properties do have an asset value, but normally they cannot be liquidated like real estate, only re-purposed for another use by the institute. Hard to sell a land-locked football or baseball stadium to an investor for the value of sunk costs over time even if it's desired to do so.

I didn't post article as a critique or to say GT's approach was wrong or out-of-step. I did so because I think it shows a bigger problem for all collegiate athletics in the near term. It also demonstrate the limitations inherited by our new AD as both our fan base and coaches ask for more resource investments when limits on the revenue to support it may already be reached.
 

Skeptic

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Livin' large on debt. That's the way of the land. Go 'Murica!
Well, despite doomsayers the country could in fact carry a much bigger debt load if necessary, and much of that debt is owed American investors in bonds and notes. Still debt, but keep it in perspective. Now, as to individuals, some of it is utterly ridiculous, I agree.
 
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