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Athletic Programs Limited by Debt
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<blockquote data-quote="Papa Doc" data-source="post: 277924" data-attributes="member: 1712"><p>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. </p><p></p><p>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. </p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Papa Doc, post: 277924, member: 1712"] 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. [/QUOTE]
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