I think I will make this my one and only and last post on the topic - because most people will just believe what they want, especially when fed massive amounts of agreeable disinformation:
1) Most of the marginal revenues (up-front deposits for suites, naming rights, etc) from Beaver stadium bit are front loaded, most of the expenses are back-loaded (long-term debt etc) [FWIW: Most of the other numerous capital projects within ICA are also back-end loaded - and drive NO increases to revenue. Which is neither surprising or unusual]
Even if PSU hits every one of their revenue targets (FWIW: I didn't find the revenue targets to be out of line), the expense targets were clearly fantastical ("made up" to try to show a long-term breakeven on cash flows would be a more accurate description. Even in the short time since that project was approved, expense increases blew past their "projections" like a Maserati blowing past a hay wagon. So those concerns were anything but unfounded).
Due to the front-loaded revenues, PSU ICA should - even with very poor fiscal restraint - show fairly significant positive cash flows for the next few years, but within 5-6 years, tops, due to the drop off of the one-time revenues, and the growth of the long-term expenses, PSU ICA will be significantly under water - and descending at ever increasing rates. None of this is rocket science. And it is now baked in the cake.
2) Just a FWIW, since it was mentioned: PSU is a tax-exempt educational institution. "Depreciation" does not generate cash flows (which, for a typical for-profit corporation only generate cash flows by reducing tax liability - which is essentially non-applicable, aside from a few small tangents, for an institution like PSU - thank goodness)
3) Also, since it was mentioned: The parameters of the Adidas deal are not even in the same zip code of what has been presented by PSU leadership. It is what it is. Even if they were, not nearly enough to make a dent in the fiscal cliff PSU is now committed to.
4) Any further unanticipated expenses (like the HCJF contract bit) would only further exacerbate the problems. That said, unless PSU is far more fiduciarily unwise than I would believe - the expense there will be a small slice of the numbers being widely reported. ANY expense there would likely only be enough to allow PSU to remain in the good graces of Jimmy Sexton.
5) "Breaking Even" on the ICA operating budget - which is essentially what transpired last year - is not a good thing [FWIW: Hell, they even managed to not make any substantive profit from Men's Basketball - which has always been a cash cow - much smaller cow than football, of course - for major conference schools, including Penn State]. Not even close. that would only mean you are paying your current bills, with nothing left to save for/pay off the costs of all the capital projects - and you can only pile up debt for so long before it explodes.
For some context, aside from the COVID year, I do not believe PSU ever had a year as bad as "break even" on operating budget even under Sandy Barbour (I wouldn't swear to that without re-checking the historical figures, but I believe that is correct. Maybe one of the "sanction" years?). Under Pat Kraft the financials have gotten MUCH worse, and so much of the "worse" is now baked into the cake. Think about that for a moment.
6) When the chickens come home to roost - at which point all or most of those responsible will be long gone, the options are what they are - and, IMO, none of them are good:
- Drastically reduce funding/underfund to everything but football. Trim back the ginormous bureaucracy within PSU ICA. I expect a good bit of that may happen - when the situation becomes otherwise untenable - but even that won't be nearly enough, and far too late.
- Continue robbing Peter to pay Paul. FWIW: In addition to the blooming of "standard" debt, that is, in essence, what any "Private Equity" talk does as well - should it come to fruition - which I think it will (not directly by PSU, which would likely be illegal), but via the conference).
FWIW: that deal will be net long-term negative to the conference - significantly so (Anyone should be able to figure that out) but will likely be done anyway as a pretext to move to unequal distribution/sharing among conference members, and as a "can-kick". The "haves", the OSU, Michigan, PSU types desperately want/need unequal sharing (where they get more) but they would face a very uphill battle getting enough of the university presidents (many of whom would, of course, be getting lesser shares) to agree to that outright. Going through the contortions of this "separate entity" allows them to work around that issue - but the long-term strategy is: more for the "haves", less for the "have nots". Is that good or bad? Depends on perspective, but I think anyone can see where it leads. [BTW: PSU ICA is not the only athletic department facing the same issues. Including many of the "Blue Bloods"]
- The obvious: PSU ICA being supported by university funds outside of ICA. When expenses exceed revenues, and you can no longer kick the can down the road through blossoming debt (which, of course, is a liability of the university), the difference has to come from somewhere. You can look at all of the university's revenue streams - and where can funds be siphoned off - and there are only so many options. So, exempting some minor miracle - like unanticipated lines of Donors writing out annual checks for 8 and 9 figures [Spoiler, that is not a "plan"] - it is not difficult to decipher.
