Okay. And if Penn State is taking in less money when it comes to donations, or is generating less revenue, how is that Barbour's fault? What, specifically, has she done that is either hurting attendance or causing a drop off in donations?
There are two elements to a cash flow statement.
One of them is "Income".......any idea what the other part is?
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And - when you say - "But...but...but....."
PSU ICA is only $20,000,000 in the red during Barbour's - thus far - brief tenure.
But that's OK - - - - she's not done yet
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Here is the report that was issued after the investigation into the Financial Debacle at Cal Athletics (under Sandy Barbour):
http://vcaf.berkeley.edu/…/…/stadium_report_final_041513.pdf
The report is quite lengthy (about 100 pages), but the synopsis is:
1 - Exploding Administrative Costs and Proposed capital spending plans (for projects who's benefit to the actual student-athletes is often - at best - nebulous and tangential)
2 - Although the funds for the project are not available, propose that the necessary funds will be raised through some projected "future revenue streams"
3 - Costs balloon to double the original estimates.....and the "future revenue streams" never materialize (or at least not in nearly the amounts projected)
4 - The institution - since the money was already spent - goes into deep debt to pay off the projects. The institution is saddled with crippling debt for a lifetime (or two)....hamstringing the ICA from being able to provide the resources to actually....you know...support student-athletes.
THIS IS THE BARBOUR GAMEPLAN......and it is playing out right in front of our noses here at Penn State.
IF YOU HAVEN'T SEEN THAT - You are either:
A - Not paying attention....or simply don't care.
B - Lacking the intellectual ability to digest information.
or
C - Realize what is going down, but somehow too conflicted to recognize it.
Do we REALLY need to review ....AGAIN......Sandy's:
Staff and Admin Explosion?
Personal Salary, Expenses, and "Personals"?
Unfunded Capital Projects?
Now...since we haven't yet had time to personally witness the fallout effects of Tsunami Barbour here at PSU.....just to see what's coming down the road:
Let's template the Tsunami's actions to date at PSU....with her (nearly identical) actions at Cal....and see where they lead:
An excerpt (from pages 13-14 of the report):
"A common theme in these articles, often quoting Roger Noll, an outside expert in the field, is that the revenue and fund-raising forecasts for the stadium were very optimistic. For example,
New York Times, September 15, 2011:9 “It’s ambitious, and it’s optimistic,” said Roger Noll, a Stanford economist and a leading academic authority on stadium financing. “And, unfortunately, they’re going to have to commit to spending $350 million before they know whether they’ll get the revenue. . . ” The low percentage of donors who have paid up front worries Mr. Noll, the Stanford professor. “That strikes me as a warning sign,” he said.
“People have bought the right to have tickets for a few years, but they haven’t really bought into the endowment part.” Mr. Noll said he believes the E.S.P. will fall $50 million to $100 million short of plan.
Insidebayarea.com, April 20, 2012:10 Stanford economics professor Roger Noll, an expert in stadium financing. . . , consulted with Cal’s faculty budget committee while the financing plan was being created. He believes the fund-raising goals were “extremely ambitious,” especially when compared to similar projects at Texas and Michigan—huge state universities that have first-rate academic reputations but more football tradition than Cal. “Cal’s proposal was based on the expectation of raising three-to-five times the amount of the other schools,”
Noll said. “That seemed implausible.”
CBS news, May 9, 2012:11 “I feel really sorry for the faculty and students of Cal because there is going to be a huge financial hit a couple of years from now,” said Roger Noll, a stadium financing expert and emeritus professor at Stanford University. . . . “At this point, being 15 percent there in terms of cash in the bank and half way there if you get everything you planned from those people who made the down payment, is really scary,” Noll said.
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Here is another little dandy from the report (page 15)
Outlined on this page are the original (and revised) forecasts for "seat sales" for each stadium section.
We could look at any section, let's pick Field Level A as a "for instance"
The original projections (which still wouldn't have generated the necessary revenues) had the following for Field Level A seats:
Sales in 2010 and 2011 - 611 seats
Sales thereafter (2012 and 2013) - 122 seats
So, what actually happened in 2010 and 2011?
They sold 398 seats....not nearly the 611 projected (over 30% lower than projections)
So, what did they do? Realize their "expectations" were too optimistic?
No.
They "revised" their projections for 2012 and 2013........UP from 122 seats to 406 seats
They "missed their mark" by over 30%.....so - to make up for that lost "revenue" - they just took out the eraser and assumed that moving forward they would not only "make their mark", but actually exceed their projections by over 200%
You can't make this shit up! (Well, actually, "making it up" is the ONLY way to get to where they got)
ENRON has nothing on Sandy!
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Page 17 "Investment Earnings" has another dandy:
Once you weed through the bullshit (and even a non-finance person should be able to see this, if they know what to look for) the synopsis of this section is as follows:
1 - We spend a bunch of money we don't have.....and take on debt to pay for stuff.
2 - When we bring in revenues (which, as we all know now, were WAY below the revenues they projected....but lets go ahead and look at the "plan")...we don't use the revenues to pay down the debt, but instead we......
3 - Don't pay down the debt (that will be someone else's problem, well after we are out of town) but instead invest the revenues into riskier more highly volatile investments.....and assume we will reap a big return on them.
4 - We later take the profits from the big returns and use that (presumably) to pay down the even larger debt load in the future.
Investors know EXACTLY what this is. It is BUYING STOCK ON MARGIN.....borrowing money in the hopes that when we invest it we will earn a higher rate on the investments than the rate of interest charged on the debt.
Now, if this was a sound strategy for a University....why wouldn't they have done it (borrow a bunch of money and invest it) 20 or 30 years earlier?
We know why. This type of "investing" led to the Market Crash of 1929....and is the reason why markets now require investors to put up at least 1/2 of the money in cash (no more than 1/2 in borrowed money) when they buy stock......and EVEN then many/many folks lose their ass buying on margin.
It ain't "rocket surgery".
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BTW - Who DOES make out like a bandit in a scenario like this?
Think about it for a minute.......
THE FOLKS WHO MANAGE THE UNIVERSITY'S INVESTMENTS. They take a cut no matter whether the client makes money or looses their ass.
The more they have in the investment pot, the more they make.....no matter what else happens
BTW....guess who manages that big investment pot here at Penn State?
I ain't gonna' say....yet....but folks can look it up, and when they do I don't think they will be surprised at the answer.
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The recent vote (this was actually almost a year ago....at the time this was written up) to approve another $12 Million in Lasch Building Renovations
It was a unanimous vote.....but - as opposed to how these things used to be handled - there was significant debate and voicing of concerns.
SOME NOTES FROM THAT MEETING:
In the end, Penn State trustees said "Go Lions," as they voted Friday to proceed with a $12 million renovation to the football team's headquarters.
But not everybody was happy about how the deal came to them.
The vote came only after several trustees raised objections to green-lighting construction on what has been defined as a 100 percent, donor-supported project when the donations aren't completely in hand.
"The money ought to be in hand at the time the board is asked to approve a project on this basis," Trustee John Hanger, Gov. Tom Wolf's representative on the board, said when the Phase II Lasch Building renovations came up.
Penn State President Eric Barron confirmed that not all necessary pledges have been locked down yet.
Barron also assured the board that fund-raising for the Lasch renovations are on track, and that if there are surprises that throw it off, he would only tap unrestricted donor accounts to finish it off.
GUESS WHAT? Nearly a year later - - - - and we continue to spend money, that we don't have, on ICA projects.
And NO ONE says BOO!
And it sure won't be the mouth-breather, short-sighted Fans.
Certainly, when projects do indeed "Barbour" (cost explosions and failure of the financing plan to come to fruition) we should all be holding their feet to the fire, and the Governance board should respond appropriately (by becoming more directly involved and/or replacing the managers......
though I have a large amount of skepticism that the majority of the BOT would react appropriately. (to say the least - especially when several of them directly profit from the failures)
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But all the majority of fans care about is:
How many times Sandy Baby can say "JVP" and "409" and "Success with Honor"
I don't think anyone would argue that an AD - at PSU - should NOT say those things.....or even that saying those things may not be a good thing to do.
But, to act as if that stuff was the "success criteria" for some Dumbshit given a $1,000,000+ salary and placed in charge of a $100,000,000+ per year operation? Really?
And don't even try to argue that MOST PSU "fans" place a hell of a lot more emphasis on that crap than they do on the ability to actually successfully run the $100,000,000 business.......because that would be a laughable contention
(If for no other reason: the large majority of fan-boys have neither the intellect not the energy nor the desire to actually investigate what it takes to successfully run a $100,000,000 athletic department)
God help us.
