(12-26-2012 10:45 PM)PEO16 Wrote: You're telling me that UAB has the money - cash in hand raised from supporters or athletic operations - for a new stadium? Even the plan that the Board rejected wasn't cash in hand.
Per the link, UAB operational expenses were subsidized $14 million in 2010, or 59% of the budget, the highest in C-USA. That is what gives the board the cover to reject things like new stadiums. It's the never-ending circle. Revenues lag because of the attendance which is a result of losing. You can't correct the losing without either a) a miracle coach or b)a big investment into facilities and budgets.
http://usatoday30.usatoday.com/sports/co...able_n.htm
Hrmmm...not sure a) how old you are, and b) what you do for a living, but here goes: The Powerball scenario was a strawman, built solely for the purposes of knocking it down to prove my larger point which is (and I'm trying not to bore the rest of the conference so I'll be as brief as possible):
- All but just over a dozen FBS athletics programs are subsidized. Alabama, in fact, receives a $5 million subsidy from the University every year. The size of our subsidy is definitely large compared to our conference brethren, but as our "money sport" has suffered so much that is to be expected.
- Here, though, is your problem: Do you remember Sony's Playstation 2? And then the Playstation 3? How about Microsoft's Xbox? There were almost innumerable articles written in the early days of the Console War about Microsoft hemorrhaging money
in it's console division (an important distinction). They continued being written as Microsoft continued to lose money on the Xbox and then Xbox 360. Then, suddenly - like it was a strategy or something - Sony fell back. Their developer base was stale and incremental advances in Microsoft's product made it simply better. The critical point is that
although the console division was losing massive amounts of cash, Microsoft as a whole just happened to have a whole lot of that on hand. Like, enough to slowly bury Sony's Playstation one bit of dirt at a time.
Sure, UAB gets money from the University...although it's not the $14 million you stated (that number includes the costs of Grants in Aid - Schollys - which are not, by GAAP standards, included in the athletics operating budget). Still, let's act as if it is. UAB, the institution that chooses to fund athletics for some reason (we'll get to that), has net assets as of FY2011 of $2.34 billion. Also, in FY11, the University had Operational Expenses of $2.48 billion against Operational Revenues of $2.25 billion plus Non-Operational Revenues (Federal Grants, Endowment, Capital appreciation, etc.) of $328.8 million...for a Net Increase in Assets of $102.3 million. If you don't have a calculator handy, your $14 million is 0.056% of the University's Operating Expenses.
2) Now, why throw even 0.056% of the budget into a black hole every year? Clearly someone must have asked that question. The obvious, stupidly obvious but still missed by many news people who cover sports (wait, that was kind of redundant), answer is that it has to be seen as some kind of investment. Microsoft didn't see money come back from their Console operations for all those many years...
BECAUSE THEY DIDN'T EXPECT TO!. It was a strategic decision based on Microsoft's vision of the future of their industry and their strengths and weaknesses against their main competitors. Likewise, the University
INVESTS 0.056% of its budget in an FBS athletics program...spending that, since 1996 when football started play at this level, seems very proportional to a sudden and persistent rise in size of Freshman classes, # of students living on campus, % of out-of-state students enrolled...FBS football, in short, is a marketing tool that raises the profile of the University in this uniquely American industry. Could UAB choose to spend that money elsewhere? Sure. They could do that tomorrow. It's driven by the Vision outlined by our Administration. If they decided to spend that money on teachers and eliminate football, fine...but we went down that path and were forced to make a strategic change when market dynamics changed. The money has been successful in producing the results expected. Yeah, I really don't see UAB re-thinking that line in the budget.
3) Now this will really burn your biscuits. Ready? Name for me one, just one, capital project (um, that means "very expensive") related to athletics facilities that was funded 100% by cash on hand. Any conference, anywhere, anytime...I'll wait.
*wow, pr0n sure has gotten strange over the years*
Alright, so what did you come up with? Nothing? Not one project? But isn't it smarter to pay cash than use credit cards? Here's where you're just going to have to trust me: in this instance? No. Quite the opposite, in fact. So, when UAB is going to build an OCS (and this is plainly stated in the plan you say you saw...it is, I'm just joshing, I know you saw it) they will issue bonds. But if UAB is paying 0.056% of its budget on stupid football, they must be drowning in red ink!! No way they could take on more debt service (i.e., interest on the bonds)! Um, nope. The ratio of Expendable Resources to Debt for the University is a healthy 1.58. In fact, if you remove the hospital the University alone is at an astonishingly healthy 2.35 ratio.
So, today we've learned that Operating Expenses and Revenues do not exist in a vacuum, that organizations many times decide to spend money for strategic purposes with returns evident either in other seemingly unrelated areas or years down the line, and that no University - including UAB - gathers up cash and writes the Stadium Fairy a check, with a little tip on the side, to get to work.
Well, then...the UA BOT must have plainly seen that the financial plan - incorporating all I said above - for the OCS was horribly flawed, doomed to failure, and could not responsibly approve the proposal. First, if they did see that it was in private - an illegal act according to Alabama's "Sunshine Laws" - as the proposal was
never discussed publicly. Second, in all my years of doing what it is that I do (very well, I might add), the financial plan for the OCS was one of the most conservatively solid funding and revenue models I have ever seen. The revenue-neutral point as pegged at an average of 16,500 people per game. Since turnstile counts began in 2001, UAB has averaged just under 20,000.
Well the timing must be horrible right now for floating bonds and construction costs sky high!! Ok, you're a farmer, right? I guessed it didn't I? Bond rates are ridunkulously low right now...but who knows how long that will last. Construction costs were even more ridunkulously low - relatively speaking - but have begun trending upward. If you wonder whether the BOT was aware of all this, at the same meeting where they unofficially-officially disapproved the officially submitted OCS proposal (definitely not in any side meeting/conversations that the public had no access to) they approved floating bonds for a $15 million fraternity house to
replace an existing, functioning, less than 20-year-old house because they found a better location.
4) We're almost done...hang in there, Farmer Joe! Well, of course the Tuscaloosa campus can float bonds when it wants...it's the flagship university of the system! Um... I mean, look at football! Tuscaloosa probably keeps UAB's light bill paid. Actually...I mentioned back a ways (you can go look, I'll wait) Back? So, I mentioned that UAB's Operational Revenues were $2.24 billion. From the same year's (2011) fiscal report out of Tuscaloosa, UAT reported Operational Revenues of $544.8...wait for it...Million. What? Crazy, right? I know! UAB generates
76.6% of the Operational Revenue for the UA System.
Wowee!!! 76.6%?!? Well, if the OCS was kneecapped, it must be that UAB is using up their ratio of revenues on existing debt service. Let's take a look: again, from FY2011:
UAT:
- Invested in capital assets, net of related debt: $598.4 million
- Total capital assets, net (i.e., minus depreciation): $1.127 billion
UAB:
- Invested in capital assets, net of related debt: $754.0 million
- Total capital assets, net (i.e., minus depreciation): $2.14 billion
So, UAB contributes 76.6% of system revenue, but is only leveraging 55.7% of the debt service. BUT, UAB does have 65.5% of the Total capital assets. Yeah, not so fast...UAB includes the Hospital and it's related properties. I'll let you guess how much capital must be invested in a world-renowned research institution as opposed to, you know, a dorm, parking deck, or $65 million OCS.
Oh, and while you're at it, Tuscaloosa does
NOT have a hospital with its related capital investment...what in blue hell could they own that has their debt service nearly equal that of an advanced, international research institution in the middle of a major urban city? I mean, something like that - or many projects like that - would have to take up a helluva lot of space so it would be VERY conspicuous. Hmmm...beats me, bro. I just post here.