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Saturday, October 29, 2011

KU athletics department says $58.8 million debt ‘manageable’

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According to documents from Kansas Athletics Inc. and an interview with its chief financial officer, the athletics department owes about $58.8 million in debt as of the end of the 2011 fiscal year, which ended June 30.

Susan Wachter, Kansas Athletics’ chief financial officer, said the debt was “all very manageable.”

“The debt’s there, but it’s not something we can’t manage,” she said.

Jim Marchiony, associate athletic director, said the debt shouldn’t affect the other athletics operations.

“As long as it stays manageable, it will not and should not hamper us in any way,” he said.

During the last fiscal year, Kansas Athletics spent about $2.5 million on payments toward its debt, according to its financial statements. In addition to these payments, Kansas Athletics is also putting some money aside for a contractual obligation for men’s basketball coach Bill Self, who will be due a $2.1 million retention bonus from his contract in 2013. That payment — similar to retention bonuses for former athletic director Lew Perkins — will be tax-free for Self, so Kansas Athletics will likely pay Self an amount similar to the $3.59 million in gross bonus pay it paid to Perkins in 2009. Wachter said Kansas Athletics is aware of the coming payments and has been setting money aside to cover it.

Here’s a breakdown of where the department still owes money and when it should fall off the books:

Facilities Revenue Bonds: $44,255,000

This category encompasses most of KU’s current debt load. Wachter said the bonds are paying off two major projects:

  • Renovation to the football stadium undertaken while Bob Frederick was the athletic director.
  • Major renovations done to Allen Fieldhouse, which were completed in 2009.

Wachter said Kansas Athletics was able to refinance the football stadium debt at a lower interest rate in 2004.

Kansas Athletics paid about $1.2 million as a debt payment for the projects in the 2010 fiscal year. Wachter said the football stadium debt is set to be retired by the 2023 fiscal year, and the Allen Fieldhouse renovations should be paid off by the 2033 fiscal year.

Notes payable on Anderson Football Complex: $6 million

Wachter said Kansas Athletics will owe $6 million to help pay for the Anderson Football Complex, but, because of the way the debt is structured, the entire $6 million will be due in one lump-sum payment in 2017.

The Anderson Football Complex was completed in time for the 2008 football season. Most of the funding for the project came from private donations from Dana and Sue Anderson, former basketball team captain Tom Kivisto and his family, and other donations.

Contributions payable to the university: $4,727,489

Kansas Athletics has an agreement with KU to pay for some of the debt associated with the Ambler Student Recreation Fitness Center, Wachter said. The athletics department’s payments supported the building of new gyms in the building.

The athletics department paid $465,000 to the university last year, and its total obligation is scheduled to be paid by June 2020, Wachter said.

Long-term debt on Jayhawks Tennis Facility: $2,537,973

The athletics department spent $3.1 million in 2010 to purchase the First Serve Tennis Center at 5200 Clinton Parkway from Mike Elwell.

Kansas Athletics paid $61,040 on the debt associated with the purchase last year and is scheduled to have it paid off by June 2015.

Capital lease obligation for Allen Fieldhouse video board: $1,245,317

Kansas Athletics paid just more than $571,000 toward the debt on the video board last year, and the entire debt is scheduled to be paid by the 2013 fiscal year.

Comments

kusportsdotcom 10 years, 9 months ago

Perfect. What's another few million to buy out Gill if we already owe 58.8 million?

flyingfinn 10 years, 9 months ago

Agree as long as we're in debt lets spend a little more to get rid of him and find a real coach PLEEEEEEEEASE!!!

Mike Barnhart 10 years, 9 months ago

It's actually a solution to the problem. Fire Gill, hire a winner and sell a ton of tickets while raising prices along the way.

Bad football team = poor athletic budget

Rob Zerwekh 10 years, 9 months ago

I guess we'll keep the stadium track for a while.

Jeff Coffman 10 years, 9 months ago

I always that we should have a bring your own shovel "and backhow" day at the stadium.

Jeff Coffman 10 years, 9 months ago

One note is that you should have an accountant review your articles on finances. You refer to the Facilities Revenue as Current Debt. Current means the debt is due this year (in the next 12 months). Clearly this is not the case, please reword your article to be accurate. I believe that you mean that there is $44MM on the Balance Sheet and that only $1.2MM is current debt.

Facilities Revenue Bonds: $44,255,000 This category encompasses most of KU’s current debt load.

Also as mentioned above, please start accruing for the payout for Turner Gill's Contract. I'm hoping the SZ can negotiate a buyout.

rockchalk_dpu 10 years, 9 months ago

There is no way that SZ can negotiate a buyout of Gill's contract. Its been fairly well documented that Lew stuck us with a horrible contract when he signed Gill on for a 5-year deal worth $10 million, no buyout (and I thought NBA contracts were horrible). While Gill is a nice guy, he is not going to back out and give up money owed to him should the athletic department choose to go in a more successful direction, and I don't think anyone else in that situation would despite the fan base's beliefs to the contrary.

That being said, we should probably start looking for ways to raise roughly $12 million; $6 mil for the remaining 3 years, the other $6 mil to be used in getting rid of his staff, and bringing in a solid staff committed to righting the ship. I hate saying it, and this isn't really the article, but I've been a supporter saying he needs more time and I still believe that changing staffs every couple years does more harm than good, but this has reached the point where we need to accept the mistakes of the last administration, cut our losses and move on.

I'd also be interested (Andy) if you could put together a list of other athletic departments in the Big 12 so we could see how our level of debt compares with other schools.

RCJGKU

Eric Williams 10 years, 9 months ago

You realize that only the tennis center and big screen for Allen was undertaken while BGL was Chancellor. The rest occurred under other Athletic Director's and Hemenway.

Secondly, Hemenway/BGL have zero responsibility. It's not University of Kansas debt, it's KU Athletics Department debt. The 2 are separate entities.

FreddyinLA 10 years, 9 months ago

BLG signed the Turner Gill contract. Go look for yourself.

jakzhumans 10 years, 9 months ago

Ah, yet another LJW article about debt that never mentions the other side of the ledger...assets, and more particularly, revenue. Citing debt levels and the plan to pay for them without also providing some kind of evaluation of the revenues that will be used to offset them pretty much makes this a completely meaningless article. It's all about context. Annual debt service of $2.5 million is an enormous problem if the athletic department's revenue stream can't support it, but since we all know that revenue stream is considerably larger than that, you really do have to cite the overall budget, debt service included, to tell us anything about why this debt should matter to us. How does this compare to other colleges, or at least other Big 12 schools? How does the added revenue from the new Big 12 television contract impact this picture?

This is sort of journalism 101, is it not?

Saguaro_Jayhawk 10 years, 9 months ago

You are correct.

Annual debt service payments are < 5% of total annual revenue, thus an easily manageable level.

KU_cynic 10 years, 9 months ago

Yes, the article lacks a discussion of revenues vs. debt service.

A few observations:

  1. Much of this debt was assumed around the time of the football Orange Bowl victory and the basketball national championship, and pretty much before the financial crisis and recession. There were assumptions made about ticket sales, football attendance, media revenues, and sustained donor giving at that time which probably have never been fully realized. KUAC "bet on the come" in a lot of ways. How far off is KUAC from those assumptions -- given lackluster football ticket sales, fewer football media and post-season revenues, 2011-2012 men's basketball tickets that are still not sold, and some likelihood of donor fatigue?

  2. Case in point: Does KUAC still carry the Kivisto pledge at face value?

  3. KUAC CFO Susan Wachter seems like a very nice lady. Given the lack of internal controls that led to the ticket office scandal, however, I can't help but wonder if KUAC really has a good handle on its finances.

pepper_bar 10 years, 9 months ago

This article makes no editorial claims either way about whether KUAC can support its debt. It lays out what is owed, and offers the KU reassurance that it is under control. Journalism 101 is that articles can't be all things to all people. This article is fine.

milehighhawk 10 years, 9 months ago

Yeah, that's not correct at all. The pricetag in the headline is intended to be shocking, as it seems like a large figure. The lack of context, both with respect to incoming revenue and comparison to other institutions makes it a flimsy article. Of course they need a comment from KUAC, otherwise it would be devoid of any quotes whatsoever. The presumption in your comment is that Journalism 101 articles are fine for the LJW, and I think that any responsible journalist would recognize how the article may be interpreted, and therefore should try to present as complete a picture as possible.

Andy Tweedy 10 years, 9 months ago

We're never going to get rid of that stupid track!

McGuzzo23 10 years, 9 months ago

I take the article with a grain of salt. They are just listing out all the mortgages or renovation projects we did. It's like a home equity loan to make improvements on your house and you are paying for it over many years. The LJW makes a good way of painting it in a different light that's for sure. It's really a worthless article. I would say we should have plenty of money to buy gill out with just university funds and probably wouldn't need private but I know BGL won't go for that. I'm pretty impressed that we only have this amount of debt. In america if you don't have some sort of debt you aren't trying hard enough.

gchawk 10 years, 9 months ago

I'm glad the revenue bond was refinanced in 2004, but what is the reason it wasn't further refinanced in '09 or later? Most bonds issued after 2000 have a 5 year call provision, and if that's not the case in this situation it demonstrates poor business skills.

Enoughsaid 10 years, 9 months ago

This makes me sick, college athletics has come down to it all about the money. Giving Coach Self a 2.1 million retention bonus, tax free. The blue collar employees of the athletic's and KU support staff barely make a living, let alone a tax free bonus.

Should College Football Coaches be paid more then Professors? By the way I was at the last home football game and and noticed one of Gill's staff driving one of the Athletic's Dept vehicles with a Missouri dealer tag. I thought KU Athletic's got censored by the state for running dealer plates on their vehicles. Since the Athletic Department is getting limited on funds, maybe they can give staff members bicycles instead of luxury vehicles.

Mike Skiles 10 years, 9 months ago

Suggest you get off of this sports board then, if you feel that way. To not acknowledge competitive payment for one of the top 3 coaches in College Basketball is beyond childish. Jeeez, why don't you form up a 'occupy KU athletics' protest? LOL

rockchalk_dpu 10 years, 9 months ago

+1 (though don't give this nut bag any ideas cause there's definitely the people in Lawrence to carry that out)

Chad Dexter 10 years, 9 months ago

It's pretty simple, really. Self's value is that he brings in a ton of $$ to the AD every year. Therefore, he is worth that $2.1, easily. Professors don't bring in the kind of $$ that Self does. Whether or not you like the idea that a coach gets more than a teacher is irrelevant.

kuilander 10 years, 9 months ago

Self is worth every penny of that and more to the school and its fans.

kureader 10 years, 9 months ago

Agree with a number of posts above. LJW, go find a financial advisor who can help you put financial information into context. So, what's your conclusion, LJW ... does KU have too much debt or not? Your article was worthless.

LJW, here are ideas for future article about KU's finances. Was the KU athletic department, under Perkins, financially succesful or not? I say "not", but maybe I'm wrong. Perkins did improve facilities, but he didn't do that much of it with contributions. He did it with borrowed money, and he left KU with more debt than when he started. I also think much of the revenue increase at KU came from television and advertising agreements that occurred with most other BCS schools too. In this regard,Perkins did nothing more than the other Big 12 AD's. While Perkins did conviscate a lot of money from KU's basketball fans, he squandered much of it on a very large administrative staff (as many as 15 assistant AD's making an average of $125k/year) and employee/coaching "buyouts". By year's end, KU will pay 12 million to Mangino, Perkins, and Gill to NOT work at KU. And, because there was very little oversight, Perkins managed pay himself more than any AD in the country. And, he manipulated KU to the very end with, what was essentially, a $3 million dollar severance. Perkins' financial accomplishments (or lack thereof) would be a great subject for another article, LJW. Since the article will probably be negative, perhaps Keegan should write it.

As for the 6 million dollars still owed from the Anderson Sports Complex and practice field, is it a coincidence that this is about how much Kivisto promised but DIDN'T PAY? KU had pledges for 100% of this project. Kivisto's pledge was 12 million, yes? In the end, Kivisto was able to get KU's football field named after him for 4 or 5 million. What ever happened to him?

gchawk 10 years, 9 months ago

This was my point earlier, as this is what I do. Since '04, interest rates on bonds have dropped approximately 200 basis points, which refinancing alone at the current debt level would lower interest owed around $1million. Maybe they have non callable bonds, but, again, if they do, that's not very savvy business.

WaxAndWane 10 years, 9 months ago

From a financial standpoint, KUAD under Perkins was very successful. Don't forget that during his time here he negotiated a $26 million deal with Adidas, a $40 deal with ESPN and an $86 million deal with IMG. Zenger seems like a nice guy but no AD other than Perkins and DeLoss Dodds has the ability to pull in that kind of coin.

Lance Cheney 10 years, 9 months ago

A 40-dollar deal with ESPN? That's not very much! (Haha, I know what you meant.)

Hammertoe 10 years, 9 months ago

A $58 million debt seems excessive. Curious to how that compares to other universities? A buy out for Gill to add to that figure might be a tough sell to any fiscally responsible party.

LogicMan 10 years, 9 months ago

Was it Kivisto (or someone else?) who ran into big financial problems after making a longterm financial commitment to the KUAC? If I am remembering correctly KUAC went ahead and built something expensive but the money stopped flowing from the donor.

Is that person/group back on track with its contributions to the KUAC?

BigSam 10 years, 9 months ago

Thank the Lord that Kivisto's donations were in hand before he got busted. He essentially stole a few hundred million from his clients. I wonder how much additional debt there would be if the donations had not been in hand before he got caught.

kureader 10 years, 9 months ago

If I'm not mistaken, less than half Kivisto's pledge was in hand before he got "busted". KU did not receive about 6 million of the original pledge.

To me, it's not clear that he stole a few hundred million, but he did lose a few hundred million, because of his aggressive oil futures trading activities. It appeared that he didn't "come clean" with shareholders of the company until after the money was lost. And, there was a suspicious relationship between a private company he owned and a public company he managed. It appeared there was a serious conflict of interest, and that his private company made money at the expense of the public one. Additionally, a couple banks lost a lot of money, because of loans that went bad. They've apparently accused him of misrepresenting the situation in hopes of getting some of their money back. He's not very well liked in Tulsa right now, but his guilt or innocense is still somewhat of a mystery, and there's not much news in the media. So, who knows. It's clear that he made some very good business decisions in the 1990's and some very bad ones after 2005. People who know Kivisto, like him. The unfortunate thing is that Kivisto's problems caught KU by surprise.

gchawk 10 years, 9 months ago

If by "busted" you mean he got caught in ill advised risky investments, you're right. But, he didn't do anything illegal. Without getting into the logistics of his ordeal, Goldman Sachs was actually the bad guy in this situation, Kivisto just got caught up in what he perceived to be a potential windfall, which turned horribly wrong.

Dyrk Dugan 10 years, 9 months ago

one of the "loans that went bad" was $15 million from Bank of America, personally to Kivisto, He tried to secure it through the company, and of course, that's when the bankruptcy was announced.

he didn't do anything illegal? very debatable....fraud is hard to prove. but it's a good bet that the jack he got from BOA, was turned around and pledged to Kansas. i've stated on this board before that KU shouldn't have named the field for him...and should return what ever cash we got and take his name down.

A lot of people in the state of Kansas, and some that i know personally, are owed millions of dollars from SemGroup...and they may only have received fractions of the dollars they are owed.

this story about the debt at Kansas is just another saga in the sad state of affairs that is KU athletics. it will only take hard work and operating under general accepted accounting principles for years, that will allow us to start to clean up this mess.

gchawk 10 years, 9 months ago

Point well taken. I should have said that he was never convicted of anything illegal.

5DecadeHawk 10 years, 9 months ago

Once again the LJW completely misses the real story.

The news isn't that KU has $58.8 million in outstanding debt.

Last year the LJW reported that KU had $93.67 million in debt. See this link to read their own article about it. http://www2.ljworld.com/news/2010/sep...

That is a reduction of $34.87 million in a very short period of time when the economy is struggling.

This amount of debt reduction is impressive news, and the LJW completely ignored this great news story and instead chose to write the story in a manner that ignores how well KU has reduced its debt in a very short period of time.

What should any of us expect from a Tabloid Newspaper than to do its best to put KU in the worst possible light? They employ Keegan for cripes sake.

kureader 10 years, 9 months ago

If the two debt figures mentioned above are "apples and apples", then you're right. If that's true, I'd like to know how in the world KU came up with 35 million in just 2 years (frankly, that's almost hard to believe).

Ryan Gerstner 10 years, 9 months ago

Why? KU brings in about $75 million per year in revenue. It doesn't cost that much to run an athletic department and KU is about to bring in a lot more money from Big XII TV contracts and payments from schools leaving the league.

kureader 10 years, 9 months ago

I'm one of those who suggested that LJW should put these figures into context, so that readers wouldn't be mislead. But, I certainly wouldn't say that 60 million is "no big deal".

I guess that would make Gill's 6 million dollar buyout and the 3 to Mangino and the 3 to Perkins ... no big deal!

jgkojak 10 years, 9 months ago

That debt is no big deal.

A bigger deal is that it would not even be a headline if we were selling football tickets (10,000 extra seats per game at $40 a pop minimum--400,000 x 7 = 2.8 million - there's Self's bonus right there.

Joe Ross 10 years, 9 months ago

To be honest, I'm surprised at the level of financial knowledge among all of you in these comments. An economics lesson! Just never know what you're gonna get when you log into kusports.com.

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