Archive for Tuesday, September 14, 2010

Report: Kansas Athletics debt on the rise

Lawrence-Douglas County Fire Medical workers stop to admire a wall of photographs from the Kansas University men’s hoops 2008 national championship in the northwest corner of Allen Fieldhouse. The KU athletic department put on a tour of the renovations at the fieldhouse.

Lawrence-Douglas County Fire Medical workers stop to admire a wall of photographs from the Kansas University men’s hoops 2008 national championship in the northwest corner of Allen Fieldhouse. The KU athletic department put on a tour of the renovations at the fieldhouse.

September 14, 2010

Advertisement

Related document

KU's 2008-09 IRS Form 990 ( .PDF )

Kansas Athletics revealed to have millions in debt

Recent tax documents showed the department had about $30 million in debt, money that was used for improvements on Allen Fieldhouse. Enlarge video

Kansas Athletics Inc. has reported financial liabilities of $93.67 million for the 2008-09 fiscal year, up nearly 57 percent from a year earlier.

The total is included in documents the department filed with the Internal Revenue Service, to maintain the athletics operation’s tax-exempt status. The report is the most recent available.

The jump in liabilities came largely because of major construction projects: more than $32 million for construction, expansion and renovation at Allen Fieldhouse, the Horejsi Family Athletic Center, the Wagnon Student Athlete Center/Parrott Athletic Center and vicinity.

The filing also noted how the department had borrowed $6.5 million from the KU Endowment Association. The transaction served as a bridge loan, allowing the department to start construction of the Anderson Family Football Complex.

The loan was repaid during the fiscal year.

The report includes information about the department’s long-term debt, including liabilities of $46.565 million from tax-exempt bonds. That was up from $15.065 million a year earlier.

Kansas Athletics is repaying such bonds using private donations, and donors are maintaining their commitment to athletics through the economic downturn, said Jim Marchiony, an associate athletics director.

“They’re going great,” Marchiony said Tuesday, of donation levels. “Kansas Athletics has very loyal and generous donors. … The indication is that it is at least as strong as last year.”

The documents filed with the IRS also indicated that the department paid nearly $2.2 million to the Orange Bowl in 2008-09, ranking the bowl No. 4 on the department’s list of highest-paid independent contractors. The expense reflected the amount of money the department spent on bowl tickets, which in turn were sold by Kansas Athletics.

Comments

Patti Hadl 4 years, 7 months ago

"The documents filed with the IRS also indicated that the department paid nearly $2.2 million to the Orange Bowl in 2008-09, ranking the bowl No. 4 on the department’s list of highest-paid independent contractors. The expense reflected the amount of money the department spent on bowl tickets, which in turn were sold by Kansas Athletics."

The department spent $2.2 million on bowl tickets but no record of how much they were sold for or any accounting thereof. Maybe this should be next on the list to investigate to see what the return on investment was.

puddleglum 4 years, 7 months ago

2.2 mill for some tickets, then they sell the tickets for their own pocket money? or morningstar's pocket money?

anybody surprised?

scatfu 4 years, 7 months ago

It should say "The expense reflected the amount of money the department spent on bowl tickets, which in turn were scalped by Kansas Athletics"

Evan Ridenour 4 years, 7 months ago

This article is misleading for anyone who isn't knowledgable about Finance.

You can't mention the increase in liabilities (which in large part is due to the issuing of debt to fund improvements) without mentioning how it compares with the assets. To the uninformed this article makes the increase in liabilities look tragic when it in fact could be completely meaningless (I don't know KU Athletics financial shape and don't have time to research it at the moment).

Maybe providing enough information to write an article that is meaningful should be a future goal of the "reporter" who wrote this piece.

Jonathan Kealing 4 years, 7 months ago

Total assets increased from $134 million to $143 million. Total liabilities increased from $60 million to $93 million. Net assets declined from $74 million to $50 million.

Steve Jacob 4 years, 7 months ago

Whats up with that big of decline in net assists in one year.

PugnaciousJayhawk 4 years, 7 months ago

A problematic decline in cashflows and an accounting change I believe.

David Roberts 4 years, 7 months ago

Perhaps my mind is too simple to comprehend the complexities of finance, but if one builds, expands, or renovates structures, such as those listed; one might expect a corresponding increase in assets roughly proportional to the liabilities incurred in the project, no?

I don't go spending $320K building a house if it is only going to be worth 90K when I'm done. 32 mil was spent on construction and gross assets still only increased 9 mil?

David Roberts 4 years, 7 months ago

Never mind, the filing only shows 5m for assets in buildings. Obviously, it's not as simple as it appeared at first blush.

Here's to the hope that KU Athletic Corp. can establish good practices of fiscal management moving forward, regardless of what has (or has not) happened in the past.

KEITHMILES05 4 years, 7 months ago

Why was this information withheld in the article? If you have access why did the author of the article not do his homework? Sloppy reporting?

konzahawk 4 years, 7 months ago

I, like many, would like to know why this little tidbit of information was excluded from the initial article. Typical of your "newspaper" of late. You personally seem to be replying to more comments than ever before because of the poor work of your reporters. Who is in charge and why is this acceptable? You guys are all over KU for every little issue, but the LJW can make mistake after mistake and no one is held accountable.

gccs14r 4 years, 7 months ago

I think part of the point is that the bond payments depend on the continued largesse of donors. If donations dry up, my guess is that KUAC goes bankrupt and the University (taxpayers and students) has to pay the bills.

Clevercowgirl 4 years, 7 months ago

Yup. No bank would allow you to take out a loan predicated on donations. KU Athletics has been "Leveraged", with the profits going into peoples pockets. How soon until Perkins is indicted?

Clevercowgirl 4 years, 7 months ago

I'm sure time will tell. Let's chat in a month or so when the !@#$ totally hits the fan. Question: Why would Perkins resign abruptly, when he had already set an exit date? I know, blah, blah, blah.

Clevercowgirl 4 years, 7 months ago

Yeah, it is easy to kind of shoot off your mouth, that's what makes blogging so fun. Based on what has so far been revealed regarding tickets, my personal feeling is that this is the tip of the iceberg. Speculation is what blogging is all about. It's free speech to the tenth power, and I still say that the !@#% is going to hit the fan. Or should I say fans.

Clevercowgirl 4 years, 7 months ago

Hey, Mr. Agressive (I'm just guessing that you are a man), news flash: I don't have to answer your questions in order to state whatever I want. And yes, many of us bloggers really do enjoy saying what we want. I'ts kind of like talking back to the news. get a grip.

Vinny1 4 years, 7 months ago

The point of this story is to try and tarnish KU Athletics just like most of the other stories the LJWorld writes about KUAC.

As Eride pointed out, everything should be mentioned. But isn't. And then Kealing responds quickly with the numbers. But no explanation for why such easily accessible, or already in hand information, pertinent to the article are not included.

Just another half-azzed job of reporting by the LJWorld.

skinny 4 years, 7 months ago

Then they wonder why their circulation base has drop off so much! Duh!

Lack of reporting local news, no crime section, no court news section, no arrest logs! ect ect

BigAl 4 years, 7 months ago

I think the decline in circulation is directly related to people that are too cheap to pay for the newspaper. They can just as easily read it online. It wouldn't bother me one bit if the LJW made access on-line contingent with a paid subscription.

I like the LJW, my hometown newspaper, but I am getting real tired of the constant attack on KU Athletics and KU in general. Withholding these asset numbers in this article doesn't help my attitude towards these attacks.

Jeremiah Jefferson 4 years, 7 months ago

I guess they will have to stop paying the basketball players.

justforfun 4 years, 7 months ago

Kansas Athletics is repaying such bonds using private donations, and donors are maintaining their commitment to athletics through the economic downturn, said Jim Marchiony, an associate athletics director.

Wasen't there an article about the Kivistos (Nane of KU football field) being way behind on their donations to KUAD a few monthes ago????

Jim Williamson 4 years, 7 months ago

Dear Dolph: Lew quit. You won. Lighten up, Francis.

BigAl 4 years, 7 months ago

Ditto. These attacks are getting REAL old. Especially when the articles are as misleading as this one. Again, lighten up, Francis.

CountyResident 4 years, 7 months ago

There is nothing misleading about this article. Thanks JK for your follow-up reporting that asests decreased $24M at the same time as the debt increased. Please keep up the good reporting. It seems to me that a good portion of future contributions will have to be used to pay off this debt.

WaxAndWane 4 years, 7 months ago

I cancelled my LJW subscription several months ago due to misleading anti-KU stories like this. When the girl who took my call asked the reason for my cancellation I made my reason clear. I know of two others who recently cancelled due to all the anti-KU stories and editorials as well. (Actually one cancelled and the other opted not to renew when the subscription ran out).

MattressMan 4 years, 7 months ago

But yet here you are spending your precious time reading LJW on line, kind of ironic isn't it.

WaxAndWane 4 years, 7 months ago

Not ironic at all. I just hated having to pay for it. Kind of like people who read "People" magazine in the waiting room at the doctor's office but wouldn't be caught dead actually paying for it. LJW online is now my free daily tabloid. They'll never get my money again and, no, I don't use Sunflower as my cable provider. Dolph doesn't get a penny from me. :)

prrkc 4 years, 7 months ago

Love the crimson and blue glasses, how exactly is this 'misleading'? Debt has increased 57%. I think what you actually want is no reporting of negative things- to not have to stick your fingers in your ears and go 'la la la, I can't hear you!!!'

If you somehow managed to ignore it, KU is presently being investigated by federal authorities for letting a huge criminal enterprise operate for years right under their noses. This resulted in less revenue for KU. KU recently canned it's AD, whose main defense of his regime was 'look at all the money I raised and buildings I got built'.

So an article about KU's debt ballooning with both of those items in the background is NOT newsworthy? Or perhaps you expected them to trumpet the miniscule (by percentage) total assets increase, and try to bury the debt item somewhere?

Love how folks will basically poke their eyes out to be able to pretend that 'their team' or 'their guy (Lew, for instance)' is obviously not to blame for all the dirt that seems to be stuck to them, that it's some journalist's fault- 'my team could never be wrong!'

Methinks a lot of folks need to have their justification/excuse machine well-oiled when the Feds start dropping indictments that let us know exactly what has been going on at ol' 'lack of institutional control' U the last 5 years or so. The feds won't be intimidated, and won't shy away from digging deep to get all the details of what was going on. They will want to know where every $ of unreported income went. Here's betting some of that $ went into very wrong pockets.

4everahawk 4 years, 7 months ago

If all the LJW published were positive, happy, heart-warming stories about athletics, there would be so few to write. For those of you griping about the negative stories, get out of denial for goodness sake!! LJW shows both sides and there IS a bad side! There has been so much concealed in previous years and now most people want to know these things and the LJW is doing the right thing by making people aware. It's kinda like staying with, and continuing to love an abuser, even when the bruises and lumps start to show and lying to explain them away...at some point someone will report those things and the truth, however ugly, will be revealed. I applaud the reporters who are getting underneath the veneer of KAI.

BigAl 4 years, 7 months ago

4everahawk, that is almost a fair point. However, this particular article was not "getting underneath the veneer of KAI".

I am definitely NOT in denial. My only contention is that the LJW has not been showing both sides as you claim. And yes, there is a bad side to KU Athletics but it definitely is not all bad. If one were to only read the articles coming from the LJW concerning KUA, one would think that everything was in total disarray, underfunded and about to go down. That is simply not the case. Dolph has been writing negative articles for quite some time. He is pretty much correct in a lot of his assessments but he rarely gives the positive side. When he does, he does it begrudgingly.

Just be fair in the reporting and this article is far from giving both sides.

anonyname 4 years, 7 months ago

"The documents filed with the IRS also indicated that the department paid nearly $2.2 million to the Orange Bowl in 2008-09, ranking the bowl No. 4 on the department’s list of highest-paid independent contractors. The expense reflected the amount of money the department spent on bowl tickets, which in turn were sold by Kansas Athletics."

Do the documents show how much Kansas Athletics earned from the sale of those tickets? If not, did the reporter make an attempt to find out? If they were sold for $1 million, there's a problem. If they were sold for $2.5 million or $3 million, that would be a far different result than the loss the article seems intended to imply. Even if the information somehow wasn't available, responsible reporting would state that the LJW attempted to find it out.

BigAl 4 years, 7 months ago

anyonyname, thank you. That is another good point of not having both sides of this story.

BigAl 4 years, 7 months ago

Actually, this is another point that should help 4everahawk "get out of denial for goodness sake!!"

grammaddy 4 years, 7 months ago

Why is KUAC in financial trouble. I thought that was th argument for keeping Lew, that he and Mangino had raised soooo much money for the athletic's dept.Why is this a problem if they actually did that? Or did they?

Frightwig 4 years, 7 months ago

They aren't in trouble at all. The article fails to mention that total assets have increased as well. Donations haven't decreased either. New construction costs money, but KU has it covered. It would be the same as if you bought a new house and the paper reported, "Grammaddy's debt is increasing!" while failing to mention that you have the ability to pay. People would mistakenly assume that you were going broke.

CountyResident 4 years, 7 months ago

Please read Jonathan Kealing's reply above. While he does say that assets increased from $134M to $143M, he goes on to say that net assets decreased $24M. It is net assets that really matter. If net assets decreased that means you have lost money somewhere along the line.

ralphralph 4 years, 7 months ago

The "value" of the assets involved are largely made up. What is the market for a "student athlete center"? They ran up some big time debt, and they have some stuff to show for it, but that stuff can't reasonably be sold to pay off the bonds if there are insufficient donations. How do you sell new paint on a wall or new carpet in a jock apartment? They need to hope Kivisto finds a new flock to fleece.

lionheart72661 4 years, 7 months ago

MattressMan (anonymous) replies… But yet here you are spending your precious time reading LJW on line, kind of ironic isn't it.

So true. All I can say Is Goodbye Lew and watch out small business..KU is a lawsuit happy school. Just ask Joe College

guess_again 4 years, 7 months ago

The real analysis that I have been waiting for a paper to write about is the about of debt the athletic corporation had at the time that Lew was hired, and what it is now.

Much has been made of his capital improvements, but it is easy to finance those improvements with debt. Loans and bonds are secured by the general revenues of the department. The department isn't going to move away or close, so it is a good risk for any lender. But a house of cards made of debt can work a world of hurt against the annual operating needs of the department.

LJW, can you find us a balance sheet for when Lew was hired and give us the particulars?

And no, this is not an "anti-KU" observation, but it is a measure for how the athletic department was managed by Lew.

MyName 4 years, 7 months ago

The Athletic department takes in revenues from tickets, TV and Radio deals, revenue sharing from the Big 12 and merchandising in addition to donations. The question is whether paying the bonds they issued to make the improvements will outstrip these revenue sources. And I don't think that is likely, especially since donors have already agreed to fund alot of these improvments already.

In many ways it makes sense for them to make these expansions in one large batch as interest rates are at historical lows, and investors are out there looking for stable (and tax free) revenue sources like these kinds of bonds.

The only questionable expenses in my mind are the huge (and growing) salaries we're paying to coaches and upper level executives, but some of this is part of the arms race that college athletics is being forced into.

ralphralph 4 years, 7 months ago

... and some football practice fields that can't be used, 'cuz they're not secret-ey enough.

volunteer 4 years, 7 months ago

I hear that BGL is not helping KU Athletics bottom line by a)whining about having to spend so much time on sports and b)refusing to meet and greet the big cigars. A family of very big contributors (who made their money in Kansas City candy) are squawking about these matters and fear BGL may appoint some wimp as the new AD so she can keep him under her thumb.

Perhaps these big donors merely fear they will have less influence than in the past. I'm just passing on what I heard from a smaller cigar.

anonyname 4 years, 7 months ago

I know many thought the last part of the article was implying that KU Athletics took a financial hit from the purchase of Orange Bowl tickets, as has been posted in the comments. I wrote one myself thinking that someone from LJW would reply. It hasn't happened yet. So, I did my own research.

It took me about two minutes of searching, mostly on ljworld.com itself. KU was obligated to purchase 17,500 tickets at $125 each, a total of $2,187,500. $125/ticket is the price participating schools pay, according to http://www.signonsandiego.com/news/2009/dec/17/tickets-guarantees-price-play/.

Per the LJW, three weeks prior to the game only 1,200 were unsold, though KU did take a hit on selling about 10% of those sold to students at $50, a loss of $122,250. The article does show the tickets being sold at $125, so no markup was involved. http://www2.ljworld.com/news/2007/dec...

An LJW article after the game stated "KU is expecting to make $2.1 million from its trip to the Orange Bowl, including a $1.7 million travel allowance from the Big 12 and about $400,000 from ticket sales." http://www2.ljworld.com/news/2008/feb... So, a profit, which certainly wasn't the way I interpreted the way it was treated in today's article. If there's mention of a large expense, it seems fair to mention that the specific expense was more than balanced by directly-connected income.

It took me maybe three minutes to find and compile this. Maybe I should apply for a job.

Evan Ridenour 4 years, 7 months ago

Sigh... no, that is not at all why the "debt" is high. In fact, your response is a prime example of why this article is shady "journalism."

The headline screams "debt on the rise" and yet it quotes the increase in liabilities without telling the other side of the balance sheet... much less bothering to explain what any of it means to the financially clueless majority (no offense intended).

If you were to scan up to see my initial post on this thread you would see the response to my initial comment about the journalistic integrity of this article and see the figures quoted by the online "editor" (no offense Jon but a real editor fact checks his writer's articles and ensures they meet journalistic ethics before they get published). Even what Jon gives in response doesn't even give any real value to forming an opinion to the financial shape of the entity.

The right thing to do would be for this "newspaper" to write a retraction and publish an accurate and informative article on this subject to make up for this asinine piece of yellow journalism.

As much as I would like to expect that to occur I think the much more likely outcome is that my comment (rightfully accusing this rag of bias) gets deleted.

CountyResident 4 years, 7 months ago

Your above comments contain no facts. In your original post you stated you had no knowledge of KU Athletics financial situation. So, why do you condemn Jon's article for lacking facts when you have no facts? If you would read Jon's follow-up post, you would see clearly that there has been a decline in the financial situation at KU Athletics.

Evan Ridenour 4 years, 7 months ago

No I would not clearly see that.

Looking at only a balance sheet asset and liability value is a wholly worthless measure.

Commenting has been disabled for this item.