Money and Kicking the Can down the road.

[Macloney]

Yes Finance person so I know how budgetting process works.

People also immediately say, issue debt to pay for the deficits. That might be a good solution at University level. Only problem is someone has to be willing to lend/invest.

I will give you some credit because that is exactly what I wanted to say.

There is no problem at all with ISU finding creditors. Assets alone qualify them for a blank check.

You guys are all right when you say that ISU is facing a challenging financial situation, but it seems a little ingenuous to state that they can't cover a year of scholarships.

 

[isucy86]

I will give you some credit because that is exactly what I wanted to say.

There is no problem at all with ISU finding creditors. Assets alone qualify them for a blank check.

You guys are all right when you say that ISU is facing a challenging financial situation, but it seems a little ingenuous to state that they can't cover a year of scholarships.

Some of those assets, like newer residence hall, may already have bonds issued.

ISU's physical assets have very little value to a lender/investor. Beardshear or the Campanille don't have much value to a lender. Not like Wells Fargo can repo them.

Revenue streams are what creditors will look for. Who knows the long-term impact of Covid on 4 year school enrollment.

Cash flow pays the bills. When ISU's revenue gap is at least $70m, subsidizing the Athletic Department means cutting costs, finding a donor or some other creative means of raising cash or deferring planned expenses.

 

[Macloney]

Some of those assets, like newer residence hall, may already have bonds issued.

ISU's physical assets have very little value to a lender/investor. Beardshear or the Campanille don't have much value to a lender. Not like Wells Fargo can repo them.

Revenue streams are what creditors will look for. Who knows the long-term impact of Covid on 4 year school enrollment.

Cash flow pays the bills. When ISU's revenue gap is at least $70m, subsidizing the Athletic Department means cutting costs, finding a donor or some other creative means of raising cash or deferring planned expenses.

I think they have a few more assets than you realize. This is old data, but it gives an idea of the massive amount of assets they have.

http://www.controller.iastate.edu/far/finreport11.pdf

 

[NorthCyd]

ISU's physical assets have very little value to a lender/investor. Beardshear or the Campanille don't have much value to a lender. Not like Wells Fargo can repo them.

This seems like a fairly limited view of their assets. I use to do my graduate research on a machine the university purchased for hundreds of thousands of dollars and it actually went up in value years after they purchased it. And thats just one machine in the basement of Science 1.

 

[isucy86]

This seems like a fairly limited view of their assets. I use to do my graduate research on a machine the university purchased for hundreds of thousands of dollars and it actually went up in value years after they purchased it. And thats just one machine in the basement of Science 1.

I agree ISU has different valuable assets on campus, but most banks/investors aren't that interested in those types of assets as collateral. If worst thing s happen, do they want to find a buyer for such equipment.

Most banks & investors will be looking at specific cash flows as collateral for any borrowing by ISU.

This is complicated if a vaccine isn't developed in the next year. The next couple weeks will show attrition for returning and freshman students. If most freshman classes are online, do parents choose local community colleges vs. sending their kids away.

Also will the pandemic cause universities to invest significant monies to remodel residence halls? How many parents will be comfortable with community bathroom facilities if Covid is a consistent presence like the flu?

Universities are going to have to make A LOT of tough choices over the next year. The possibility of declining revenue streams and increased costs are a tough environment for any leader.

 

[superiorcyclone]

I will give you some credit because that is exactly what I wanted to say.

There is no problem at all with ISU finding creditors. Assets alone qualify them for a blank check.

You guys are all right when you say that ISU is facing a challenging financial situation, but it seems a little ingenuous to state that they can't cover a year of scholarships.

Good post. I agree. The issue for me isn't that some people and organizations can go into debt, as they can. The issue is that taxpayers, benefactors, and students will end up paying in some way for the decision to fund scholarships when there is no sport, and no revenue to pay for the sport. I would be happy if every athlete that wanted to play their sport got to play, and those that wanted to sit out, had their scholarships funded for the year. Maybe I am OK with that scenario because I know that most college kids are going to continue their lifestyle the same way that they were pre-Coronavirus. Either way, it is irresponsible in my opinion to be racking up debt to pay for Scholarships and Expenses and Paychecks for activities that are not taking place. I think the whole issue would not be an issue, if you just let the young men and women make their own choices. For instance, it is my choice to purchase tickets, and I did. I only attend about one game a year because I live out of state. It is not just college students having their choices taken away. I also am not happy about college age kids who lost their ability to earn a living with the shutdown of restaurants and other businesses.

 

[superiorcyclone]

Some of those assets, like newer residence hall, may already have bonds issued.

ISU's physical assets have very little value to a lender/investor. Beardshear or the Campanille don't have much value to a lender. Not like Wells Fargo can repo them.

Revenue streams are what creditors will look for. Who knows the long-term impact of Covid on 4 year school enrollment.

Cash flow pays the bills. When ISU's revenue gap is at least $70m, subsidizing the Athletic Department means cutting costs, finding a donor or some other creative means of raising cash or deferring planned expenses.

It also means reducing services and facilities for future generations of athletes and students. While the academic center is a recruiting tool, it is also a great way to help young men and women who have tremendous time and scheduling demands be more successful in school and life, IMO. Take away the students choice, and taking away benefits from future student athletes is the end result of a lot of these decisions.