Education  March 6, 2015

CSU professor: Stadium financing flunks Econ 101

Rich Schweigert, Colorado State University’s chief financial officer, recently warned that Standard & Poor’s may downgrade CSU bonds because of the financial risks of its new football stadium.

This remarkable announcement has been brushed aside by Schweigert and CSU President Tony Frank. Nonetheless, it clearly shows that the financial projections for the new stadium are shaky at best.

Contrary to his promises, Frank plans to borrow the entire $242 million needed to build the new stadium and start paying down the bonds. That will increase CSU’s total debt to the point where Standard & Poor’s could lower its credit rating.

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After all, college football programs around the country overwhelmingly lose money. Attendance at the games has been falling. Frank has never explained why CSU will be an exception to these national trends.

The new football stadium will need to generate $12 million every year above what Hughes Stadium generates just to make its bond payments. It also will need to generate the additional revenues needed to pay for a dramatically expanded football program, including the extravagant salary paid to the new coach.

Why is Frank so confident that the new stadium will clear these financial hurdles? The only evidence he ever has provided is the feasibility report by Icon Ventures, a stadium consulting and construction company. The Icon report concludes that the stadium project is financially feasible.  But Icon has a significant stake in that conclusion since it stands to make millions of dollars from overseeing the construction of the new stadium.

That is a blatant conflict of interest that calls into question the objectivity of the Icon report.  At the very least, it creates an appearance that the process has been rigged to get to a preordained conclusion.

The biases in the Icon report are not subtle. For example, it ignores the negative national trends in college football finances and attendance that raise the risk of financial failure.

It projects a permanent 22 percent increase in attendance, compared with attendance at Hughes Stadium, based on a survey of Rams fans who said they would be more likely to attend games in a new stadium.

But that hopeful assumption does not take into account the increased cost of attending games at the new stadium because of higher ticket prices, parking charges and even a proposed fee for tailgating.

As these costs go up, demand for football tickets will go down, particularly since there is no reason to believe that personal incomes will rise as quickly as the cost of attending football games.

Nor does the Icon report acknowledge that ticket sales at the new stadium should fall over time as the stadium ages. After all, if Rams fans don’t want to attend games at Hughes because it is old, why will they want to attend games at the new stadium when it is old?

For a variety of reasons like these, the Icon report cannot be taken seriously. Yet Frank has no other evidence that would justify this amount of borrowing and spending.

Frank now faces widespread anger and cynicism. He says the stadium will pull our community together, when in fact it has torn it apart.

The new stadium may be a done deal, but the debate about it will go on. It is a necessary debate because the new stadium embodies so much that has gone wrong with higher education, including excessive cost, bloat and mismanagement, a lack of focus on its core educational mission and a loss of public trust.

That will be Frank’s legacy to our community, written in steel and stone.

Steven Shulman is a professor of economics at CSU. He teaches and writes about the economics of higher education.

Rich Schweigert, Colorado State University’s chief financial officer, recently warned that Standard & Poor’s may downgrade CSU bonds because of the financial risks of its new football stadium.

This remarkable announcement has been brushed aside by Schweigert and CSU President Tony Frank. Nonetheless, it clearly shows that the financial projections for the new stadium are shaky at best.

Contrary to his promises, Frank plans to borrow the entire $242 million needed to build the new stadium and start paying down the bonds. That will increase CSU’s total debt to the point where Standard & Poor’s could…

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