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Added Costs, Declining Revenue Hurting Penn State Athletics: University May Take Out $30 Million Loan

The head of Penn State’s athletics department is painting a grim picture for the school’s athletic programs, citing additional costs and declining revenue.

In an appearance Thursday, before the board of trustees’ committee on finance and capital planning, athletic director David Joyner talked about plans to borrow $30 million to keep the system afloat.

Penn State’s ending reserve balance over the next five years is projected to dip as low as 5.52 million dollars in the red. That figure does not include revenue implications of a new Big Ten TV deal.

Penn State will continue to pay annual $12 million installments required to cover a $60 million fine imposed by the NCAA. The upgrade of  the Beaver Stadium scoreboards will cost an estimated $10 million. The university says the athletic program will miss out on $21.6 million over the same five year span due to Big Ten conference sanctions that prohibit Penn State from collecting its share of money generated by football bowl games.

In a worst-case scenario, the number of tickets sold for football games could fall, leaving Beaver Stadium at 88 percent of capacity. That number represents a six percent decrease from the 94 percent capacity average over the past several years.

For context, each percentage point of attendance is valued at $350,000 on ticket sales alone. If attendance declines to 88 percent, the university could lose an additional $2.1 million in yearly revenue. Factoring in additional revenue lost from food and parking sales could cost Penn State another $5 million dollars.

If Penn State moves ahead with the proposal to take out a $30 million loan, $5 to $10 million would be used to establish a line of credit to offset projected deficits through the 2016 fiscal year.

Twenty million dollars to $25 million would be borrowed to cover critical short-term capital needs.

Penn State believes it is looking at a temporary shortfall. The reserve balance is expected to be back in the black by 2017.

Penn State employs 315 full-time athletics-related staff and funds 31 varsity sports, second highest in the Big Ten conference only behind Ohio State.

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