Bear Fans,

This was sent to me. Perhaps you've already seen it. KQED did all the reporting. I have no idea how much of it is true or not. Check that: Whatever is or isn't true, Vice Chancellor John Wilton never pays for another drink again. (No wonder we saw white smoke just before he was hired).

One assumes that the reason Eurystheus had Hercules clean out the Augean Stables rather than solve the ESP conundrum, was that not even Hercules (even with the clandestine aide of Hermes and Athena) could have cleaned up our current mess.

Guys and gals are working hard to make this happen. They deserve our support. No doubt eventually they will triumph--but wow! How did we ever get from "there to here?"

If you get up this way stop by and join us for some Cab--after reading this you may need it.

Go Bears,
Jeffrey Earl Warren '70



http://calfannotes.jeffwarren.com/2013/03/cal-struggles-with-unproven-stadium.html

Why is it so impossible to reschedule the costs of purchasing a University, Stadium or Field club seat? A reduction in price would not signal failure, but a realistic appraisal of price-point. In short, some money is better than no money. Meeting its obligations will not be a problem and refinancing is certainly available in the long-term if the lender sees a consistent flow of capital.

Of course, the simplest answer is winning. It solves all the ills.

What is odd is that they are able to sell ANY seats given what Tedford did to the program towards the end

For several years (3) we were more likely to lose by double digits than to win or lose by single digits. We were as likely to lose by 17+ as we were to win.

To top it off, Tedford and Sandy skipped through those years, right up until the final whistle, as though nothing was wrong (communicating to the fans that this was the new acceptable) and, maybe worse than that, that Cal football was somehow at its peak under this kind of "win some, get thrashed in an equal amount, but at least we aint losing 10!" mentality (further telling fans that there was no hope of doing better).

That is the climate we started selling long term seating plans under. THAT is the climate we finished construction under. That is the climate Cal endured until the start of this quarter.



These guys are NOW tasked with trying to sell muli-year hyper expensive seating packages with a new and unproven (at this level, arguably at any level) coach who talks the talk but has not had an opportunity to walk the walk...



The fact that they actually sold some of these seats during the 2012 season...ANY OF THEM...shows how good a sales team we have, and the potential of the model if Cal ever shows a pulse on the field again, IMHO.

If these guys are doing that well, imagine what sales will look like when Cal fields a team that a fan of football would actually want to watch. 17 sales of these seats when we went 3-9 and serious discussions about KEEPING the coach? That is a win in my book...

6bear6;842101490 said:

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Why is it so impossible to reschedule the costs of purchasing a University, Stadium or Field club seat? A reduction in price would not signal failure, but a realistic appraisal of price-point. In short, some money is better than no money. Meeting its obligations will not be a problem and refinancing is certainly available in the long-term if the lender sees a consistent flow of capital.

Of course, the simplest answer is winning. It solves all the ills.

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The simplest answer is competing.

Excitement > winning. Otherwise D1AA OOC games would always be sellouts everywhere.

Phantomfan;842101496 said:

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What is odd is that they are able to sell ANY seats given what Tedford did to the program towards the end

For several years (3) we were more likely to lose by double digits than to win or lose by single digits. We were as likely to lose by 17+ as we were to win.

To top it off, Tedford and Sandy skipped through those years, right up until the final whistle, as though nothing was wrong (communicating to the fans that this was the new acceptable) and, maybe worse than that, that Cal football was somehow at its peak under this kind of "win some, get thrashed in an equal amount, but at least we aint losing 10!" mentality (further telling fans that there was no hope of doing better).

That is the climate we started selling long term seating plans under. THAT is the climate we finished construction under. That is the climate Cal endured until the start of this quarter.



These guys are NOW tasked with trying to sell muli-year hyper expensive seating packages with a new and unproven (at this level, arguably at any level) coach who talks the talk but has not had an opportunity to walk the walk...



The fact that they actually sold some of these seats during the 2012 season...ANY OF THEM...shows how good a sales team we have, and the potential of the model if Cal ever shows a pulse on the field again, IMHO.

If these guys are doing that well, imagine what sales will look like when Cal fields a team that a fan of football would actually want to watch. 17 sales of these seats when we went 3-9 and serious discussions about KEEPING the coach? That is a win in my book...

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Never looked at it that way. Interesting take.

Phantomfan;842101496 said:

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What is odd is that they are able to sell ANY seats given what Tedford did to the program towards the end
* * *
The fact that they actually sold some of these seats during the 2012 season...ANY OF THEM...shows how good a sales team we have, and the potential of the model if Cal ever shows a pulse on the field again, IMHO.

If these guys are doing that well, imagine what sales will look like when Cal fields a team that a fan of football would actually want to watch. 17 sales of these seats when we went 3-9 and serious discussions about KEEPING the coach? That is a win in my book...

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Ding ding ding. Winner winner chicken dinner.

Assuming we will always have good and exciting teams is not a realistic assumption to make when planning a financial model. I am curious what happened to everyone in the AD who worked on the stadium financing.

well the assumption was that there are x number of people/corporations willing to spend y number of dollars for premium seating. now the assumption is that the original argument will hold true if we have winning, exciting football. however, what if there just aren't enough rich people/corporations willing to spend that kind of money on ESP at CMS regardless of our record or playing style? That's the real question.

Can somebody explain how the ESP seating packages work as a donation (tax deductible)? For some reason I recall this being the case.

First, as much as I love football, the idea of spending 40K to 225K per seat for 50 years of football is absurd - Is that paid up front ?

On tax deduction isn't 80% deductible so long as donation is to an educational institution and as a result of donation, donor receives preferred seating rights to athletic events ?

slotright20;842101610 said:

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First, as much as I love football, the idea of spending 40K to 225K per seat for 50 years of football is absurd - Is that paid up front ?

On tax deduction isn't 80% deductible so long as donation is to an educational institution and as a result of donation, donor receives preferred seating rights to athletic events ?

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I believe the range of annual payments is approximately $2,700 per seat for the lowest priced to $16,000 for highest priced University Club seats (if one is not able to fork out $40-225,000 in one shot). That price is locked in over the life of the seat rights.

Most of that is tax deductible (I think arould 70%).

I know there is some tie-in for seatbacks at Haas as well - I believe the donation requirement is waived and you just pay for the seat tickets.

At the end of the day, posters saying "winning solves everything" are correct. My brother, sister and I collectively have a block of seats - and while my brother and I never miss a game, my sister, wife and daughter sometime have other more important things to do (can't imagine what) - and so we invited friends to games last year when we had available tickets.

I would say between the 3 of us, there are probably 7-8 seats worth of potential ESP purchasers amongst the people we invited last season.

One of my buddies is purchasing 2 of the lowest price seats so he and his 4 year old son can begin enjoying games together. He certainly has the means to 'move up' if the Bears started putting winning seasons together.

I think at least 2 more seats worth are seriously close to making a decision - and would step in by mid-season if we did something really surprising (like a huge upset of Ohio State or Oregon enroute to a 6-2 start).

If we started winning consistently and the idea that ESP could actually translate into preferred seating at BCS playoff games and the Rose Bowl, I think most of our friends who are "waiting and seeing" will jump in.

I would imagine other ticket holders have similar relationships as well.

Dykes really is the most important hire Sandy will probably make in her career at Cal. Winning soon would give Cal Athletics a boost in sales and in time to cover the costs associated with SAHPC and CMS.

If we're in the same place in 5 years, it could get pretty bleak.

Go Bears!

slotright20;842101610 said:

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First, as much as I love football, the idea of spending 40K to 225K per seat for 50 years of football is absurd - Is that paid up front ?

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it's sort of like the reverse of winning the lottery -- you can pay in annual installments but it'll cost you twice over 40 years what it would if you paid the lump sum now. (that's not counting inflation etc). there's no real contract so you can stop the installment plan at any time without penalty.

I think the article highlights the problem well:

Quote:

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The basic elements of ESP were the brainchild of Lou Weisbach, managing partner of Stadium Capital Financing Group. Weisbach said the idea of ESP was completely fresh: use up-front premium seat sales to finance stadiums or provide capital.

“Nobody in the world had ever done this. To that extent it was very novel,” said Weisbach, who has a patent pending for the idea.

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A brand-new never-been-done idea for pre-selling 40 years of seats in order to build a stadium sounds perfect for a school like, say, Ohio State, which has won at least 3 conference championships in each decade since the 1930s. It's a tougher plan to execute for a school with a finicky fan base and without a record of consistent success. That's not to say they won't sell a fair amount of ESP seats but they constructed the financing plan with certain expectations, and each year they sell under their target means money they have to make up in other ways.

Hail2Calif, I believe the tax deductibility is 80% of the 70%. The annual payment option is up to 30 years, not for the life of the seats (40-50 years). And you can amortize the amount over any period up to 30 years @ 6% interest.

The fans who bought ESP seats (many of whom are on this forum) are in it for the long haul. While interest will grow with a better team, these fans bought in to the entire experience, the gameday enjoyment, and the future potential of the team, not the team's current performance. The clubs are pretty awesome, too.

The fact that the economy went into the dumper right about at the beginning of this whole thing really didn't help. That said, we start winning again, Bear Raid becomes super-exciting and we go to a Rose Bowl and ... boom... another thousand are in.

Big C_Cal;842101688 said:

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The fact that the economy went into the dumper right about at the beginning of this whole thing really didn't help. That said, we start winning again, Bear Raid becomes super-exciting and we go to a Rose Bowl and ... boom... another thousand are in.

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a couple issues though.. a) the lost revenue is already lost; we need to sell the leases last year, not four years from now; b) if that other thousand goes with the installment plan many will opt out in five years when we go on a cyclical downturn, meaning more lost revenue.

Thanks to many for info.

One more question, what is estimated seating capacity if and when Phase III completed?


The more I think about it - the fairly significant diminished seating capacity aspect of the renovation is just as atypical as the financing - for a big time public university.

We should all hope for a modest bump in inflation to erode the value of this debt over the longterm. Wages typically keep up with inflation over the long term so that doesn't have to be a bad thing for us as individuals.

BearyWhite;842101700 said:

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a couple issues though.. a) the lost revenue is already lost; we need to sell the leases last year, not four years from now; b) if that other thousand goes with the installment plan many will opt out in five years when we go on a cyclical downturn, meaning more lost revenue.

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I think the whole thing about people jumping ship after a few years because it is an installment plan is wayyyy overblown. It is not like you are paying each year for that year's seats. You are paying for the whole 40 or 45 or 50 years worth of seats.

In the end, no matter how the things in financed, they can't take it away, it had to be done. So, let's all enjoy it!

NeverOddOrEven;842101790 said:

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I think the whole thing about people jumping ship after a few years because it is an installment plan is wayyyy overblown. It is not like you are paying each year for that year's seats. You are paying for the whole 40 or 45 or 50 years worth of seats.

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Overblown in what way? When someone goes on the installment plan rather than the lump sum plan the school notches that as a "sold seat" over the whole term for the purposes of determining the health of the financing plan. In actuality though it's just a season ticket sold, with the next year's money not guaranteed. Just makes for shakier accounting than it might otherwise.

JeffEarlWarren;842101458 said:

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Bear Fans,

This was sent to me. Perhaps you've already seen it. KQED did all the reporting. I have no idea how much of it is true or not. Check that: Whatever is or isn't true, Vice Chancellor John Wilton never pays for another drink again. (No wonder we saw white smoke just before he was hired).

One assumes that the reason Eurystheus had Hercules clean out the Augean Stables rather than solve the ESP conundrum, was that not even Hercules (even with the clandestine aide of Hermes and Athena) could have cleaned up our current mess.

Guys and gals are working hard to make this happen. They deserve our support. No doubt eventually they will triumph--but wow! How did we ever get from "there to here?"

If you get up this way stop by and join us for some Cab--after reading this you may need it.

Go Bears,
Jeffrey Earl Warren '70



http://calfannotes.jeffwarren.com/2013/03/cal-struggles-with-unproven-stadium.html

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though there still is a lack of understanding the full picture.

First, there is an immediate issue of operating deficits that I/A must address, and this is more of a priority. The money for operating the programs (as opposed to funding capital facilities) will be stretched in the short run by JT's buy-out, and the fund raising is focused on that. If the MBB and football teams do well, this item, which has been controversial with the faculty, goes away.

Now to switch gears. The funds to pay capital projects, such as the stadium remodel, comes from different sources than operating funds. The financing that was used to pay for the Stadium was a UC public bond issue and not any of the whacky things suggested by some professors. The view was that there would be significant arbitrage over the tax free rates of the bonds, but yields in the interim investments have been low. That has had a major impact on the model. The other impact is sales of the highest costing seats are under projections (last I heard, the other seats were meeting or close to projections). We finally have someone who notes that there is a long period before this becomes a problem. That doesn't mean you ignore the problem, but it does mean there is no panic either. Now if interest rates increase or the program becomes more suited for big donors, the model works, and the problem goes away.

And then there is the ultimate question as to if there is a short coming who pays. The bonds are secured by UC revenues, not Cal revenues and not Cal I/A revenues. In fact, UC makes capital improvements all the time that are not ultimately paid for (at least fully) by private donors. Funds to pay the bonds related to these projects are paid for out of UC's capital revenue funds, which consist of donor money or federal or state money allocated towards capital improvements. This happens all the time with sports facilities at all the UC schools, faculty centers, and all sorts of non-academic capital projects. I assume that Cal feels a moral obligation to stand behind its ESP seat plan to pay off its share of the bonds, but UC sets aside money for the purpose of funding these types of shortfalls. None of this impacts funds for operating academic operations.

So the bottom line is Cal needs money for annual team operations, and in the long run, it wants money to fund the stadium remodel. That gets us to Mr. Warren's astute comments:

"Guys and gals are working hard to make this happen. They deserve our support. No doubt eventually they will triumph."

Big C_Cal;842101688 said:

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The fact that the economy went into the dumper right about at the beginning of this whole thing really didn't help. That said, we start winning again, Bear Raid becomes super-exciting and we go to a Rose Bowl and ... boom... another thousand are in.

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Huh... I left that out.


It is even more amazing when you factor that in. Everyone loves to point to the trouble Dumpster Muffin caused, but a few short months later the entire financial system of the "WORLD" locked up, people lost half their wealth, etc etc...

And yet, we still managed to sell this ridiculously priced seats.

Simply Amazing.



Think about the climate while planing: Popular team, popular coach. Explosive and exciting football, home record through the roof, unprecedented wealth, especially in the Bay Area... Then when we finally finish it up... EVERYTHING right in the pooper.

I would say, at least until we have a half way decent team, or a reasonably strong economy, or SOMETHING, judging this model as though this is normal times is extremely difficult, at best.

Phantomfan;842102483 said:

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Think about the climate while planing: Popular team, popular coach. Explosive and exciting football, home record through the roof, unprecedented wealth, especially in the Bay Area... Then when we finally finish it up... EVERYTHING right in the pooper.

I would say, at least until we have a half way decent team, or a reasonably strong economy, or SOMETHING, judging this model as though this is normal times is extremely difficult, at best.

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So you're saying that making a 50-year plan with the assumption that the previous few years of success would continue maybe wasn't exactly prudent?

BearyWhite;842102029 said:

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Overblown in what way? When someone goes on the installment plan rather than the lump sum plan the school notches that as a "sold seat" over the whole term for the purposes of determining the health of the financing plan. In actuality though it's just a season ticket sold, with the next year's money not guaranteed. Just makes for shakier accounting than it might otherwise.

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That's the thing. In most peoples' consciousness, I don't think it is a season by season cost. You are simply amortizing the cost of the tickets. Only in an extreme situation (loss of a job or other financial uncertainty) do I think people will back out.

30 year (or less) amortization for a 50 year seat != per season ticket cost.

NeverOddOrEven;842102976 said:

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That's the thing. In most peoples' consciousness, I don't think it is a season by season cost. You are simply amortizing the cost of the tickets. Only in an extreme situation (loss of a job or other financial uncertainty) do I think people will back out.

30 year (or less) amortization for a 50 year seat != per season ticket cost.

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I picked up on that, too. If the buyer backs out, and you can resell the seat(s)(not a certainty, but probable), Cal actually makes money.

NeverOddOrEven;842101663 said:

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Hail2Calif, I believe the tax deductibility is 80% of the 70%. The annual payment option is up to 30 years, not for the life of the seats (40-50 years). And you can amortize the amount over any period up to 30 years @ 6% interest.

The fans who bought ESP seats (many of whom are on this forum) are in it for the long haul. While interest will grow with a better team, these fans bought in to the entire experience, the gameday enjoyment, and the future potential of the team, not the team's current performance. The clubs are pretty awesome, too.

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Yes - your details are correct. All I know is what my payment is for 29 more years (28 after April 1) - and certainly my family made the decision because we're 'all-in' for the long haul.

On the other hand, I do personally know several who are on the fence and kind of waiting to see how things go - so I'm sure if we started to enjoy the kind of success our rival across the Bay has, ESP would sell out their remainder pretty quickly.

Heck, 28 years from now - if I can still make it to Memorial - what I pay per seat and what someone in the chairbacks is paying might not be THAT different!