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re: GA Prof says Bama is a billion dollars in debt
Posted on 5/22/15 at 1:06 pm to mrbroker
Posted on 5/22/15 at 1:06 pm to mrbroker
quote:
i would think a value of a building in NY would be higher then Bama due to the property values, but I would assume that the depreciation of that building would follow the same rules. I am not really sure what you are trying to say.
What I have been trying to say from the beginning. That the true value of a building on non-urban campus is over inflated. If it is just the cost of building plus the cost of the property, then it might be legit. Most of the big buildings on Campus are thru Federal Grants, so how is that factored in the equation. I am asking those who might know.
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Posted on 5/22/15 at 1:07 pm to WDE24
quote:
They can make up another championship and pay this debt off by November selling MNC smack talk tee
Bama still has 4-5 times as many non-disputed titles than Auburn has so I don't get why Auburn fans always bring that up. Also Bear didn't make rings for his '66 team like Tubbs did in 2004.
Posted on 5/22/15 at 3:34 pm to Irons Puppet
quote:
Hey dickhead, nobody was talking about Bama's debt in the recent posts.. We were talking about their assets. You are just the typical arrogant bammer, who starts talking about something that is not part of the conversation. You try to give examples based on your life and those around you, but it goes unnoticed,
I hit "Reply" on your post, but I thought I was fairly clear that the "you" I referenced was plural. That is, I wasn't directing all of my post to "Irons Puppet," but that's quite obviously the way you took it. I wasn't participating in the recent conversation; I was replying to the entire thread. I apologize if I was unclear and hurt your feelings.
And yes, I probably came off as arrogant, but I feel that it's only because I'm a beacon of knowledge in an otherwise ignorant group of people. If I came to this board criticizing the power grid in Auburn, I would imagine that it would be pretty galling to an Electrical Engineer that I was spouting off on a subject where I know very little, just in the pursuit of criticizing a rival.
Posted on 5/22/15 at 3:40 pm to Irons Puppet
quote:
What I have been trying to say from the beginning. That the true value of a building on non-urban campus is over inflated. If it is just the cost of building plus the cost of the property, then it might be legit. Most of the big buildings on Campus are thru Federal Grants, so how is that factored in the equation. I am asking those who might know.
I'm more familiar with accounting and finance for business, but I'm pretty sure that asset valuation is similar for public institutions. The value assets are nearly always calculated by the costs associated with putting them into production. In the case of Bama (or any institution, really), the cost of putting a building into "production" is the cost of land, the cost of the building, and the material cost of everything else that goes into it getting ready to be used for its intended purpose.
Market values are wildly variable, so assets are not "marked to market" unless there is some compelling reason to do so, such as a liquidation. They are also reduced in value through an accounting process known as depreciation. Therefore, it is much more likely for land and building assets to be undervalued w/r/t the market than to be overvalued. This is intentional, as there is an accounting principal of conservatism.
The way the buildings are financed has little to no impact on their valuation, so the Federal Grant issue doesn't apply here.
Posted on 5/22/15 at 3:56 pm to Tiguar
quote:
"UAT wants to shut down undergrad at UAB"
I still cannot believe there are actually educated people who believe this. We are accustomed to hearing preposterous rumors from AU fans, but this beats all. Hopefully it's just a small group of crazies at UAB.
Posted on 5/22/15 at 4:10 pm to BamaNixon
quote:
They are also reduced in value through an accounting process known as depreciation. Therefore, it is much more likely for land and building assets to be undervalued w/r/t the market than to be overvalued. This is intentional, as there is an accounting principal of conservatism.
Not trying to be a smartass, but how much would this property be valued in Tuscaloosa, if the University did not exist :
Most buildings on College Campuses fit in this category. How much does Bama credit BDS value against the bottom line ? That is why I say Universities bloat their assets.
Compare it to the value of this building at UAB:
This post was edited on 5/22/15 at 4:14 pm
Posted on 5/22/15 at 4:31 pm to Irons Puppet
quote:
Not trying to be a smartass, but how much would this property be valued in Tuscaloosa, if the University did not exist :
It's a good question w/r/t the asset conversation, so I'll answer it, even though it's the WRONG question.
Probably very little, as it was built for a specific, revenue-generating purpose. The land has value, but the building potentially could only be worth salvage. So, it's being depreciated to the level of its salvage value. This isn't unique to Bama, by the way.
However, this is still the WRONG question. The book asset value is only one element in loan decisions, and, these days, it's not the most important element. The most important element is the ability to service the debt (i.e. paying interest and principal in a timely manner). Asset value is relatively unimportant compared to cash flow. That's why saying things like "Alabama has a BILLION dollars in debt" is just a way to get hits and excite the rubes, several of whom have appeared in this thread.
A good shortcut to figure out what's true or not is to actually look at the source. The writer of the article is a geography teacher with a math background. When it comes to business, he may be able to calculate numbers, but it's obvious that he doesn't know what they MEAN. The people who know what these numbers mean are the bond rating services who have rated the Alabama bonds at Aa2, which is HIGH investment grade. In other words, very safe money with a ridiculously high likelihood of being repaid.
Posted on 5/22/15 at 4:46 pm to BamaNixon
quote:
A good shortcut to figure out what's true or not is to actually look at the source. The writer of the article is a geography teacher with a math background. When it comes to business, he may be able to calculate numbers, but it's obvious that he doesn't know what they MEAN. The people who know what these numbers mean are the bond rating services who have rated the Alabama bonds at Aa2, which is HIGH investment grade. In other words, very safe money with a ridiculously high likelihood of being repaid.
When was the last time a State (AL) University was unable to pay back a debt? We are not talking about bonds from a City or County.
Posted on 5/22/15 at 4:47 pm to BamaNixon
This is a big fuss about nothing. Let's be real, if there was a real money issue at Bama the state legislature would give more money. If that still didn't work , they would start taking Auburns money and give it to Alabama.
Posted on 5/22/15 at 4:50 pm to Irons Puppet
quote:
When was the last time a State (AL) University was unable to pay back a debt? We are not talking about bonds from a City or County.
I don't know. It's probably pretty rare for large schools to go bankrupt. That's part of why I think the article in OP is disingenuous at best. There's little to no evidence that the debt load that Bama has is unsustainable, or that any of the decision-making process he describes even makes sense.
EDIT: I know that Aa2 rated bonds have less than a 1% default rate. Much less, in the case of bonds somewhat backed with municipal clout.
This post was edited on 5/22/15 at 4:53 pm
Posted on 5/22/15 at 4:54 pm to BamaNixon
quote:
I don't know. It's probably pretty rare for large schools to go bankrupt. That's part of why I think the article in OP is disingenuous at best. There's little to no evidence that the debt load that Bama has is unsustainable, or that any of the decision-making process he describes even makes sense.
I have heard the biggest concern is the % of out of State Students needed to support the infrastructure of the enrollment goals. UA is offering big $ to these students, and at some point it will be hard to maintain those numbers.
Posted on 5/22/15 at 5:00 pm to Irons Puppet
quote:
I have heard the biggest concern is the % of out of State Students needed to support the infrastructure of the enrollment goals. UA is offering big $ to these students, and at some point it will be hard to maintain those numbers.
I'm not sure that I'm following you. If they're offering big $ to attract out-of-state-students, how are those students a net positive to supporting infrastructure? And if they are a net positive, why wouldn't Bama just keep doing this?
Either way, I still trust that the bond rating agencies have done much more effective and extensive research into Bama's ability to repay. They can be held liable for being wrong. Some geography professor can't.
Of course, this doesn't mean that the bond rating agencies CAN'T be wrong, but just that it's much more likely that the writer in OP is wrong.
Posted on 5/22/15 at 5:11 pm to BamaNixon
quote:
I'm not sure that I'm following you. If they're offering big $ to attract out-of-state-students, how are those students a net positive to supporting infrastructure? And if they are a net positive, why wouldn't Bama just keep doing this?
UA has built over the last 5 years to support a 40K+ enrollment. They are offering money to out of state students in order get those numbers, but the instate population can not support it. Buildings half full in the future will stress the University.
Posted on 5/22/15 at 5:19 pm to Irons Puppet
quote:
UA has built over the last 5 years to support a 40K+ enrollment.
Ok.
quote:
They are offering money to out of state students in order get those numbers, but the instate population can not support it.
My understanding is that they are currently admitting 57% of applicants. The demand is obviously there.
quote:
Buildings half full in the future will stress the University.
Maybe. But your assumptions don't add up. They're making their payments while offering money to out-of-state students. What are you assuming changes? Are you assuming that they won't be able to offer money in the future? On what are you basing this assumption?
There are two scenarios in your assumption:
1. Bama is offering so much money to out-of-state students that they end up paying less than in-state students. If this is the case, why? Why not offer less money and take a higher percentage of applicants?
2. Bama is offering money to out-of-state students, but it still costs more for them than the in-state students. If this is the case, why would this necessarily change?
You're making declarative statements that you seem to believe are facts, but they don't make sense.
Posted on 5/22/15 at 5:50 pm to BamaNixon
quote:
My understanding is that they are currently admitting 57% of applicants. The demand is obviously there.
That % is skewed by a lot of instate students who are on the lower scale of academic achievement. If they a forced to start taking some of those in, the overall effect will kill any academic reputation of the school.
quote:
1. Bama is offering so much money to out-of-state students that they end up paying less than in-state students. If this is the case, why? Why not offer less money and take a higher percentage of applicants?
see above
2. Bama is offering money to out-of-state students, but it still costs more for them than the in-state students. If this is the case, why would this necessarily change?
Because the school would not be able to keep that pace of providing money to out of state students, while increasing the tuition cost of instate students. It is a problem for all the schools in the state, but Alabama's
growth goals have put a lot of pressure on parents in Alabama.
This post was edited on 5/22/15 at 6:07 pm
Posted on 5/22/15 at 6:12 pm to Irons Puppet
quote:you are pretty much full of crap, as is the guy who wrote the article. bama had revenues or nearly 900 million last year, and has more than a billion in liquidity. since they started the push to enroll more out of state students, tuition revenues have more than doubled to close to $400 million last year, and is expected to increase another $89 million in 2015. the increase in out of state students has also increased the average act of enrolling students, and bama has steadily risen up the academic list for public institutions over the time period since the peak of instate enrollment in 2008. trying to paint a billion in debt as a financial issue for a non-profit with nearly that much in annual revenue plus more than that in cash on hand is completely retarded. bamas credit rating remains stellar. If you want to see an academic institution in real trouble, look at lsu, who did not make such a good strategic move as alabama to cope with dropping state funding. The campus upgrades are a long term investment to increase enrollment, which increases revenues, especially with increased out of state enrollment.
Irons Puppet
Posted on 5/22/15 at 6:13 pm to Scoreboard
Posted on 5/22/15 at 6:15 pm to Old Hellen Yeller
I don't believe the reasoning behind it put forth by the article, but I don't doubt for a second UAT would shed no tears if UAB undergrad population was cut by 7k+
Posted on 5/22/15 at 6:18 pm to Irons Puppet
quote:
That % is skewed by a lot of instate students who are on the lower scale of academic achievement. If they a forced to start taking some of those in, the overall effect will kill any academic reputation of the school.
So? If we're still talking about the article in OP, then it's a money issue first. I'm not sure I buy this assumption (Auburn accepts 80% of applicants; 57% is pretty low for most state schools), but even if I did, Bama has a lot of ways to avoid defaulting on the debt. Seems like UAB and UAH are small potatoes for a billion dollar overhang.
quote:
Because the school would not be able to keep that pace of providing money to out of state students, while increasing the tuition cost of instate students
Why not? It seems to be working ok so far. In 2013, the University of Alabama made income of $103mm. This is after interest expense. It also had cash flow of $130mm, which is after all debt service. It looks like there is no reason to change any of its policies.
Do you have any evidence that what Bama is doing is unsustainable? Looks like it's working like gangbusters.
By way of comparison (these are 2014 numbers, which I just found),
Alabama - Noncurrent liabilities - $951mm
Alabama - Net Income - $153mm (6.2 debt/net income ratio)
Auburn - Noncurrent liabilities - $751mm
Auburn- Net Income - $65mm (11.6 debt/net income ratio)
I wouldn't worry about Alabama's financial position if I were you. Based on the items brought up in OP's article, Auburn is in much worse position.
EDIT: Auburn's Financials
Bama's Financials
This post was edited on 5/22/15 at 6:21 pm
Posted on 5/22/15 at 6:40 pm to BamaNixon
You either live in another state or just a dumbass. This is not a Football or Athletic issue. When either school suffers financially, it hurts all the citizens of Alabama. I think both schools have lost focus on what their mission is for the citizens of the state.
AU acceptance rate is high and so is their enrollment scores, because it is well know that you do not apply there unless you have certain scores.
AU acceptance rate is high and so is their enrollment scores, because it is well know that you do not apply there unless you have certain scores.
This post was edited on 5/22/15 at 6:45 pm
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