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Topeka Capital-Journal (Kansas)

This isn't what Andrew Knopp intended to sign the Kansas student body up for.

Knopp - KU's student body president from 2003-04 - questions the ethics of KU Athletics in regards to a contract signed in 2004. The contract terms, he says, were never supposed to stretch nearly a quarter-century.

In April 2004, Knopp signed a contract with former athletic director Lew Perkins. The main point of the contract was this, according to Knopp: KU Athletics would pay up to $1 million per year for the new recreation center expansion and in exchange would get to sell 1,431 seats in Allen Fieldhouse that previously were student tickets.

The swap, according to Knopp, would basically be $1 million for $1 million each year, with Perkins assuring Knopp that KU Athletics could make at least $1 million extra by selling those 1,431 seats as season tickets instead of single-game tickets when those seats went unused by students.

According to Knopp, the recreation center expansion was supposed to cost $6 million. Yet, recently Knopp learned that the bond payments are stretched out until 2027.

The Topeka Capital-Journal obtained an email sent on March 11 from Knopp to Chancellor Bernadette Gray-Little.

"The value of the additional seating and the student fee over the past 10 years far exceeds the cost of the expansion to the Rec Center," Knopp said in the email.

Knopp was out of office nearly one month after he signed the contract in 2004. KU Athletics would soon be dealing with a new set of student senators.

"I'm sure if I or my successor had been consulted," Knopp said, "we never would have agreed to those terms."

DISPUTED TRADE

KU assistant athletic director Jim Marchiony refutes Knopp's claim that the tickets-for-bond agreement was meant to be a $1 million-for-$1 million swap.

"I don't know where that's coming from, but the trade was, 'We pay for the building, and we would get the seats,'" Marchiony said. "It shouldn't matter how many years we took to pay the bonds off."

The rec center bonds are back in the news now, though, after KU's student senate voted to eliminate the $25-per-semester student athletics fee in March. Gray-Little, who had a chance to veto the Senate's decision, decided on compromise, lowering the semesterly fee from $25 to $7 while also ruling that Athletics would no longer have to pay for the rec center bonds.

Those same bonds - the ones that Knopp claims Perkins promised KU would commit to paying for at a rate near $1 million per year - have now been turned back over to the students, who are in charge of paying that $470,000 per year; that will cost each student $12 per semester, meaning each KU student will save $6 per semester in total next year.

"All that the chancellor and I had to operate off of was the contract that was before us that had been in place for 10 years," KU athletic director Sheahon Zenger said. "Conversations from 10 years ago are not something I can really make decisions based upon. I know the student government, I believe, essentially asked to take control of that rec center fee, which is what happened."

SELLING SEATS

According to Theresa Gordzica, KU's chief business and financial planning officer, KU Athletics originally signed onto a 20-year bond starting in 2007 for the rec center expansion at an annual cost of $470,000; the bond did not begin until 2007 because bonds are not sold until all the planning and authorization for the project are complete. The total cost of the bond was $6.275 million, with KU Athletics making a one-time $400,000 payment during the planning phases before the bond began in 2007.

"At that time, it looked like their original commitment I think was around $565,000 a year, and that turned out to be about a 20-year bond," Gordzica said. "Well, when we went to market, a 20-year bond would amortize out at about $470,000 a year. So that's what they were basically committed to paying for the 20-year term of the bond."

In return, KU Athletics was making money off the 1,431 additional seats acquired from the students thanks to its contract with Knopp.

"I think it's a fair deal for both sides," Marchiony said. "I think it's a fairer deal for students who knew what they were getting and knew that they were going to get this without having to pay for it. We didn't know how much money we were going to get from selling the tickets. But the students got a really good deal."

A 2004 Capital-Journal article cited that KU increased its season-ticket price that year to $40 per ticket for 19 home games for a total of $760, not including the Williams Fund donation required. With those figures, KU Athletics would stand to make $1,087,560 off the student seats acquired that year, not taking into account the dollars KU might have previously made by getting leftover students seats and selling them at single-game prices.

The potential earnings from those seats also have increased with the recent success of the men's basketball team. According to the latest men's basketball season ticket application, the minimum price for a season ticket - including a Williams fund donation - is $950. Assuming a sellout, KU Athletics would make a minimum of $1.3 million per year at current prices on those seats.

Those numbers trump the amount KU Athletics was paying for the rec center bonds each year, which ranged from $400,000 combined over the first two years to $470,000 annually since 2007.

Marchiony said the amount of money made by KU Athletics those years was not relevant because the department was taking on uncertainty with the acquisition of the 1,431 student tickets.

"That was a risk on our part. We didn't know how much money we were going to get for the seats. The opportunity was certainly there. The chance was there," Marchiony said. "The only sure thing here was that the students got the rec center that they desperately wanted. And again, I'll go back to the fact that it didn't affect their student fee at all. They didn't pay $1 more a year to get their rec center."

CHANGES FOLLOWING COMPROMISE

Shortly after Gray-Little's compromise in March, the KU Athletic department announced it was taking away the location of some of the best student seats in Section U for next year, saying the decision was made to try to recover the approximately $350,000 it would lose because of the reduction in student fees. Though KU students would not lose any seats, they would have the location of 120 seats switched from Section U behind KU's bench to an area farther from the court.

A Williams Fund information sheet shows season tickets in the new section will cost donors $2,600 per year (including donation). Assuming a sellout, that's approximately $1,650 more than KU would have gotten from the previous location of seats it had sold to season-ticket holders ($950), resulting in a potential profit of around $198,000.

KU Athletics also is planning on raising its student ticket fee from $150 to $175 at the beginning of next season.

Even with the increase, KU remains competitive with its student-ticket packages and is the cheapest of four Big 12 schools that require a separate student-ticket package fee: Iowa State charges $249 for an all-sports pack, Oklahoma State charges $250, while K-State's package includes a $150 option for football only with $235 and $295 options for combined men's basketball and football tickets.

"It was important to me that we be able to move forward in a way that our student prices remain low in comparison to peer institutions in our league and in our own state," Zenger said. "I think we've tried really hard to do that. We've responded to what we've been told by the student government to find other revenue streams, particularly through donors."

Marchiony estimated that KU sells 4,000 student-ticket packages every year, and with that number, KU's increase would bring in an additional $100,000 in revenue beginning next year.

PAYING THE REC CENTER BILL

KU students will have to deal with more than just the changes to the seat location and student-ticket package price, though. Under Gray-Little's compromise, they now will have to foot the bill for the rest of the rec center bond that Knopp says Perkins originally agreed to pay near $1 million annually for.

"He's putting words in Lew's mouth there. That's not very fair," Marchiony said. "To concoct a story based on something he thinks Lew may have said, that's not fair at all."

Attempts by The Capital-Journal to reach Perkins were unsuccessful.

Knopp agrees with Marchiony that, in principle, the student seating swap had the potential to be a fair deal for both sides. His contention, though, remains that KU students shouldn't be bound to taking on the rec center bonds that still have 13 years until completion.

Knopp also says the language of the 2004 contract drafted by KU Athletics was potentially misleading, as it stated: "This agreement will be for five (5) years or until maturity date on the bond, which ever is longer." Knopp says a length of 20 years on the bond was never discussed by the two sides, and that the contract made it seem like the bond would be closer to the five-year period cited. The contract also didn't explicitly state who would determine the length of the bond.

"Once that (20-year) length was decided, Athletics should have come back to me, or the next student body president since I was graduated by the time they made this decision to sign a final agreement with all the terms set," Knopp told The Capital-Journal in an email Tuesday night.

Knopp remains clear that he doesn't think the students should still be responsible for payments on a rec center he believes should have been paid off by now.

"I certainly don't think that Athletics intentionally stretched out the payments in order to manipulate our agreement and contractually extract the maximum amount of money from students through this fee; I am confident that they issued the bonds at terms that made fiscal sense for them," Knopp said in his email to Gray-Little. "But if anyone is seriously arguing that the intent of either party to this agreement was to bind students into paying over $1 million per year until 2027, in exchange for a $6 million construction project, they would be calling my presumption of Athletics' good faith into question."

 

June 26, 2014

 

 
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