Bobinski: Purdue won't need loan to overcome $17M deficit
Seventeen million dollars.
That’s the number that stares Purdue A.D. Mike Bobinski in the face each day as he tries to navigate the financial challenges wrought by the pandemic. The good news: Bobinski thinks his athletic department is positioned to erase the deficit on its own.
“We're hopeful that we can even drive that $17 million number down a little bit at June 30 (the end of Purdue’s fiscal year),” Bobinski told GoldandBlack.com. “But, regardless of that, over the course of this year and next year, we will bring this thing back to level.”
Bobinski says his department is on track to erase the debt--which initially was projected to be $50 million when the pandemic hit hard in March 2020--without having to ask the general university for a loan. Many athletic departments won’t be as fortunate, needing to ask their universities for financial help via a loan.
Iowa is one, which is asking for a $50 million loan from the university after the pandemic forced Big Ten schools not to sell tickets to football and basketball games, which helped created a big financial shortfall.
Some schools have cut sports to save money. Furloughs, salary cuts, unfilled jobs and job eliminations were common at schools across the nation … all in the name of saving money. There has been plenty of financial pain at Purdue along those lines.
What is Purdue’s road to financial solvency?
“We have a very clear path to that,” said Bobinski. “Part of that is the restructuring of our debt.”
Bobinski says Purdue has existing debt on facilities, including the renovations of Mackey Arena and Ross-Ade Stadium, as well as the construction of the Kozuch Football Performance Complex.
“We've worked with our finance people to restructure that debt,” said Bobinski. “And that will give us in the first month of the next fiscal year (which starts July 1) about a $10 million savings because we will have a much reduced payment into the 2021-22 year.
“As long as we have a path towards solvency here, which we clearly have in operations and everything else over the course of this year and next year, everyone’s been comfortable with us proceeding along that way.”
By restructuring the debt, Bobinski says Purdue can trim $10 million off the $17 million deficit it is facing.
“That is a result of the restructure, which gives us in the very first year almost a deferred payment,” said Bobinski. “You almost always get a free year. So, instead of paying our usual $14 million in debt service, which is about what the number is, I think we'll pay somewhere between three and four (million). So, that ordinary $14 million hit that we take in 21-22 will not happen. So, we'll have a $10 million dollar benefit right out of the box just by that restructuring process.”
Purdue’s road to financial recovery will extend beyond debt restructuring. The athletic department continues to raise money through the More Than A Game campaign. Bobinski says the goal of the campaign is to raise $18 million. So far, $12 million has been raised, according to Bobinski.
“We've been very successful, the Purdue community has really, really gotten on board with helping us through this thing,” said Bobinski. “As long as we can finish the job on that in a good way, we’ll land this thing in a good place over the course of this year and into next year.”
The goal: Don’t make this debt an issue for multiple years.
“By the end of the 21-22 year, we will have this thing behind us,” said Bobinski. “All along, our goal has been to not have this thing become an anchor that we wear for 5, 10 15 years like some people are going to have to do, having to take these significant loans.
“We wanted to avoid that at all costs, which is why we did all the things we did this year from the pay reductions and furloughs and not filling jobs and sadly eliminating a few jobs and cutting budgets and doing all these different things, deferring maintenance projects just to try to get behind this as quickly as possible.”
By September 1, it should be business as usual for Purdue.
“We believe that we'll have a full year in terms of everything we do,” said Bobinski. “We’ll get out of that pain stuff behind this as of September 1 and we'll return back to regular operations and nobody will feel or have to deter what they usually do going into next year, which is a great outcome in my opinion.”
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