More Thoughts on Ohio State and PPP
The Ohio State University gets $485,000,000 and it proposes to invest the money in such a way as to generate $3 billion over the next 50 years and add substantially to the university’s long term investments. Nowhere do they mention paying off existing debts. Excellent!
“When you compare man-aging $483 million versus managing parking … it’s an obvious trade-off to me,” said Jerry Jurgensen, the head of the board’s finance committee. “Every physical asset on this campus has a depreciable life, but cash is forever.”
I”m not sure about the “cash is forever” line, but if they manage it properly, perhaps.
There is a 700 page agreement that supposedly ‘protects’ the university from those money grabbing capitalistic business folks who are after, lets face it, profit profit profit.
The numbers are a little more clear now — According to the local press, the parking program at The Ohio State University generates $28mm a year. If you increase that amount by 5.5% each year for 10 years, you generate $382 million and change. During the next 40 years, at the 4% annual increase, the revenue generated would be close to $3 billion. So in the end, assuming that people keep driving cars at the same clip they drive today and that The Ohio State University doesn’t grow in size, the deal is worth in excess of $3.3 billion.
That’s about the same amount that the university said it would get if the money was invested so it appears a wash. They feel more comfortable managing the money than the parking and we can ‘assume’ that Laz and Co will do a more efficient job of running the garages finance wise, so the ‘net’ will probably be more than it would have been if the parking program was kept under the university. Good deal for Laz and the Aussies, good deal for the university. Financially speaking.
If the 700 page document truly protects the university and gives them some control over policy, then all the better. However I doubt if a prudent business would give up too much control along with its $483 million so we will see.
All the best to both partners in this PPP.