Judy Loy: The Punishment Begins and Where Does it End?
I started my last article with, “In Centre County, we tend to weather economic challenges with less pain than other areas of the country. We didn’t get the nickname Happy Valley for nothing. An American Community Survey from 2006 showed that Centre County Residents enjoy a higher standard of living than other areas of Pennsylvania.”
Being a small town surrounding a large university has historically benefited the citizens and businesses of State College and the entire county. With the University facing unprecedented NCAA sanctions, Big Ten fines and predicted civil lawsuits, will the problems at Penn State turn into problems for the town?
At this point, I harken back to my article in StateCollege.com dated Nov. 20, 2011 and reiterate: no monetary amount can repair the damage Sandusky did to young children. He is in his rightful place, jail, most likely for the rest of his life.
No matter where you stand on the Freeh Report, the damage has been done to Penn State in the media and the court of public opinion. One friend actually said she witnessed someone in Pittsburgh wearing a Penn State sweatshirt and thought, “That took courage.” This is quite a turnabout for a university and football team that served as paragons of virtue and educational values.
In my previous article, I highlighted some financial issues that could occur and damage Penn State and the town financially.
We will start with football. One issue that we dodged was a NCAA death penalty, whereby Penn State would have been ineligible to play football for a year or, as reported, a possible four-year ban. Instead, we face a $60 million fine, a reduction of 40 scholarships over the next four years and a ban on postseason play for four years.
As of the time I am writing this article, nine current PSU players have transferred and four recruits have decommitted. The downtown State College borough has many restaurants, clothing stores and bars that benefit greatly from football weekends. Many merchants have already been quoted in the New York Times and Fox Small Business Center indicating that Penn State Football traffic made up 10 – 30 percent of their profits each year.
Four years of disappointing Penn State Football crowds could end up causing collateral damage for innocent small business owners. Thus far, economic backlash has been limited, as most are seeing a move from Paterno merchandise to inspirational shirts, such as “We are Still Penn State” and hotels have not yet faced an influx of cancellations.
The major financial clouds hanging over Penn State are lawsuits and its credit rating. The University faces a possible $100 million in lawsuit settlements or court cases. PSU will most likely opt for settlements in this case since it accepted and sanctioned the Freeh Report. In most cases, General Liability coverage would help cover these expenses. However, the university’s insurer, Pennsylvania Manufacturer’s Association, is trying to deny any claims.
Secondly, Moody’s, a rating agency, put Penn State on a negative credit watch and indicated a potential credit downgrade based on the financial fallout of the Sandusky scandal. This would make Penn State’s borrowing costs higher thus adding to the financial consequences over the long haul.
With the uncertainty and fear surrounding Penn State, there are effects already being seen in State College. Just like with uncertainty and fear in the markets causing a stalemate, many of my fellow local businesses are seeing consumers freeze.
On the positive side, business owners are working together to create a more positive outcome. The Chamber of Business and Industry in Centre County (CBICC) held meetings to create a unified, positive message for the community. Mike Desmond, owner of Hotel State College, Scott Lucchesi, owner of Champs, and McLanahan’s all provided posters for the County stating “Proud to Support Penn State Football.”
An estimated 3,000 people greeted the Penn State Football team for its first practice at a Rise and Rally Event on July 31. The solidarity and pride that graduates and residents still have in the community, the university and the current innocent players and coaches of Penn State Football is inspiring. In some ways it counteracts some of the ugliness of the media’s portrayal of our town and university along with the general public’s current negative viewpoint.
What will the final tally be to the university, Happy Valley and State College businesses? As with anything to be faced in the future, time will tell. Hopefully, Penn State and our community are taking the right steps to make the future a positive one.
- Judy Loy: Where is the Middle Class? - July 1, 2012
- Judy Loy: Facebook Does a Face Plant - June 3, 2012
- Judy Loy: What is Next for Equities? - April 8, 2012