Are Fresno State students paying the price for university’s grand campus arena dream? | Opinion
More than 20 years ago, Fresno State administrators full of optimism and grandiose dreams built a basketball and concert arena on Shaw Avenue with a financing plan made of Jello.
The rosy projections their dreams were based on soon wilted. Now the largest bills are due, and there’s evidence suggesting students in the present day could be made to swallow an enormous debt. Potentially impacting how much they pay for campus housing, dorm food and other services.
The financial drain on Fresno State that is the Save Mart Center has finally been revealed. As reported by The Bee’s Robert Kuwada, the university still owes more than $42 million on the 21-year-old arena – with $16.5 million in balloon payments due in 2024 and 2025 ($6.2 million this year and $10.3 next) that greatly exceed the typical annual amount.
How can a $103 million arena that opened in 2003 – with a fundraising campaign kicked off by a $40 million gift from Save Mart and Pepsi and other pledges said to exceed $20 million – still be $42 million in the hole?
One answer to a complicated question: interest-only payments. Between 2002 and 2013, according to financial records, the university paid only the interest on the arena debt as its capital lease obligations hovered near $70 million.
Fresno State president Saúl Jiménez-Sandoval acknowledged the remaining debt and balloon payments (“It’s not an issue of opinion. It’s a fact,” he said). What’s uncertain is how the university intends to extricate itself from a sticky financial predicament.
The story presented hard numbers indicating today’s students may be bearing the brunt of the poor decisions made by past campus administrators. If that’s true, Jiménez-Sandoval must come right out and say so.
It’s important to note Save Mart Center is owned and operated by the California State University Fresno Association, a nonprofit auxiliary organization that also oversees Campus Pointe, student housing, dining services, the student union, the student rec center and the bookstore.
These “auxiliaries” are considered public benefit corporations and are legally separate and distinct from the university – even though the Association’s board of directors is chaired by vice president of administration Debbie Adishian-Astone and made up mostly of campus officials. Auxiliaries do not receive state funding; they must cover their own costs.
A suddenly profitable nonprofit
Building and operating Save Mart Center and Campus Pointe through the auxiliary organization prevents these large-scale projects from negatively impacting Fresno State’s debt capacity and credit rating. However, the university has also employed its nonprofit status to keep financial arrangements shrouded from public view.
Because the Association operates independently from the university, administrators can’t simply transfer money from the general fund or other state sources to cover the balloon payments. At least not without asking the CSU system for an exception – something Fresno State hasn’t done.
Adishian-Astone, who has been involved with Save Mart Center since its inception, wouldn’t answer Kuwada’s questions about where the money is coming from. However, in a 2023 story in The Bee, she acknowledged the auxiliary covers all debt service on the arena as well as any operating losses.
As it happens, the California State University Fresno Association has become increasingly profitable as the due dates on the balloon payments crept closer. For seven straight years between 2014-15 and 2020-21, the nonprofit reported net operating losses.
That changed in 2021-22 when the Association reported a net income of $833,741. That figure rose to $6.6 million in 2022-23 and is projected to land at $4.7 million in 2023-24.
Huge increases in the profitability of student housing and university dining facilities account for most of those gains. In 2021-22 alone, the Association made $1.6 million off dorm food.
Spell out the facts
Because we don’t have a complete financial picture, it would be irresponsible for me to declare that Fresno State students are directly funding the arena’s balloon payments by paying more for basic services.
But if there is another explanation, Jiménez-Sandoval must spell out publicly what’s going on. He didn’t create this mess — Jiménez-Sandoval was getting his PhD in Spanish and Portuguese literature at UC Irvine when the deal was made — so there’s no need to obfuscate.
The cold, harsh reality of what Save Mart Center has become couldn’t be further away from the sunny, optimistic projections pushed 20-plus years ago by then-president John Welty and others, including Adishian-Astone.
The arena’s original financing was highly complex. It relied on more than a dozen revenue streams, including $74 million in bonds, the $40 million naming rights deal and income generated by suite leases and personal seat licenses.
To make the suite lease and PSL projections pencil out, Fresno State needed fan enthusiasm for Bulldogs basketball seen during the Jerry Tarkanian era to continue unabated. That, of course, did not happen. Attendance and interest plummeted by the late 2000s and after 10 years, when the original agreements expired, few were renewed.
Having 10-year leases for suites and PSLs for an arena that would require at least 20 years to pay off was identified by independent experts as a major flaw in the financing plan. But no one predicted students in the 2020s could be made to foot the bill.
