Penn State Hometown’s ‘Engine’ Escapes Game-Ban Crisis

Steve Moyer, whose Lions Pride shop sells Pennsylvania State University gear, paused when asked what would happen if he couldn’t sell football-related merchandise.

“It would be a huge hit,” Moyer, 42, said by telephone before the football program’s fate was known. His father started the store in 1976 in the school’s hometown of State College. Items such as caps and shirts emblazoned with team logos provide 60 percent of his revenue, he said.

While the National Collegiate Athletic Association fined the university $60 million today for its handling of a child sex-abuse case involving assistant coach Jerry Sandusky, it avoided a shutdown of the football program that was at the center of the scandal. That may provide a measure of economic relief to State College, a borough of 42,000 residents.

“They’re severe but I can’t disagree with them,” said Jacob Ross, 18, an incoming freshman from Salisbury Township, Pennsylvania, who’d stopped at the student union today to watch the NCAA announce its sanctions in a televised press conference. Shutting down football “would have just victimized people who didn’t deserve that, the town, the players,” he said.

Nittany Lions games generate $50 million in direct spending for Centre County, which includes State College, according to a fiscal 2009 study commissioned by the school. Games draw 100,000 fans to Beaver Stadium on a half-dozen Saturdays each year.

‘Economic Engine’

“Penn State basically acts as an economic engine,” said Centre County Commissioner Chris Exarchos, 67. Everyone in the area either works there, studies there or knows someone who does one or the other, he said. “We’re a company town.”

The NCAA’s penalty is “pretty severe,” he said today in an interview. “I think it would have a significant impact on the football program. There could be a lot of unintended consequences.”

One of those may be unexpected pressure on the community’s $21 million budget. Borough Manager Thomas Fountaine said he and other officials will discuss the possible short- and long-term effects of the football sanctions when they meet on Aug. 1 to discuss the 2013 spending plan.

The borough relies “heavily on Penn State football,” Fountaine said in an interview. “There’s no doubt there will be an impact.”

‘Corrective’ Action

In addition to fining Penn State, the NCAA said its “corrective and punitive” measures stripped the school of all of its wins from 1998 through 2011, barred it from postseason play and eliminated 20 scholarships annually for four seasons.

“I am grateful that the NCAA did not impose the ‘death penalty,’ which would have also had a severe detrimental impact on the citizens of State College, Centre County and the entire commonwealth,” Governor Tom Corbett, a Republican and a university trustee, said in a statement.

“I also want assurance from Penn State that no taxpayer dollars will be used to pay the $60 million fine imposed on the university,” Corbett said.

Louis Freeh, a former FBI director hired by school trustees to investigate the child sex-abuse scandal that rocked the campus last year, said ex-football coach Joe Paterno, former president Graham Spanier, 64, and other university officials failed to protect children from Sandusky, 68, an assistant for 31 years, in a report released July 12.

45 Counts

Sandusky was convicted last month on 45 criminal charges tied to abuse of 10 boys over 15 years and may spend the rest of his life in prison.

University officials didn’t report allegations made against Sandusky, or take steps to ensure the safety of children he came in contact with, according to Freeh.

Penn State athletics generated $116.1 million in operating revenue in fiscal 2011 and had a $14.8 million surplus. The gain helped pay for facilities maintenance and buildings. Removing revenue and expenses tied to football would have cut revenue to $57.2 million and produced a $29.1 million deficit that year, according to school records.

The school also has $51.9 million in debt tied to athletic facilities that costs $3.57 million a year to service.

Penn State football acquired goods and services valued at $13.9 million within Centre County, while game-day spending by employees came to $2 million and out-of-town visitors drawn into the community by the program plunked down $34.1 million on hotel rooms, meals, souvenirs and other items, according to the fiscal 2009 study by Pittsburgh-based consulting firm Tripp Umbach.

‘Who Knows?’

“We’ll take a loss” because of the NCAA’s ban on postseason play, said Jason Sincavage, an employee at Rapid Transit Sports, a store near the campus that sells shirts related to bowl games involving the Nittany Lions.

When asked how the store would make up any losses, Sincavage said, “Who knows?”

The program generated $134,000 in direct state payroll taxes and $690,000 in levies collected by Centre County, according to the Tripp Umbach report. In 2009, 1,130 jobs, almost all within the county, were linked to Penn State football, including administration, coaching, ushers and media.

Penn State football helped keep the county’s jobless rate, at 5.3 percent in May, lower than the state’s 7.4 percent, Exarchos said.

Centre County, with almost 155,000 residents, is already coping with economic challenges stemming from the longest recession since the 1930s, with more than 18 percent of residents living in poverty, compared with 12 percent statewide.

“Our area has been devastated by all these events,” said Exarchos, who earned a graduate degree from the school in 1976. “This is just one additional thing we have to weather.”

To contact the reporters on this story: Curtis Eichelberger in Wilmington, Delaware at ceichelberge@bloomberg.net

Romy Varghese in State College at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.