Profit pinch key to suit filed over PSU sanctions
NCAA sanctions on Penn State University are chipping away at the Centre County economy, though some State College business leaders say it may be impossible to determine how much the penalties cost them.
The 96,000 people in and around the college town took a series of hits since the Jerry Sandusky child-rape scandal broke in November 2011 — top university administrators were arrested, a legendary football coach was fired and died months later.
“I think you'd have to be cautious to attribute all (business declines) to the sanctions,” said Mike Szczesny, director of hotel operations at State College-based HFL Corp. “There's an economy issue. There's a Penn State-raising-ticket-prices issue.”
How much the loss of bowl game appearances and other NCAA penalties pinch profits will be key as Gov. Tom Corbett and state lawyers pursue a federal antitrust lawsuit to overturn them, said Notre Dame Law School professor Joseph P. Bauer. The NCAA said the lawsuit appears meritless.
Although Corbett said the sanctions will bring irreparable economic harm to the university and Pennsylvanians, his office did not cite numbers and referred questions Thursday to the Pennsylvania Chamber of Business and Industry.
Chamber President Gene Barr said ballpark figures likely will materialize if the complaint, announced Wednesday in State College, proceeds in U.S. District Court. “It's going to be tough to get projections, certainly,” Barr said. “I don't think anyone would agree that the sanctions have been an assist to the business community in State College.”
The Penn State athletics office did not return a call.
Szczesny said HFL had local hotel business slip about 5 percent to 6 percent in the six months since the NCAA announced sanctions in July.
At several bars and restaurants the Hotel State College owns, the volume of customers slipped about 10 percent on weekends during the 2012 Penn State football season, partner Mike Desmond said.
He attributed that largely to declines in crowd sizes at Beaver Stadium. Penn State reported last month that its average home game attendance was 96,730 in 2012. ESPN reported that average attendance was 104,234 in 2010 and 101,427 in 2011.
“Longtime fans who didn't attend the games this year I think are feeling confused and a little confounded by Penn State,” Desmond said.
Pat Daugherty, owner of the Tavern restaurant, said his meal sales are off about 10 percent, too. Part of the decline probably stems from the sanctions, he said.
“There's a negativity” now in people's view of Penn State football, Daugherty said.
Other measures are less clear. Overall use of public parking systems in State College is about on par with 2011, and the borough's parking garages had a total of about 900 more vehicles on football weekends in 2012, said parking manager Charles DeBow.
“At this point, I'm not anticipating a massive decline,” he said.
Still, Corbett argued NCAA officials overreached their authority by applying “arbitrary and capricious” sanctions intended to cripple Penn State football and hurt Pennsylvanians. The sanctions include a reduction in football scholarships, a $60 million fine and the erasure of football victories tallied under late coach Joe Paterno between 1998 and 2011.
To win the antitrust case, Bauer said, attorneys will need to show the sanctions “had a net adverse impact on competition.” He called the state's arguments plausible but not strong.
“I think if I were betting, I'd say it's a less than a 50-percent chance of success,” Bauer said.
On Thursday, Corbett said in a release that if the state wins the lawsuit, he would encourage Penn State trustees to spend $60 million on efforts to help victims of child abuse in Pennsylvania.
State General Counsel James D. Schultz, working under Corbett, took the lead in the lawsuit. Attorney General Linda Kelly gave Schultz the go-ahead to handle the case, saying Thursday that a potential conflict of interest precluded her deputies from pursuing the matter. Her office is prosecuting Penn State administrators Graham Spanier, Tim Curley and Gary Schultz on charges related to the Sandusky case. James and Gary Schultz are not related.
A Centre County jury in June convicted Jerry Sandusky, 68, a former assistant football coach at Penn State, of abusing 10 boys over 15 years.
Fallout since prosecutors filed their first charges has created a constant ordeal for the community, business operators said. At the Family Clothesline, a carrier of Penn State-branded clothes and gifts, the bowl-game ban brought an end to bowl-game merchandise, too.
“It has all hurt our business at some level,” said Caroline Gummo, the store advertising manager. “The full impact — we'll probably not see for another couple years.”
Staff writer Brad Bumsted contributed to this report. Adam Smeltz is a staff writer for Trib Total Media. He can be reached at 412-380-5676 or email@example.com.