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 CONTENTS vii

FEASIBILITY STUDIES DEFINED 288 SIDEBAR 12.D Psychic impact 331

Phases of a Feasibility Study 288 Causes of Overestimating 332
Parts of a Feasibility Study 289 SIDEBAR 12.E The further they travel, the more they
MARKET DEMAND 290 spend 333
Individual Ticket Demand 292 CONCLUSION 334
SIDEBAR 11.A Luxury suite prices: What drives CONCEPT CHECK 335
them? 296 CASE ANALYSIS 335
Corporate Demand 296 REFERENCES 337
BOX: Primary research on corporate demand 299
Event Activity 302
SIDEBAR 11.B Kansas City . . . BBQ, jazz, and PART IV
basketball? 303
FINANCIAL ATTRIBUTES OF SELECT
Facility Specifications and Operating
SPORT INDUSTRY SEGMENTS 339
Estimates 305
Results of Market Demand Analysis 308
FINANCING 308
LOCATION, CONSTRUCTION COSTS, AND
ENGINEERING 309
FEASIBILITY STUDIES FOR RECREATION
Public Sector Sport 341
FACILITIES 309 Key Concepts 341
CONCLUSION 309 INTRODUCTION 342
CONCEPT CHECK 309 FINANCIAL MANAGEMENT TRENDS IN PUBLIC
CASE ANALYSIS 310 SECTOR SPORT 342
REFERENCES 310 SIDEBAR 13.A Frisco, Texas: School district, community,
and professional sport partnerships 344
SOURCES OF FUNDS 344
Public Sources of Funds 345
SIDEBAR 13.B Pay-as-you-go financing for the Blythewood
Economic Impact Baseball and Softball League fields 352
Analysis 311 SIDEBAR 13.C Bond financing for the City of Fenton,
Missouri 355
Key Concepts 311
Private Sources of Funds 355
INTRODUCTION 312
COLLABORATIVE FINANCING 358
SETTING THE PARAMETERS 312 Joint Use Agreements 358
Geographic Area of Impact 313 Public/Private Partnerships 359
Spending 313
CONCLUSION 360
METHODOLOGIES FOR MEASURING EVENT
CONCEPT CHECK 360
ECONOMIC BENEFITS 315
PRACTICE PROBLEMS 361
Spending Methodologies 315
CASE ANALYSIS 361
Fiscal (or Tax) Impact Methodology 323
REFERENCES 362
MEASURING EVENT COSTS 325
ECONOMIC IMPACT OF A LOCAL TEAM 325
SIDEBAR 12.A Where do visitors spend their
money? 326
ECONOMIC IMPACT OF A SPORT FACILITY 327
COMMON MISTAKES IN ESTIMATING ECONOMIC
College Athletics 365
IMPACT 327 Key Concepts 365
Causes of Underestimating 327 INTRODUCTION 366
SIDEBAR 12.B Smaller teams, smaller communities = greater FINANCIAL STATUS OF INTERCOLLEGIATE
economic impact 328 ATHLETICS 366
SIDEBAR 12.C Vacationing at home 329 The Race to Build New Athletic Facilities 367
viii CONTENTS

The Race to Change NCAA Divisions 369 Expansion 418

Other Races to Be Won 370 SIDEBAR 15.F The future of women’s professional basketball
SIDEBAR 14.A University of Alabama–Birmingham football: in the United States 419
The cost of on-field success 370 Territorial Rights 419
FINANCIAL OPERATIONS 371 COMPETITIVE BALANCE 420
National Collegiate Athletic Association 373 SIDEBAR 15.G Competing leagues 421
Conferences 376 Player Drafts 422
Schools 380 SIDEBAR 15.H NBA draft lottery 423
SIDEBAR 14.B Financial turnaround for an intercollegiate Salary Slotting 423
athletic program 384 SIDEBAR 15.I Did the Houston Astros exploit the new MLB
SIDEBAR 14.C A deeper look at athletic department draft slotting system? 424
budgets 388 Free Agency 425
ATHLETIC DEPARTMENT FUNDRAISING 393 SIDEBAR 15.J Curt Flood versus MLB 426
The Capital Campaign 393 Player Salary Negotiations 426
Annual Giving Programs 398
SIDEBAR 15.K MLB collusion 431
SIDEBAR 14.D Intra-university development issues 401 SIDEBAR 15.L What is the cost of a win? 432
ENDOWMENT FUNDAMENTALS 402 Luxury Tax 432
CONCLUSION 402 Revenue Sharing 436
CASE ANALYSIS 403 SIDEBAR 15.M Á la carte pricing to doom financial future
CONCEPT CHECK 403 of sports? 438
PRACTICE PROBLEMS 404 SIDEBAR 15.N Fixing free riding with a relegation system in
APPENDIX 14.A Top-20 cost-of-attendance budget increases European soccer 441
2015–2016 404 SIDEBAR 15.O Does the global game need more revenue
REFERENCES 405 sharing? 442
EMERGING REVENUE SOURCES 442
Luxury Seating 443
Seat Licenses 443
Ticket Reselling 444
Variable Ticket Pricing 444
Professional Sport 407 Fantasy Sports and Gambling 444
Key Concepts 407 Securitization 445
INTRODUCTION 408 CONCLUSION 446
LEAGUE STRUCTURES 409 CONCEPT CHECK 446
Franchisee/Franchisor Structure 409 PRACTICE PROBLEMS 447
SIDEBAR 15.A Beyond the Big 4 409 CASE ANALYSIS 447
SIDEBAR 15.B Pete Rozelle and “league think” 410 REFERENCES 448
Single-Entity Structure 411
OWNERSHIP RULES AND POLICIES AND LEAGUE
FINANCES 412
New Ownership 412
SIDEBAR 15.C NASCAR 413
APPENDIX
SIDEBAR 15.D Japanese professional baseball problems
beginning to change? 414 TIME VALUE OF MONEY TABLES 453
SIDEBAR 15.E Long-term family ownership to end in
professional sports? 415 Glossary 462
Debt 416 Index 473
PREFACE
he business of sport has changed dramatically
T since the first edition of Financial Management
in the Sport Industry was published, and this second
edition reflects the impact of these changes on finan-
cial management within the industry. Adopters of the
first edition expressed positive feedback regarding
its content, and they also provided important ideas
where material could be updated and new informa-
tion could be introduced.
I [Matt Brown] had been teaching sport finance
for several years when the need for this text became
apparent. During my time at Ohio University, the
graduate and undergraduate sports administration
programs evolved as they prepared to move into the
College of Business. In addition, as students became
grounded in introductory accounting, economics, and
finance courses, it became apparent that there was a
need for a text that truly explored financial manage-
ment in the sport industry. At the time, most sport
finance texts focused on revenue generation in sport,
with little focus on financial management. Feedback
from students and their quest for new knowledge
moved us to write the first edition of this book.
In the sport industry, the need for understand-
ing finance and the importance of sound financial
management has continued. Over the past decades,
through periods of financial growth and even tur-
moil, the industry has grown tremendously—the
estimate of its growth and current value vary depend-
ing on the source, but we all agree it is large and
expanding. Concurrent with the growth, the need to
better prepare students to assume managerial roles
in sport organizations has also grown. This need is
underscored by the movement of several renowned
sport management programs into business schools
and the creation of specialized sport management
MBAs. As mentioned above, we believe that change
is also needed in books devoted to sport finance; they
need to focus on revenue acquisition and also address
basic financial management concepts in sport. In this
book, we go even further to discuss how finance
works in the sport industry.
Part I, Finance Basics, introduces sport finance
and basic financial concepts and explains the tools
and techniques of financial quantification using
industry examples. Topics covered in this section
include the analysis of financial statements and ratios,
risk, and time value of money. In Chapter 2 we use
the financial statements of Under Armour as a basis
for discussing balance sheets, income statements, and
statements of cash flow, and we revisit these financial
statements when discussing and calculating financial
ratios. Chapter 3 relates risk to revenue sharing mod-
els used in North American sport leagues. In Chapter
4, the time value of money is explored using examples
such as deferred salary issues related to major league
sports teams.
Part II covers the foundations of financial man-
agement—the decisions within sport organizations
to ensure wealth maximization. Budgeting, debt and
equity financing, and capital budgeting are addressed,
using examples from the sport industry. This part
segues between traditional texts on the fundamentals
of financial management and a text on these funda-
mentals as applied to the sport industry. Here we go
beyond simply providing examples in a sport con-
text to discussing how finance actually works in the
sport industry. For example, we address how a team
uses debt and equity financing and why one method
over the other may be selected. We also explain the
importance of capital budgeting when planning for a
new facility, such as upgrading the field in a univer-
sity football stadium and constructing a community
swimming pool.
Part III of this book applies financial management
concepts to the industry through the examination of
ix
x PREFACE
facility financing, valuation, feasibility studies, and
economic impact. Much of this section is written
based on our past consulting experiences with indus-
try partners, including several professional teams,
various sport leagues, and several municipalities.
Finally, Part IV examines financial management in
three sectors of the industry: public sector sport, col-
legiate athletics, and professional sport. We provide
an in-depth analysis of the mechanics of financial
management within each of these sport sectors.
This book is designed so that it can be used in
either an upper level undergraduate or a graduate
course in a sport management program. Students
do not need a previous background in finance to
grasp the material. Part I, Finance Basics, provides
the needed introduction to financial concepts. After
reading the chapters in Part I, students will be pre-
pared for material in the remaining sections.
The text can also be used by students in busi-
ness schools in an upper-level finance course or
students in an MBA/Sport Management program.
Chapters 1 and 5 through 15 can be used for an
in-depth study of sport finance. Part II, Financial
Management, contains material that would be cov-
ered in a Principles of Financial Management course
at either the undergraduate or first-year MBA level.
However, the topics in these chapters are addressed
from the sport industry’s perspective, addressing what
works and what doesn’t work. Part III, Application
of Financial Management in Sport, and Part IV,
Financial Attributes of Select Sport Industry Segments,
should be completely new material for most readers,
providing a detailed view of financial management in
those segments.
NEW TO THIS EDITION
his edition includes new and revised material
T reflecting a broad spectrum of changes in
sport finance. These discussions cover changes in
college athletic finance (O’Bannon v. NCAA, cost
of attendance, new television right packages); cur-
rent venue financing methods; the financial impact
of new collective bargaining agreements on players,
teams, and leagues; new revenue sources in profes-
sional sports and college athletics (such as the devel-
opment of entertainment districts, public–private
partnerships, and sale of luxury suites and their
pricing); and additional emphasis on sport outside
college and professional sport (high school, recre-
ational sport, entrepreneurial sport ventures).
This edition also reflects the increasingly global
nature of sport. For example, new sidebars cover
the effect of differing national income tax rates on
players and teams in European professional soccer
leagues and the NFL, and the impact of competition
for players by the Russian Premier League on the
WNBA’s salary structure. Other changes include:
Q Current industry examples used throughout to
help make the principles of financial manage-
ment applicable to sport.
Q A primer on accounting principles to help stu-
dents interpret financial statements.
Q A valuation case study assignment that takes
students step-by-step through a valuation using
both income and market approaches.
Q A new stadium feasibility analysis focused on
efforts by the Oakland Raiders to get a new
stadium.
SPECIAL FEATURES
n an effort to make this text useful and to
I facilitate understanding of financial manage-
ment topics, the following features are included:
Case Studies. When teaching sport finance, we
have found that the case-based method is one of the
best means to help students learn the material. Each
chapter contains a current case on a relevant topic
followed by questions to help students understand
how financial management concepts have been or
should have been applied in the given situation.
These cases and questions invite in-depth analysis
and discussion of selected topics.
Sidebars. Throughout the text, sidebars provide
additional high-interest context. Often, explaining a
financial management concept is not quite enough
for readers unfamiliar with finance to grasp a new
concept. To reinforce the understanding and the
application of concepts to the sport industry, sidebars
offer additional examples, with a broad range of
topics. These include, for example, the financial turn-
around of an NCAA Division I athletic program; the
use of stadium districts to generate additional revenue
for a team; the formation of school district, commu-
nity, and professional sport partnerships to benefit
sport at all levels; the financial practices of selected
international sport organizations; the use of deferred
contracts in professional sport; and the development

of various professional women’s leagues over the past
20 years.
Concept Checks and Practice Problems. The
concept check questions found at the ends of chap-
ters emphasize key concepts and aid in the review
of chapter material. Further, the practice problem
sections reinforce the use of numerous financial man-
agement tools and formulas in the sport industry.
Glossary of Key Concepts. Key concepts are bold-
faced and defined when they first appear in the text.
PREFACE xi
They also appear in a glossary at the end of the text.
Since financial concepts discussed in one chapter
often apply to several chapters and topics in the text,
the glossary will be helpful when readers need to
review a concept presented earlier.
It is our hope that this book continues to help read-
ers better understand financial management in the
sport industry. We thank the instructors and stu-
dents who encouraged us as we revised the book to
meet the needs of today’s sport finance students.
ACKNOWLEDGMENTS
ll of us wish to thank those who reviewed this
A book in various stages and offered suggestions
for its improvement. Their input helped us to make
this a better book. These individuals are as follows.
For this edition: Stephen Dittmore, University of
Arkansas; Marion Hambrick, University of Louis-
ville; Michael Hutchinson, The University of Mem-
phis; Sloane Milstein, Texas A&M University; Emily
Must, Metropolitan State University of Denver; Jef-
fry Noble, Wichita State University; Seheon “Jack”
Oh, New York University; Andrea Pent, Neumann
University; Larry Prober, Rider University; Kathy
Pryor, Ecclesia College; Janice Robinson, Durham
College; Eric Schwarz, Victoria University, Mel-
bourne, Australia; Narcissus Shambare, College of
Saint Mary; Brian P. Soebbing, Temple University;
Emily Sparvero, The University of Texas at Austin;
and Lonni Wilson, Keiser University. And for the
previous edition: Jan Bell, St. Thomas University;
Joris Drayer, Temple University; Dianna Gray, Uni-
versity of Northern Colorado; Daniel F. Mahony,
Winthrop University; Joel Maxcy, Drexel University;
J. Christopher McGrath, Georgetown University;
John Miller, Troy University; Michael Mondello,
University of South Florida; Stephen Shapiro, Old
Dominion University; Robert Taylor, California
University of Pennsylvania; Nathan Tomasini, Vir-
ginia Commonwealth University; Galen Trail, Seat-
tle University; Sharianne Walker, Western New
England University; and Jason Winfree, University
of Idaho.
first wish to thank those students who initially
I pushed me to develop a better finance course
and better materials, particularly the Ohio graduate
and undergraduate classes of 1999 through 2005. I
especially want to thank my graduate and under-
graduate students at South Carolina, who provided
xii
feedback on the first edition and also suggested
changes needed for the second edition.
Next, this project would not have been possible
without my coauthors, Dan, Mark, and Chad. It has
been great writing with you over the years. I appreci-
ate the quality of your work and most importantly
your friendship. As usual, completing this project
took longer than anticipated, given job and univer-
sity changes. Thanks for sticking with the project
and seeing it through to completion.
To my friends and colleagues at Ohio and South
Carolina, thank you for your friendship and sup-
port. Andy Kreutzer, Doc Higgins, Tom Regan, and
Frank Roach have been great mentors, and they
have helped shape and influence the sport industry.
To my wife, Becky, and sons Jake and Luke,
thanks for letting me sneak away to complete this
manuscript. Your support at home is truly appreciated.
Finally, Colette Kelly at Holcomb Hathaway,
Publishers has been extremely patient with us. Her
edits, comments, and work on early drafts were
insightful and made significant improvements to the
text. Colette, Gay Pauley, Sally Scott, and the rest of
the Holcomb Hathaway staff have been great to work
with, and we appreciate all they have done to help us
make this edition the best it can be. I am glad that my
friendship with Packianathan Chelladurai (Chella)
and his relationship with Holcomb Hathaway made
this all possible.
MTB
any people were involved, either directly or
M indirectly, in helping develop this book and
its content. The reason for writing this book is, of
course, because of the enthusiastic students who want
to understand all there is to know about managing
sport organizations. My thanks to those students who
read the first edition and provided feedback.

I want to thank my wife and partner, Heather,
for helping me think about the best ways to explain
some of the complex ideas, but more importantly
for her patience and encouragement. I also want to
thank my two wonderful boys, Aidan and Lucas, for
understanding that I also had homework like them
(this book) that needed my best efforts. It seems that
both boys love sport as much as I do.
The team at Holcomb Hathaway, especially
Colette Kelly and Gay Pauley, have been very support-
ive and have provided us with excellent insight, ideas,
and editing. They also found very helpful review-
ers who provided important insights. Additionally,
Michel Desbordes at the University of Paris–Sud was
a kind host during my summer sabbatical, allowing
me to make great progress in a creative environment.
The most satisfying part of this has been my work
with my coauthors, Matt, Mark, and Chad. I want to
thank them for having me be a part of this team once
again. My friendships with each of them have been the
most important and long-lasting outcome of these edi-
tions. Thank you all for your excellent work.
DAR
would first like to thank my family and close
I friends, who have provided continual support
for this project and many others. There would have
been no way to complete a second edition without my
loved ones providing the time needed to focus on
writing and editing. My wife Leslie has been espe-
cially patient once the initial shock dissipated after I
told her we planned to work on a second edition. I am
hopeful my wonderful children, Annie and Canton,
will someday understand how much excitement the
challenge of seeking knowledge to write a book can
provide. It is my goal that they both someday find a
passion for something in the same way that I have
found a passion for the sport industry. I am also
extremely thankful that my parents—who have never
been sport fans—both tolerated and encouraged my
passion to continually learn about something I love.
Hopefully, they can find room on their shelf for this
edition among all the non-sport books that they have
read over their lifetimes.
ACKNOWLEDGMENTS xiii
I was extremely fortunate to work with esteemed
coauthors on this book and other projects. Matt,
Dan, and Chad consistently challenge me to think
and inspire me to see what can be accomplished.
What is particularly rewarding is that we genuinely
enjoy spending time together talking about sport,
business, and, most importantly, life. It is a wonderful
blessing to work with close friends I respect. My col-
leagues in the Sport and Entertainment Management
Department at the University of South Carolina have
also provided consistent support as I worked odd
hours at “the end of the hall.” It is a blessing to
be able to come to work with people who are not
only dedicated professionals but also wonderful
friends. The students I have had the privilege to teach
throughout my career have provided an outlet for
my (sometimes) crazy ideas. I hope that I have been
able to teach them as much as they have taught me.
Colette Kelly and the staff at Holcomb Hathaway
remained patient throughout our endeavors, and for
that I will be forever grateful.
MSN
would like to thank all those involved in pub-
I lishing this book. Colette Kelly and the staff at
Holcomb Hathaway were excellent to work with.
Thanks as well to the many reviewers who provided
excellent advice on how to improve the text.
Thank you to all of my students and colleagues,
both past and present. Because of you, coming to
work each morning is a pleasure. Helping our stu-
dents grow, learn, and chase after their dreams of
working in the sport industry is an incredibly reward-
ing profession.
Thanks also to my wonderful family—to my
wife Kerry for being so supportive and for being such
a terrific partner and mother, and to our children,
Andy, Luke, and Abby, who bring a smile to my face
each and every day. I look forward to continuing to
share my love of sport with you in the years to come.
Finally, thank you to Matt, Dan, and Mark for
including me in this project. I appreciate both your col-
laboration and your friendship immensely.
CDM
ABOUT THE AUTHORS
atthew T. (Matt) Brown is the chair and an
M associate professor in the Department of Sport
and Entertainment Management at the University of
South Carolina. He teaches graduate and under-
graduate sport finance courses and researches in the
areas of sport finance and sport business. His cur-
rent research focus is on tax practices and the impact
of tax policy on professional sport leagues. Brown’s
research has led to publications in the Journal of Sport
Management, Sport Marketing Quarterly, Entertain-
ment and Sport Law Journal, International Journal
of Sport Finance, and Sport Management Review. In
addition, he has presented at more than 70 national
and international conferences.
Brown has been a consultant for a variety of
organizations in the sport and tourism industries.
His clients have included Patriots Point, the Center
for Exhibition Industry Research, the International
Association of Venue Managers, minor league hock-
ey teams, minor league baseball teams, the Ohio Golf
Course Owners Association, and the State of South
Carolina. He currently serves as a consultant for the
Lexington County Blowfish, a wood bat baseball
team in the Coastal Plain League. In addition to his
work with the Blowfish, Brown has served as the
chief financial officer of the Southern Ohio Cop-
perheads and treasurer of the Board of Directors of
the Southern Ohio Collegiate Baseball Club. He also
has served as the treasurer of the North American
Society for Sport Management. In 2003, Brown was
named the Jefferson College Alumnus of the Year.
Brown received his doctorate in sport administra-
tion from the University of Northern Colorado. Prior
to joining the faculty at the University of South Caro-
lina, he was a faculty member in the Sports Admin-
istration and Facility Management program at Ohio
University. His primary teaching responsibilities were
in the dual-degree MBA/MSA graduate program,
xiv
where he taught sport finance and research methods
courses to first and second-year MBA students.
aniel Rascher teaches and publishes research on
D sports business topics and consults to the sports
industry. He specializes in economics and finance
and, more specifically, in industrial organization,
antitrust, mediations and arbitrations, valuation, eco-
nomic impact, market readiness, feasibility research,
marketing research, damage analysis, strategy, and
labor issues in the sport industry. Rascher founded
SportsEconomics to enable sport enterprises to capi-
talize on the sport industry’s transition from hobby
status to multibillion dollar industry. As founder and
president of SportsEconomics, LLC, partner at OSKR,
LLC, and former principal at LECG, LLC, Rascher’s
clients have included organizations involved in the
NBA, NFL, MLB, NHL, NCAA, NASCAR, MLS,
PGA, sporting goods and apparel, professional box-
ing, mixed martial arts, minor league baseball,
NHRA, AHL, Formula One racing, Indy Car racing,
American Le Mans racing, Premier League Football
(soccer), professional cycling, endurance sports, IPL,
media, ticketing, IHRSA, music, as well as sports
commissions, local and state government, convention
and visitors bureaus, tourism businesses, entrepre-
neurs, and B2B enterprises.
Rascher received his Ph.D. in Economics from the
University of California at Berkeley. He is Director of
Academic Programs and professor in the Sport Man-
agement Program at the University of San Francisco,
where he also teaches courses in sports economics
and finance and research methods. He has also taught
at Northwestern University, the IE Business School
in Madrid, and the University of Massachusetts
(Amherst). He has authored articles for academic and
professional journals, book chapters, and a textbook
in the sport management and economics fields, has

been interviewed hundreds of times by the media
on various aspects of the business of sports, and has
given more than 50 presentations at professional and
academic conferences. Rascher has served on the edi-
torial boards of Case Studies in Sport Management,
Journal of Sport Management, Sport Management
Review, International Journal of Sport Finance, Inter-
national Journal of Sport Management and Market-
ing, and the Journal of the Quantitative Analysis
of Sports. He has been named Research Fellow of
NASSM. He is also certified as a valuation analyst
(CVA) by the National Association of Certified Valu-
ators and Analysts.
Rascher has testified as an expert witness in fed-
eral and state courts, in arbitration proceedings, and
provided public testimony numerous times to state
and local governments.
ark S. Nagel became a faculty member in the
M Department of Sport and Entertainment Man-
agement at the University of South Carolina in 2006.
He now serves as the Associate Director of the Col-
lege Sport Research Institute there. Prior to joining
USC, he was the director of the graduate sport man-
agement program at Georgia State University. At
Georgia State he was responsible for all aspects of
the sport management program including recruiting
and advising students, developing and scheduling
courses, identifying and supervising adjunct faculty,
and maintaining alumni and sport business relation-
ships. Nagel has also previously worked in sport
management programs at the University of West
Georgia and San Jose State University. He currently
serves as an adjunct faculty member at the Univer-
sity of San Francisco and St. Mary’s College, where
he teaches summer courses in sport administration.
Nagel received his doctorate from the Univer-
sity of Northern Colorado. He has authored and
co-authored numerous articles in refereed journals
such as the Journal of Sport Management, Sport
Marketing Quarterly, Entertainment and Sport Law
Journal, International Journal of Sport Finance, and
Sport Management Review. He coauthored the books
Introduction to Sport Management: Theory and
Practice and Sport Facility Management. In addition,
he has written numerous academic book chapters
and given dozens of research presentations. Nagel
was named Research Fellow of the North American
ABOUT THE AUTHORS xv
Society for Sport Management and served as treasurer
for NASSM and the Sport and Recreation Law Asso-
ciation. Nagel has also worked as a consultant for a
variety of sport and tourism organizations.
Before pursuing a career in academia, Nagel
worked in various areas of sport management, pri-
marily in athletic coaching and administration as well
as campus recreation. During his years as an assistant
coach of the women’s basketball team at the Univer-
sity of San Francisco, he helped lead the team to three
NCAA Tournament appearances and a spot in the
1996 Sweet 16.
had D. McEvoy is a professor and chair of the
C Department of Kinesiology and Physical Edu-
cation at Northern Illinois University, having previ-
ously been a sport management professor at Illinois
State University and Syracuse University. Prior to
pursuing a career in academia, McEvoy worked in
marketing and fund raising in intercollegiate athletics
at Iowa State University and Western Michigan Uni-
versity. He has conducted research projects for cli-
ents at various levels of sport, including professional
sport, intercollegiate athletics, Olympic sport, and
sports agency organizations.
McEvoy holds a doctoral degree from the Uni-
versity of Northern Colorado, a master’s degree from
the University of Massachusetts, and a bachelor’s
degree from Iowa State University, each in sport
management/administration. His research inter-
ests focus on revenue generation and ticket pricing
in commercialized spectator sport settings. McE-
voy has published articles in journals including the
Journal of Sport Management, Sport Management
Review, Sport Marketing Quarterly, and Interna-
tional Journal of Sport Management and Marketing.
His research has been featured in numerous media
stories and interviews including The Wall Street
Journal, Sports Illustrated.com, ESPN.com, Chicago
Tribune, Philadelphia Inquirer, and Atlanta Journal-
Constitution. McEvoy appeared as a panelist before
the prestigious Knight Commission on Intercollegiate
Athletics in 2008, and he serves as the founding
editor of the journal Case Studies in Sport Manage-
ment, having previously served as the co-editor of the
Journal of Issues in Intercollegiate Athletics. McEvoy
served as president of the Sport Marketing Associa-
tion for 2015–2016.
This page intentionally left blank
Finance Basics

Introduction to Sport Finance 3

Analyzing Financial Statements and Ratios 35

Risk 57

Time Value of Money 87

1
This page intentionally left blank
Introduction
to Sport Finance

capital markets gift financing North American Industry

Classification System (NAICS)
debt financing government financing
retained earnings
distributed club ownership gross domestic product (GDP)
model Sherman Antitrust Act
gross domestic sport product
economic cycle (GDSP) single-entity structure
economic depression investments single owner/private investor
model
economic growth money markets
sustainability
equity financing multiple owners/private
investment syndicate model wealth maximization
finance
multiple owners/publicly traded
financial management corporation model

3
 Introduction
Why is an understanding of financial management important? Consider
the example of the construction of a new stadium or arena. This area
of sport finance is often in the news because a new stadium or arena
directly impacts local residents, businesses, and government. Here are a
few examples:

Q Levi’s Stadium, home of the San Francisco 49ers, opened in 2014 at

a cost of $1.2 billion. The venue seats 68,500 and offers 165 luxury
suites and 8,500 club seats. The stadium has several environmentally
friendly features, including a green roof atop the luxury suite tower and
three solar bridges with several hundred solar panels.
Q The City of Columbia, South Carolina, is paying approximately $29 million to build Spirit Commu-
nications Ballpark to bring Minor League Baseball back to the state’s capital. The $35 million
ballpark will open in 2016 and seat 8,000 for baseball games and 14,000 for concerts. The city
is using revenues from its hospitality tax to pay off bonds used to finance the new stadium’s
construction. The Savannah Sand Gnats announced in 2015 that they would relocate to Columbia
for the 2016 season. Hardball Capital, the team’s owner and manager of the stadium, will con-
tribute approximately $6 million toward construction costs.
Q In 2008, the New York Yankees replaced old Yankee Stadium, built for $2.5 million in 1923, with
new Yankee Stadium. The $1.3 billion stadium opened in 2009, with top seats selling for $2,500
per seat, per game.
Q Emirates Stadium, which opened in London in 2006, is the third largest stadium in England and
seats 60,000. Home to Arsenal of the English Premiere League, the £470 million ($869.6 million)
venue was privately financed by the club, primarily via a £260 million senior loan from a stadium
facilities banking group. This group of banks included the Royal Bank of Scotland, Bank of Ireland,
Allied Irish Banks PLC, and others. The loan was for 14 years.
Q For the Minnesota Twins, a new stadium meant access to previously unavailable revenue. The
Twins shared the Hubert H. Humphrey Metrodome with the Minnesota Vikings. The facility was
poorly designed, not only for watching a baseball game but also for generating baseball revenue.
The Twins received almost nothing from luxury suite rentals; rather, the money from luxury suite
sales went to the Vikings. The City of Minneapolis kept a portion of revenue generated from park-
ing, concessions, and in-stadium advertising. In their new ballpark, Target Field, the Twins have
kept almost all revenue, including revenue from naming rights, premium seats, and luxury suites.
The average ticket price for a premium seat when the stadium opened was approximately $52
per game. A membership fee of $1,000 to $2,000 was also charged to premium seat ticket hold-
ers for access to the exclusive club areas within the stadium (Roberts & Murr, 2008).
Q Texas A&M University is expanding and renovating Kyle Field, its football stadium, in a $450 million
project. More than 20,000 seats are being added, bringing the stadium’s capacity to more than
102,000 and making Kyle Field the largest stadium in the Southeastern Conference (SEC).
Q MetLife Stadium, home of the New York Giants and the New York Jets of the National Football
League (NFL), opened in 2010, replacing Giants Stadium (The Meadowlands), which opened in
1976. The $1.6 billion stadium was named by Billboard Magazine as the highest-grossing stadium
in the world in 2014 (Oliver, 2015). In addition to being the home of two NFL teams, the venue
held a variety of non-NFL events, including concerts and soccer games. For the 2014 season,
the stadium grossed more than $71 million.
4
 Introduction to Sport Finance CHAPTER 1 5

These examples represent the revenue side of constructing new venues—the large price tags of
which put them in the news. But what about other financial management issues related to a facility’s
construction, for example, how the revenue is shared and how ongoing operating expenses will be
met? To consider these issues and how they can impact a community, let’s look at the Indianapolis
Colts. Lucas Oil Stadium, the replacement to the RCA Dome, immediately generated new revenue
for the Colts after the team moved into its new home; however, none of the new stadium-generated
revenue went to the Capital Improvement Board (CIB). The CIB is the governmental entity that
operates the stadium and manages its debt service—the cash required over a specific time period
for repayment of the principal and interest on the debt (“Indy Wrestles,” 2009).
The $675 million stadium was paid for through a municipal bond issue backed primarily by a
1% tax increase on prepared food in nine counties surrounding Indianapolis. However, the revenue
generated through the increased tax covers only the facility’s debt service. No funds were made
available for the operation of the facility. With the tax revenue allotted for debt service and stadium
revenue going to the Colts, the CIB has been operating the stadium at a $20 million annual deficit
(“Indy Wrestles”). As a result of poor financial management—specifically plans and forecasts relating
to the operating costs of the new stadium—state officials had to act. The citizens of the metro-
politan area likely will be required to pay for the stadium’s operating costs through some form of
tax increase.
As the above examples show, the revenue generated in these new venues attracts a large
amount of media attention. However, financial management issues related to the construction
and operation of the venues are often ignored, overlooked, or perhaps not understood. When this
happens, as in the case of Indianapolis, the importance of understanding financial management
becomes clear.
In this chapter, we will introduce you to key concepts in finance, many of which will be discussed
in greater depth in later chapters. You may encounter terms with which you are unfamiliar. To gain a
working knowledge of these terms, refer to the Glossary at the end of the book.

WHAT IS FINANCE?
inance, the science of fund management, includes application of concepts
F from accounting, economics, and statistics. Within the world of finance, there
are three interrelated sectors: (1) money and capital markets, (2) investments, and
(3) financial management (Brigham & Houston, 2012). Money markets are markets
for highly liquid, short-term securities; capital markets are markets for intermedi-
ate or long-term debt, as well as corporate stock. Hence, the money and capital
markets sector includes securities markets such as the New York Stock Exchange
and the Chicago Mercantile Exchange. Investment banking falls within this sector
as well, as do insurance and mutual fund management.
As opposed to this first sector, the focus of the investments sector is on secu-
rity choices made by individual and institutional investors as they build portfolios.
Merrill Lynch and Edward Jones are companies operating within this sector.
The financial management sector involves decisions within firms regard-
ing the acquisition or use of funds, usually with the goal or outcome of wealth
maximization, or maximizing the overall value of the firm. To achieve wealth
maximization, the finance department forecasts future revenues and plans future
expenses. In sport, this may include calculating cash flow increases resulting
from a move to a new facility (as shown in the chapter introduction) and deter-
mining how much the organization can increase player payroll as a result of the
forecast. The finance department also performs a portion of the control function
of management. Through coordination with other departments in the orga-
6 PART I Finance Basics

nization, the finance department pursues efficiency of operation and resource

utilization. The finance department makes investment and financing decisions,
working with financial markets and investment firms when necessary. The type
of debt financing to be used when constructing a new stadium is one example of
these decisions.
A firm in the sport industry may be structured as a for-profit, not-for-profit,
or governmental entity. For-profit sport enterprises have many commonalities with
other types of for-profit business. Hence, the financial management of a sport
organization is often quite similar to the financial management of organizations
in other industries. These commonalities include value creation, or increasing the
value of a firm over time, and revenue growth. However, there are areas of dif-
ference. One major difference is the diverse objectives of firm owners within sport
(Foster, Greyser, & Walsh, 2005). Although sport organizations usually compete
for wealth maximization, an owner in professional sport might not be interested in
this goal. Rather, the owner may be more interested in winning championships or
in seeking celebrity status by being one of a select few professional sport franchise
owners. Another goal of the owner may be to protect a community asset. The
differing objectives of owners can harm the competitive balance in a league, par-
ticularly in terms of winning championships. For example, an extremely wealthy
owner with a willingness to incur losses over several seasons can create an imbal-
ance in competition. As a result, at the beginning of a season, only a few teams
may have a realistic chance of winning a championship. Leagues have reacted by
implementing salary constraints, revenue sharing, and other similar mechanisms
that create both competition between franchises on the field and cooperation
regarding financial management off the field.

FIVE WAYS TO FINANCE THE OPERATION

OF A SPORT ORGANIZATION
hether an owner’s objective is wealth maximization or winning and whether
W the sport organization is for-profit, not-for-profit, or governmental, a manager
in the sport industry will encounter five methods used to finance the organization
(see Exhibit 1.1). These include three methods typically used by for-profit companies
to finance their operations: debt, equity, and reinvestment of retained earnings. In
sport, two additional financing methods are often available: government funding
and gifts. Examples of each will be seen throughout this text. A brief introduction to
each is presented here.

Debt
When an organization borrows money that must be repaid over a period of time,
usually with interest, debt financing is being used. Typically in sport, teams issue
bonds or borrow from lending institutions (or in some instances their league) to
finance operations through debt. The New York Yankees financed the new Yankee
Stadium in this way. The team borrowed $105 million from a group of banks,
including Goldman Sachs, to pay for cost overruns. The team also borrowed more
than $1.2 billion through the tax-exempt and taxable bond markets (Kaplan,
2009). Debt financing may be either short-term or long-term; short-term debt
obligations are those repaid in less than one year, and long-term obligations are
those repaid in more than one year. A key point of financing operations with debt
is that the lender does not gain an ownership interest in the organization. The sport
organization’s obligation is limited to the repayment of the debt.
 Introduction to Sport Finance CHAPTER 1 7

Methods used to finance sport organizations. EXHIBIT 1.1

METHOD DEFINITION EXAMPLE

Debt Borrowing money that must be repaid over time,
usually with interest
Equity Exchanging a share or portion of ownership of the
organization for money
Retained earnings Reinvestment of prior earnings
Government Funding provided by federal, state, or municipal
sources, including land use, tax abatements, direct
stadium financing, state and municipal appropriations,
and infrastructure improvements
Gift Charitable donations, either cash or in-kind
Construction of Yankee Stadium
Green Bay Packers’ renovation of Lambeau Field
Packers Franchise Preservation Fund
Tax-backed bonds issued by the City of Arlington,
TX to support AT&T Stadium
Donations totaling $85.4 million to Texas A&M
with most money going toward Kyle Field

Equity
In contrast to debt financing, in equity financing, the owners exchange a share or
portion of their ownership for money. The organization, therefore, obtains funds for
operations without incurring debt and without having to repay a specific amount of
money at a given time. A drawback is that ownership interest will be diluted and
the original owners may lose control as additional investors are added. Stephen M.
Ross used equity financing to raise capital after he purchased the Miami Dolphins
in 2009. He sold minority interests in the team to several partners, including singers
Marc Anthony and Gloria Estefan (Talalay, 2009). Few sport organizations issue
stock, a common form of equity financing outside the sport industry. One of the
few, the Green Bay Packers, used $143 million of stock proceeds to help finance the
renovation of Lambeau Field (“History of Green Bay Packers,” 2015).
Two reasons account for the fact that professional team sport organizations
do not typically issue stock to raise equity capital. One reason is that little can
remain hidden when a company is publicly traded. To comply with Securities and
Exchange Commission (SEC) regulations, publicly traded organizations must file
annual reports detailing the accounting activities of the organization. A team that
claims financial hardship in seeking public funding for a new stadium may have
difficulty convincing the municipality of the need if financial reports reveal signifi-
cant positive cash flow. A second reason is that teams that issue stock must answer
to their shareholders. Stockholder demands for profitability might run counter to
the goal of winning on the field (for example, the team might be unable to acquire
a player at the trading deadline because of the near-term financial loss that would
result from the acquisition). Concern over public ownership is so great that the
NFL does not allow its teams to be publicly owned. The league instituted a ban on
public ownership in 1960 (Florio, 2011).
As noted above, the Green Bay Packers are an exception to the norm and the NFL
rule. To keep the franchise from leaving Green Bay, Wisconsin, the team went public
in 1923, and today the Packers continue to be exempt from the NFL’s prohibition
on issuing shares. However, unlike those of a typical publicly traded company, the
Packers’ shares do not appreciate in value and are not traded on a stock exchange.
Despite sport organizations’ reluctance to use equity financing, teams in leagues
other than the NFL have raised significant amounts of capital by doing so. The Cleveland
8 PART I Finance Basics

Indians raised $60 million through the team’s initial public offering (IPO) in 1998. The
Florida Panthers, Boston Celtics, Vancouver Canucks, and Colorado Avalanche all have
used equity financing. Today, however, these teams are privately held (Kaplan, 1999).

Retained Earnings
In addition to financing through debt and equity, organizations can finance opera-
tions or the acquisition of assets through the reinvestment of prior earnings. The
portion of earnings that a firm saves in order to fund operations or acquire assets
is termed retained earnings. The reinvestment of retained earnings is generally
considered a type of equity financing, as this financing method is often used by
publicly traded companies, when they choose to reinvest earnings rather than
pay them to shareholders as dividends. However, in sport, financing through the
reinvestment of retained earnings should be considered separately from equity
financing, because organizations in the industry—with the exception of sporting
goods manufacturers and retail stores—are typically privately held. Although earn-
ings may be distributed to team owners, in sport they are often used to finance the
acquisition of players, improve operations, or make other investments.
The Green Bay Packers reinvest retained earnings to maintain a competitive and
successful football operation and to preserve the franchise and its traditions. However,
because the franchise is owned by its shareholders and not a single, wealthy individual,
the organization is at a disadvantage when reacting to business challenges. A wealthy
owner is able to use personal funds to infuse cash into a sport organization. One
method that the Packers use to overcome this disadvantage is the Packers Franchise
Preservation Fund. By providing liquidity, the fund is intended to improve the sustain-
ability of the corporation and franchise. In 2013, the fund totaled $127.5 million and
is a part of the team’s corporate reserve fund. At the end of the 2013 fiscal year, the
corporate reserve fund totaled $254 million (Walker, 2013).

Government Funding
In the sport industry, it is common for private organizations, such as professional
sports teams, to receive funding from governmental sources. In addition, public high
schools and universities typically receive a portion of their financing through direct
or indirect government funding, and this funding may support sport programs at
these schools. For all sport organizations, government financing may be provided by
federal, state, or municipal sources and may include land use, tax abatements, direct
stadium financing, state and municipal appropriations, and infrastructure improve-
ments. During the 2012 season, 64 major-league teams played in stadiums and arenas
built with tax-free municipal debt (Kuriloff & Preston, 2012). Exhibit 1.2 provides
examples of direct stadium financing from government sources.

Gifts
Gift financing includes charitable donations, either cash or in-kind, made to an
organization. Gift financing is a primary source of operating and investing income
for major collegiate sports programs. It is also a supplemental source for minor
college programs and non-profit sport organizations. According to Wolverton
and Kambhampati (2015), colleges received $1.26 billion in athletic department
donations during 2014. Of this total, the top 20 athletic departments received over
$700 million, with Texas A&M collecting the most of any department. See Exhibit
1.3 for athletic donations to the universities in the Southeastern Conference.
Another random document with
no related content on Scribd:
 Pivoted Searchlight Made of an Old
Milk Strainer
By JOHN J. SPAULDING

Both as a safety device and a practical novelty, a homemade

searchlight for a canoe, or other small craft, is worth while making.
An old milk strainer was used for the reflector of that shown, and
many equally serviceable makeshifts can be devised easily from old
cans, or formed from sheet metal. The detailed construction, as
indicated, is suggestive only, since local conditions and materials
available will govern the design of the fittings. The light has a double
control, one cord governing the vertical adjustment, and another,
arranged like that of a ship’s wheel, the horizontal pivotal range. The
vertical adjustment is desirable, but not essential. The control cords
are run in screw eyes along the coaming of the craft, so that one
person can paddle the canoe, and adjust the searchlight as well. Dry
cells, stored under the bow deck, or in a box set at some other
convenient place, supply the current for the 6-volt lamp.
 Canoeing and Boating at Night Is
Safer and More Pleasurable if the
Craft is Equipped with a
Searchlight. This One was Made of
Pick-Up Materials at Small Cost

The Support for the Reflector is

Pivoted in the Deck, Reinforced as
Indicated

The main dimensions of the fittings, as detailed, are: strainer, 10

in. in diameter and 10 in. long; vertical support, 12¹⁄₂ in. over all, and
6 in. wide at the upper portion; the wood used is ¹⁄₂ and ³⁄₄ in. thick,
except that for the pivot post, which is 1 in. thick. The reflector is
fitted with a wooden block through which the porcelain socket is set,
as shown. A knife switch, placed near the stern of the craft, controls
the connection with the battery circuit.
The inside of the reflector should be polished with emery cloth,
and if the surface is rough, it may be painted with white enamel. The
outer surfaces of the metal part are painted black. The wooden parts
may be painted, or given several coats of spar varnish, to withstand
the weather.
Gravity-Feed Coal Hopper on Truck
 The Large Capacity of the Hopper and the Ready Portability of This
Arrangement Are Practical Features

In the large farm kitchen, in the workshop, and even for firing a
small furnace, a coal hopper that will hold considerable coal, and
that can be rolled along the floor easily, is a convenience. Such an
arrangement, made from a section of galvanized-iron pipe, 10 in. in
diameter and 30 in. long is shown in the sketch. The pipe was cut at
one end, as shown, so that when the coal was poured into the
hopper, it would feed out. A truck, mounted on casters, was made,
12 in. wide, 5 in. high, and 25 in. long. The hopper was mounted on
one end of it, and bolted securely at the sides and end. The coal is
shoveled into the hopper at the bin, and the load pushed to the
furnace, where it can be easily used as needed. The construction
can be made larger for use with a coal scoop, in firing a boiler or
large furnace.—L. R. Markwood, Factoryville, Pa.
 Taking Photographs in Falling Snow
Falling snowflakes in a camera photograph—the large feathery,
slow falling kind—often make an exquisitely beautiful picture out of a
commonplace scene. And while the great majority of the attempts to
get them prove failures, the photographer—usually an amateur-
needs only to provide an avenue in front of his lens a short distance,
that is free from falling flakes by the use of a shelter such as a tree
or porch. The slow snapshot necessary in cloudy weather will not
stop the motion of the flakes nearest the camera and these passing
through greater angles of space in equal length of time than those
farther away, will blur on the negative. We made some excellent
outdoor views in deep snow, while heavy snow was falling, with
flakes splendidly decorating the darker regions of figures and foliage,
by holding a felt hat and two umbrellas in a line in front of the
camera, and above the range of the lens.—J. Cecil Alter, Cheyenne,
Wyo.
 A Double-Contact Vibrator

When the Vibrator Touches One Contact, the Coil on the Opposite Side
Attracts the Vibrator, This Process being Repeated Alternately

A double-contact vibrator, which eliminates sticking contacts,

spring troubles, and other sources of annoyance, in addition to
producing a fine high tone, is shown in the sketch. It is an instrument
easy to construct, by reason of its simplicity. Special care in making
the vibrator D will insure good vibration. The springs, holding the
contacts, are of phosphor bronze The contacts may be made of
silver platinum, or other metals, which will not burn and break
contact. The coil B are of the common bell-ringing type. The springs
on the vibrator should not be too long, nor too weak; experimenting
will determine the length at which they will work best. The
adjustment is made at the thumbscrews A. The coils are supported
on metal brackets, bolted to a wooden base. The method of hooking
up the vibrator in the key circuit is shown in the diagram.—J. L.
Taylor, Barker, N. Y.
 Battery Buzzer Converted into a Telegraph
Sounder

The Amateur can Practice the Morse Code Handily on This Sounder, Made
from a Buzzer

An ordinary battery buzzer may readily be converted into a

telegraph sounder for use in practicing the Morse code. All that is
necessary is to connect the vibrator contact C of the buzzer to the
binding post that is not insulated from the frame. The other
connections of the key and battery are the same as in any ordinary
telegraph or buzzer circuit. In the diagram, C represents the vibrator
contact; D, the wire connecting the contact and the uninsulated
binding post, and F, the uninsulated binding post; E is the telegraph
key, and B, the dry cells.—Clarence F. Kramer, Lebanon, Ind.
 Lawn Seats Built on Tree Stumps

These Practical Lawn Seats Show the Possibilities of Stumps as Supports

for This Purpose. The Conservation-Chair Design Is Especially Interesting

A practical use to which stumps, left from the felling of trees, are
put in a city park is as supports for lawn benches. This obviates the
need of grubbing them out, while the work of preparing them to
receive the seats is less than would be required to remove the
stumps. Of course, the location of the stump will determine whether
it is worth while as a support for a seat, or had better be grubbed out.
Many designs are possible, and the position and size of the stumps
available will suggest suitable construction. The woodwork for the
seats is simple, and the benches can be made removable for the
winter if desired.—C. L. Meller, Fargo, N. D.
A Hinged Box Cover Made without Hinges
 When a wooden box with a hinged cover is desired, especially a
small one, hinges are not always at hand, and are sometimes
difficult to obtain. Under these circumstances a good substitute is to
make the box as shown in the sketch, using the extension of one
end and nails, or screws, driven through the back corners of the lid,
as a hinge arrangement. This makes the use of hinges unnecessary,
and is serviceable even for permanent use. Where hinges projecting
from the surface of the box are objectionable, this method of
construction is especially desirable. It is best to make the hinged
ends with the grain vertical, and to round off the hinged corners of
the lid slightly.—R. J. Rohn, Chicago, Ill.
Automatic Flash Light Snaps Chicken-Coop
Marauder
This Photographic Evidence Was Proof Positive as to the Identity of the
Thief in the Night
 After the wire fence around the chicken house had been torn up,
and the place entered 13 nights in two weeks, I decided on more
preparedness. Various ways and means failed, so I used a
comparatively slight knowledge of photography in the process.
I mounted my flash lamp on a piece of board, 1 by 4 by 8 in. long,
and fastened this to a base, as shown. I attached a weight to the
lamp, which was supported by a hinged drop, halfway down the
upright board, which in turn was supported by a nail, to which was
attached a string. The flash was set off by a slight pull of the string,
which dropped the weight. This contrivance I concealed in the
chicken yard, and the camera in the chicken house. That night I
opened the lens of the camera in the dark, and attached the string to
a loose board in the fence. The next morning, before daybreak, I
closed the lens again. The flash had been set off during the night.
Also there were drops of blood on the ground. I could hardly wait
until the plate was developed. The result, as reproduced, was hardly
what I expected.—H. U. Scholz, Medford, Ore.
 A Fishing-Tackle Outfit in a Shotgun Shell
At the camp or on the trail, an emergency fishing-tackle outfit is
almost as handy as matches, compass, and knife, and it may even
be the means of saving one’s life. A convenient way to carry such an
outfit is in two old shotgun shells, telescoped. The hooks, on a cork,
and the sinkers are fitted snugly into the shell. Several yards of line
are then wound on the outside. This outfit can be stowed into a
pocket handily, always ready for use.—E. Everett Buchanan, Jr.,
Elmira, N. Y.
 A Split-Bamboo Lettering Pen

This Pen, Cut from a Piece of Bamboo and Fitted with a Spring Fountain
Device, Is Especially Useful for Marking Packages

Marking of packages and similar lettering can be done neatly with

a pen made in a few minutes from split bamboo fitted with a short
section of watch spring. Select a piece of bamboo, ¹⁄₄ by ¹⁄₁₆ in. and
about 7 in. long, and finish the end, as at A. Trim the end to an
angle, as at B, and then point it, as at C. Split the point carefully, as
at D, and smooth away the tufts at the edges. Cut a piece of watch
spring the width of the pen point and bind it into place, arched as
shown. To use the pen, insert ink into the arch of the spring, and it
will work much like a fountain pen.—Raymond H. Lufkin, Dorchester,
Mass.
 How to Make a Houseboat
By H. SIBLEY

Thewithhouseboat shown is of the scow design, 6 ft. wide by 20 ft. long,

the cabin extending beyond the scow 1 ft. on each side. The
scow tapers up at the forward end and is protected with a heavy
sheet-iron plate so that the craft may be snubbed up on sandbars
without danger of springing a leak, even though a submerged log be
struck while running at full speed.
The power plant consists of a standard 4-hp. reversing gasoline
engine which drives the paddles at their most efficient speed, 45
revolutions per minute through a 13-to-1 reduction. Cast-iron hubs,
into which are inserted cold-rolled steel spokes, and wood paddles
bolted to their ends constitute the propeller wheels. The cruising
speed is about 4 miles an hour.