I read the article but can’t understand the practical differences this will make, which may be due to my ignorance.
What say you
@TheOriginalCane
It's very interesting, as the article itself is somewhat confusing and self-contradictory.
Very briefly, the use of a separate legal entity such as an LLC could involve issues such as ownership (an LLC defaults to a partnership, and the article mentions "public-private partnership"), separation of assets, legal governance, traditional limitations on "state entities" such as a university, and AS ALWAYS tax implications.
1. Ownership - this is potentially the most confusing portion, as there is no detail of the "public-private partnership". In other parts of the article, is is called a "foundation" and the athletic department is referred to as a "holding company". All of that is a bunch of word salad nonsense until we can see a corporate org chart to understand the big picture. What I CAN comprehend is that, perhaps, by forming an LLC, UK could take on one or more OUTSIDE partners (such as a private equity firm or a sports management company) that could supplement the financial and/or operational functions currently peformed by the UK Athletic Department. Having said that, it is a dangerous business to give partial ownership of something that has historically been 100% owned by a state entity such as UK, so I'd love to see what the "rights and limitations" might be as to ownership of names, logos, and revenue streams generated by the sports programs.
2. Separation of assets - this one can be tricky. It's one thing to drop UK-AD employees into a new entity, and maybe even an administrative building. I'm not so sure that UK could put Rupp Arena into this LLC, so they might have to secure the rights with a lease agreement. I've been to Rupp, it is connected to a hotel/conference facility, and I'm not sure who the ultimate owner is (City of Lexington?). The same would be true of the football stadium, though I have not been there, and don't know if it is considered "on-campus" on UK property or not. Still, these facilities are massive assets, and I'm not so sure that the Kentucky taxpayers wouldn't have valid questions/claims as to whether such assets can be dropped into an LLC that might have outside (non-state-entity) stakeholders.
3. Legal governance - this is one of the "clearer" points made in the article, in that there would be "business" and "industry" experts on the Board, and that the entity would have its own HR Department. At least on its face, these both seem like positive developments that could democratize and professionalize the UK-AD operations. However, I might question whether "the Board" would eventually function in much the same fashion as a "booster-club-captive" Athletic Department tends to function in the SEC-SEC-SEC currently. It would certainly be interesting if the "private partners" who co-own the LLC were allowed to appoint directors independently of who UK were to appoint. Also, assuming UK would still have "majority" control of The Board, would there be a percentage of "activist shareholders" who could block certain actions. It's one thing to be optimistic in planning for the future, but you have to structure things in the event of "worst-case scenarios" so that you are not screwed over years down the road.
4. Traditional limitations on state entities - the article alludes to certain things like "real estate" and "fund-raising" that may be limited by the long-standing traditional roles and limitations of a state university. There may be some merit here in "steering around" such limitations on state universities, though I wonder whether this "LLC/foundation/holding company" would still qualify for state financing and/or bonds when the time comes to renovate facilities or build roadway/parking improvements.
5. Tax - building on a couple of my prior comments, would this be a "tax-exempt" FOUNDATION that would be intended to build up the revenue (and profits) of the Athletic Department without having to pay income tax? As a part of a state university, I'd imagine that UK is not a traditional "income tax payer" anyhow, but if you siphon off one of the highest-revenue-generators and "run it like a business", it would be very...unusual...for such a like-a-business entity to NOT pay income taxes, particularly if some of the "partners" are for-profit businesses.
Lots of very interesting questions generated by such a vague and contradictory news article.
