Wednesday, February 25, 2015

Buying the Naming Rights to a Performing Arts Venue Creates Principle-Agent Problem

On February 18, I wrote about Smart Financial CU buying the naming rights to a performing arts venue in Sugar Land, Texas.

The credit union is paying $6.7 million over the next five years for this naming rights or $1.34 million per year.

On the other hand, this low-income designated credit union paid slightly more than $1.58 million in interest and dividends on its members savings in 2014.

I know that we are in a low interest rate environment, but it appears to me that this decision by credit union management is not in the best interest of its members.

I don't see how buying the naming rights benefit members. Wouldn't that $1.34 million be better spent on the members?

Moreover, I don't see how this meets the public policy purpose of the credit union tax exemption.

1 comment:

  1. 1.3 million per year for one piece of their advertising.
    The credit union net income in 2014 was 2.7 million.
    What analysis went into determining the ROI of this investment of "member" capital?
    Wonder what increase in new members and business Mr Tuma expects to achieve.
    Doesnt seem to be a Smart investment.
    Based on investment portfolio yield the credit union isnt a very Smart investor.



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