WSC debt: Dilemma or par for course?
Officials say it’s part of competing; students don’t seem to notice
Originally published 2012-05-03
Students shuffled in and out of the College Center this week, scrambling to wrap up the semester, finish finals and send off another year.
When they return in the fall, construction of the last piece in a four-year-long series of new campus facilities — that has included the College Center and a new student apartment complex — will be underway. Building of a recreation center and fieldhouse complex is slated to begin in coming months.
The new construction on campus has only been possible because of college leaders’ — and students’ — willingness to take on tens of millions of dollars of institutional debt. The situation isn’t unique to Western, as state support has waned amid increasing competition to build new and better facilities for students.
The recent capital construction drive has a lot of moving parts when it comes to financing — involving the Western State College (WSC) Foundation, a new student fee enacted at the beginning of last school year and institutional debt college leaders have accepted as a means attracting students in an increasingly competitive environment.
In many ways, it all started with the construction of the Borick Business Building in 2007. While private money was committed to build the facility in full, the WSC Foundation took an unprecedented step to complete the project.
Bonds were issued to see that the project got off the ground as private gifts began trickling in. It was a way of managing cash flow, Foundation Executive Director Tom Burggraf explained.
Prior to then, the WSC Foundation had never issued debt as a means of funding capital construction on campus.
Then, the need for a new College Center — including a replacement of the Keating Dining Hall — emerged. Of the $28 million needed for that project, the foundation ponied up $6 million — again, issuing bonds — with hopes that private giving would pay off the debt in short turnaround.
It was even hoped that enough private money would be generated to help pay down the $19 million in bonds for the project that the college took on.
But the economy went south, and today just $4.5 million has been committed to the foundation’s portion of the project, while nearly all of the original principle debt that the college issued for the College Center remains. A deal to refinance the foundation’s remaining debt between Borick and the College Center was completed Monday. Burggraf estimates it will result in about $1 million in savings over the life of the debt.
Yet, while fundraising for the College Center was in its infancy, new projects were already being planned. The college issued $58 million in bonds in 2010 — following the approval of a new student facilities fee — to, among other things, construct the new student apartments and fieldhouse.
The bonds sold to build those two projects launched WSC to top among universities and colleges in Colorado for institutional debt per full-time student — and that’s not counting the foundation’s financial obligations. Based on 2010 figures, Western had amounted $45,805 in debt per full-time equivalent student. Colorado School of Mines ranked second with $38,156.
While Colorado institutions have continued issuing debt to pay for new facilities, and are catching up, Vice President for Finance and Administration Brad Baca recognized last week that Western is still on top of the debt-per-student pile.
“We were willing to take that risk in realizing we are going to be the highest-leveraged institution in the state,” he said.
College criticized for high debt
While the aforementioned projects have allowed a virtual revamping of Western’s campus, the associated debt has opened the door for criticism by some — including a former trustee who actually voted to issue the bonds two years ago.
It’s not the debt, in itself, that concerns Peter Dea, a WSC alum and trustee until a year-and-a-half ago.
Rather, he believes that the additional debt was not accompanied by “changes and upgrades” to the private fundraising and enrollment strategies.
“People say, ‘Well it’s the economy,’” he said. “We all appreciate the downturn in 2008 or 2009. With that said, in 2010 we had nearly record amount sof money being raised by CU and CSU and other non-profits demonstrating that successful strategies work.”
Dea, whose criticism has become more pronounced amid a proposed name change for the college, further argued that other colleges that have poured millions into their campuses in recent years (like Colorado Mesa University and Adams State College) have seen large jumps in enrollment, while Western has not.
Western leaders, however, maintain that paying off the debt is not incumbent upon enrollment growth. That is, the payments can be made as long as enrollment remains flat.
For example, last year the college saw a slight increase in enrollment. As a result, more than $700,000 was able to be diverted to a debt repayment reserve account, when only $500,000 was planned, said Baca.
He added that the only facility needs that still exist are for renovation — for which 2010’s new fee provides revenue — not new buildings.
“Part of it is having facilities that can attract students. It’s a competitive atmosphere out there,” Baca continued. “We don’t have the money, the state doesn’t have the money, to provide these facilities to the institution, which means the institutions are going to have to take on the responsibility to pay for, construct and maintain their own facilities.”
Most students don’t seem to mind. Western is still one of the most affordable among Colorado’s institutions, they say.
And if the recent passage of another new student fee — albeit optional — by a two-thirds student body vote a few weeks ago is any indication, the cost of college at WSC is not a concern.
“Fifteen bucks isn’t that much per semester,” said junior Adam Nickerson of the optional fee’s cost per semester, even though he’s paying for college himself through loans and scholarships.
Sophomore Colin Rada, however, expressed concern about more fees being tacked onto students’ bills.
Sitting at a couch in the College Center, Rada said he’s torn over the college’s debt that resulted in the construction of that building.
“Having the new dining hall here is beneficial,” he said. “I’m fine with having this building, if it’s paid off first. But we’re trying to move so fast with having the school look better. We’re not thinking about how the cost affects our students and whether that impacts the number of students that come here.”
Building boom continues elsewhere
Western leaders’ vision for the campus — namely, new buildings — is not dissimilar to new construction taking place elsewhere.
“We have no debt capacity whatsoever to take on any more projects right now,” said Baca. “Institutions are out there building like crazy — still.”
Since college leaders issued the $58 million in bonds two years ago, the higher education building boom across Colorado has continued — including a $22 million student housing project at Colorado Mesa University; $13 million for housing renovations, a High Altitude Performance Center and other improvements at Adams State College; and $224 million for housing, a student center expansion and other improvements at Colorado State University.
That’s just some of the projects elsewhere. The debt that institutions have taken on to pay for those are, in part, a result of a decline in state support, said Mark Cavanaugh, CFO for the Colorado Department of Higher Education.
“Situations like Western, for instance, you have limited opportunities for big enrollment increases (to pay for projects),” he said. “You still have the responsibility to try to keep the campus vital, attractive and relevant for students. ... It’s a difficult position for them to be in, because they still have to compete.”
But still trying to raise money for a project that’s been complete for three years — in the case of the College Center — can prove difficult, admitted the foundation’s Burggraf.
“Yeah, we would have liked to have gotten some more pace-setting gifts at the outset, but we’re continually working on things that will not only erase our debt, but put us in a much better position to help the college take advantage of a lot of opportunities,” he said. “There’s a lot of work going on in every corner of the campus that I think will turn things around in a really positive way.”
“Should we be careful about new debt we take on and pass along? Yeah, absolutely,” he continued. “Is Colorado and Western still ridiculously affordable compared to other institutions across the state and country? Absolutely.”
(Will Shoemaker can be contacted at 970.641.1414 or email@example.com)