Declining state support and a building boom has left the University of Massachusetts (UMass) $3 billion in debt, but system officials say the benefits of the construction have outweighed the negatives, Laura Krantz reports for the Boston Globe.
In a bid to raise the profile of its five campuses and enroll more students, the university began a capital plan scheduled for completion in 2019. The university owes $203 million in interest and debt this year, and estimates that by 2020, it will spend $222 million annually on debt service.
"A large part of the debt that the university has assumed is really what the Commonwealth should have been investing," says Christine Wilda, UMass's senior VP for administration and finance and treasurer.
States increase higher ed funding, but barely
UMass remains financially healthy for now, Krantz says, but it is nearly at its borrowing limit. And the system's board of trustees says the school should not stop investing yet.
"I think it's a way to recruit students and interest parents at taking a second look at UMass," says Phil Johnston, a trustee and chairman of the Building Authority, which oversees all construction projects.
In the last five years, UMass enrollment grew 6.4%. Now, about 82% of all undergraduate students are Massachusetts residents.
In addition to a new student center at UMass Lowell and a planned pool at UMass Boston, funds are also going toward repairing and modernizing old buildings—many of which were built before 1985.
While Moody's Investors Service continues to award UMass good ratings, it did warn that the system could end up in trouble if it does not successfully raise enough to pay its new debts.
Last January, Moody's downgraded the outlook for the Building Authority to negative from stable, and gave it the same score in February. Yet UMass still has an Aa2 rating, which Krantz says is more important.
Alternative business models
In order to stem borrowing but continue facility improvements, the system is looking to enter into public-private partnerships with developers.
UMass Boston, for example, plans to add dormitories in order to position its commuter Dorchester campus as a competitor to local private institutions. The system is seeking an arrangement where a private development company would run the dorm and rent to students.
A similar project worked at UMass Lowell, although it required special legislation (Krantz, Boston Globe, 3/22).
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