While funding for universities in Colorado remains tight, CSU plans to spend upwards of $400 million in coming years on new construction projects, and general campus maintenance, with the bulk of the money coming from large investment corporations.
The state’s funding woes have forced CSU and other institutions to rely more on donations from the private sector and hefty loans from Wall Street to fund such projects — even if it means going into debt.
Students will not feel any extra financial burden, university officials said, for improvements that include a new parking garage, a new high-tech academic building and renovations and additions to existing buildings.
While the decision to make necessary campus improvements was almost unanimous in student and administrative organizations, payment methods remained abstract during discussions among the entities.
The construction will be financed through revenues from various university departments, state-funded monies, private donations, student facilities fees and largely by the sale of university bonds.
The current projects are defined as “capital construction,” which means CSU went into more than $500,000 worth of debt to pay for them, according to the facilities department at CU-Boulder.
Zane Guilfoyle, a former member of the Student Fee Review Board, said most board members supported the choice to allocate student fees to the construction projects.
“In the long run, the construction is better for everyone as it makes for a better atmosphere here on campus,” Guilfoyle said.
Opponents, however, were concerned by specific project details.
The largest of the projects are:
a four-story, 900-stall parking garage on Lake Street
an academic instruction building just south of the Clark Building
a 24-hour computer science facility, which is slated to be finished this fall and
a new phase of the Academic Village
Renovations of existing facilities include:
two additions to the Student Recreation Center
an addition to Rockwell Hall, which houses the College of Business and
a modernization of the University of the Arts.
One of the biggest concerns cited last year by student leaders is the viability of some of the projects when CSU, a land grant institution that has struggled to bring in money from the state for nearly a decade, is in such a restricted fiscal position.
The most prominent item on their docket was the expansion of the recreation center, which includes a glassed-in climbing wall. The SFRB expressed concern last year to university officials, citing disappointment in what they said was a lack of commitment to more important projects.
Getting the money
In September of 2007, CSU struck deals with national financial giants, such as Lehman Brothers, Morgan Stanley, CITI and A.G. Edwards and Sons Inc., to sell $210 million in bonds and an additional $83.3 million in June of 2008. The four companies sell the bonds to institutional buyers, big corporations, insurance companies and retail investors including entrepreneurs and “mom ‘n pop” businesses.
Investors are more willing to buy bonds from institutions like CSU that have stable revenue streams and high credit ratings.
Investors were impressed with the quality of the university’s students and its research projects, said CSU Provost Tony Frank. As a result, the bonds sold rapidly, even in what he called a “turbulent market.”
“We have been working hard in financing on these projects, and I am extremely comfortable because of the simple fact that we, as a university, have such a good reputation and ratings in the market,” said Robert Osika, the treasurer for the CSU System Board of Governors. “We did not face any immediate problems in obtaining money to finance current projects, and we do not foresee problems in paying that money back in the future.”
The bonds are slated to be repaid by 2037 and 2038, which is similar to the average time it takes a home-owner to pay off their mortgage.
“Students should not feel the effect of the debt because the plan is based upon existing fees that have been approved,” Osika said. “The university did not build new revenue streams or increases in student fees into the overall plan in order to pay for debt services.”
Before 2007, CSU Pueblo and Fort Collins campuses were separated financially, each with its own system of bond finances and individual credit ratings. To become more financially viable to investors, all CSU entities were combined under a cohesive system of credit in 2007. The merge allowed the university to increase its overall credit rating.
For several of the projects, the university is relying on state money and student fees.
To finance campus projects using student fees, CSU must obtain approval from the University Facility Fees Advisory Board, a student-headed organization. The university presents the case of student fee allocation to the board, which undergoes careful scrutiny. From UFFAB, the request is sent to the SFRB for further student approval before climbing the ranks to the Board of Governors, where the decision is finalized.
Since 2007, the university has obtained approval from UFFAB and the SFRB to use approximately $65.5 million in student fees to help finance several projects, including the University Center of the Arts, the Microbiology study lounge and the addition to Rockwell Hall. Construction of the Computer Science building and Academic Instruction building is fully paid for by student fees.
The amount of state funding the university has received leaves much to be desired.
Student facility fees totaling $2 million was allotted to help fund an $8 million renovation of C-wing of the Clark Building. The state Capital Development Committee gave the remaining $6 million.
In addition to funding the Clark project, the CDC provided $1.6 million for the construction of a regulatory storage building and $45 million for the construction of a three-story Diagnostic Medical Center that will be used by students in the College of Veterinary Medicine and Biomedical Sciences.
The CDC is responsible for approving capital construction projects as requested by state departments and higher education institutions.
Currently, the CDC is unable to fund all capital requests and struggles to provide even small funds to institutions because of a $471.9 million revenue shortfall, after nearly a decade of legislative woes placed Colorado in what state politicians call a “spider web” of economic frustration.
And Sen. Bob Bacon, (D – Fort Collins) who chairs the CDC, said the new projects will be paid for by current students who won’t see the finished product.
“By using student fees, the university is essentially taxing a small demographic in order to pay for improvements that will benefit future generations,” Bacon said.
He said the only way to fix the system is to get approval from Colorado voters to extend dying tax initiatives that allow lawmakers to allocate more state funds to public projects.
And even the current money is not nearly enough to pay for all CSU construction and leaves the majority of the financial responsibility in debt investments.
Staff writer Madeline Novey can be reached at firstname.lastname@example.org.