Univ. to lower debt dependency

A significant portion of the University’s construction costs this year will be paid for by fund raising, as part of an ongoing strategy to reduce the school’s reliance on debt, a vice president said last week.

GW will use more than $98 million in gifted money to fund ongoing construction projects this academic year, up 13 percent from last year, said Lou Katz, executive vice president and treasurer. The shift from the dependence on debt to reliance on fund raising is part of a multi-year plan to reduce debt dependency, he said.

“This is at least a 10-year plan and perhaps maybe a longer plan so that the amount of fund raising at the University is more normative to peer group institutions,” Katz said. “What you are looking at is a by-product of the beginning of our strategy and quite frankly we are already seeing some successes, but we still have a long way to go.”

Some of the ongoing construction projects include the renovation of Pelham Hall, which will cost about $20 million this academic year, and the building of a new residence hall on F Street, at an estimated cost of $52 million this academic year, according to the capital budget.

Though debt will fund a majority of this year’s construction costs, the University will use more fund raising dollars than it has in years past, Katz said.

In 2005, 78 percent of construction costs were funded by debt, with only $6.4 million coming from gifts. Four years later, the amount of gifted funds has increased by $91.4 million, though debt has decreased by only 3 percent.

“We are still (reliant) primarily on debt,” Katz said. “Over time, we want to keep moving more and more towards fund raising and less and less on the need to spend these dollars either from debt or from tuition. That gives us more flexibility to put more into the program dollars and continue to improve our academic programs and to provide better services for our students.”

In order to decrease debt dependency, the University is also beginning to spend more on improving fund raising capabilities, said Laurel Price Jones, vice president for advancement.

“You do not raise money without hiring more people to help out,” Price Jones said.

She said it is too soon to tell whether or not contributions will decrease in light of recent economic news.

“When the dot-com economy busted, it did not affect fund raising,” Price Jones said.

The economy may not only affect fund raising, but it may also change how the University plans to expand.

“I typically grade our success in five-year cycles, and I am still very optimistic,” Katz said. “But the next two to three years are going to be difficult years in the economy and we are just trying to position the University the best we can so we’ll be able to withstand all of this and so we will be able to better support our students who will need (financial assistance) as their financial situations change.”

Economics professor Anthony Yezer said the University’s plan to decrease in debt dependency is a step in the right direction. He added, however, that the construction around campus is exorbitant and not enough attention is being paid to academics.

Yezer said the University is trying to attract students with residence halls and new buildings rather than academic factors like smaller class sizes, an attractive library or full-time faculty to student ratio.

“Some faculty on the faculty senate think it is odd that we are rated number three for dorms like palaces, but we have the number one spot for part time professors,” Yezer said. “It is a business model some of us question.”

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