From staff reports
An Ohio University proposal to issue $40 million in bonds to upgrade the university's technology infrastructure and purchase a new Student Information System took a step forward Thursday when a Board of Trustees committee reviewed the project's scope as well as its impact on students and university finances. The project will come before the full board in January.
During a wide-ranging meeting, members of the University Resources Committee also received an update on universitywide budget planning and options for closing a $7.4 million gap in funding to complete the Academic & Research Center. In addition, they learned that the global credit crisis had touched off events leading to higher interest rates on bonds issued to construct University Courtyard Apartments and reviewed plans for reducing those costs.
Much of the day's agenda would be sobering, Senior Vice President for Finance and Administration Bill Decatur acknowledged.
"The common theme today is dealing with forces that are buffeting us from outside the university," he told trustees.
Among the big topics discussed Thursday:
Information technology improvement plan
Decatur and Chief Information Officer Brice Bible briefed committee members on a university proposal to issue up to $40 million in bonds over 10 years to upgrade the technology infrastructure and buy a new Student Information System (SIS). Original plans had called for an additional $5 million in bonds to improve the university's Oracle E-Business system, which handles basic functions such as payroll and procurement, but officials have tabled that request while they consider alternatives.
Upgrading the infrastructure and replacing SIS is long overdue, Bible noted. More than half of the university's network equipment is more than nine years old, which limits functionality and capacity as well as efforts to add security protocols. And the maker of the current SIS software is going out of business.
Trustees acknowledged that a stronger information technology system could help the university streamline functions and save money. But Board of Trustees Chair C. Daniel DeLawder questioned if the technology would be obsolete by the time the bonds are repaid, suggesting a shorter repayment period would better reflect the life of the asset.
Repayment of the debt would be covered through a combination of student fees and university budget reallocations, Decatur said. For students, that could mean a technology fee of up to $102 a year, but officials noted that students likely would not face the entire fee immediately.
Decatur told trustees that a rating agency has indicated the university's credit rating would not be affected by the additional debt.
ARC funding strategy
Ohio University needs to secure $7.4 million to complete the Academic & Research Center, which will provide classroom and research space for the Fritz J. and Dolores H. Russ College of Engineering and Technology and the College of Osteopathic Medicine, Decatur said. The $36 million facility is being built mostly with private funding.
An existing gift from the Dolores Russ estate was expected to contribute interest earnings toward completing the project. However, stock market troubles have erased those anticipated contributions, Decatur said.
Here's how officials plan to close the funding gap: $3.2 million from the Russ gift's principle; $1.5 million from OU-COM carry forwards; $300,000 from income generated by the university-owned Russ Research Park near Dayton; and $2.4 million from the College of Engineering and Technology, paid for with an internal loan to the college from the university's working capital.
Budget issues/budget planning
Ohio University is planning for the worst but hoping for better as it maps budget strategies for this year and next, Decatur told trustees.
That means addressing concerns on both the revenue and expense side of operations. For fiscal 2010, Ohio University could be looking at a deficit ranging from $15 million to $38 million, based on what happens with state aid, enrollment and tuition caps, the stock market and the cost of health care, utilities and compensation. Decatur gave a similar presentation to Faculty Senate on Monday night.
Trustees said they appreciated the thoroughness of university budget planners, saying preparation will ensure the university responds thoughtfully to challenges. They also praised planners' efforts to share information with the university community.
Tough times represent an opportunity for change, noted Trustee Larry Schey, chair of the committee. The good news, he said, is that the university is better prepared to meet the challenges because of its work in crafting the Vision OHIO strategic plan that identifies priorities and sets strategic initiatives.
Trustees heard an update from Vice Provost for Enrollment Management Craig Cornell and Associate Provost for Institutional Research and Assessment Mike Williford concerning two reports the University System of Ohio has requested all public universities in the state complete by Nov. 30. The data will help the state determine how each institution will contribute in meeting four operational goals laid out by Board of Regents Chancellor Eric Fingerhut earlier this year.
In the first report, Ohio University has been asked to craft best-guess scenarios on student out-of-pocket costs for full-time, full-year, in-state undergraduates who filled out the federal student aid form (FAFSA). University officials have built tuition projections assuming no increase in the state subsidy and a 2 percent increase in the state subsidy.
That information and the other requested report -- on accountability -- are expected to form the basis of funding discussions between Fingerhut and state lawmakers as they move forward in building the state biennium budget.
Housing for Ohio
The University Courtyard Apartments has succeeded in spurring high-quality, apartment-style student housing in Athens, Decatur told trustees. The project is 99.5 percent leased for fall quarter 2008 and is producing income.
But Decatur told trustees that the global credit crisis had touched off a series of events that resulted in higher interest rates on bonds issued to pay for the project, a scenario that threatened to pull the project into the red. Trustees explored various scenarios to reduce the housing project's interest burden, such as securing a mortgage loan or finding short-term financing.
The apartment project was undertaken by Housing for Ohio, a limited liability company in which The Ohio University Foundation is the sole shareholder.
However, Decatur received some good news soon after the meeting. He learned that a new investor has bought the securities, a transaction that reset the bonds' interest rate at a much lower level.