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Another $150 Million of Borrowing

Institutions of higher learning normally have capital campaigns in order to fund new facilities. But if fundraising bogs down because a President has his mind elsewhere, and if operations are inefficient and costly, then borrowing is the only option left to fund construction and even ongoing activities. The Trustees, in their typical Washington/Wall Street/What, me worry? manner, have decided to spend money today and leave future generations to pay the bills. They have announced that Dartmouth will soon be borrowing another $150 million in the capital markets. The new bond offering is on top of the recent sale of obligations totaling $70 million. From an off-line article in the Valley News yesterday:

The college is in the early stages of seeking to build the Williamson Translational Research Building on the Dartmouth-Hitchcock Medical Center campus in Lebanon and the North Campus Academic Center in Hanover.

The Board of Trustees gave the green light for the [122,000-square-foot] academic center on Friday and approved conceptual plans for the 160,000-square-foot Williamson building. At this point, neither project has been permitted…

Although Anderson said it’s too early to tell how much each building will cost, the college plans to borrow $150 million to help pay for the two buildings and other strategic projects. Dartmouth-Hitchcock will contribute funds for the Williamson building.

Anderson said the college is financially sound enough to take on a $150 million debt, despite having closed a $96 million budget gap only about a year ago. Cuts led to layoffs and reduced spending on temporary workers and overtime.

As we’ve seen, the College’s debt burden keeps climbing: from $286 million in 2000 to close to $1 billion now, and with the new debt the figure will climb to $1.15 billion. Beyond those raw numbers, between 2000 and 2011 our debt to endowment ratio went from the second best in the Ivy League to the second worst.

Increased debt is a short-cut from doing the hard work of improving the College. There has long been no excitement at Dartmouth — no new programs, interesting initiatives, or exciting new faculty members — and so there is little to inspire the kinds of donors who might give $150 million for new buildings. Constructing facilities with borrowed money might offer the impression of activity; we need an institution that is genuinely alive in order to progress intellectually and financially.

A decade or two more at this pace and the College’s total debt will exceed the value of the endowment. How very sad for Dartmouth.

Addendum: At an alumni meeting in Chicago on May 9, President Kim stated that the College would also be taking on more debt in order to be able to recruit new faculty. He observed that Dartmouth’s indebtedness is half that of the average “state university.”


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