The amount of debt Ohio University is predicted to incur during the next five years could pay for in-state tuition for the 13,277 freshmen admitted to OU in 2013 as of the end of February, the world’s most expensive car, a private jet — and there would still be enough money left over to buy 7 million sheets of GoodFella’s pizza.
As part of its Capital Improvement Plan, OU would have about $1.4 billion of debt needs during the next 20 years.
“This campus and this leadership on campus have demonstrated forward thinking over the years,” Trustee Chair Gene Harris said at a news conference after the Board of Trustees meeting Feb. 8.
About 40 percent of the debt, or $567 million, is planned for Phase 1 of the Housing Development Plan, which begins in May 2013.
At February’s board meeting, Vice President for Finance and Administration Stephen Golding said OU plans to issue 30-year bonds, which had a 3.9 percent interest rate at the time of the meeting.
“Just like the U.S. government or a corporation issues bonds, Ohio University issues bonds for investors to purchase,” said Chad Mitchell, director of budget planning and analysis. “Our interest rate is determined by the market for our bonds when we issue them.”
The 30-year bonds are different than treasury bonds from the federal government or the state of Ohio, he added; the IRS treats them as tax exempt since OU is a state entity.
Jan Palmer, a retired associate professor of economics, said this isn’t the first time OU has sold bonds to fund new buildings.
“They will have a firm that will help them market the bonds,” he said. “They do market studies, and they will come up with an interest rate that they think will sell to investors.”
One of the rating agencies OU has collaborated with, Moody’s, is an independent entity whose purpose is to evaluate and provide an assessment of the level of risks associated with investments, Mitchell said.
The agenda for the Feb. 8 board meeting states OU expects the rating agencies will be accepting of the university’s plan to borrow $567 million during the next six years in light of the fact that OU has a “sound, strategic need for the debt.”
It also states that after fiscal year 2018, OU will most likely not be in a position to undertake any additional significant borrowing for a few years.
OU plans to sustain a total of $170,230,000 in debt for the completion of the Schoonover Center for Communication, the multipurpose center, the Lausche Heating Plant, the Ridges Master Plan and the renovations for classrooms in the Athena Cinema, Clippinger Laboratories, McCracken Hall, Tupper Hall partial and the President Street Academic Center.
“These are all something that the Board (of Trustees) wants to continue conversation on,” Mitchell said. “It’s not fair to say the university has committed itself to this debt today, and it is not something that is locked in place, but I think they still want to keep an eye on all of this.”
bc822010@ohiou.edu
