I defer to folks who know more about (1) the overall economic health of the City of Valparaiso and of Porter Co. generally; and (2) VU's overall reputation within said circles, when it comes to thinking about whether VU's surrounding community can play a role in nursing it back to fiscal health.
When I attended VU from 1977 to 1981, the notion of "town and gown" was rather foreign. Valparaiso was more like a city abutting the University, rather than a "university town." However, my more recent trips back to Valpo over the past decade or so have suggested a much closer, mutually beneficial connection. Am I correct about that? If so, then the community has a genuine stake in the survival and hopefully renewal of the University.
The financial situation facing VU is very serious, yet I do not see any risk of imminent closure and certainly not over the next few years. The reason for this is that as of last year (June 30, 2024), VU had total assets of $602M (which includes the endowment, property, buildings, cash, accounts receivable, etc. Of course much of the endowment is designated for specific programs and the value of VU's property would be hard to monetize). VU had total liabilities of $167M (which includes debt, accounts payable, and other obligations). For reference, VU paid out $5.3M in interest in 2024, and had a total budget of $117M.
On an operating basis, VU has run large deficits especially since COVID, though that is offset somewhat by investment earnings and donations. Many private universities run at an operating loss, offset by the earnings from their endowment plus donations. (Think of it this way: a university could run an annual $10M operating deficit if earnings from the endowment were $20M).
As I see it, there are three financial problems for VU: First, that their operating losses have become large relative to the overall budget. This is because the student numbers (and associated net tuition revenue) are down. This means that there is little room for employee raises, for regular maintenance of buildings, computer equipment, marketing, or to hire necessary faculty and staff. I expect that the interest payments will be larger than $5.3M for 2025, and if they did not have those large interest payments it would be much easier to pay employees, do ongoing maintenance and make strategic investments in programs. Second, there are principal payments on the prior borrowings are increasing, and it looks to me like the 2014 loan was being paid interest only at this point. These principal payments (edit - including the 2014 loan plus other borrowings) were estimated at $2.9M in 2025, $3.1M in 2026, $3.7M in 2027, $4.3M in 2028. (VU operates on a fiscal year, so FY 2026 starts July 1, 2025). Third, the total liabilities, including loans and lines of credit, have become large relative to the asset base. Probably, most of the debt is secured by VU's assets and the endowment in particular. It was relatively easy for President Heckler to borrow $42M in 2014 and $40M in 2017 against the endowment because VU did not have as much debt, yet that is no longer the case.
As far as I can tell, the resolution lets VU consolidate and re-finance its debt, possibly extend re-payment of principal amounts over a longer term, and make needed capital repairs and improvements. Probably, most of the borrowing numbers is not new debt at all, it moves the prior loans and short-term lines of credit to long-term debt. As @realist77 points out, there also is provision for a debt service fund so that lenders would know they would be getting paid over the short to medium term which reduces their risk. It seems to make sense for VU, and lenders would probably appreciate it simplifying the lending picture.
Longer term, the key issue is that VU needs to close the large operating deficit; it is impossible for any entity (perhaps other than a federal government) to run perpetual deficits. If VU can increase its revenues (i.e., more net tuition dollars) or reduce its expenses (i.e., close programs or cut staff) it can be on a solid financial footing; this would allow re-payment of prior loans and more investments.
Part of the answer will be the sale of all the excess land owned by the university. Eastgate alone is worth millions.
Although I'm glad the city could maybe help, is it wise to take out more debt? I admit my understanding is getting lost in the weeds of all these financial details (so not clear if this is just a reshuffling of debt or actually new and greater indebtedness). In the big picture, I wish the university would just go back to the basics: Stop taking on debt! Pay your faculty and staff enough to stop turnover and restabilize the learning community and student experience! Salvage the academic quality and institutional reputation! And recruit like heck!
@vuindiana the way it reads to me is this is a consolidation effort. The school would rather consolidate their debt with the city as opposed to third party sources. The article stated that the city bond will be used to pay off other debts in an effort to do so.
While I'm sure no one disagrees with you. It's easier said than done. Like others have said, can't give your staff any more cash flow because you are drowning in debt. Can't recruit if people aren't interested in your school because of the accomodations. Ect ect
I hate to be the "realist" as always.
VU72 is correct in saying they must sell Eastgate. Buyers will have leverage, but it must be done. Bonds will kill us.
No one refinances a huge loan at a HIGHER interest rate without severe desperation and no other options. Moody's sees that. It's that simple. Yes, Valpo has a big pile of "net assets" ($600M), but those are endowments and non-liquid assets such as physical buildings without any logical buyers.
And of course,...a huge fraction of their endowment funds are restricted to purposes. You might win your case in court on a "survival" argument which won the paintings case. But VU's charitable donors and Moody's rated bond buyers would run for the hills even faster.
Should housing really be the number one priority? Alumni and Brandt could stand to be updated, but the other ones appear to be fine. Beacon Hall was build in 2014.
Valpo is never going to attract students who value dorms as a high priority. But that’s always been the case. Instead of pouring money into housing, why not just let students live off campus? If enrollment goes up, then you renovate. Improving housing is putting the cart before the horse. The idea that we just need to fix the dorms and students will flock back is suspect. People are coming here for an education, we should focus on improving that.
We’ve all been hearing rumors of a potential increase or stabilization in enrollment this year. I’m interested to see how that turns out. Valpo in my opinion probably isn’t considering selling East Gate, but who knows… I hope they’re considering everything. School definitely won’t be shutting down in 2 years I can tell you that much. They wouldn’t be considering almost 30M in renovations if that were the case. This also reads to me like it’s a consolidation. Hopefully we get a LEADER at president rather than a sitting duck.
Google AI says, “ Valparaiso University is facing financial challenges, including declining enrollment, operating deficits, and reliance on lines of credit. However, the university's endowment and total cash and investments remain substantial, suggesting potential for future financial stability.” If AI says we can get to stability then it has to be true…. right?
If you’re a numbers person then here’s a website I found helpful.
Valpo in my opinion probably isn’t considering selling East Gate,
It's been in the works since 2021. They would keep the baseball field. In addition, they acquired the Strongbow property which gives the entire property access to Route 30.
@mj08 I totally agree with you that Valpo's never going to draw students primarily on amenities when there are so many other campuses which have both swankier campuses and are in nicer geographies. The draw must be more substantive than that (academic, or programmatic, or student-experience related).
BUT I think to totally shift and give up on the residential campus and let it go fully commuter would be a mistake. If we're talking off-campus frat houses or student rentals just off campus, that's one thing. But if students live at home with parents and it becomes mostly a regional commuter campus (which it already is trending towards), that really kills the 4-year college experience vibe for all, gives the impression that we are just a glorified community college, and is also a huge revenue loss in room & board (aka even worse operating deficit) which I suspect the uni cannot survive.
@vu72 Yes, my understanding is VU is willing/trying to sell East Gate. Does anybody know why that hasn't happened yet? Just waiting for a buyer?
Should housing really be the number one priority? Alumni and Brandt could stand to be updated, but the other ones appear to be fine. Beacon Hall was build in 2014.
Talking with people in Admissions and just people who live in Valpo it seems that yes, the freshman residents halls are not just old but significantly below standard across the board. Admissions supposedly has data that shows that they actively lose students to peer institutions where they indicate residence halls are a large factor.
As far as letting people live off campus, there's just not that much housing and what is around is not affordable for the average college student. I've heard that graduate students have started living on campus due to lack of decent housing.
Right, a quick internet search confirms my sense of the numbers, that in Valpo the average 1 bedroom apt goes for around $1250 a month, while a 2 bedroom is around $1400 a month, 3 bedroom $1800, etc.... While this is not terrible compared to elsewhere in the country, the costs to the individual after splitting rent are still going to end up higher than a shared dorm room, so any student or young adult would struggle to stay above water. Most the movement off-campus is students wanting to live at home with parents to bypass room rental costs entirely.
Valpo in my opinion probably isn’t considering selling East Gate,
It's been in the works since 2021. They would keep the baseball field. In addition, they acquired the Strongbow property which gives the entire property access to Route 30.
Thanks for the info. I don’t think the school needs the land east of the baseball field. I’m guessing that company played a part in adding the new gas station near the football field on Lincolnway.
