I don't really get how this 'pass through' works... So it is the city lending money to the university? Or the city serving as some kind of stand-in for the university (though wouldn't lenders (banks?) still see that it's actually the university trying to borrow more, especially with all these news articles about it?)
@rezynezy is on the right track here.
The key is that the interest paid on municipal bonds is typically free of federal income tax and would also be free of state income tax (at least within the state of Indiana). (Consult your tax professional!). Because it is tax free, the interest rate paid by the borrower can be less.
In general, authorized municipalities issue tax free municipal bonds for things like streets, water / sewer upgrades, municipal power generation, public airports and the like. Over time, these were expanded for other services, such as hospitals, nursing homes, sports complexes. They also might include upgrades - for example new roads or a new water treatment plant that would be dedicated to support a new manufacturing plant - it could be that that the manufacturing plant is the only customer of the water treatment facility and pays all the bills. Similarly, it could be that a hospital group, or nursing home company, puts in and operates the facility rather than the municipality, yet the financing for this goes through the municipal development authority. (The community would benefit from having a hospital or nursing home, but does not own it.) Public universities sometimes have similar authority to issue tax free bonds.
As far as I can tell, what VU did is similar to a private owner/operator of a new hospital built in a city - in this case, VU is tapping into the municipal financing authority so the lenders get the benefit of tax free interest payments. VU is still responsible for the payments, and the lenders have a claim against VU for the payments.
Thanks! Ok, cool - aside from the fact that we're talking about loans/debts at all, that all sounds beneficial! The tax free aspect does sound helpful.
So let me get this straight… Valpo is spending the artwork money on dorm renovations ($12M), refinanced their debt with the city to renovate places across campus($12M - $15M) and enrollment is ~rumored~ to be increasing??? I know selling paintings and refinancing debt isn’t ideal, but is Valpo kind of on the come up? Almost $30M in renovations in theory ~should~ help with recruitment.
Thanks! Ok, cool - aside from the fact that we're talking about loans/debts at all, that all sounds beneficial! The tax free aspect does sound helpful.
I would assume the tax free part is what is promoting the school to ask for these loans in the first place. Anything to make payments lower is certainly a major plus. On top of funding for much needed improvements on top of the art work sales.
enrollment is ~rumored~ to be increasing???
Not so fast. Nothing is certain until the new semester begins, but I was told yesterday that in the last month, coincidentally or not since the Moody's report, enrollment data may have made a sharp about face and now ultimately be lower than last year. Just a reminder that the prospective numbers are flexible and fragile.
@valpopal Dang. Not surprised. As you say, best not to count our chickens till they hatch. And hatch-time is really after Labor Day weekend when we see who comes back.
valpopal - Or, without the actual data on deposits, etc. ever being released, it was never as positive as they projected.
Regardless, if enrollment numbers decline further as the 2025-2026 academic year is entered, Pres. Padilla needs to resign or be fired immediately. In that case, he cannot be in the University's senior position for the start of another recruiting and enrollment cycle.
@vu84v2 I hope he resigns for the practical reason that it could give the next president a bit more time to turn things around.
But I doubt that many prospective students really decide to come or not come based on a given president at the helm or not. At VU, supporters and detractors of Padilla alike have tended to attribute far more importance to the personnel and strategic decisions of the Upper Admins than they really should. Presidents can concoct whatever brilliant or cockamamie ideas they want, but the uni's enrollment draw has always ultimately depended on practical issues of cost/value to students and the reputed stability & excellence of the academic programs and faculty. IMHO, so long as the next pres stops destroying and start salvaging those basics, it does not really matter who it is. Most prospectives don't have any clue who runs the various institutions they're looking into when they're visiting campuses; they just care that its a good school or not.
I think you are right about the student's thought processes. 18-year-olds typically don't look at the financial or leadership side of things.
I have no idea or research on this, but I would guess that parents are becoming very careful buyers. They are PROBABLY (though I have no idea how many) studying all sides of the enrollment and the value proposition more closely than ever.
Who writes the checks for private college costs? I always thought that this mattered and it did in my day. But more and more frequently I hear parents saying that "Billy or Susie" chose school x even though they advised differently.
For sure, I think both parents and students do see all the news about "X college cutting programs" or "Y college wins tournament" etc., and all that deeply shapes their decisions about where to open the purse! Whatever the actual merits or demerits of such decisions, I think all the press about program cuts, faculty layoffs, art pawn sales, and whatnot has been absolutely devastating for the perception of the school and thus terribly counter-productive to efforts to stabilize the operating budget. As you say, parents are keenly aware of the high financial risks of going to a dud school and increasingly so, since many of today's GenX or Millennial parents were themselves burned by massive student loans! They reaaally don't want their kids going deep into debt for a education that doesn't pan out.
That said, parents are still as keen as ever to try to help their kid get a leg up wherever they think that can actually be gotten in this world, and so you do still have parents willing to let the kid take out loans and/or foot the bill themselves at the particular program/school where they think it'll actually make a difference somehow. If Susie gets into Notre Dame or U Chicago or Boston College or something, the family is going to worry a ton over that bill/loan but ultimately sign on the dotted line because of the institutional reputation. And I don't think they're totally wrong to do so. While there's a lot of pop lit out there narrating the turn to public/community college/trade schools (and I welcome that for a lot of reasons pertaining to accessibility and equity!), let's not be naive that there isn't still a huge academic/professional benefit to going to a private name school where you can get more personalized attention and intimate residential college experience. The rich and powerful in this country, for all their attacks on higher ed, are still not telling their own kids 'oh just become a plumber' or 'go to the satellite state campus'! Most the political and economic elites are still sending their own kids to the private 4 yr colleges because they know it is, on some level, still a better leg up in this world.
If you want examples of what prospectives think, go onto the VU reddit page. Plenty of posts asking "is this a good school. They offered me great financial aid, and I have researched the programs and they are highly ranked/accredited, but the news makes it seem like this school isn't going to last or isn't actually good. Help".
I was not implying that prospective students choose a university based on its President. Rather, I was arguing that the President ultimately oversees and aproves the entire marketing/recruitment process. A failed recruitment cycle should not be followed into the next cycle with the same failed senior executive...especially for Valpo where recruitment/enrollment are so critical.
He wouild need to be replaced by an interim as it is not possible to hire a good University president that quickly. But the Provost or a qualified Board Member would be focused on the longer term and would very likely be better than Pres. Padilla.
Gotcha. Overall, I agree but I guess I just put less overall stock in these personnel issues at the top. VU has had a lot of turnover, and whether we keep or axe bad people or keep or axe good people is starting to feel a little irrelevant, at least on the scope of a few months. It's like the language student who picks up a stack of flashcards and then decides they want to switch it out for another set... different font? different colors? more or less pictures!? Okay, but what does this or that matter if you're starting to study in the 11th hour and cramming for the test? Either you know the vocab or you don't, and either you have the study and mental skills to start committing them to memory or you won't. So too for the university, there are some realities that just are what they are, even in the midst of frantic shifting marketing strategies or rotating senior officers. Either the university has been and is strengthening its academic programs and reputation, or... it hasn't/isn't. In that sense, I doubt that getting an interim in 3 months earlier matters that much. Admins and their observers talk as though there's some kind of silver bullet of institutional salvation and as if 'leadership' might have it -- this VP is going to find VU the magic real estate deal, or that Pres is going to get the right marketing pitch! - and then when they fail yet another year of enrollment goals, we all think it looks stupid for them to say "The dog ate my flashcards!" and people want somebody's head on a stake. But all of this, both the not-studying and the finger-pointing, never makes up for the more basic bread and butter, the bread not baked and the butter left out to sour. If VU wants to salvage enrollment, they'll have to do the tougher homework of actually investing over the long haul in the actual academic people/programs to shore them up, and it doesn't really matter who at the top does it. So that's why I'm not super into the Padilla hate. Padilla is neither a hero nor a villain, but just the latest top administrator who didn't do what needed to be done.
