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Tuesday, October 13, 2009

Tuesday, October 13, 2009

Does UC Raise Fees to Help Sell Construction Bonds?

Meister, UC on Wall Street                                                                                                                           
Posted by Chris Newfield
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3 comments:

wilhelm meister's lehrling said...

Meister raises issues that warrant further analysis, especially if they reflect others' concerns as well as his own. Such an analysis would include: (1) an evaluation of the business-as-usual alternative and any other logical management alternatives to the financing/re-financing actions the University has taken; (2) an analysis of whether students will ultimately pay more, or less, as a result of the University's reduced cost of capital realized through several coincident factors that ought to be spelled out; (3) the consequences, in terms of both costs and benefits as well as "opportunity costs," of placing a policy priority on a high UC bond rating; and (4) an analysis of why so many other AAU institutions are pursuing essentially the same refinancing strategy as UC has, if they can.

Incidentally, for decades the UC Regents have made no secret of their support for financial management strategies that minimize the long-term cost of capital, often noting in discussions I have heard that a research university is a capital-intensive enterprise warranting aggressive debt management. I do not see any new policy direction here that went "undisclosed."

I was also confused by the view that UC is pursuing the "opportunity to break free of the state in its capital funding." Currently, and for the past three decades at least, UC has sought and advocated large State-funded capital programs, and taxpayers have supported generous capital bond issues even in surprisingly poor economic times, with a few exceptions. The University's capital budget and its operating budget have often seemed out-of-sync, sometimes because the capital bond issues were actually passed a few years earlier when the economy and the State budget were less stressed.

October 13, 2009 at 4:50 PM Reply
loanshark said...

Again a conspiracy theory out of Santa Cruz. Why not stick to the facts - they're bad enough. All universities need to pledge their cash flow to secure debt. When the state of California is not paying (not even what it agreed to pay - the payments have been delayed and deferred), debt is the only remedy. If your boss does not give you your wages at the end of the month, you go to the loan shark...

October 17, 2009 at 2:31 PM Reply
Michael Meranze said...

I'm not sure that is Meister's point though loanshark. What he is describing is a conscious decision to place capital improvements over the needs of students and UC employees. If Harvard can cut back on building why not UC? And why suddenly start using fees as bond collateral? If the answer is that the state was threatening to cut back its support then that gets us back to the "Compact" that was negotiated with Arnold apparently without including the Democratic legislative majority in the discussions.

You don't need to be a conspiracy theorist in Santa Cruz to wonder if the Regents are fulfilling their roles as stewards of a public trust to wonder about the timing and the logic.

October 18, 2009 at 6:38 PM Reply

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