According to Trinity’s financial statements, the university gained $50 million in additional debt in connection to the construction of the Center for Sciences and Innovation. However, Trinity has a 30-year plan to use tuition and donations to pay off its debt.
This size of financial debt is not unusual for institutions like Trinity.
“We have taken on more debt as have almost all institutions, and actually that’s happened very much in the public sector as well,” said Gary Logan, vice president for finance and administration. “Because interest rates have been so historically low, it’s efficient for us to do that.”
According to Diana Heeren, associate vice president for finance, Trinity actually has a relatively low level of debt, reaching only $113 million as of 2017.
“Compared to peers, I’d say we are on the low end — on Trinity’s financial statements it shows long term debt,” Heeren said. “We like to use benchmarking against our peers to make sure that we stay in line, and we also have a debt policy, which is a guide to how much debt we think is reasonable.”
Though too much debt might have negative effects, at times it can be used strategically.
“Universities use debt to finance dorms. Get the money for the dorms from room and board fees overtime, and you pay for it now. Then you reap the benefits in terms of revenue later,” said David Macpherson, professor of economics.
Logan explained how, oftentimes, large projects will cause donors to become interested in investing in the school.
“If we raise money for a large project, people make pledges, and the pledges get over five years. So often times debt becomes a very efficient way of cash flowing those,” Logan said. “So that is not an unusual way to finance our projects.”
Trinity uses interests rates and various financial ratios like debt-burden percentage and debt-service coverage, which are monitored by the Board of Trustees. The Board of Trustees and the finance department collaborate on every project to decide how to fund it and use debt as a liberating tool instead of an inhibitor.
This past semester Trinity has released a Master Plan of construction that details the projects the university plans to fund for the next 10 years, including the renovation of Chapman Hall.
However, the university has no formal plans to accumulate any more debt for these projects.
“So right now our plan, even looking out to 10 years, Trinity is not planning to take on any additional debt,” Hereen said. “So our goal is to either build the projects within the master plan through fundraising, so asking donors to support those projects, or using our reserves.”