College house proposal will be difficult to fund

Several University planners who described the University's current financial situation as "very tight" said it may be hard to find money to pay for a proposed college house system. "Given the current financial constraints that the University is facing it will be a challenge to find the resources to implement this proposal," Budget Director Stephen Golding said. "However, I do not doubt that if this is a priority of various constituencies within the University that we'll find the funds for it." Vice Provost for University Life Kim Morrisson recently drafted a report calling for the creation of a residential college system at the University. Senior Vice President for Development and Planning Rick Nahm said that money could be found for Morrisson's proposed system, but only if the University is able to borrow more and finance any new residences through tax exempt bonds. "Clearly there are ways of [implementing the plan]," Nahm said. "But it's more a matter of finding a way of financing through borrowing than finding the money." Nahm added that it was difficult to finance buildings, and in particular residences, through fundraising. "Buildings that produce revenue are typically financed through loans and payed off through revenue," Nahm said. Nahm added that University residences built in the last 30 years were financed by borrowing the initial capital and paying off the debt from money the residences earned. "Taking a hard look at the current debt on residences, most of the interest has been paid off," Nahm said. "What is left [of this debt] we're paying heavily against the principal." It might be possible to refinance some of this debt to allow for the building of new structures, Nahm said. According to Nahm, one of the current problems in financing new structures is that the University has reached a federally-mandated cap on borrowing. "We're at the cap and we can't go out and borrow new money as tax exempt bond issues," Nahm said. "But with the new administration, it is possible that Congress might lift this cap in the future." Both Nahm and Golding said there is a need to prioritize the many long-term plans and proposals currently being drafted by various segments of the University. "There are multiple planning processes," Golding said. "There are the [five year plans drafted by each school], the land use plan, health services plan, and you have this University-wide planning process that is being done with a macro view of Penn as an institution positioning itself for the next century." Golding added that all the plans will have to be presented and prioritized before any financial concerns will be addressed. "I think that putting a priority order on which parts should come first is an important step," Nahm said. "The majority of the residential college system implementation may have to be done all at once." The residential college report calls for the repair and renovation of certain structures within the Quadrangle and Superblock as soon as funds are available. Nahm said that in order for the plan to most effectively encompass those renovations, there should be a "well-focused implementation plan within next two years." Nahm added that it would be hard to fix any specific time frame for the implementation process. Both Nahm and Golding said it was hard to conceive of all the factors that might be present in the next three decades, but that the Morrisson plan was a good step toward a "vision of the future" at the University. "I think it is an aggressive plan that will require the University to look at how much it can afford and how fast it can develop in the future," Golding said. "The necessary reviews will be taking place as the plan goes forward and is discussed across the University campus, but this is an excellent first step at taking a strategic view of residential living for the next century."