Finding funding for a future campus

University architects may be planning to replace black parking lots with green grass, but administrators are working to keep Penn's budget out of the red.

As the University enters the first phase of the eastward-expansion project with the acquisition of the Postal Lands, officials have begun looking at different ways to pay for the project's $1.94 billion price tag.

John Zeller, vice president for development and alumni relations, is currently gauging how receptive the alumni have been to Penn's seven-year Capital Campaign - a fundraising campaign, to be kicked off this fall, with the goal of supporting many of the facilities projects tied to the eastward-expansion plan.

Though that information is still being sorted out, he will use it to set what he deems as a feasible amount of money to solicit from alumni.

Zeller is also working with the University administration to determine how much money can come from within the University's relatively tight operating budget.

Private investors, local governments and loans will support the project somewhat, but most of the money will come from fundraising, Penn President Amy Gutmann said.

"This is going to be the most ambitious fundraising campaign ever in Penn's history by a significant order of magnitude," she said. "Part of that will go to creating a much better campus."

But other factors will be presenting the University with financial challenges.

Zeller pointed out that Penn must plan especially far ahead because of its smaller endowment-to-student ratio.

Penn's $5.3 billion endowment is only the 70th largest endowment per student, and the University - unlike its peer institutions, with significantly larger endowments, funds and budgets - will not be able to rely heavily on this amount, said Anne Papageorge, vice president for facilities and real-estate services.

This puts Penn in a weaker financial position than other schools funding similar expansion projects, like Harvard University, whose $29 billion endowment will largely be used for its own Allston- and Cambridge-based expansion project, Papageorge said.

As a result, Penn specifically designated a long time frame for the project to accommodate any delays that might occur because of funding issues, City and Regional Planning professor Eugenie Birch said.

"The University will build as they get funds, which is why there are many phases of this project," she said, adding that Penn will also invest in buildings that will bring in revenue to help fund the project.

Two of the expansion project's major expenses include the initial construction cost of the buildings and the ongoing operating costs, Executive Vice President Craig Carnaroli said.

In the meantime, officials have a rough idea of the sources of this major initiative.

Forty-four percent of the money will come from contributions, 18 percent from internal resources, 10 percent from grants and 28 percent from debt. There is also the potential for leasing and third-party developers to finance the project, Carnaroli said, based on an outside consultant the University hired last June to come up with broad cost estimates.

Penn's last Capital Campaign ended in 1994 and raised roughly $1.54 billion, Zeller said.

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