Financial fears grow as Rider’s bond rating is reduced to junk status – The Rider News

By Stephen Neukam

As the coronavirus (COVID-19) throws the daily lives of students, staff and faculty into uncertainty, Rider’s financial future becomes increasingly uncertain, with bond credit rating firm Moody’s downgrading the university revenue bonds to junk status on April 6.

The rating means the school’s bonds carry a higher risk of default and will affect rated bonds worth $73 million through the New Jersey Educational Facilities Authority. Also, if the university borrows more money in the future, it will likely pay higher interest rates.

While Moody’s report makes clear that its action follows projected COVID-19 costs, Rider’s overall financial condition is what precipitated the downgrade.

The report notes that declining enrollment and net tuition revenue were downgrading factors. Additionally, Moody’s isn’t terribly optimistic about forecasting these issues, saying that shrinking incoming classes and increasing tuition cuts will cause revenue to decline further in fiscal year 2020. Furthermore, he warns of the prospect of a recessionary environment due to the virus, which may cause students to choose less expensive alternatives.

In addition to declining revenue, the school continues to post operating deficits, with the administration’s latest projection in March being a $14.1 million deficit for the current fiscal year.

Rider’s ongoing financial problems have been compounded by COVID-19, and in particular by the university’s policy of issuing a refund or credit to students for room and board for part of the spring semester. The exact cost of this policy, or the amount of reimbursement students can expect, has not been announced.

Rider President Gregory Dell’Omo and Chief Financial Officer Jim Hartman declined to be interviewed for this story.

The administration is still assessing the severity of economic damage from COVID-19. The university’s vice president of marketing and communications, Kristine Brown, said the university monitors “huge” sets of projections and estimates and also receives advice from state and federal sources.

“Once we have a clearer picture of the whole situation and all the information we need to take into account, then we will be in a better position to discuss the extent of the impact of this pandemic on the university. , as well as the various actions that will need to be taken to remedy the situation,” Brown said in a statement to The Rider News.

There are signs that relief may be coming for college. Under the National Coronavirus Aid, Relief, and Economic Security Act, Rider is set to receive more than $3.6 million from the federal government. A minimum of just over $1.8 million of this amount must be awarded for student emergency financial assistance grants.

“At this time, we are working on a plan to use these funds as intended,” Brown said. “When this plan is finalized in the coming weeks, we will communicate the details to our university community.”

However, Moody’s report says that while federal aid could provide immediate relief to Rider, it is unlikely to neutralize the short- and long-term effects of the virus on the university.

Professor in the Department of Information Systems and Supply Chain Management, Arthur Taylor said it was clear COVID-19 was not the reason for Rider’s rating downgrade. Instead, it’s a consequence of Rider’s management and business decisions, he said.

“In my opinion, Rider’s current financial situation is almost entirely self-inflicted,” said Taylor, who also serves as vice president of Rider’s chapter of the American Association of University Teachers (AAUP).

Taylor pointed to Rider’s failed attempt to sell Westminster Choir College (WCC) and the revenue he lost for the university. In particular, he said declining choir school enrollment, which fell 42% between 2016 and 2019, was a huge opportunity cost for Rider.

The cost associated with the WCC will continue to escalate for Rider. The administration estimated that the cost of consolidating the WCC in Lawrenceville would be between $16 million and $20 million.

The administration plans to recoup some of these costs with the sale of the Princeton campus, however, legal hurdles remain before this can be accomplished.

The spending comes at a time when the university has announced and begun major infrastructure investments around its Lawrenceville campus. Some of the investments that have been prioritized are aimed at helping to welcome WCC students when they arrive on campus in September.

Many universities across the country have halted construction projects due to COVID-19 — for example, George Washington University has suspended all major capital projects on its campus. However, New Jersey has allowed school construction to continue, and Brown said progress continues to be made on the Gill Chapel and Omega House projects. Brown did not mention the progress of renovations to the Palace of Fine Arts.

“While there have been some minor challenges over the past month, primarily related to the delay in the delivery of construction materials, projects remain on schedule at this time,” Brown said.

To help fund these investments, the university raised more than $49 million during the “silent phase” of an $80 million capital campaign. However, this number represents both donations and pledges and they are often limited to specific uses.

Imminent negotiations between the university and the faculty union for a new collective agreement this summer further complicate matters for the administration. Although faculty have not received a cost-of-living increase in six years, the administration is expected to reach that threshold in negotiations, Student Government Association president-elect, Dylan Erdelyi, signaling public support for this. objective.

Taylor said the union is “fully aware” of the university’s economic conditions, but said there is a way for the administration to give the faculty a raise.

“They can change their behavior,” Taylor said. “They can stop making bad business decisions.”

This summer, the Rider AAUP will begin negotiations with the Rider administration for a new contract. Since the founding…

posted by AAUP runner on Friday, March 6, 2020

Moody’s report details factors that could potentially lead to a rating upgrade in the future, including “A significant and sustained improvement in financial performance to demonstrate long-term viability.” However, Moody’s is also gloomy about the possibility of a future downgrade, which it says could occur in the event of continued financial disruption due to COVID-19 and a further decline in enrollment, among other factors.

Earnest L. Veasey