University seeks $165 million in bonds from Allegheny County
Carnegie Mellon is trying hard to get around some serious obstacles in the way of something it might not even really need or want.
The University last week sought approval of a $165 million bond from the Allegheny County Higher Education Authority. The authority approved the bond issue last Tuesday.
The bond has two main purposes, Mark Kamlet, Carnegie Mellon provost, said. Mainly, the University needs the money to finance capital projects on campus including $88 million for the construction of the Gates Center for Computer Science and $27 million to renovate Doherty Hall. The University also hopes to update computer networks on campus and has a $65 million option to refinance past loans.
“The faculty let us know many years ago, if we wanted to keep a top-notch department, that these [Doherty Hall] facilities that have not been renovated in 50 years be updated,” Kamlet stated in an August 26 article in the Pittsburgh Tribune-Review. “They reminded you of a 1940s chemistry lab.”
But there are some problems to overcome before these renovations can begin.
“Much has to happen before money changes hands,” stated Robert Strauss, professor of economics and public policy at the H. John Heinz III School of Public Policy and Management. He explained that the University must first obtain a clean audit opinion for the 2005–2006 financials, the report of which usually comes out around October 1.
Additionally, Strauss pointed out potential conflicts that may arise within the University. One issue, he noted, is that the entire University is being asked to support a project — the Gates Center — that will only benefit the computer science department.
“Presumably, notice will be taken of the fact that a $165 million bond issue is a very large percentage increase in outstanding long-term indebtedness of the university,” he stated.
Also, despite a $20 million gift from the Bill and Melinda Gates Foundation, concern is growing over the University’s need to borrow to complete the project.
“Usually when universities put up buildings, they wait until they have accumulated enough capital gifts so they don’t have to borrow to put up a building,” Strauss stated.
However, both Kamlet and Strauss have pointed out some potential benefits of implementing a bond from the county authority.
Created under state law, this authority issues tax-exempt bonds, explained the Pittsburgh Tribune-Review article.
“Whenever universities build things, they issue bonds. The reason is for tax purposes,” Kamlet said. “We can issue bonds in tax-exempt ways. We have a plan to finance the Gates building. Even though we have the money coming in, it’s beneficial to use the bond.”