Our Sustainable Future: Capital Project Needs and Resources

Major capital expenditures for academic buildings, student life and co-curricular needs, and energy systems are included in the identified needs of the Priorities Campaign (see below). Once major renovations are completed, future updates, repairs, and maintenance of these buildings will be supported by the annual depreciation budget, and/or temporarily restricted gifts, and income from the stewardship endowment to be established through the campaign. Smaller scale capital improvement and building refreshes will be funded with the same means.

Major capital projects should be launched when construction costs can be covered by received pledges. If the cash conversion of the pledges is slower than the construction cost outflow, we will need to obtain the board’s approval for a bridge loan against those pledges from the endowment. There is a limit to bridge financing, however. For large-scale capital projects, the College may need to look at refinancing its existing debt to obtain a new funding tranche. Given the College’s rural location, USDA loans could be very attractive. USDA loan requirements have numerous conditions associated with them, and the process must be followed meticulously.

In terms of debt capacity, we currently have a public Amherst County Industrial Development Authority bond (IDA Bond) of $12,160,000 at 4-5% rates with semiannual payments and a final maturity of September 2030. The current annual payments total approximately $1,425,000 (principal and interest) per year. We also have an internal debt of $6,000,000 owed to the endowment at 2.97%, with all principal due Dec. 31, 2036. Unless paid off earlier, we will initiate a six-year principal and interest payment of approximately $550,000 every six-months, starting on March 1, 2031, to retire the debt by Sept. 1, 2036. This amounts to an annual debt service of approximately $1,100,000 for 2031 through 2036.

The current IDA Bond has a negative pledge covenant prohibiting any assets pledges. Accordingly, any new financing will need to retire the existing debt and fund the new board authorized projects.

Finally, we will need to build cash reserves, as the College lacks a line of credit or operating reserves backed by cash. This is a significant financial management concern. One way to build the cash reserves would be to change the current policy regarding unrestricted bequests, by redirecting them from the annual fund and operating budget towards “strategic reserves.” We expect to bring this issue to the board.