QUESTION #12: I'VE HEARD THAT THE COLLEGE JUST TOOK ON A LARGE AMOUNT OF DEBT AT A VARIABLE RATE FOR NEW FACILITIES. IF INTEREST RATES SOAR NEXT YEAR, COULD THE BASE BUDGET BE RAIDED TO PAY OFF THOSE LOANS?
No. The College did take on $50 million in debt in December, but the Trustees established a policy whereby any fluctuations in interest expense will be absorbed by the Capital Reserve Fund and not the base budget. Because of the College's demonstrated fiscal prudence, we were able to garner the highest bond rating given by the rating agencies. Nevertheless, the College will have to expend a significant amount of money in paying the interest and principal of the loans. This predictable, "fixed" cost increases the importance of handling our endowment wisely.
