Potential Alternatives to Rate Increases Cut expenses to generate more free cash flow
Benchmarks with professional organizations, such as the National Association of College & University Food Services and the Association of College and University Housing Officers-International, show that CWU already is more efficient than other schools (see below for recent results). We could improve cash-flow by making significant cuts in programming and staffing, at least in the short run. In the long run, our students would likely vote with their feet and occupancy levels would decline to the point that even maintaining our current cash-flow would be unlikely. Public Private Partnership (P3) The next consideration could be a Public Private Partnership, commonly referred to as a P3. A P3 is a risk- sharing arrangement and can be an attractive option under certain circumstances, such as when the university cannot borrow the funds it needs, lacks operational expertise, or is growing so fast the institution cannot keep up with housing requirements. The typical P3 means that the public partner contributes something, usually land, and the private partner borrows, builds, and potentially operates the housing facility. At the end of the 30- to 60-year term, the asset is turned over to the public partner for a nominal fee (sometimes $1). CWU has explored P3 opportunities extensively in the past, up to the point of having one of the nation’s largest campus housing P3 firms prepare an evaluation of a possible P3 in 2016. Their conclusion was straightforward: a P3 is difficult to establish in a rural location, however this could be overcome if the university’s annual growth rate was projected to be at or above 4-5 percent. Our annual growth rate for the past three years has been 0.3 percent, not enough to be attractive to a well-qualified, experienced campus housing P3 firm. Nor do we lack the ability to borrow funds to build and operate our own facility. Additionally, there is a hurdle to overcome related to bond covenants. When we borrow money to build new facilities, we pledge future revenues (typically 30 years). But we also make certain other pledges. One of them is that we will not enter into any other agreements that compete with the Housing/Dining “System.” A P3 is not necessarily inherently direct competition, however one common requirement that the private partner is that there is a “fill clause,” meaning we agree to fill their facility with students first, then fill ours. This is an excellent way to minimize the occupancy risk of the private partner, but would create an explicit competitor to the university’s Housing/Dining “System,” in violation of our bond covenants, and an unreasonable transfer of risk to the university. Defer Asset Re-investment The final option would be to delay renovations and repairs. This is the most obvious and adopted alternative at all universities, as it is very difficult to set money aside for renovations when resources are constrained to begin with. Immediate needs are chosen in favor of long term needs, sometimes that is a fact of life. But at some point, long-term needs become immediate and end up costing significantly more in an emergency
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