Trustees' committee to discuss possible yearly hikes in room & board

A committee of Ohio University's Board of Trustees meets in Lancaster today to discuss the future of OU's student room-and-board programs.

Topics include a proposal to hike residence-hall rents by more than 8 percent a year for at least the next five years, to help pay for needed dorm and dining-hall renovations.

The Audit, Finance, Facilities and Investment Committee is scheduled to discuss both long-term planning for OU's Auxiliary Services, and the state of the university's "financial ratios."

These are a set of budgetary benchmarks defined in state law, and are meant to provide a measure of the institution's economic health.

According to a handout for the meeting, the trustees will review long-range plans for the housing/dining program, including major residence hall renovations, minor maintenance and repair, and projected fee hikes.
They will also consider what impact raising room-and-board costs will have on OU's position in the market for new students, as compared to its peer institutions.

A table projecting revenue, operating and renovation expenses, and fund balances for the next decade predicts that Auxiliaries will see total operating expenses rise from their current level of about $58.6 million to just over $80 million by fiscal year 2015-16.

Proposed rate increases would more than cover that additional cost, however, and the extra money would be used to fund a capital renovation plan rather than paying for it with borrowed money.

Auxiliaries will also draw down carry-over funds to help pay for the renovations, the table indicates. If all goes as planned, this means the fund balance will drop from its FY 06-07 level of around $6.9 million to less than $1.7 million by the end of FY 10-11, before rising to more than $23 million by the end of FY 15-16.

Expenditures for the proposed in-house renovation plan add up to more than $154 million.

A 10-year operating plan for housing/dining services at OU, included with the trustees' material, is meant partly to address what the handout calls the "vast deferred maintenance needs" of the Athens campus.

The plan includes a major capital investment component, to help deal with the impact of what the handout calls "the minimal investment in renovations and maintenance in past years."

Some money for capital investment will come from belt-tightening, the handout indicates, with average budget cuts of about 5.7 percent planned across the board in Auxiliaries departments.

The handout also mentions in passing that the university is open to possible "public-private partnership opportunities" to address its deferred maintenance needs.

The plan calls for the budget line for minor maintenance and repairs, around $4.8 million in 2006-07, to rise steadily to $10 million by 2015-16.

The plan assumes a steady rise in room-and-board rates. Room rate hikes are projected to be more than 8.5 percent each year till 2012, then slow somewhat after that. The plan calls for board rates to rise by 3.1 percent next year, 3.5 percent each year through 2012-13, then 4 percent each year though 2015-16.

The size of the overall increase in combined room-and-board rates would be somewhere between the sizes of the individual hikes for room and for board.

Thus, for example, a student with a single, non-air-conditioned dorm room and a 20-meal plan would see an overall room-and-board increase of about 6.4 percent from 2006-07 and 2007-08, based on the projected numbers.
Tables comparing OU to six other Ohio public universities suggest that while OU's proposed room rate hikes would lead the pack, its board rate increases would be near the bottom.

Predicted room rate increases at other Ohio schools range from 4.5 percent at Kent State to 5.5 percent at Bowling Green. Only Miami University, with a projected increase of slightly over 8 percent a year, comes close to OU.
Predicted board rate increases for the same six institutions, however, range from 4 percent at Toledo to a little over 6 percent at Miami.

ANOTHER SECTION OF the meeting material deals with the "financial ratios" defined in Senate Bill 6, a 1997 state law.
The trustees heard a presentation on these ratios in September from Bill Decatur, OU's vice president for finance and administration.

The ratios compare various budgetary numbers, and are meant to give a broad overview of a public college's financial soundness -- though interpreting their significance can be tricky.
Generally speaking, the material for the trustees meeting suggests that OU officials are aware of the fact that their credit has been rather stretched in recent years.

Based on something called the "viability ratio," for example, the handout states, "our ability to cover our long-term debt is at a five-year low."

The viability ratio essentially measures how readily an institution could come up with the money to settle its outstanding debt if it suddenly came due.

Another number, the "return on net assets" ratio, measures any change in the university's net financial assets (plus or minus) against what those assets were in the previous year.

OU shows a small increase of about 5 percent in this category. The handout warns, however, that this increase for FY 2006 "would have been nonexistent except for capital revenues."

The average among a dozen peer institutions - both in-state and out-of-state - used for comparisons was closer to 7 percent.

The "facility maintenance ratio" looks at what a university spends on maintenance as a portion of its entire revenue stream. OU was near the top of the 13-school comparison group for this ratio, but has shown a declining trend since FY 2002.

"A declining trend would suggest that we are not keeping up with our maintenance needs," the handout warns.
In the area of revenue, the handout material also suggests a need to keep a close eye on OU's "net tuition dependency ratio," This number measures how big a portion of an institution's overall revenue comes from tuition and fees.
OU ranks second from the top in the comparison peer group, behind only Miami of Ohio.

"Clearly (tuition and fees) is a revenue stream which needs conservative budgeting or a backstop of reserve funds to deal with unanticipated decreases in enrollment," the handout states.