ND will not halt current construction projects
Joseph McMahon | Thursday, November 20, 2008
Despite concerns over the recent economic slowdown, Notre Dame will be able to complete its current construction projects and the University will continue to function normally, although future building plans may be delayed, Executive Vice President John Affleck-Graves said.
“All of the construction projects we have on campus at the moment are fully funded, and we are not going to stop construction on them because we have the funding,” Affleck-Graves said. “We have a number of projects that we are still seeking funding on, and those projects will be delayed until we can get the funding.”
Affleck-Graves credited the University’s conservative economic approach for preparing Notre Dame for a recession.
“But in general we always run the University in a very fiscally conservative way,” he said. “We always balance our budget … so we’re in a much better position to face an economic downturn than almost any other school in the country.”
Unlike many other universities that are now facing difficulties completing their construction projects, Affleck-Graves said Notre Dame only begins construction when it has received all of the money necessary for the project.
“Our policy is that we cannot begin construction of buildings until we have 100 percent of the money pledged from donors. We have to have 75 percent cash in hand, and the remaining 25 percent needs to be in within five years,” he said.
While current construction projects, such as Ryan Hall and the addition to the Law School, will be completed, Affleck-Graves said plans for a new student center, two new dorms and a social science building will probably have to be put on hold.
“There’s a lot of other building that we want to do on campus but we won’t do them until we get the funding for them,” he said. “So, in a sense, we are slowing down just to the extent that we don’t get people to provide the funding.”
All four of the buildings are part of the administration’s plans for the development of the campus, and Affleck-Graves said they had already planned out where the new structures would be placed.
“We have place markers on campus for where new buildings can go. We haven’t decided what those buildings will be,” he said. “For instance, the social science building is slated to go just south of the Hesburgh Center for International Studies. We know that the two new dorms are slated to go on old Juniper, just east of Pasquerilla East and Knott. We know the student activity center is slated to go just east of the Stepan Center.”
Affleck-Graves said it would probably be a few years before the school can raise enough funds from its donors to begin those projects.
“I think everybody knows that funding is going to be much tighter in the next few years. The economy is not in good shape; the financial markets are still in some disarray,” he said. “We’re reliant on the donors to provide the funding.”
However, Affleck-Graves said the absence of these buildings would not have a significant impact on life at the University.
“At the moment we are operating the University without those buildings and we will continue to do so,” he said.
Affleck-Graves said the University would have to be more conservative in purchasing, which would include cuts in travel expenses and computer and equipment upgrades.
“I think parts of our operations will have to look at cost savings across the University, maybe in some of our purchasing,” he said. “At the moment we’re pretty well positioned to handle most other things.”
Moreover, Affleck-Graves said the endowment would remain strong throughout the recession. He said the endowment would probably shrink over the next couple of years because it is heavily invested in market-related securities, but it is important to remember the endowment had grown rapidly over the past four years.
“The endowment will always fluctuate because it is invested in a lot of market-related securities, and so certainly the endowment will go down,” he said. “But it has also gone up dramatically in the last four years, so it fluctuates with the market.”
However, Affleck-Graves said the University would continue to extract the same amount of money from the endowment each year as they had previously.
“We don’t like to pay out a fixed percentage of the endowment each year,” he said. “We like to pay out a specific dollar amount so we’ll always have the same amount of cash coming out of the endowment.”
Affleck-Graves credited his predecessors for establishing the University’s conservative policies that will help steer the school through the recession.
“I think the people who led the University’s financial system before me – Fr. Ned Joyce and Fr. Tim Scully – did such a wonderful job of creating a financial discipline in the University that has always allowed us to be cautious of overspending in good times and that is providing us now with a great reserve so we don’t have to impact our operations too much,” he said.