USA construction projects $19 million in the
hole:
facility probably won't be open for any of upcoming season
By RONNI PATRIQUIN CLARK Staff Reporter, Mobile Register,
Aug. 27, 1998.
Section 1A, 4A
Ongoing construction projects at the University
of South Alabama,
including the 10,200-seat basketball arena, are more than $19
million in the red, according to top university officials.
Interim USA President Gordon Moulton told the
university trustees' Budget
and Finance Committee on Wednesday that the price-tag for the Mitchell
University Center arena has ballooned to $27.9 million.
The bottom line is that when all these construction
projects
are complete, we're going to be in the hole $19.25 million,''
Moulton
said. And that does not include the university library addition
that is so desperately needed.''
All of the current projects, including the arena,
were begun before the
university's founding president, Fred Whiddon, retired on July 29, Moulton
said. Whiddon could not be reached for comment Wednesday night.
During the afternoon committee meeting, Moulton
said the arena
that originally was supposed to be completed in time for the 1997
basketball season, still won't be ready for the 1998 season.
I want to warn people that we cannot even count
on playing any
basketball games in there this coming season,'' Moulton said.
It looks like it will be mid-spring or late spring before its finished.''
He said he will be talking with other Sun Belt
Conference school
presidents next week in an effort to avoid any conference sanctions
against USA's Jaguars, who again will be forced to play their home
games in the university's 3,136-seat gymnasium.
Sun Belt Conference Commissioner Craig Thompson
has said
he will do anything he can to help us,'' Moulton said.
In view of the university's looming financial
problems, the
committee members voted unanimously Wednesday afternoon to recommend
that the full board of trustees ask the USA Foundation next week
to release at least 1 percent of the net assets of the university's
$400-million endowment and also to reduce significantly the interest rates
the
foundation is charging on the more than $26.7 million it has loaned the
university.
The committee is recommending that in the future
the foundation
a private endowment set up to support the public university annually
give USA 5 percent of its net assets.
We have got to find a way to get that foundation
to do what the
overwhelming majority of university foundations around the country
do that is to at least put 5 percent back into the university every
year,'' said Mobile businessman Mayer Mitchell, a former trustees'
chairman pro tempore.
Whiddon, who headed the university for more than
34 years, now
manages the foundation.
This is the right thing for them to do,'' said
committee Chairman
Ken Kvalheim. Most of that money in that foundation was transferred
from this university. It's time to pay some of it back.''
Kvalheim, a USA graduate, described the 6.8 percent
to 9 percent
interest the foundation has been collecting on its loans to the
university as exorbitant in this day and time.''
He called the foundation action last week reducing
the higher
rates to 7.5 percent too little, too late.''
During last week's foundation board meeting,
Whiddon said
the foundation could not reduce its interest rates to below
7.5
percent and continue to get a good return on its investment.
On Wednesday, Mitchell strongly criticized the
foundation's
policies toward the university.
The current philosophy of that foundation is
that there is only one goal
growth of the foundation,'' Mitchell said. This institution can't wait
until the foundation is worth a billion dollars before we start getting some
assistance.''
Kvalheim said the university is only asking for
the right to
benefit fairly from its own endowment.
On the open market, we can get interest rates
in some cases
under 4 percent on tax-free bonds, and we have quotes from
investment
bankers to prove it,'' Kvalheim said.
The consent agreement with a majority of the
trustees that
the foundation signed calls for the foundation to bear interest
at rates prevailing in credit markets for comparable loan transactions.'
All we're asking them to do is what they promised to do five
years
ago in a court document.''
Moulton said that although bonds usually are
issued before
projects are begun, he has been told that the university can
arrange
an unusual $45 million tax-free bond issue to pay off the loans
from
the foundation and clear up the construction deficit.
The foundation's net assets, invested in timber
and securities,
amounted to $313 million as of last Sept. 30, according to
Wayne
Davis, the university's vice president for finance. The foundation's
gross worth was then around $400 million, he said.
The net assets have certainly grown since that
time, but I
don't know exactly what they are today,'' Davis said.
A spokesman for the foundation could not be reached
for comment Wednesday
night.
In other business during the meeting Wednesday,
the committee:
Approved a $411 million tentative university
budget for the
fiscal year beginning Oct. 1. Moulton, who was named president
on July 29, told committee members he expects to present them with
a revised budget in six months, after he and his staff have had an
opportunity to review the budgets for various departments. I
imagine the revised budget will just reallocate some funds from
one area to another,'' Moulton said.
Voted to recommend pay raises averaging 7.5 percent
for all
university faculty and staff, with an additional .5 percent available
to help equalize salaries where needed. The 7.5 percent for faculty
will be allocated on a merit basis, meaning that some might get a
little less, while others receive a bit more, according to Pat Covey,
interim vice president for academic affairs. All staff members,
on the other hand, will receive at least a 5 percent increase and
be eligible for another 2.5 percent distributed on the basis of
merit, she said.
Recommended not transferring this year's approximately
$5.7
million in disproportionate share Medicaid funds to the foundation.
In the past, well over $100 million in special Medicaid funds awarded
annually to university hospitals for indigent care was moved to
the foundation. Moulton said this year the money needs to go into
the hospitals' depreciation fund to help cover the cost of replacing
equipment as it wears out or becomes obsolete.
BILL STARLING Staff Photographer An
architect's model shows the
10,200-seat Mitchell University Center, which is under construction at the
University of South Alabama. The cost of the basketball arena is now estimated
at $27.9 million.
This article reproduced with special permission
from the Mobile Register.
