U of T’s outstanding debt has surpassed $1 billion.
According to U of T’s Status Report on Debt, presented at the Business Board meeting on June 12, the university’s actual outstanding debt rose from $1 billion last year to $1.0129 billion this year.
This number includes all long-term external and internal borrowed funds, excluding letters and lines of credit, and all short-term and medium-term internal financing.
U of T’s external debt totals $719.4 million, with internal debt standing at $293.5 million.
According to U of T’s debt strategy, approved in November 2012, the amount of debt repayments plus annual interest cannot exceed five per cent of the university’s total annual expenditure. On this basis, the university can take on nearly $1.4 billion in debt.
“The university is comfortable that the amount of debt permitted under the Debt Strategy is affordable and that the amounts outstanding will be repaid on the various maturity dates,” said Michael Kurts, U of T’s assistant-vice president, strategic communications and marketing.
“The vast majority of the debt incurred has been used for new and renovated buildings to accommodate the growth in students and research activities over a period of more than a decade. The province of Ontario has also provided significant capital funding in support of infrastructure expansion, as have donors,” said Kurts.
Moody’s Investor’s Service, one of three credit rating agencies assessing the university, gave U of T an Aa2 Stable rating with Standard and Poor’s and Dominion Bond Rating Service assigning a rating of AA Stable. A rating of AAA represents the highest credit quality.
“These are strong investment grade ratings, the third highest ratings assigned by these agencies, and for two of these agencies, represent ratings that are one level higher than the ratings assigned by those agencies to the province of Ontario,” said Kurts.
The University of British Columbia (UBC) has the highest credit ratings of any university in the country and obtained credit ratings of Aa1 and AA+ from Moody’s in January 2013 and Standard & Poor’s in April 2013 respectively.
UBC reported $374.4 million in debt at the end of last year. UBC’s board sets the debt limit at 5.5 per cent of total expenditure, with an actual debt burden of 1.42 per cent projected for the year 2013–2014.
Scott Prudham, president of the University of Toronto Faculty Association (UTFA), expressed concern about the debt level, with particular regard to the university’s management of the faculty pension plan. The Business Board report revealed $130.8 million in internal debt for pensions. “The debt associated with the pension plan is a concern to all of us. And the management decisions pertaining to investment of the pension money has been and remains a matter of great concern to UTFA,” said Prudham in an email to The Varsity.
“It is important to remember that the pension money belongs to the members of the plan. Those funds are deferred compensation. And the pension is a promise made by the University of Toronto to its employees, one that the representatives of those employees, including UTFA, fought hard to secure. Management of the plan needs to reflect those basic facts,” said Prudham.
The University of Toronto Asset Management Corporation (UTAM), a wholly owned subsidiary of the university that also manages the university endowment, manages the university’s pension plan.
In 2013, UTAM’s assets were $6.6 billion, of which the U of T Pension Plan made up $3.2 billion.
Since UTAM’s establishment in May 2000, the UTFA has sparred with UTAM over the management of the pension funds. UTFA highlights allegedly high management costs, low return on investments, and the pooling of endowment funds with pension funds as points of concern.
U of T’s total outstanding debt per capita was approximately $16,830.80 based on full-time undergraduate enrolment of 59,415 in 2013–2014. UBC’s total outstanding debt per capita in the same year was $8,132.10 based on a full-time undergraduate enrollment of 46,040.