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University Development and Campus Services publishes first ever budget and expenditure report

Significant losses incurred in 2020–2021 as a result of the pandemic
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RANIA PHILLIPS/THE VARSITY
RANIA PHILLIPS/THE VARSITY

University Development and Campus Services (UDCS) ancillary operation was established in June 2020 and became a bridge between U of T St. George Campus Ancillary Services and development prescribed by the tri-campus mandate of the Real Estate Department and Four Corners Strategy.

They recently published their first ever budget and expenditure report which includes the performance of various ancillary services they provide.

The COVID-19 pandemic brought campus life to a standstill. This was reflected in the report, which showed significant losses. These losses are expected to continue into the next fiscal year and the UDCS expects to eventually start recovering in 2023 and onward as students and faculty gradually return to campus. 

The UDCS’s pilot year

The UDCS was created to support the development of innovation spaces, housing for faculty and students, and commercial retail spaces required for students to thrive outside the classroom while generating a source of revenue for the university.

The UDCS’s domain includes faculty housing, student family housing, student residence outside of the college system, academic leasing, commercial leasing, residential and retail dining, and much more. It also aims to support the university’s flagship Four Corners Strategy, which uses the St. George campus’ assets in real estate to provide resources for academic offerings and earn revenue outside of enrolment. The goal of the Four Corners Strategy is to generate $50 million in operating funding over the next 15 years by developing about four million square feet of space dedicated to housing, campus services, innovation, etc.

When asked whether the UDCS could be considered a success in its first year, Anne Macdonald, assistant vice-president of Ancillary Services, wrote in an email to The Varsity, “Yes, absolutely. We set ambitious goals for the first year of the UDCS and I am delighted that they have all been met, despite the operational and financial challenges that the global pandemic presented.”

Creating a consolidated annual report, establishing the UDCS as an administrative body to combine operations and development teams, and advancing the work of the Four Corners Strategy were among these ambitious goals.

Hit hard by the pandemic 

The newly established UDCS operation achieved many of its goals in its first year, but was not exempt from the negative impacts of the pandemic and lockdowns. The UDCS incurred significant losses, reporting a 53 per cent decline in revenue in the 2020–2021 academic year compared to the previous year. It is projected that revenue will rebound slightly in 2021–2022 but still remain 42 per cent short of the previous year’s budget. The UDCS forecasts that revenues will fully recover in the 2022–2023 academic year, but expects a cumulative operating loss of $32 million due to the pandemic.

“All the University’s ancillary operations, including UDCS, were significantly impacted by the low numbers of people who were on campus over the past year due to the global pandemic,” wrote Macdonald.

The UDCS’s expenses increased in order to find new ways to support students and faculty and to implement new health and safety requirements as it navigated these unprecedented times. 

While the UDCS carried out cost mitigation attempts by cancelling repair and renovation projects, postponing investments in administrative and service improvements, and even going as far as temporary layoffs, it did not make much of a difference since fixed costs account for about 60 per cent of the total operating costs.

The pandemic affected life inside and outside the campus, and while all areas of operations of the UDCS bore the brunt of the public health guidelines, some suffered more than others.

“The global pandemic has had a negative impact on all UDCS operations, but the severity has varied from area-to-area. For example, Family Housing has been less affected than Food Services, ” wrote Macdonald.

Before the pandemic UDCS operations saw modest growth and this trend is expected to continue after the pandemic as a result of new projects developed under the Four Corners Strategy, she explained.

Revenues in Food & Beverage and Campus Events were down by 86 per cent in 2020–2021 and campus retail food service operations failed to achieve even five per cent of their previously budgeted income because of public health guidelines and closures during lockdowns. While it is estimated that the revenue for Food & Beverage and Campus Events will more than double in the next year, they would still be generating less than 30 percent of revenue levels that were achieved before the pandemic.

Looking ahead to 2021–2022

The 2021–2022 budget has been designed based on assumptions about how the pandemic will evolve. In particular, it assumes that vaccine rollouts will continue as planned, which would lead to a gradual return to normal operations over the planning period.

The UDCS’s main priority for the next year is financial and service recovery, and it will continue to support students and faculty as the U of T community gradually returns to campus this fall. During pre-pandemic times, ancillary units were expected to operate without subsidies from the university’s operating budget, but under these unusual and extenuating circumstances, the UDCS will turn to the university for financial support.

Madonald wrote that UDCS will prioritize investments that generate revenue and spend less on non-essential projects.

While modest losses are expected in 2021–2022, the UDCS projects a steady rate of financial recovery in the 2022–2023 academic year and beyond. It expects its revenue to grow by over 50 per cent in five years, with a net profit of $16.8 million in 2026. Strong cash flow from operations and the $51 million in capital debt that was paid off will allow the UDCS to contribute significantly to deficit reduction over the planning period. 

This revenue growth is expected as a result of the rollout of the Four Corners projects which will create new commercial retail and student housing spaces. Some of these Four Corners projects included in the Four Corners Strategy are the Spadina Sussex Student Residence, which is expected to open its doors in 2024, and the Schwartz-Reisman Innovation Campus, which is expected to be completed by December 2022.

Joshua Mitchell, U of T’s director, real estate, wrote in an email to The Varsity, “Overall, the 4 Corners strategy is expected to provide almost 4,000 units of University Housing, to develop more than one million square feet of innovation and retail spaces, and to generate alternative sources of revenue to support our academic mission.”