U of T forecasts $391 million in annual net income, according to new CFO report

Debt expected to rise above $1 billion due to capital projects

U of T forecasts $391 million in annual net income, according to new CFO report

U of T is expected to report a net income of $391 million for the fiscal year ending April 30, 2018. This income shows a decrease of $26 million from last year’s $417 million, according to a report from Chief Financial Officer Sheila Brown to the Governing Council’s Business Board. Net assets are projected to be approximately $5.8 billion, increasing by $313 million from 2017.

The report details revenue, expenses, net income, and net assets for the university. It was prepared using a combination of forecasting methods, including projection to April 30 using current year-to-date figures and estimation based on trend analysis of prior years.

Key assumptions made in projecting these numbers are a 5.4 per cent investment return, an $84 million endowment payout, $100 million in divisional savings, and $444 million in capital asset additions, or property.

Revenue and deficits

Based on the report, U of T’s revenue should be $3.36 billion this year, principally generated through a projected $1.57 billion in student fees. Expenses are forecast to come in at $2.97 billion, meaning U of T is making and spending a little more than it did last year, based on totals of $3.22 billion in revenue and $2.8 billion in expenses from 2017.

A deficit of $95 million is projected for 2018. Last year’s report projected a deficit of $93.9 million, but the actual deficit came in at $59 million.

The deficit is comprised of a $43 million operating fund surplus, with $35 million more in tuition fee revenue earned than in budgeted due to international undergraduate enrolment, $5 million in utilities savings, $4 million in additional government grants, and $3 million in investment returns.

An unrestricted deficit of $138 million in other funds is attributed to the internal debt component of the university’s debt program. These will be repaid over a longer period of time.

Debt projections

U of T places its outstanding debt at $1 billion, whereas its debt policy limit, or the amount it can borrow, stands at $1.5 billion. The Business Board approved $1.26 billion in allocations, which includes borrowing and contingency for donations, targets, and pledges, leaving $241 million remaining for future allocation throughout the next four months.

The annual debt strategy review states that debt “primarily supports capital projects and pensions.” Over the next five years, the review estimates that approximately $560 million of additional debt will be needed for capital projects that have not yet been approved by the Business Board but that are under consideration.

Some of these capital projects include a second instructional centre at UTSC, renovations to some Arts & Science buildings at UTSG, and the Landmark project to renovate front campus.

“In assessing the appropriateness of a debt strategy, we considered the need for debt together with the need to remain affordable, and for debt servicing to continue to be financially responsible,” reads the Debt Strategy Review.

By April 30, 2023, the debt policy limit is projected to increase to $1.85 billion to accommodate these new capital projects. Moody’s Investors Service gave U of T an Aa2 credit rating, which is unchanged from recent years, meaning U of T fulfils its financial commitments and repays the money it borrows in an effective and timely manner.

U of T’s debt remains at $1 billion

Numbers reported to Business Board show $11 million increase since July 2015

U of T’s debt remains at $1 billion

The University of Toronto’s debt sits at a cool $1 billion dollars as of August 31, 2016, according to the status report on debt presented to the Business Board on September 22.

The $1 billion debt has remained a constant figure in the university’s financial record since June 2014, when the outstanding debt initially surpassed $1 billion. The total amount of debt has fluctuated only marginally since then, sitting at $1.012 billion in July 2015. The actual outstanding debt for the University now totals $1.023 billion, an $11 million increase from the 2015 figures.

The university allocates a debt limit of 5 per cent of the University’s annual expenditures. The status report shows that the actual outstanding debt currently sits at 3.5 per cent of expenditures, well within the Business Board’s $1.5 billion limitation for the 2016–2017 year.

Of that 3.5 per cent, 1.2 per cent comes from internal loans. This includes the university’s pension debt — $121 million — which totals 0.4 per cent of the internal loans. The remaining 2.3 per cent stems from external debts, due to institutions outside of the university.

Of the university’s external debt, $715.8 million is tied up in external debentures, which are unsecured loans without the backing of assets. This is a slight decrease from the $717.6 million outlined in the February 2016 status report on debt.

The report notes that net allocations, borrowing that is approved by the Business Board, stood at $1.2 billion up to August 31, with $220.1 million available for future allocation. This amount includes an allocation change of $1.9 million.

U of T financial reports show decrease in endowments, income

University’s credit rating stronger than Province of Ontario’s

U of T financial reports show decrease in endowments, income

The university’s financial report and report on debt were presented to Governing Council’s Business Board last month, revealing decreased income and endowment figures.

Net income for the university fell 26.8 per cent to $210.6 million and the university reported almost $2.10 billion in endowments, which is a 2.1 per cent decrease from the over $2.14 billion that was reported last year. U of T’s pension plan’s deficit increased from $617.4 million in 2015 to $797.4 million in 2016. The university attributes this increase to investment returns on pension plan assets falling below expectations.

Demand from students to study at U of T remains high, with student enrollment increasing by 3.51 percent from 2015 to 77,130 students in 2016. Revenues from student fees reached $1.292 billion.

With the rise in student population, the limits of the university’s infrastructure have been pushed. Repairs and maintenance costs went up 16.3 per cent while materials and supplies costs increased by 6.9 per cent from a year ago.

The university also spent a substantial amount on its investment in the MaRS Phase 2 project. In September 2015, the University of Toronto partnered up with the Government of Ontario, MaRS and Johnson & Johnson, a consumer packaged goods manufacturer, to establish JLAB, a business incubator that is designed to accommodate up to 50 bio-medical start-ups. The 40,000 square foot facility will occupy a floor of the MaRS West Tower and will compose 75% of laboratories and digital equipment while the rest of the space will be dedicated to collaborative work spaces.

The report paints an optimistic view of the financial outlook in 2017 stating that: “Revenues are expected to increase modestly over the next several years as a result of continuing growth at the Scarborough and Mississauga campuses, graduate expansion, and increasing international enrolment.”

According to the status report on debt, U of T’s total debt for the year came to $992.5 million. Much of it consisted of future obligations to bond payers. As well, the university’s credit ratings are Aa2 (Moody’s), AA+ (Standard & Poor’s) and AA (Dominion Bond Services), which ranks the university as a strong investment-grade credit; two credit rating agencies rated the university above the province of Ontario.

U of T forecasts net income of $138.2 million, $70.1 million deficit

Actual outstanding debt $1 billion, credit rating remains investment grade

U of T forecasts net income of $138.2 million, $70.1 million deficit

The University of Toronto’s financial results and report on debt reveal that U of T forecasts a net income of $138.2 million and projects net assets to be at $4.35 billion. The forecasted net income is a decrease from last year’s net income of $287.8 million, while the value of last year’s net assets was $4.38 billion.

The forecast, which includes the university’s projected revenue, expenses, net income, and changes in net assets for the fiscal year ending on April 30, 2016, was presented on January 25 to the Governing Council Business Board. The board oversees the university’s financial transactions.

These forecasts are based on a projected investment return of 0.4 per cent, an endowment payout of $78.3 million, an increase of $96.4 million in reserves, and an increase of $23.7 million for future divisional capital expenditures. The university acknowledges that it only has interim information regarding divisionally controlled revenue and expenses, and that investment returns are uncertain.

The university also projects a deficit of $70.1 million, which is a drop from the $89.5 million deficit run during the 2015 fiscal year. This has been partially attributed to the $22.9 million increase in tuition fee revenue, correlated with an increase in enrolment from international undergraduate students, who currently pay over five times more than domestic students.

The debt report

This report is comprised of three parts: the annual debt strategy review, the status report on debt, and the credit report by Moody’s Investors Service.

According to the status report on debt, the university allocated $1.218 billion in borrowing room, with $150 million allocated to pensions and $200 million allocated to other internal debt. The university also allocated $868 million for external components, which includes $15 million for the expansion and renovation of the Recreation Wing at UTSC.

The University of Toronto’s actual outstanding debt as of October 2015 totals $999.9 million. Of that figure, $123.3 million is pension debt while $158.9 million comes from other internal debt.

External debt makes up $717.6 million, the bulk of which is in the form of unsecured bonds issued by the university.

The university’s credit rating is unchanged from last year; Moody’s gave the university an Aa2 rating, while Standard & Poor’s and Dominion Bond Service assigned a rating of AA. These ratings are considered investment grade.

Currently, U of T’s debt policy limit is set at a debt burden ratio of five per cent. This means that the debt and interest should not exceed five per cent of total expenditures. This is only the university’s acceptable limit; the recommended upper limit is set at seven per cent.

According to the annual debt strategy review, the university’s debt policy limit was set to $1.401 billion as of April 2015, and the university expects this to increase by an additional $350 million to $1.75 billion by April 2021.

The review also states that a one per cent increase in the interest rate would result in the reduction of the limit between $53 million and $88 million, while a two per cent increase would see a reduction between $95 million and $158 million.