Despite Borrowing Millions to Build, Colorado State U. Keeps Its Credit Rating Good

Colorado State University has borrowed hundreds of millions of dollars in recent years to finance new buildings on its Fort Collins and Pueblo campuses. But by pledging a wide range of revenue streams in an unusual debt configuration, the university has kept its credit rating good and its borrowing costs low, according to a behind-the-scenes look in the Fort Collins Coloradoan.

The university owes $436-million right now, an amount that is financing 19 construction projects in Fort Collins and two in Pueblo, the newspaper reports. Administrators expect their gamble to pay off as the new buildings—among them a rec center, a new residence hall, an academic building, and athletics practice facilities—attract students who might otherwise go elsewhere.

Tony Frank, the incoming president at Fort Collins, said his predecessors had done a good job of improving the university’s faculty, but then realized they needed to make the campus a better place to work. He also noted that many potential applicants have grown up enjoying their own bedrooms and attending modern high schools.

The new “System Enterprise Credit” borrowing model dates to 2006, administrators said, and involves pledging money from a number of very reliable income sources—including fees, room and board, and parking—even though not all of the revenue streams are being used for debt service at the same time. “The bond market views the CSU system as well-positioned to service its debt,” said Bob Osika, the university system’s treasurer.

The system will pay about $26-million on the borrowed money in the coming fiscal year, an amount equal to about 4 percent of its annual operating costs.

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