Financial Overview: Welcome Home 2025 Plan
EMU’s Welcome Home 2025 Plan is an equity initiative that will transform on-campus student housing to ensure that EMU students have access to quality and affordable housing with modern technology that meets the demands of the 21st Century.
EMU, like many regional public universities, is a resource-constrained institution following decades of cuts to higher education funding from the State of Michigan. EMU today receives $42.7 million less in funding per year from the State (after adjusting for inflation) than it did in 2003, and the State has scaled back funding for capital outlay projects. EMU has therefore been forced to invest its limited capital spending in upgrades to academic facilities (e.g., Sill Hall and the Science Complex) and campus infrastructure (e.g., the new energy center, security improvements).
The result: EMU has not sufficiently invested in its student housing facilities. The average age of EMU student housing facilities is 57 years, and student housing facilities face $200+ million in deferred maintenance.
Investing in the Student Experience
To address these challenges, EMU and its partners will invest more than $200 million from 2022-2025 to construct new on-campus student housing, renovate existing housing, and demolish outdated housing facilities.
The Financial Plan
External financing and expertise is required to ensure the long-term success of this transformative initiative. EMU has partnered with Gilbane Development Company, which has coordinated financing for this project. Specifically:
- EMU has entered into a ground lease agreement with a 501(c)(3) tax-exempt entity for all student housing facilities.
- The 501(c)(3) entity has issued bonds that have been underwritten by Barclays Capital, thereby relieving EMU of the significant burden of carrying such debt.
- The 501(c)(3) organization is responsible for making debt service payments on those bonds, instead of having EMU pay the principal and interest for such debt.
- In return for coordinating the financing and overseeing the construction work, Gilbane and their development team will receive professional service fees for the $200+ million investment from 2022-2025. Gilbane will also receive a property management fee annually to provide maintenance, custodial, and other related services that will be subject to key performance indicators developed by EMU and Gilbane.
EMU carefully considered the advantages and disadvantages of self-funding the $200+ million needed to upgrade its student housing facilities, but rejected such an approach for several reasons:
- Self-financing this transformational student-focused initiative would require EMU to absorb a significant debt burden of more than $200 million that would negatively impact the University’s credit rating. Through this financing partnership, the 501(c)(3) entity will assume that debt burden.
- If EMU issued more than $200 million in bonds to cover the cost of this project, the annual principal and interest payments would exceed $10 million per year. The University would be forced to drastically cut spending on academics and other core functions in order to absorb such a significant cost.
The University also considered a slower approach that would construct/renovate one student housing facility every few years instead of consolidating construction/renovation in a shorter time frame of four years. That plan is not desirable for students or the campus community because:
- EMU’s housing facilities need substantial improvements and updates [PDF]. A phased approach would result in many student housing facilities not receiving any significant upgrades for more than a decade, which is detrimental to students who live in student housing.
- Construction costs are rising much faster than the rate of inflation. It is therefore financially advantageous to complete construction as quickly as possible to mitigate potential cost increases.