(09-06-2018 12:11 PM)the_blazerman Wrote: Interesting because wasn't Alabama trying to move all the undergrads to Tuscaloosa in these recent events since 2014?
(09-06-2018 12:11 PM)the_blazerman Wrote: Interesting because wasn't Alabama trying to move all the undergrads to Tuscaloosa in these recent events since 2014?
Sort of. The University of Alabama has a bond issue problem. They were borrowing so much money during their building spree that banks considered it a credit risk and were going to jack up the interest rates of the bonds for all of the projects they had in the pipeline. The banks pointed out that bama couldnt really afford all of that debt service even with their then record high enrollment. Alabama countered that they were going to keep growing so revenues would grow to keep up. The banks said that was a bad bet and so would be rising the interest rates to cover the risk.
Then the BoT said "How about if instead of basing these bonds off revenue from the Tuscaloosa campus, we instead base it off of revenue from the whole system, if you include all of that UAB money on our bottom line, the risk goes away and we can keep the same low interest rate on our bonds right?"
The banks were like "Sure, but you realize that by tying these bonds to that UAB money, if you cant pay for some reason, say, enrollment goes down when students quit being able to afford all of this record high tuition, then we get to go after that UAB money to cover the debt obligation on these bonds."
The BoT basically said "Thats ok, that money is better spent in Tuscaloosa anyway."
And now we have over two BILLION in bond debt tied to things like new greek housing, new football/basketball/baseball facility enhancements and new dorms in Tuscaloosa thats guaranteed with UAB income.
As long as enrollment keeps going up in Tuscaloosa, no problem. But if we are at the top of a higher ed bubble, like most every economists agrees we are, then when that bubble goes pop, a lot of money that currently is earmarked for UAB will instead be going to cover Tuscaloosa's debt and the undergrad side of UAB will be in a world of hurt.