Northwestern issued $200 million worth of bonds last week in order to finance two major construction initiatives.
The money will be used primarily to renovate the wings of NU’s Technological Institute, and will also fund the Southeast Campus Development Project, which will renovate the music school, the visitors center and the south campus parking garage.
“We have a lot of construction projects that are ongoing,” said Ingrid Stafford, the associate vice president of finance operations and NU treasurer. “Usually every three to four years, we borrow money to be able to complete the construction of these projects.”
Selling bonds is the standard way universities fund construction projects over time, Stafford said.
However, the type of bond NU decided to sell this year was not so standard. Although colleges typically sell bonds in the municipal market, meaning they usually sell tax-free bonds, comparable interest rates and looser government oversight led NU and several other colleges to sell corporate bonds, or taxable debt, Stafford said.
“If we have a chance to have comparable interest rates, but don’t have to report as much to the government, we’re going to take it,” Stafford said.
The bonds, plus interest, will be paid back over a period of 35 years.
Although the bonds will be less regulated by the Internal Revenue Service, the school still has a secure plan to repay the debt. Donors have pledged gifts to fund both the Southeast Campus Development Project and the engineering project in Tech. Stafford said she hopes Illinois’ government will also help fund the engineering project because it is interested in funding research and learning.
“We work very hard to make sure that they’re 100 percent funded from dedicated sources that are already at hand,” Stafford said. “We try to minimize the impact on tuition, and to be very careful about the amount of debt that the University has.”
NU’s careful financing has landed the University a AAA credit rating with the major crediting companies.
“We’re able to borrow at a lower interest rate cost because we have responsible plans,” Stafford said.
NU also has construction plans that will demand loans in the future such as renovation to residential halls and the Kellogg School of Management, Stafford said. Kellogg is currently raising the funds to pay back any future debt, and plans for residential renovations are forthcoming.
“When those plans are finalized, we’ll probably be doing a similar thing to borrow money,” Stafford said.
