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$10 Million Gamble
Buying a new campus sends Burlington College deep into debt. Can it survive?
Classes begin today at Burlington College, a liberal arts college in Vermont that enrolls fewer than 200 students. But you wouldn’t know it from the college’s website. A notice on the website’s main page declares, in capital letters: “It’s not too late to apply for fall 2014.” The college urgently needs more students, who enter at $23,500 a head. With financial holes that have prompted no-confidence votes in the president and endangered the institution’s accreditation, dwindling enrollment is the last thing Burlington can afford.
The college is 15 or so students away from its fall 2014 enrollment goal of 180 students. That shortfall -- the equivalent of a much larger enrollment deficit for a larger institution -- translates into roughly $400,000 that the college will have to strip from its budget, Burlington College President Christine Plunkett said. “We’re hoping not to cut any positions, but we’ll absolutely be looking at benefits,” she said. “That’s a hard pill for people to swallow.”
Burlington has occupied a financially precarious position since it was founded in 1972 in its first president’s living room. But its story is more than the well-trodden tale of the tuition-dependent liberal arts college hurt by declining growth. Burlington College’s finances took a turn for the worse in 2010, when Jane Sanders, the college’s former president and the wife of U.S. Sen. Bernie Sanders, bought a $10 million lakefront property from the local Roman Catholic diocese. (The college itself is secular, politically progressive and offers such majors as woodworking, film production and media activism.)
Matters have worsened under Plunkett’s leadership, former and current staff members at the college say. In June, the college’s accrediting agency put Burlington College on probation. The institution has two years to improve its financial position, or else it will lose its accreditation.
A $10 Million Gamble
Thirty-two acres on Lake Champlain make up the college’s new campus. The main building is brick, Victorian, erected in the 1880s to serve as an orphanage.
A vision of radically increased enrollment spurred the college’s purchase. A larger campus would allow the college to double or triple its enrollment – to as many as 750 students, college officials thought.
Burlington College took on $10 million of debt to pay for the new campus. The institution owes $6.5 million in tax-free bonds issued by the Vermont Educational and Health Buildings Finance Agency and purchased by People’s United Bank. The diocese also loaned the college roughly $3.5 million. And the college received a $500,000 loan from Tony Pomerleau, a local philanthropist and real estate developer who’s an old friend of Bernie Sanders, The Burlington Free Press reported.
The diocese, cash-strained by priest sex-abuse lawsuits, was eager to part with the property.
The college closed the deal with the diocese on New Year’s Eve, as 2010 gave way to a new decade. “We all looked at each other and said … 'It’s going to be a rough ride for a few years while we grow enrollment,'” Plunkett said. “Our enrollment has not grown quite as quickly as we would have hoped.”
Sanders resigned in October 2011. Plunkett, who succeeded her as president, had served as Sanders’ chief financial officer since 2007.
Yves Bradley, the current chairman of the college’s board of trustees, served as the listing agent on the sale. He did not join the board until January 2013, Plunkett said.
The enrollment projections on which the purchase hinged proved illusory. In a July 7 statement addressing the college’s probationary accreditation status, Coralee Holm, the college’s director of community and alumni relations, wrote that the college served 290 students. Data from the National Center for Education Statistics, however, show that total enrollment for fall 2013 stood at 243 students: 220 undergraduates and 23 graduate students. Twenty-seven percent of the undergraduates were part-time. And enrollment for fall 2014 shows the student body shrinking, not expanding.
The lush lakeside campus promised to offer more space for students. But half of the stately main building is uninhabitable. The college needs $2 million for repairs. The institution can currently accommodate “maybe 300” students, Plunkett said.
The diocese says the college has defaulted on its loan. It is charging the college a penalty fee, which by June 2013 had reached $150,000, according to Seven Days, a Burlington-based independent weekly.
The college disputes that it’s in default, saying that People’s United Bank has not authorized the college to make payments to the diocese. “We have agreed to respectfully disagree on the definition of default,” Plunkett said.
She said the college maintains a “cordial and successful” relationship with the diocese. Officials at the diocese declined to comment. “If I’d known you were calling about Burlington College, I wouldn’t have taken your call,” said Monsignor John J. McDermott, the diocese's chancellor and apostolic administrator.
In addition to unpaid debts and accumulating interest, the $10 million campus brought about new costs, including a quarter of a million a year in property taxes, Plunkett said. The tax exemption in Vermont applies only to properties used for an institution's educational mission, and so it doesn't apply to the large share of the property the college is not currently using.
The college now plans to sell half the campus to Eric Farrell, a local real estate developer. Farrell did not return multiple calls seeking comment about the status of the agreement and when the sale might take place.
“In hindsight one could say, wow, should we have done this?” Plunkett said. “Was this more than we could chew? The reality is we have it now, it’s a stunning property, and there is no doubt that with success in enrollment it’s a transformational opportunity.”
Mark Renkert, a Burlington-based economic development adviser, had a more sober take. “Have you heard of Sisyphus?” he said. “Plunkett’s going to roll that building up the hill, because Sanders killed the organization’s credibility. Ultimately it looks like it’s going to be bankruptcy."
Sanders could not be reached, but told VTDigger that she left the college with a plan in place to pay for the buildings by adding 12 students a year. Plunkett's administration failed to carry out the plan, she said.
Searching for Stability
College officials told People’s United Bank that they would launch a capital campaign to repay the more than $6.5 million they owed, VTDigger reported. The college has abandoned that plan. About a year ago the board of trustees decided against embarking on anything other than a “silent” phase of a capital campaign, Plunkett said.
“Right now the college is not in a position to be out promoting itself for major gifts,” she said. “Most donors aren’t interested in giving gifts to pay the electric bills or make ends meet.”
The college has raised roughly half a million while she’s been president, Plunkett said.
Burlington College doesn’t have enough money to successfully ask for money – a seemingly irresolvable quandary. So college officials have turned their attention instead to boosting enrollment. Yet a catch-22 exists here as well. Increasing enrollment is key to the institution’s survival. But many students are loath to attend a college that they fear may fold before they graduate.
“The media coverage obviously has not helped,” Plunkett said.
In an attempt to bolster enrollment, the college has hired two enrollment consultants and is rebuilding the admissions office. The college had no admissions director for nearly a year, a staff member said.
Past enrollment strategies at the college have faltered. In 2012, Plunkett and Stephen St. Onge, who resigned this month from his post as dean of the college and vice president for academic and student affairs, took a trip to China. They met with several high schools in hopes of recruiting Chinese nationals. The effort resulted in one student.
“For that one student, the tuition did more than twice cover what we spent – maybe four times,” Plunkett said.
For some disaffected staff members, the failed China strategy is emblematic of an administration whose strategies are erratic and futile, a staff member said. On July 21, 16 of 28 voters on the Faculty / Staff Council expressed no confidence in Plunkett’s leadership. About a week later, the student union issued its own no-confidence vote.
Multiple sources at the college said Plunkett has just two allies left: Holm, the director of community and alumni relations, and Bradley, the chair of the board of trustees, which continues to back the president despite the calls for her resignation.
VTDigger reported that at least 25 staff members have left in the last three years. Plunkett said she didn’t know how many had left, but said “it’s probably a significant number.” Some of the departures were typical to any new administration, which wants to bring on its own team, she said. And other departures, such as the resignation of the dean of the college, were for personal reasons unrelated to the college’s financial position.
“The turnover isn’t because I’m out there firing people left and right,” she said.
In addition to internal upheavals, Plunkett has had to contend with external pressure, including a steady stream of media reports by the local press. VTDigger reported last week that the college had used $50,000 from a restricted scholarship fund to pay for operating costs. Plunkett said the terms of the donation did not declare the money an endowment, which means the college would be able to tap only the interest, not the principal sum. Further, the college used funds to pay for student scholarships, as the donor wanted, Plunkett said. She said the college plans to replenish the funds and treat the money as a formal endowment.
“We have since begun to repay that fund, and we carry it formally and publicly on the balance sheet as a liability we still owe,” she said. “We didn’t snitch money secretly from a fund and pay the electric bills with it.”
Other colleges in the area are looking on Burlington College with concern, said David Provo, senior vice president and chief financial officer of Champlain College, which neighbors Burlington College.
Champlain College, Middlebury, and St. Michael’s, a Catholic college in the area, have formed a consortium to pool resources, Provo said. Burlington College has not reached out to Champlain for a shared-services arrangement, he said.
“Traditional higher education is fairly complex, and the required infrastructure and services you do need to provide, the economies of scale have to be found with a larger student population,” Provo said.
Burlington College, with fewer than 200 students, has no economies of scale to speak of.
“All of us have the benefit of being in the Burlington market,” Provo said. “Burlington College has a niche to offer its students that we think is needed. I think all the institutions would like to see Burlington College thrive.”
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