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Valpo President/Board Decide to Sell Art Masterpieces to Pay for Dorm Renovation

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The Yak:

--- Quote from: peter_speckhard on February 24, 2023, 12:04:16 PM ---As for #4, I don't think the faculty are in a position to have a relevant opinion. Clearly it is sometimes expedient to sell something that is appreciating in order to buy something that will depreciate. People do it all the time depending on their circumstances. The physical dorn building will certainly depreciate (unless it were convertible to apartments down the road, in which case it will appreciate) but if it works to attract more freshmen to enroll or upperclassmen to stay in student housing, the depreciation will be offset by an income stream, much like machinery on a farm or factory depreciates but more than makes up for it.

--- End quote ---

Dorms are regularly regarded as income-generating centers and are those things that many fiscally-responsible universities will build (if needed) without securing the entirety of their funding beforehand, unlike, say, a new academic building which would need to be fully funded first.

peter_speckhard:

--- Quote from: The Yak on February 24, 2023, 01:24:35 PM ---
--- Quote from: peter_speckhard on February 24, 2023, 12:04:16 PM ---As for #4, I don't think the faculty are in a position to have a relevant opinion. Clearly it is sometimes expedient to sell something that is appreciating in order to buy something that will depreciate. People do it all the time depending on their circumstances. The physical dorn building will certainly depreciate (unless it were convertible to apartments down the road, in which case it will appreciate) but if it works to attract more freshmen to enroll or upperclassmen to stay in student housing, the depreciation will be offset by an income stream, much like machinery on a farm or factory depreciates but more than makes up for it.

--- End quote ---

Dorms are regularly regarded as income-generating centers and are those things that many fiscally-responsible universities will build (if needed) without securing the entirety of their funding beforehand, unlike, say, a new academic building which would need to be fully funded first.

--- End quote ---
True, but that is probably what adds to the urgency. It isn't that people can't live in the existing dorms, it is that they have too many better options for the same price. The anticipated income stream generated by increased enrollment might be different in the eyes of the bank and the eyes of the administration, and VU's credit might be extended beyond sustainability. From what I understand the goal ten or twenty years ago was to push into a different size category altogether and have around 6,000 undergrads, but the growth never materialized and the same shrinking of the available pool of students exacerbated by Covid has left a lot of places scrambling. I'm not for selling off the paintings, but I'm also not in on the discussion of options, and I suspect being president of a university (unless it is a state school or a massively endowed elite school) is in the top ten crummiest jobs to have right now, so I'm at least sympathetic to the possibility that this is a perfectly responsible decision.

Michael Slusser:

--- Quote from: The Yak on February 24, 2023, 01:24:35 PM ---
--- Quote from: peter_speckhard on February 24, 2023, 12:04:16 PM ---As for #4, I don't think the faculty are in a position to have a relevant opinion. Clearly it is sometimes expedient to sell something that is appreciating in order to buy something that will depreciate. People do it all the time depending on their circumstances. The physical dorn building will certainly depreciate (unless it were convertible to apartments down the road, in which case it will appreciate) but if it works to attract more freshmen to enroll or upperclassmen to stay in student housing, the depreciation will be offset by an income stream, much like machinery on a farm or factory depreciates but more than makes up for it.

--- End quote ---

Dorms are regularly regarded as income-generating centers and are those things that many fiscally-responsible universities will build (if needed) without securing the entirety of their funding beforehand, unlike, say, a new academic building which would need to be fully funded first.

--- End quote ---
That varies. When I was assistant to a college president in 1968, there was a firm policy to set room and board at a break-even rate. We also borrowed for building or renovation of academic buildings, with the payments to be provided out of tuition and philanthropy.

Peace,
Michael

Mbecker:

--- Quote from: peter_speckhard on February 24, 2023, 10:25:25 AM ---This has been a hot topic of conversation around Valpo. It seems to me universities in general are having a rough go of it financially and this is a sice that the situation at Valpo is more dire than people are being led to believe. While I oppose the sale in principle and have a hard time understanding it apart from the possibility that Valpo is closer to insolvent than anyone likes to think, I do think there are pros and cons to the idea that merit consideration.

1. Valpo's dorms are a joke for what they're charging. My daughter lived in one her freshman year and I considered it one of the biggest rip-offs we ever fell for. Small, old-school cinderblock room with a roommate, no A/C or climate control, communal bathroom down the hall, walk to the union for dining services, very 1950's. Except they wanted around $1500/month for the privilege of living there, and that was six years ago before rents skyrocketed. I lived in the dorms at Valpo my freshman year, but the dining hall was in the dorm at least, and it wasn't nearly as expensive. Comparable universities charging comparable amounts for housing have dorms that are drastically more attractive to incoming freshmen.

2. Art, as the currency du jour of the jet set, is at an all-time high and could be facing a bubble situation as governments crack down on using art for the purposes of money laundering. It is possible that someone has made the museum an outlandishly high offer that it would be bad stewardship to refuse, but that the president cannot disclose it yet. Let's face it, every piece of art has a price. If someone offered a billion dollars for an O'Keefe, I think it would be foolish to refuse. If they offered a thousand dollars, it would be ridiculous to sell it. But where is the line, and what is the offer on the table? It is untenable to say that art must never be sold.

3. It could simply be a matter of sounding an alarm. The board might have anticipated the outcry, and this gives them a chance to say, fine, we'll keep the art but the people making the outcry need to point out where we're going to get the money.

Selma, Portland, and Bronxville all went belly-up very suddenly and unexpectedly to everyone except those on the inside who knew the real situation. From what I understand, Valpo had an overall growth plan in the last twenty years or so to build up the campus and make improvement to accommodate a much larger student body, but that student body never materialized. And now every demographic trend is a stiff headwind. I don't know anyone involved personally, but I'm assuming the board is comprised of people who would not flippantly toss around the idea of liquidating the art museum to raise money for dorms if it weren't close to panic time. This could be an effort to liquidate assets responsibly before they get liquidated anyway.

That having been said, universities have to have a clear purpose apart from churching out employable people. Trade schools do that much less expensively. Art, Music, Literature, Philosophy (not in the trendy "re-imagined" sense, but in the classic sense) will almost never be profitable but will always be close to the core of any university's reason to exist. Even if there aren't many art majors and few of the students ever go to the museum, selling off the art collection would be symbolically brutal.

--- End quote ---

The Valpo faculty were told by an admissions officer last week that student housing is #5 on the list of priorities for "most residential students," when they are making the choice of which college/university to attend. She didn't share what the top four criteria are.  At Wednesday's special faculty senate meeting, the majority of speakers were students who are outraged by this decision and the way in which it has been made (and reinforced by subsequent behavior on the part of our president). One student: "Our school's motto is 'In Thy Light, We See Light," and yet this decision was made in dark secrecy." She and other students also stressed that they did not choose Valpo because of its dorms or dining halls (the central dining halls in the Harre Union are relatively new, ca. 2008). The dorms need some renovation, no one disputes that point (my son lived in Brandt his freshman year, in G-M for part of his sophomore year, until he moved off campus), but students are rightly worried that the renovations themselves may be used to jack up the cost of on-campus living. Many of our students, a lot, lot more than was the case even five years ago, are living off campus and are commuting. According to my son and his friends, people want to move off campus and get away from the meal plan(s) as quickly as possible. But I think that is likely the case at other universities as well. (Side note: Valpo has constructed many new residences on campus in just the past five years: Beacon Hall and the sorority houses down by the ARC. Beacon is not full because only the wealthiest of the wealthy [or those on a full-ride scholarship] can afford to live there. Greek housing is relatively full since it is also relatively cheaper.)

Valpo must move away from the false notion, "If we build it (or dramatically improve it), the freshmen will come."

What has hurt the institution over the past decade has been the amount of money that has been poured into athletics, the amount of building debt that was allowed to accrue, the amount of student discounts that are given out each year, the 17% reduction in faculty in the past two years (mostly in the arts and humanities), the elimination of the secondary ed program and the theater program, and then Covid-19 (which directly led to the faculty cuts and early retirements--a huge payout was just made a few weeks ago to cover those RIFs).

We are told, however, that the university is not facing imminent financial collapse. The projected enrollment for fall is up over the past two years. Our endowment is somewhere above $300 million, not a small chunk of change for a university of our size.

At the faculty senate, two proposals were made by economics experts. One proposal is to wait a year on the renovations and to draw out of the endowment the projected $10 million for those projects. The other proposal is to take out a $10 million loan from the endowment, so not a draw-down but a loan that would be paid back with interest (like one could do on a retirement account).

According to my colleagues who know these things, the paintings are not worth the amounts that have been quoted in the press. Those amounts were strictly for insurance purposes. To auction these paintings privately is very risky, precisely because the seller will not be paid what the paintings might sell for in a public auction. No musuem will purchase these paintings because their sale is unethical (and potentially illegal), according to standard museum ethical principles. The figure that is currently bandied about is about $10 million for the three pieces, which means that Valpo would net approximately $7.5 million (or less, if the auction house takes a larger cut than 25%, which is a possibility). So that leaves $2.5 million still to cover construction costs for the renovations--and what building project comes in under budget these days? And Valpo's bond rating could take a significant hit next year, if the ratings agencies think this cannibalization of core assets runs contrary to the stated mission of the university--precisely a key point I make in the faculty letter.

Bottom line: the sale is unethical, it may be illegal, it is contrary to our stated mission as a liberal arts institution. The announced sale has already hurt our public image and our future endowment (one donor, a former Valpo law professor, who had written into his will a gift of $2 million for Valpo, has now taken that bequest out of his will; he was present at the faculty meeting to let everyone know what he has done and that there are others like him who are doing the same; he has also filed a suit with the Indiana Attorney General's office, which is investigating the matter of the potential violation of the Sloan Trust). The decision to sell the paintings, if carried out, will ultimately hurt our brand equity. In my letter I tried to show why faculty should be opposed to the decision, grounding my rationale in Valpo's historic Lutheran heritage and mission.

There is fundamental distrust right now between at least 1/3 of the faculty and the president/board. Some of my colleagues--who have talked to others who did not sign the letter--have told me that these non-signers had their own reasons for not signing the letter, but they also distrust the president. So the percentage of distrust in the faculty may be higher than what the 76 current faculty signatures signify.

Matt Becker

Mbecker:

--- Quote from: Dave Likeness on February 24, 2023, 11:04:38 AM ---The harsh reality is that Valparaiso University is facing a financial  crisis.
 For the past 20 years the Presidents of private colleges and universities
have by necessity needed to become fund raisers.  What type of endowment
fund does Valpo have?  Has there been any financial fundraising done in
recent years?

The current situation at Valpo calls for genuine leadership and financial
honesty by the Valpo President  and Board of Regents.  Selling off your assets
from your art museum is a desperate measure but it is better than declaring
bankruptcy.  Hopefully, Valpo can remain viable  as a Lutheran university for
the future.

--- End quote ---

Dave,
The endowment is somewhere above $300 million. I don't have the exact figure in front of me.

The faculty has been told that the university is not facing a financial crisis. (And yet why all the secrecy about the proposed sale? The sale would have taken place in secret, too, had not the matter been accidentally discovered by a senior faculty member who works in the Brauer.)

Enrollment for fall is up at this point over where we were at this time last year and the year before. We who help to define what Valpo is need to set our sights on an enrollment in the 2500-3000 student range, not the 6000-range that the previous president envisioned (hence the new campus residence halls that were built during his tenure, which have put us into significant debt; Beacon Hall was opened just a few years ago).

We don't need to sell these paintings, which will net us perhaps $7.5 million (perhaps less, given the potential illegality connected with their sale; and what buyer wants to purchase these paintings if that person will be told to return them once the litigation is over?)

We could do a targeted campaign to improve residental living spaces, or we could take out a loan from the endowment to pay for the renovations, or we could wait a year to draw from the endowment, and do it that way.

M. Becker

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