A total of $30 million in funding that was put aside in 2007 will be reallocated to programs that could help the University raise money to pay off its debts.
The $30 million was accrued from the sale of system revenue bonds in 2007, and the University has decided to invest it in as-yet undecided programs to ensure the University can repay everyone who purchased the bonds, said Andrew Cullen, associate vice president for institutional planning.
The $30 million would have paid for the purchase and installation of a $6 million cogeneration unit, which would produce steam and electricity for the University; a $10 million parking structure for the University and Health Sciences Center; and $14 million worth of renovations at University Stadium, Cullen said.
The Board of Regents approved the reallocation plan, which executive vice president David Harris announced at its meeting on Tuesday.
Regent Mel Eaves said the University decided to reallocate funds because the administration was unsure if the projects would be able to pay back the bond money in time.
The total debt on the system revenue bonds includes principle plus interest, Cullen said. Payments on the debt begin in 2011, and the total must be repaid by 2036. The University must pay back about $2 million each year on the bond debt.
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"It all comes back to what President Schmidly said," Eaves said. "The University is being very, very cautious as to what money is spent right now.. The University is really concerned about what the debts of this economic problem is going to turn out to be, and so everybody is beginning to become very conservative on spending funds."
The University hasn't decided what to do with the $30 million.
Harris, Cullen and the athletics department will submit recommendations to the regents on how to spend the money.
"They will be reviewing which projects the money should be diverted to, and what they've told us is the potential allocation beneficiaries could be Health Sciences Center, athletics or the student recreation facility," Eaves said.
The beneficiary will be chosen based on its ability to generate profit and its need for funding, Eaves said.
"Although the need is certainly an important part of it, the bonds have to be paid, so it has to be reallocated in such a way that it will have to be an income-producing project," he said.
Eaves said he expects to have the recommendations in by the next Board of Regents' Finance and Facilities meeting Dec. 4.
Athletics director Paul Krebs said the administration has not looked into reallocating the $60 million of funding for renovations to The Pit.
Cullen said The Pit is likely to generate funds for the University once it is renovated.
"We are real confident that the state community and Albuquerque community will support the renovations of that arena through attendance to be able to pay the debt service, so we feel more confident in being able to pay the debt service on The Pit on those bonds than we do right now with football," Cullen said. "Some of it is because they almost compete for some people's dollars. There is probably a lot of families because of the times that we live in that are saying, 'You know I can afford to go to a women's basketball game, or I can afford to go to a men's football, but not both.'"
Eaves agreed that the original projects, including the stadium renovations, might not be economically prudent at this time.
"The recent financial conditions that we are undergoing . have raised concerns that the projects it was originally allocated for might not be able to generate the debt service necessary to pay off the bonds," Eaves said. "With regards to the University Stadium, there was also a concern that the market for the fans might not be able to support the renovations for both the stadium and The Pit facilities at the same time."
The stadium's second phase is on hold, and there is no scheduled date for the second phase of improvements to begin, Krebs said.
Although the funds for future renovations have not been secured, Cullen said the money will most likely come from the Legislature or more bonds.
