[ Editor’s Note: The following comment appeared on AN‘s website in response to the editorial, “Cooper Union’s Tragic Compromises,” which cited a report in the New York Times, titled “How Errors in Investing Cost a College Its Legacy.” The selection ran as a letter to the editor that ran in print edition, AN08_06.05.2013. Opinions expressed in letters to the editor do not necessarily reflect the opinions or sentiments of the newspaper. AN welcomes reader letters, which could appear in our regional print editions. To share your opinion, please email firstname.lastname@example.org. ]
The article on Cooper Union, “How Errors in Investing Cost a College Its Legacy,” like many others in response to the college’s decision to charge tuition, discusses selected aspects of its financial history, leaves out crucial elements, and offers misleading and outright incorrect details.
Left out of the sweeping generalization—“decades of bad decisions”—is that the college experienced a remarkable period of recovery from near bankruptcy in 2001–02, when the annual operating deficit had been more than $10 million for more than a decade, the cash reserves were months from being depleted, and the endowment dipped below $100 million. By 2008, the operating budget returned a surplus, according to the Times article, the endowment had climbed to $710 million, and the $250 million, 12-year capital campaign launched in 2002 had produced more than $20 million per year.
Beyond the restructured Chrysler Building lease that will bring a total of $32.5 million in annual revenues plus an estimated $20 million in tax equivalency payments, there were a number of other successful real estate transactions during this period. It is often stated that the college borrowed $175 million to build a new academic building. This is a gross misrepresentation of a complex transaction that consolidated the institution’s existing debt, permitted the college to add $34 million to its investment portfolio, and, most importantly, enabled the development of 51 Astor Place (the old engineering building) that returned $100 million to the endowment in 2008. In addition, the latter, together with the 26 Astor Place transaction, assuming a reasonable investment return together with rents or tax equivalency payments on those properties, yield annual revenues that more than cover the debt service on the loan. These were, in fact, very sophisticated deals that brought a net positive financial return to the college while yielding a state of the art building without which the college could not have sustained a first rate engineering school. These transactions are clearly not a source of the college’s current financial woes.
Operating a free university, offering degrees in critical, technology intensive disciplines, has always been an enormously challenging proposition financially, and Cooper Union has been close to giving up this aspect of its mission many times before. While I do not know enough about the current financials to comment on the decision to charge tuition, I have to believe there are other choices that could be made.
George Campbell Jr., Ph.D.
The Cooper Union
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