Vassar funds physical plant improvements in four primary ways: operating budget allocations, endowment income and special allocations, contributions, and proceeds from debt issuance.
Operating Budget Allocations
Operating budget allocations are made annually to the asset preservation reserve, which is managed by Finance and Administration in collaboration with the senior officers and subject to Board approval. Currently, $3.5 million is allocated to the reserve annually, and the goal is to build this annual allocation to $7 million by the 2024/25 fiscal year. This $7 million figure is derived from an assumed backlog of deferred maintenance of approximately $70 million and a 10-year replacement cycle. Asset preservation funding typically is allocated to a broad mix of small to mid-sized infrastructure and programmatic projects, with funding sometimes used for planning costs. Small reserve balances can be carried over to the subsequent year, particularly when a larger project is planned.
Some buildings, including Noyes residence hall and Alumnae House, have dedicated endowment funds that provide regular income for furnishings and capital improvements. Funds may be used annually or carried over to subsequent years. The College used to include building endowments in budgets for new construction projects, but that practice has not been followed in recent years. Additionally, the Board has at times in the past allocated funding from unrestricted quasi-endowment funds to plant improvements, essentially shifting resources from one capital asset to another. That practice has not been followed since about 2007.
Donor contributions are sought for construction and renovation projects, sometimes providing a donor with a naming opportunity. Contributions may complement funding from other sources, particularly debt proceeds. This hybrid approach typically is applied to large construction projects, such as the science initiative and the Center for Drama and Film, where significant funding is needed. The use of donor funds in place of bond proceeds is particularly important in spaces where sponsored research or other “private business use” will occur, as such spaces cannot be funded with tax-exempt debt.
The College has a history of issuing debt – typically tax-exempt debt – at intervals of three to seven years as a source of funding for its capital program. Such funding may be used for a small number of large projects (as with the 2001 and 2013 bond issues) or a large number of smaller projects (2007 and 2010). Bond issues can include incremental debt for new initiatives, refinancing of outstanding debt, or a combination. Vassar's four bond issues since 2001 have ranged from $50 million to $125 million in size, with the largest including a significant refinancing component. Bond issuance is a complicated and costly process and, in the case of tax-exempt issuance, carries with it certain reporting requirements and restrictions on how funding and financed facilities can be used. Still, it is a sensible component of the College's financial structure as it provides long-lived assets that can be both used and paid for by many generations of Vassar students.