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The Daily Tar Heel

Officials: UNC is $1.4 billion in debt

Matt Fajack, the vice chancellor for finance and administration, said the debt financed important campus buildings, such as residence halls and research facilities.

“It is appropriate debt,” Fajack said.

Smith said, despite the debt, UNC has an “Aaa” credit rating — the highest possible credit rating.

Smith said UNC’s debt, issued through the bond market, is similar to other Aaa rated universities, like the University of Virginia or the University of Michigan.

“The numbers are normal, and we’ve got the highest credit rating,” Smith said.

Moody’s, one of the institutions that assigns credit ratings, said in a statement the rating was a reflection of UNC’s multibillion-dollar financial resources, consistent operating performance and continued donor support, among other things.

Compared to other schools’ financial debt, UNC is right on track, Smith said. Moody’s website says University of Virginia has $1.5 billion in debt and University of Washington has $2.4 billion.

“We’re not an outlier,” Smith said. “It’s not unusual.”

Most of the current debt was issued between 2004 and 2012 to finance campus growth, Smith said.

“A lot of universities and a lot of colleges across the country were growing, and so it was commonplace (for) a lot of schools during that period of time, a lot of our peers during that period of time were growing, expanding, and all of us were issuing debt at the same time,” Smith said.

Smith associated the growth with more students going to college and the need to renew aging facilities.

“We are borrowing for our dormitories, parking decks, athletic facilities, research facilities,” Smith said. “We debt-financed the genetic medicine building on campus.”

Fajack said the University tries to match the expense of the debt with the people who are benefiting from it. People living in new residence halls, for example, pay for the debt service in their fee. He said UNC only uses debt for capital projects like new buildings and not for operating expenses.

“It properly matches the benefit of that building to the users of the building,” Fajack said.

The University is limited by state statute to borrowing for 30 years and at the end of that time, the amount must be paid back. However, as the campus continues to grow and facilities need renovations, Smith said the University expects to borrow more money to finance projects.

“We’re borrowing to support our mission for the University,” Smith said. “So I’d say given the reason why we are borrowing, what we’re financing, I think it’s a prudent use of debt to meet the University’s mission.”

university@dailytarheel.com

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