FY 2008 was a transitional year for Bentley in terms of facilities and finances. The year ended with an operating surplus, but the results revealed sighs of the worldwide financial crisis that would follow in FY 2009. Those signs included the first decline in the market value of the endowment since FY 2003, and the failure of the auction-rate securities market early in calendar 2008, which resulted in much higher-than-anticipated interest costs.
In September 2007, the last building in the university’s $170 million construction and acquisition phase opened for use, completing a seven-year period in which Bentley achieved substantial gains in the quality and quantity of its finances and facilities. No major capital projects are planned, and no additional borrowing is anticipated for the next few years.
FY 2009 was shaping up to be a quiet year when the worldwide financial crisis hit. Bentley has solved short-term implications of the crisis – which included a temporary inability to access operating cash and five financial contracts with Lehman Brothers – and will continue to address long-term implications of a precipitous decline in the market value of the endowment. The university has maintained financial stability during this crisis, and is taking steps to ensure not only that stability continues into the future, but also that strategic progress is made.
Reviewing the Numbers
Bentley ended FY 2008 with another positive performance, reporting an operating surplus of $2 million – a number that continues to support the A3 “positive” bond rating. Operating highlights include a 5.7 percent ($7.9 million) increase in net tuition, room, board and fees over 2007. This total included student financial aid, which grew $2.9 million, or 6.4 percent, resulting from a higher quality student class and an increased cost of attendance. Tuition rates rose 5.5 percent for undergraduates and 4 percent for graduate students. Undergraduate enrollment was 4,009, compared with 4,046 in 2007; graduate registrations increased significantly, to 7,416 from 6,749.
Total operating expenses increased 6.6 percent ($10.3 million) to $164.5 million, up from $154.2 million in 2007, primarily from increased salaries, benefits, utilities, advertising, depreciation, and interest expenses. Depreciation expense increased by $1.3 million, and interest increased by $1.8 million as a result of the failure of the auction-rate bond market.
Looking Ahead
The endowment market value declined from $249.6 million to $225 million. Cash ended the year at $766,000, offset by a line of credit short-term loan of $7.1 million. As of the end of August, the short-term loan had been fully repaid. Net property, plant and equipment decreased by $129,000 on $19 million of capital purchases, offset by a slightly higher depreciation charge.
Because of the failure of the auction-rate securities market, Bentley refunded its MDFA 2003 Select Auction Variable Rate Securities (SAVRS) in the amount of $56.1 million, and issued $60 million private placement with GE Capital. This new issue provided a 25-year source of capital and fixed the debt at 4.18 percent, with a reset every three years. This reduced the university’s variable-debt exposure to just 30 percent of its total $152 million in outstanding debt, and marginally increased annual debt-service costs.
Although FY 2008 was another positive year, the university is mindful of the uncertainty that the future brings. Actions will be taken to assure that Bentley weathers the storm and remains financially strong. This is a time when our alumni and their generosity are needed more than ever, so that we can continue our positive trajectory and finance a new strategic plan.