Government shutdown has slowed next steps
In a critical development, Wabash recently reached the “funds obligated” stage of the USDA Rural Development’s loan process. This milestone marks an important moment for the financial future of the College and represents one of the critical steps of the construction of the Community Center.
“We’ve achieved what’s called ‘funds obligation,’” said Wabash President Scott Feller. “It doesn’t necessarily mean the money’s in our bank account, but it does mean that they intend to loan us what we asked for.”
But why is this milestone important? The loan that the College has applied for gives Wabash the opportunity to both finance the construction of the Community Center and refinance existing debt – all the way up to the tune of just shy of $68.5 million. This means that the College will only have to make payments on one loan at one rate moving forward.
The loan through USDA Rural Development offers adjustable rates, but with a ceiling rate of 4.875% set by the USDA, which Wabash Chief Financial Officer Kendra Cooks reacted to with hesitation.
“[The rate] is not optimal from our perspective,” said Cooks. “It’s the highest it has been during the two years we’ve been following this program…But we know the worst case.”
However, while the interest rate on the loan is higher than expected – given the extremely low rates preceding this year – the loan is still a financial win for the College.
“We have two different loan debt series,” said Cooks. “Both of these series have really, really low [rates]. However our period was short – 15 to 20 years – so we were paying a lot of principal back.”
The new loan extends the time horizon of the debt the college owes to 40 years – lowering principal payments and making debt obligations more manageable as the college looks to double its existing $32 million in debt with the construction of the Community Center.
“We weren’t necessarily looking at how we minimize the cost of debt,” said Cooks. “We were looking at strategies to help reduce our annual debt service.”
However, with the new loan being adjustable rate, the College will still need to figure out the financial modeling for the College moving forward.
“Having this worked out with the USDA allows us to figure out what the worst case scenario is,” said Feller. “The bottom line is, we think that even under this rate we can manage this debt without adding to the burden of the operating budget.”
With the loan process nearly complete and the funds guaranteed, the next step in the process is rebidding the Community Center project – something that can’t happen until the government shutdown ends.
“We need our friends at the USDA to come back to work so we can start the rebidding process,” said Cooks. “We have to conform to federal procurement guidelines, so the rebidding process is important.”
While the rebidding process is still snagged, however, the College will continue with vital “stage two” infrastructure projects – a continuation from the past year.
“We will have projects focused on cooling, parking and utilities,” said Feller. “There are a lot of moving pieces, and they are going to continue.”
So with demolition and shoring nearing completion and the rebidding process still paused, students can still expect noise as the College continues to upgrade critical infrastructure in preparation for the construction of the new heart of campus.
“When I think about it, I’m really proud of [this project],” said Cooks. “It’s sometimes a blessing when something that may seem like an obstacle allows you to get more of the pieces together.”