Sweet Briar’s $29 Million Deferred Farce

When the board announced the closure of Sweet Briar College on March 3rd, there were lots of big numbers being thrown around.  On a conference call with the alumnae, Jimmy Jones was asked how much money was needed to keep the college open.  His answer was $250 million – all to the endowment.  He then said there was $29 million in deferred maintenance that was needed and there was $25 million in bonds.  So far, the $25 million in bonds has been the only accurate statement1.

What was very interesting on the call with the alumnae, was that at one point, the $250 million turned into $10 – $15 million over 10 years to build up the endowment.  Those are two drastically different situations.  As has been well established since then, Dan Gottlieb showed Sweet Briar did not need a $250 endowment.  Curiously, I have not heard them bantering that number around much lately2.

Then there was the $25 million needed to pay off the bonds.  Well… as I previously covered in great detail, they only need to be paid off if they go into default. Otherwise, the bonds don’t fully mature until 2036, and it costs about $2 million a year to service that debt.

That brings us to the $29 million3 of deferred maintenance that needs to be done.  Nobody was able to argue with that number since there was no further information given…until now.  They have repeatedly implied that the report was completed recently.  It was not4.  In the summer of 2012, the the college contracted with The Stone House Group to prepare a facilities condition assessment and campus utility plan.  The study was funded by a $135,000 grant from  the DuPont Foundation. The report was completed in March of 2013.

Much like the other enormous numbers thrown out to scare people into this being a problem too big to solve, a few things were omitted5. The report said the college needed $28.9 million – over 10 years. What is really interesting though is the breakdown of that $28.9 million.  It included deferred maintenance ($5.6 million), cyclical maintenance ($13.5 million), modernization ($9.4 million) and the rest ($300,000) was for miscellaneous items.

Unfortunately, I still haven’t been able to wrangle an actual copy of the report, but I have enough details to make things interesting.  Now, I know this is going to come as a terribly shocking surprise to many people, but some of that work has already been done. That means the number is actually less than what they have been repeatedly throwing at every media outlet that will regurgitate their spin.  About $1 million of work identified as being of critical importance has been addressed, and it is possible other things have been done as well in the two years since the report was delivered.  It’s hard to know without any transparency.

One of the biggest issues on campus is the old steam heat system.  The report recommended replacing the boiler with a biomass boiler, as Sweet Briar could grow its own biomass, and it would also reduce emissions by 85% since the current system burns fuel oil.  The energy savings alone has the biomass boiler paying for itself in six years.  In fact, the energy cost saving estimates indicate annual savings of $638,000, and some of the bigger ticket items have a six year payback. That’s a handsome chunk of change in savings.

So they say there is $29 million of deferred maintenance that has to be done. It appears those words do not mean what they think they mean. What is deferred maintenance you ask?

Deferred maintenance is the practice of postponing maintenance activities such as repairs on both real property (i.e. infrastructure) and personal property (i.e. machinery) in order to save costs, meet budget funding levels, or realign available budget monies.

A plain English example: the carpet is not in great condition and needs to be replaced and money is tight, but the carpet can make it another year or two before it absolutely has to be replaced.

The report said there was only $5.6 million of actual deferred maintenance, and we know they already did $1 million of that, which knocks it down to $4.6 million…over 10 years.

Cyclical maintenance is defined as work that is required to be carried out on an agreed cycle and can be done annually, or every number of years. For example, painting can be done every 5 or 6 years, or longer in some cases.  If cyclical maintenance does not get done, it eventually becomes deferred maintenance.

Modernization is just what it sounds like updating older equipment to new more efficient equipment.  In theory the savings from update will recover the cost or excess cost over cheaper and less efficient equipment over time.  Modernization is always nice, but not critical in nature.

In short, just like the $250 million number, this is just another number of convenience6 spouted out by the administration with no substantiating facts. And once again, the evidence that has been made available paints a different picture.7

Prediction: I fully expect in the coming days that these 23 people who are collectively smarter and know more than anyone else on the planet will soon proclaim that the world is flat.