November 27, 2008
Albuquerque Journal North
College Seeking State Takeover
By Martin Salazar, Journal Staff WriterShort on cash and long on debt, the College of Santa Fe is trying to work out a deal for a possible state takeover.
The private independent college, known for its strong arts programs, is in serious discussions with New Mexico Highlands University in Las Vegas about a possible merger. And the University of New Mexico is also being mentioned as a possible suitor.
The college's board in January was considering filing for financial exigency — the equivalent of bankruptcy — after struggling with budget deficits for years. It announced in May that it was in exclusive talks with Laureate Education Inc. of Baltimore about a merger.
Those talks faltered when Laureate was unable to assume the debt required to retire the college's bonds and fund the school, college spokeswoman Marcia Sullivan said in a statement issued Wednesday afternoon. The college notified Gov. Bill Richardson over the weekend.
“I believe that the College of Santa Fe is an important part of the educational opportunities available to citizens of New Mexico and a valuable partner in the Santa Fe community,” the governor said in a statement. He directed Higher Education Secretary Reed Dasenbrock to explore ways to bring the college under the state's umbrella. Dasenbrock said a possibility would be to have one of the state's universities assume the college's operations and bring it into the state funding formula.
“Our hope is that we can come to an understanding with one of these potential partners soon,” Dasenbrock said. “We do think it is in the state's and city's interest that the College of Santa Fe continue to exist, and we think the state's capital should have a four-year institution in it.”
Sullivan said Highlands is very interested. She said UNM has asked for financial information and the college will be meeting with UNM officials next week.
“I think our reaction to Gov. Richardson, the department of (higher) education and both institutions is very positive and pleased that they've stepped forward to provide support,” Sullivan said.
She wouldn't comment on the college's debt, though UNM Regent President Jamie Koch confirmed that it's between $25 million and $33 million.
Asked whether UNM is interested in taking over the college, Koch said, “If that's something the governor wants to do, we'd work with the governor on it.”
Taking over debt
It's unclear how UNM would cover the college's debt. Last year, as it was issuing more than $100 million in institutional bonds for multiple building projects, it told bond rating agencies that it wasn't planning to take on additional debt for some time. UNM is also in the process of launching a new campus in Rio Rancho.
Highlands President James Fries, meanwhile, said its financial experts feel Highlands is in a position to take on the college's debt. Fries, a former College of Santa Fe president, said he thinks the two institutions would complement each other.
Any merger would require approval from multiple sources. On the college's side, it will be up to the board of trustees to decide whether to merge with Highlands, UNM or another state entity.
For Highlands or UNM, the first step would be approval by regents. The Higher Education Capital Projects Committee and the state Board of Finance would need to sign off on the acquisition of the college's campus.
Gaining state formula funding for the college would require approval from the Legislature and governor. It's unclear how much that would cost the state.
Founded in 1859 by the Lasallian Brothers, the College of Santa Fe is the oldest higher education institution in the state. It boasts a handsome 99-acre campus off St. Michael's Drive, just south of downtown Santa Fe. The college has four residence halls and two campus apartment complexes.
It has a fully equipped tennis center, several libraries and is home to the Garson Studios, which the college's Web site describes as the only professional soundstage on a college campus in the United States.
The college has fewer than 2,000 students.
Santa Fe presence
Highlands has had a Santa Fe presence for several years. It offers programs in education, business and social work at Santa Fe Community College.
Fries said the merger being discussed with the college “would preserve the artistic emphasis that the college has developed but also return our strong programs at Highlands in education, business, possibly social work and others to the College of Santa Fe campus.”
The College of Santa Fe name would continue, at least for a number of years, he said. Fries also said that Highlands would strive for as little disruption as possible to existing employees and programs being offered.
If the merger were to occur, Fries said, students at the college would likely see a dramatic decrease in their tuition bills because it would be part of the state system. The college now charges around $13,700 per semester for full-time undergraduate tuition.
“I think this is a move, that if successful, will significantly strengthen Highlands University overall and will open up some synergistic programmatic opportunities between the two campuses,” Fries said. “We have, for example, an outstanding media arts program in Las Vegas. The college on the other hand has a very fine ... film and video (program). Both programs are supportive of the film industry and would have a great deal of synergy. I think there are a number of very positive ways in which both institutions would see their program offerings strengthened.”
As part of a merger, Highlands would refinance the college's existing debt through a bond issue that would be repaid through tuition and fees at the college.
Affordable college
While Highlands' financial experts believe the university has enough bonding capacity to take on the college's debt, Fries said one of the unknowns is whether the increase in the money Highlands would get from the state by taking on the college's students, coupled with their tuition, would be enough to cover operating costs in Santa Fe.
Javier Gonzales, the outgoing chairman of the Highlands regents, said the entire board is in favor of pursuing the merger.
“I think that, if in the end, the College of Santa Fe and the state along with the administration, meaning Dr. Fries, determine that the financial health and the academic health of the main university is not jeopardized, that the board would want to move forward on this,” he said.
Gonzales, who lives in Santa Fe, said Highlands is in the best position to bring a four-year program to Santa Fe that's affordable.
“I just think there's tremendous cultural and programmatic and historic comparability between the two institutions,” Fries said. “It would be great if one northern New Mexico institution could step in and help the other.”
Journal staff writer Polly Summar contributed to this report.