How much money did the state give Rutgers to take on UMDNJ debt ?
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As others have said, a lot and zero. RU absorbed approximately $503mm in debt, which increased our debt load by 50% to $1.5B. You may recall that debt burden increase also caused our credit rating to drop, which increased the cost of borrowing to the school. Rutgers also paid all of the merger costs which are supposed to be $76mm. The State contributed $0 toward the costs of the merger, and did nothing to reduce UMDNJ's debt burden. Instead they thanked us by (1) commencing an unsuccessful bid to give away Rutgers' Camden campus to Rowan; followed by (2) an unsuccessful bid to completely take over Rutgers' governance.
The deal was a net loss for Rutgers, and it wasn't even close. The only reason the school agreed was because that was the only way we were going to get a medical school. So we absorbed the debt burden. The State of New Jersey is a complete cesspool, and is terrible for Rutgers. This is why I am ranting and raving about Lesniak in every other thread.
This post was edited on 3/20 2:11 PM by Ole Cabbagehead
The deal was a net loss for Rutgers, and it wasn't even close. The only reason the school agreed was because that was the only way we were going to get a medical school. So we absorbed the debt burden. The State of New Jersey is a complete cesspool, and is terrible for Rutgers. This is why I am ranting and raving about Lesniak in every other thread.
This post was edited on 3/20 2:11 PM by Ole Cabbagehead
Cabbage,
So according to your nembers,we can expect to receive either a check for $579 million for taking on UMDNJ OR we can tell the state to start building our brand new $579 million basketball/hockey palace (with practice facilities for both sports) next week.
So according to your nembers,we can expect to receive either a check for $579 million for taking on UMDNJ OR we can tell the state to start building our brand new $579 million basketball/hockey palace (with practice facilities for both sports) next week.
Even I wouldn't go that far. We did get the infrastructure (I believe) and the goodwill (lol) of UMDNJ. The medical school as a going concern certainly had some value. It was simply exceeded by the debt that was taken on.
To be fair while taking on all the debt is difficult, the assets gained (Land and buildings in Newark, Piscataway, New Brunswick, Stratford) are likely worth far more than the $.5B debt Rutgers was saddled with.
Ole, your posts are accurate.....RU underwrote its acquisition of UMDNJ without state support....one thing that must be clarified that in addition to the Infrastructure and the Goodwill, RU also got a hold of UMDNJ's reserve which about $500 million dollars. However, this is funny money because RU needs to pay out a bunch of expenses and liabilities that UMDNJ's income is not going to be able to cover during the front end years....I guarantee you that the net amount of this reserves dwindles to $200 Mil in a couple of years.
Also RU's debt earning ratio and other ratios are back to near normal......And soon will be normal.
Also RU's debt earning ratio and other ratios are back to near normal......And soon will be normal.
Trenton folks would make you believe so, but this is far from the truth for UMDNJ warrants a huge budget on maintenance and operations (proportionally higher than RU), and jut like elsewhere there is an arm race for better facilities....and a lot of this asset based goes into equipment and machines that have a much higher depreciation rate.
Please do not quote me on this but the Medical school deal in the 50s was some sort of swap of debt and liabilities between the state and RU. And from what I gather RU was more than happy to get rid of the med school. And in fact, the only reason for a med school (as they all lose money) besides academics, is its research arm....you cannot have a robust research organization without a medical school.
Please show me. After splitting up assets with Rowan, etc. THe number placed on the assets that I have seen is $50mill.
Lets not forget the $75 million in expenses for the merger, most of which Rutgers paid for. What exactly did the state do in all this?
My point in all this is that Barchi who approved and welcomed this merger put Rutgers in debt for over half a billion dollars, but then tells us that even though we accepted membership to a Conference with a charter for excellence in both academics and athletics, he is unwilling and unable to lead any kind of support for any athletic facilities for at least 6 years.
I have read lots of stuff about how great it was for Rutgers to have a medical school. I have yet to read one person say this was a good financial deal for Rutgers. Again, Scarlet, if you have evidence showing what a good deal it was for RUtgers, I would love to see it.
The real estate in Stratford went to Rowan University. It amounts to about 4 buildings in an office park housing the School of Osteopathic Medicine.
If you google "Rutgers UMDNJ Merger debt" you will see a lot of articles citing the figures. The second one is linked below.
New Brunswick Today
Barchi who approved and welcomed this merger
We can criticize Barchi for many things - but as I recall the sequence of events, the merger was a 'done deal' and Barchi had minimal ability to reshape the central points - Barchi was brought in to pilot the merger process - he did not get a lot of say in the design (since it was being hashed out by the political big wigs)
I grant you he may not have been in from the beginning, but no University takes on a half billion in debt without the President approving it, that is my point. Never read one article saying he was concerned with the half billion dollar debt, but plenty of how we can't spend any money on athletic facilities for six years and WE MUST get rid of a subsidy in the mid twenty millions. In terms of an overall budget, the subsidy is miniscule compared to a half billion in debt.
You cannot relieve him of any responsibility for the half billion in debt. You can, however, hold him responsible for not providing leadership, commitment, or a plan for helping RU to be competitive in the BIG. A league he was president when we accepted a bid over 2 years ago. A league that has in its charter that teams will strive for excellence in both academics and athletics.
Sure, academics, and a medical school are important, but so are athletics too. THis is not an either or choice, All BIG schools do both, we can too.
Academics and the medical are much, much more important than athletics. There is value in having a successful athletics program, but it is not the main function of an university. In order to be an elite research institution you need to have a medical school. It was unfortunate that the state of NJ stuck RU with the large debt and the integration costs, but it was not a deal that Barachi or anyone could decline.
It is unfair to compare RU who has been in the B1G for less than a year and is getting no where near a full share of conference income and schools to schools who have been getting full share for years. Have alumni who donate more to both academics and athletics and play in front of 100,000+ every home game.
The merger was a done deal before Barchi took over. In fact, President McCormick was paid a huge bonus for having it happen on his watch.
I really don't remember Rutgers getting anything to take over UMDNJ's debt. The idea was the deal would still be a net benefit to Rutgers, which desperately wanted a medical school in and near New Brunswick. Beside, Rutgers didn't have to take over University Hospital in Newark, a real money pit.
I really don't remember Rutgers getting anything to take over UMDNJ's debt. The idea was the deal would still be a net benefit to Rutgers, which desperately wanted a medical school in and near New Brunswick. Beside, Rutgers didn't have to take over University Hospital in Newark, a real money pit.
And who knows what it is going to sot to maintain those facilities with all manner of union give-aways and deferred maintenance and sweetheart deals and so on. Rutgers might be best off closing them all down and selling the land.. but would never get away with doing that. Heck.. that is probably why they wanted Rutgers to take on those "assets".. so politicians wouldn't be shutting them down to stop losing money. Now it will be whipping boy Rutgers facing those decisions.
If the assets are on the books as only $50M, then I stand corrected. But if Rutgers was to sell the real estate just in Newark, do you seriously think it would only be worth that?
Look at it this way:
(Just focusing on New Brunswick/Piscataway, and forget about what happened in the past)
If Rutgers wanted to build a new Med school from scratch, how much would it cost?
I submit that overall the UMDNJ deal was a "good buy" for Rutgers.
I think that the BOG & BOT would agree.
Seriously? You're smarter than that.
The bond rating was dropped because of the short-term pressure of assuming the UMDNJ debt plus the risk from the complexities of merging UMDNJ into Rutgers.
Those are comparatively short term issues that have nothing to do with whether acquiring the medical school was a good mover for Rutgers in the long term.
No need for insults, and I am aware of the risk and the complexity of the merger as reasons as I read the Moodys report, but they also say "the negative outlook reflects the vast amount of work still required to fully integrate the UMDNJ units, the costs
associated with that integration, and potential pressure on government appropriations due to the state's fiscal
imbalance."
As you can see from above, costs were a factor in the rating as well. since we really don't know all the costs are. That is really my point. I never said the lowering the bond rating proves it was a bad deal, but obviously they had a lot of questions as well.
If you think its a good deal, and it may be, show me the financials that say its a good deal. Unless we have those, how do we know it was a good deal? For something that put us a half billion further in debt, there should be full disclosure, where is it?
Barchi, or someone like him, should have been brought on as some sort of merger consultant, with the real job of school President to someone who is actually looking after the whole.
I don't see how you can judge this by the financials. The question is how much does it benefit Rutgers to have a medical school. How can that be reduced to numbers? Of course it's important to ask what the full price was, but that's not going to tell us whether the deal is worthwhile.
Was it a net loss? I mean you answered the question already - we wanted a med school and got one for cheaper than it would take to build it on our own, and all at once. The fact that we took the deal tells me that we probably new it was a good deal.
Maybe in another state, we would have gotten a better deal. But financially Im going to guess that the cost of building a med school on RUs campus over the next two decades would have far exceeded half a billion, and since it would have been done in increments, alot of the benefits of having a med school wouldnt have accrued right away.
Hoboken - we certainly could have opened A medical school for less than half a billion. Thats not in doubt. But could we have opened one with anything near the assets that UMDNJ offered us - including of course a fully built out campus in two major cities and faculty (which we would have had to overpay to lure from UMDNJ) had we founded our own school? Maybe in a few decades. Of course the cost of debt might also go up in those decades. And that is of course assuming the state allowed us to build a med school on our campus, immediately adjacent to their existing med school, which they would not have.
This post was edited on 3/24 11:05 AM by derleider
Whatever the faults of the deal, and the State definitely did not step up for RU the way they did for Rowan and Norcross anybody suggesting Barchi, or anyone at Rutgers, should have not done the deal, or could have gotten much more out of Trenton, are just missing the point.
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