Debt mountain: Concordia’s mounting money troubles

Infographic by Carleen Loney @shloneys

An in-depth analysis of Concordia University’s financial situation

Concordia University has a big issue brewing. This isn’t about exams or assignments, but about money—lots of it. The university’s financial statement for 2022-2023, along with their budget planning for 2023-2024, shows that it is deep in debt, which could cause serious challenges going forward.

Here is the deal: Concordia owes a ton of money, with payments due from now until 2059. This debt comes from government loans and a financial instrument called Senior Unsecured Debentures, which are big loans taken by the company or organization without offering any of their assets. 

Think of Senior Unsecured Debentures as an I-owe-you or a big promise to pay back money. The “unsecured” part means that if Concordia cannot pay, they have not promised to give anything specific in return, such as a building or equipment. This means Concordia is juggling a lot of financial promises for a long time.

To address concerns about the university’s ability to manage this debt, Concordia’s CFO, Denis Cossette, explains that debt is normal for educational institutions. For comparison, Concordia has a debt of $274 million against annual revenues of about $613 million. McGill University, with total liabilities of $4.211 billion, reports annual revenues of approximately $1.661 billion. 

This demonstrates a substantial financial structure to manage their liabilities. The University of Toronto, in contrast, has $895 million in debt against a much higher annual revenue of $4.3 billion. These numbers highlight that while debt is common in universities, the amount of debt relative to their income varies.

Adding to this, the university ended the 2022-2023 fiscal year with a $38.8 M deficit and has a net long-term debt of $274 M. They are also managing a hefty $162 M in lines of credit carrying past operating losses, emphasizing the gravity of their financial situation.

While Concordia offers a lively hub for its students, it also promises to take care of its staff, even after they retire, by providing plans for pensions and retirement benefits. However, these promises are like a big jar that Concordia must keep filling with money, which can be tough when there are many other expenses.

Balancing debt and keeping the university running smoothly is a tricky act, but Concordia has a plan for managing and paying for its big-ticket items such as buildings and tech equipment. For this situation, they have set up something called “sinking funds.” This is a fancy way of saying that the university is attempting to put money aside regularly to make sure they can manage these major expenses.

For the 2023-2024 fiscal year, Concordia is facing an uphill battle with projected total revenues of $613 M against expenses of $653.7 M. This means they are expecting yet again to spend more than they earn, furthering their financial strains.

Another significant concern is the potential drop in student numbers in light of the changes to tuition costs, as international and out-of-province student fees are increasing significantly. This could reduce the university’s revenue, adding to their financial woes. 

Cossette mentioned the creation of the Canada Scholar Awards Out-of-Province Awards, aiming to maintain accessibility for out-of-province students in response to these tuition hikes.

Due to these various issues, the university faces various kinds of financial risks. There’s credit risk, the danger that someone Concordia lent money to might not pay it back; market risk, when changes in interest rates or currency values can disturb Concordia’s finances; and liquidity risk, the risk that Concordia might not have enough cash when it needs it.

Investments and endowments are another significant aspect of Concordia’s money management. Endowments are large monetary gifts given to the university by individuals, but often have rules about how they should be used. Managing this money wisely is crucial for maintaining Concordia’s overall financial health. 

Concordia also makes money through other services such as retail stores, student residences and parking. But even with those extra sources of income, the big debt problem is not going away anytime soon.

To tackle these issues, Concordia has implemented measures such as freezing the salaries of top executives, continuing a hiring freeze for non-academic staff, and using reserve funds to reduce the current-year deficit. They also plan to strategically reduce expenses, such as payments to the pension deficit and managing non-critical activities, to create structural financial capacity. 

This could involve a more judicious approach to discretionary spending, optimizing administrative processes to reduce overheads, and postponing non-essential infrastructure upgrades or expansions. 

The university also relies heavily on grants and contributions, especially from the government. This can be compared to an allowance or financial support from family in that changes in support can really disturb the university.

Additionally, Cossette states, “We don’t anticipate issuing new long-term debt in the near future.” This approach is a part of Concordia’s strategy to minimize further financial strain and manage its existing obligations more effectively.

Concordia also has some ongoing legal issues and other commitments that come at financial cost.

What does all this mean for Concordia? It means that the university is at a crossroads where it needs to make some smart decisions about its money. The way it handles its debts and plans for the future will affect everyone at the university—students, faculty, and staff.

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