NEWS
FAU is $2 million in debt this year and may not know what to do about it, according to a top official.
The university owes Palm Beach County $2 million by Dec. 1. The payment is part of a $12 million debt the university has been paying each year since 2009. The county built a lab building on the Jupiter campus in 2005, and FAU promised to repay the county for it.
FAU made the payment with state-granted money each fiscal year, but Gov. Rick Scott vetoed FAU’s request for this fiscal year. FAU’s fiscal year starts every July 1.
“I don’t know what we’re going to do yet. We’ll think of something,” Senior Vice President for Financial Affairs Dennis Crudele told the UP in an interview last month. Crudele is in charge of managing FAU’s operating budget.
The UP attempted to follow up with Crudele, but he was unavailable as of press time. No other person could speak in his stead, according to an FAU representative.
FAU entered into an agreement with Palm Beach County and Scripps Research Institute in 2005. Scripps is a biomedical-research nonprofit based in California with labs on FAU’s Jupiter campus.The agreement, titled “Second Temporary Facility Funding Agreement,” said the county would spend $13 million building a laboratory building on the Jupiter campus. In exchange, FAU would repay $12 million to the county in $2 million yearly payments. The payments would start Dec. 1, 2009.
Scripps scientists would use the building until FAU repaid its debt. After that, FAU would occupy it. FAU’s repayment would come out of Public Education Capital Outlay (PECO) money the state usually grants it each fiscal year after FAU requests it. PECO funding usually goes to the construction and maintenance of new and old buildings, according to FAU Architect Tom Donaudy.
At an Aug. 10, 2005, Board of Trustees (BOT) meeting, then-FAU Architect Robert Friedman said that FAU had the potential to save $7 million because of the deal. The BOT is in charge of deciding how the university’s money is spent.
FAU General Counsel David Kian added that while there’s no guarantee the state would give FAU future PECO funds, past PECO appropriations could be used to cover the debt repayment.
Friedman and then-FAU President Frank Brogan backed Kian, and the BOT unanimously voted in favor of agreeing to the deal.However, in this year’s budget, Gov. Scott vetoed FAU’s PECO funding.
Additionally, PECO money FAU already had was not used to pay the debt. It went to other projects while FAU continued requesting money from the state to pay off its debt.
FAU made PECO requests of $2 million per year, according to FAU’s 2009-2010 and 2010-2011 Five-Year Capital Improvement Plan and Legislative Budget Request. The purpose of that money was to repay the debt to the county.
A Five-Year Capital Improvement Plan and Legislative Budget Request is a list of PECO requests state universities make to the state for certain pojects over the next five years. Now that the state has cut off FAU, the university must make the payment using its own money.
According to the agreement, if FAU can’t make the payment on time, it must make monthly payments on the rest of the debt with a 1.5-percent monthly interest rate. Right now, FAU still owes the county $8 million. If it misses this year’s payment, it must start making monthly payments of $168,166.67 (rounded up to the nearest penny).
Currently, the state owns the property. The state leases it to the county, which subleases it to FAU. And if FAU can’t make its payment at all, the land goes back to the county, says the agreement.”We’re going to talk to the county to see if there’s any way to delay payment [until Dec. 31],” Crudele said.
“I feel confident FAU will keep their part of the agreement,” Assistant County Administrator Shannon LaRocque told the UP. She also noted she hadn’t heard about FAU’s debt repayment troubles until the UP told her. LaRocque is the county official who oversees the agreement.Scripps Director of Communications Mika Ono gave no indication that FAU’s missing a payment would affect Scripps or collaborations between Scripps and FAU. “I don’t have any information on the impact of a delayed payment,” she told the UP in an email.
In addition, the building is no longer occupied by Scripps, but by the Max Planck Institute, which studies neuroscience, according to maxplanckflorida.org.
Scripps will have a partnership with FAU’s medical school, Ono said. For more info, go to scripps.edu/florida.
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