How will Stockton repay $225 million in debt?
By Seth Grossman, Political Columnist
(Reprinted from June 8, 2011 Current-Gazette Newspapers of Atlantic and Cape May Counties, http://www.shorenewstoday.com/snt/news/index.php/politics/12409-how-will-stockton-repay-225-million-in-debt.html)
?Stockton?s vice president for finance takes college job in Florida. . . Vice President for Administration and Finance Matthew Altier, who makes $194,500, was hired by Stockton in April 2008. . . In three years, he created the college?s nonprofit business arm, Stockton Affiliated Services, Inc., and managed the financial end of the purchase of Seaview resort, the construction of a new $65 million campus center and the college?s partnership with the Noyes Museum. . .?
? Press of Atlantic City, May 16, 2011
During the three years before it hired Altier, Stockton College borrowed $225 million ($32,000 for each Stockton student), with bonds that must be paid back with interest for the next 20 years. Under Altier?s supervision, Stockton then spent every nickel of that borrowed money.
The college also created Stockton Affiliated Services, Inc., a dummy corporation set up to ?leverage? a $100 million ?investment fund? and borrow and spend even more. Stockton officials openly admit that they created this dummy corporation to avoid various state laws that control borrowing and spending by state government agencies like Stockton.
Stockton spent $20 million of this borrowed money to buy the Seaview Country Club, and another $16 million on high-priced union contractors to completely rebuild it ? including $1.5 million for just the golf course. It spent roughly $800,000 to truck in grown trees from Cumberland County, rather than plant new seedlings for a fraction of that cost. It spent $49 million on new dorms to house 380 students ? $129,000 per student. Stockton built plush new offices for its administrators, bailed out the Noyes Museum, built or bought buildings for top dollar in Mays Landing, Hammonton, and Atlantic City, and bought into the NextGen Aviation project near the airport in Egg Harbor Township.
Stockton spared no expense on its $65 million student center ?designed to wow,? and pushed ahead with a new $50 million science building when it found a ?surplus? of borrowed money it had not yet spent.
How does Stockton plan to pay back this $225 million, not to mention the ?leveraged? obligations of its dummy corporation?
We have no idea because the reporter for the daily newspaper never asked that question. My opinion is that Stockton officials are in the same fantasy world as the Wall Street bankers who packaged tens of thousands of worthless subprime mortgage loans into bonds, and sold them with AAA ratings.
It seems that Stockton?s partnership with the Noyes Museum assumes that state government will continue to tax hotel and motel rooms 14 percent to fund its slush fund for the arts. Stockton?s partnership with the NextGen Aviation assumes there will be no cuts in the federal budget.
But Stockton?s biggest fantasy is that for the next 20 years 7,000 students will continue to put themselves and their families into debt each year to pay $25,000 per annum for room, board, and tuition.
One of the most interesting and informative blogs on the Internet is www.athebeach.blogspot.com, written by Margate resident Glen Klotz. I disagree with Klotz when he posts essays that are to the left of our own Norm Cohen.? However, we share common ground when his blog describes how big government, big corporations, and big unions work together to limit our choices and crush the middle class.
An excellent post by Sarah Jaffe on that blog predicts that college debt is the next subprime bubble about to burst.? According to Jaffe, the cost of a college degree is up some 1,400 percent since 1972, while household incomes haven?t increased by anything close to that. She also found that many students find college degrees ?worthless? in finding jobs, that 57 percent of Americans believe college education is not worth the money, and that 75 percent can?t afford it.
When I teach at Atlantic Cape Community College I am impressed by the large number of smart students who are there to avoid the high cost of four-year colleges like Stockton.? If that trend continues, Stockton will have to make big cuts to its tuition and housing bills to bring those students back. If it accepts more bad students with government loans, it would chase away even more smart ones.? Either way, Stockton will have a hard time finding enough students to pay back the $225 million it just borrowed and spent.
If I did this deal as Stockton?s vice president for finance, I would agree that now is the perfect time to quit and move to Florida.
Somers Point attorney Seth Grossman appears on 1400AM talk radio 3-4 p.m. Mondays and Wednesdays and on 92.1FM 8-10 a.m. Saturdays. For information see www.libertyandprosperity.org, email firstname.lastname@example.org or call (609) 927-7333. Breakfast discussions are held 9:30-10:30 a.m. every Saturday at the Shore Diner on Fire and Tilton roads in Egg Harbor Township.