With a multimillion-dollar land sale to the Roman Catholic Church gone sour, the University of Hawaii-West Oahu says it’s moving away from the school’s original concept of selling or leasing lands surrounding its Kapolei campus to pay for operations.
It instead will seek more public funds from the state Legislature next year. West Oahu Chancellor Rockne Freitas said the school is also looking at revenue bond financing — which typically is repaid with student tuition — along with additional money from the UH system and donations to help cover costs.
Without the extra funds, officials are considering capping enrollment, which ballooned by almost 19 percent to 2,403 students this fall from last year.
The West Oahu campus was built on about one-sixth of a 500-acre parcel donated by the former James Campbell Estate. The campus initially was supposed to be financed almost entirely with private funds by selling off more than half of the site for housing and other projects.
Those deals fell through with the collapse of the credit market, and the state put up $48 million in general obligation bonds in 2010 to pay for the first phase of construction. The campus issued revenue bonds and took out a loan to pay for the rest of the build-out at an estimated cost of $170 million and opened last fall after conducting classes for decades in portable classrooms next to Leeward Community College.
UH-West Oahu sold off a 6-acre parcel in 2010 for $6 million to Japan’s Tokai University, which broke ground earlier this month on a new campus for Hawaii Tokai International College. It had been counting on a $12 million deal to sell another 39 acres to the Catholic Church, which had planned to build a church and private school and spend up to $20 million on infrastructure for the site.
The UH Board of Regents approved the church deal late last year, but Freitas said a letter of intent expired earlier this year without an agreement in place. He says UH is no longer selling the land, but is continuing talks with the church to possibly lease land. A representative from the church did not return calls seeking comment.
"Selling UH land for operational purposes is bad policy and a bad model," Freitas said.
The campus is seeking about $3.5 million more from the Legislature for operations next year and $30 million for capital improvement projects.
The $3.5 million would be on top $8.5 million in general funds lawmakers approved last session for the upcoming 2014-15 year. The Legislature, which enacts two-year budgets, will take up the so-called supplemental state budget in January.
The money would cover the campus’ annual debt payments, said Donna Kiyosaki, UH-West Oahu’s vice chancellor for administration.
Kiyosaki told the regents’ Budget and Finance Committee earlier this month that the debt stems from $68 million in revenue bonds the university used to build part of the campus as well as an $18 million loan it took out under an immigrant investor program known as the federal EB-5 Visa program.
"In the last three years, we were able to cover that payment because of the Tokai land sale. This current year we’re going to be using up all our remaining money that we have from the land sale, and there will be nothing left and there is nothing currently on the horizon in the near future that’s going to bring any money into that account," she said. "And that was the business plan prior to this: to sell, lease land, bring that money in and pay back our debt service."
UH interim President David Lassner said the request reflects the university’s need to stop relying on land deals for the campus.
State Rep. Isaac Choy, chairman of the House Higher Education Committee, agreed the concept isn’t working.
"It’s a bad, bad policy to sell land for operations, not just for schools, but in general," Choy said. "In this case, should the university be involved in land sales, land development, land leasing, community planning? I think that’s a question of whether that’s a core mission of the university or detracting from its mission."
Kiyosaki said the additional $3.5 million would allow the campus to work on dealing with some of the concerns raised last year by the Western Association of School and Colleges.
The accreditation body, after a visit last spring, cited concerns about West Oahu’s "inability to recruit and retain experienced senior academic leadership," among other concerns.
"What that will help us do is free up some money we can use towards meeting some of the WASC concerns," Kiyosaki said, including focusing on the university’s strategic plan to improve the quality of teaching staff.
Freitas said if the school doesn’t get the requested funds "and we are unable to hire additional faculty and staff to support the 18.8 percent increase in enrollment, it may become necessary for UHWO to cap enrollment. This would be our last resort and our only option if we are to maintain the high quality of education currently offered at UH-West Oahu."
The largest project on the capital improvements budget request is $19 million to build an administration building. Kiyosaki said the school is running out of office space, adding that adminstration staff are using 26 faculty offices.
The campus planned to pay for the administration building using the $18 million EB-5 Visa loan it took out from a Hawaii limited partnership associated with CanAm Enterprises LLC. But when general campus construction went over budget last year by about $14 million due to change orders, UH had said it would use the loan to fill the gap.
Choy said the school’s finances have raised red flags, but he’s hopeful UH can improve.
"The flag has not only risen, it’s shot off the pole. … But we can dwell on the past or pick up the pieces and move forward to serve our community out there," he said. "We can’t forget that we’re trying to service the kids in an area of high population growth. In the future I would like to see better management and execution of these master plans. And that’s an area they should be looking to, at the processes that brought this about."
