The problem is the building, Eric Darr says, referring to Harrisburg University of Science & Technology's financial straits, speaking of the $73 million, 16-story, state-of-the-art academic center on Market Street.
It's relationships, he says of his hopes for a solution.
HU, which held its first classes in 2005 and dedicated the academic center in 2009, has experienced increasing financial difficulties in recent years, as interest payments exacerbated the disparity between its revenues and expenses. Those difficulties have come front and center lately, but Darr, HU's interim president, says he's confident the institution is on the right path — as long as it continues to receive help from the local business community.
Darr recently returned from a meeting with the holders of HU's $60 million bond. Payments of $1.8 million are due spring and fall.
In the fall, HU missed its first payment.
In the spring, HU will be able to pay only about $300,000, Darr says, and Dauphin County will have to make its first payment for HU. As a guarantor on HU's bond, the county must pay up to $1.5 million a year if HU can't. The county has lent HU $3.7 million in recent years but has not previously been forced to make payments.
"Despite its financial challenges, Harrisburg University has continued to attract more students, launch new degree programs and serve as a critical asset to the community since it opened its doors nearly eight years ago," the Dauphin County commissioners said in a statement. They plan to meet the obligation.
Darr, too, points out indicators that the maturing school is watching eagerly. It now offers six bachelor's and four master's degree programs, with multiple concentrations. The average incoming GPA has risen considerably, from about 2.5 to nearly 3.3.
It is also doing better at retaining and graduating students: Its first class had a graduation rate of just 9 percent, but last fall more than 70 percent of the previous year's freshmen returned, and up to 75 students could be graduating this spring.
Darr is hopeful that this fall HU may surpass 500 students, its anticipated break-even point; that, he says, would boost its tuition revenues from last year's $7.8 million to $8 million to $8.5 million. Going into the fall 2012 semester, HU had about 430 students — and, Darr says, at the end of January, HU has already received 923 completed applications, more than its total for all of last year.
Breaking even, however, won't get HU out of the weeds. Darr estimates that it will take a couple years of things going well to deal with the several million in short-term debt HU has accumulated over the last few years.
And, he says, he's sure there will be more challenges in the future.
That's where the relationships come in. HU was designed in partnership with businesses to supply workers with the skills the businesses need, and the continued support of that community is vital not just to HU's fiscal health, but also to the fulfillment of its purpose.
Bob Dolan, chairman of HU's board, agrees.
"I don't want to say that I'm not concerned about the finances. I am, and I lose sleep," Dolan says. But, "We have the support of a lot of local businesses and governmental agencies, and that's key."
For example, he says, last fall one local company donated $900,000 to HU, and "as we had these rocky financial times over the last few months, we went to business leaders and asked them to accelerate their pledges, and they did."
That shows confidence in HU, Dolan says, and, "that kind of thing is what's keeping us going."
It's not just financial. Some collaborations, such as Capital BlueCross's helping HU set up a health care analytics program and offering some paid internships for participants, don't show up on the balance sheet but are nevertheless a real boost to the program.
Could HU have built a smaller, simpler building? Darr asks the question rhetorically, says maybe, and asks another: Would that type of building fit the vision HU is striving for and allow it to attract the numbers of student it has?
HU, he says, plans to be around for a long time.
Only two educational institutions comparable to Harrisburg University were started in the United States in the last decade, according to interim HU president Eric Darr.
One is Ave Maria University in Florida, started with a $250 million donation from Domino's Pizza founder Tom Monaghan. Its website lists the current student body at 872.
The other is the Franklin W. Olin College of Engineering in Massachusetts. According to its website, Olin was bankrolled by a commitment "in excess of $400 million" by the Olin Foundation. It gives every admitted student a four-year, half-tuition scholarship worth roughly $80,000 and has a current enrollment of 346 students.
By contrast, Darr said, nonprofit HU, which currently has 339 degree-seeking students and 380 nondegree students, was started with just a fraction of those amounts: Its inaugural comprehensive fundraising campaign netted $44.7 million.
Olin features in another HU comparison, the Integrated Postsecondary Education Data System, where it is one of seven science-and-technology-heavy institutions, most much larger than HU, that are used as HU's comparison.
HU's tuition, fees and average net price of attendance for students receiving grants or scholarship aid are all about half of the other schools' medians, although the institutional grants HU offers are less than a third of the median. HU also has more women than its cohort, at 47 percent compared to the median 29 percent, and more black students, at 21 percent compared to the median 2 percent.
The other schools get about 35 percent of their core revenue from investments and 5 percent from government grants and contracts. For HU, those percentages are 0 and 60 percent, respectively. HU also differs in core expenses per full-time student, spending nearly four times the median on institutional support and more than double the median on student services.
Digging a hole
Harrisburg University of Science & Technology's most recent publicly available tax filings, from 2008 through 2010, show its financial difficulties.
Aggregate totals, 2008-10
Tuition and fees income: $10.3 million
Salaries and benefit costs: $16.5 million
Interest cost: $9.8 million
Governmental grants (As a rule, earmarked for specific projects.): $21.4 million
Nongovernmental grants and contributions: $2.1 million