Though the SMC A-Core opened to students at the start of Winter Term, fundraising for the building’s atrium remains ongoing. Meanwhile, Knox continues to plan for the renovation of the remaining four wings.
Vice President for Advancement, Beverly Holmes said the SMC A-Core renovation has cost the school about $13.8 million. Knox did not have that money on hand in 2018, when construction began. In order to begin renovation anyways, Vice President of Finances Paul Eisenmenger said Knox took out a $7 million loan from PNC Bank.
“Advancement was fundraising for it, but we felt the urgency to get started with the first phase of that (A-Core) and working with PNC, who has been a very good partner for us, they indicated they would fill the gap between the timing of the construction and the timing of the funds coming in,” said Eisenmenger.
As a result, between July 1, 2019, and the end of January, 2020, Knox’s debt has increased by around $6 million dollars, from about $32 million to nearly $39 million.
“It sounds like a large number, and it’s not a small number, but it’s not taking anybody by surprise. Matter of fact, we’re going to be coming in a little under what the bank agreed to loan us,” Eisenmenger said.
After the school received the loan, Holmes and other advancement officers continued to meet with alumni to secure donations for the SMC project. Holmes said the Office of Advancement has raised $9.2 million so far. They are still working to secure donations to pay off a remaining $4 million from the PNC loan.
“Our debt mode is manageable. We always want to be careful though that we’re not getting our debt too out of line,” Eisenmenger said. “I don’t think we would want to borrow again for that, but we certainly have what’s called the capacity to borrow and not get it where we are in over our head. But (PNC) still stepped in and it’s higher education in the Midwest and not every bank would have done that.”
The renovation of the SMC A-Core and the construction of its new atrium is only Phase One of the SMC project. At the Board of Trustees meeting last weekend, Holmes estimated that Phase Two Ñ which aims to renovate the current E-Wing, parts of the current D-Wing and possibly the third floor of the A-Core Ñ will cost $15 million.
In the same Board report, Holmes presented a plan recommending what the future of the SMC renovations would look like.
In Phase Two, the Office of Advancement, Disability Services and IT offices will move out of SMC’s E-Wing and find new homes on campus. Similarly, the registrar and McNair Offices will find new homes on campus and psychology, math and computer science departments will move temporarily into the office spaces on the second floor of the D-Wing.
A temporary auxiliary building will also be constructed outside between the D- and C -Wing to house extra psychology classes and the psychology lab, but faculty will remain in the SMC building.
Once the psychology, math and computer science departments are emptied out of the E-Wing, the building will be renovated and the biology department will move out of the B-Wing and take their place. Here, there will also be a newly constructed greenhouse and section of faculty offices between the E- and B-Wings.
In Phase Three, the emptied B-Wing will be renovated and retrofit with labs for the chemistry department. In Phase Four, the emptied C-Wing will be renovated for the math, computer science and environmental studies departments to move in. Another group of faculty offices will also be constructed between the C- and D-Wings.
The D-Wing will be renovated throughout these phases and by the end of Phase Four will house the physics and psychology departments. The auxiliary building for psychology classes will be removed.
Holmes estimated that Phase Three will cost $13 million and Phase Four $15 million. Along with the costs for moving Advancement, Disability Services, registrar and McNair offices into new facilities on campus, the entire SMC renovation will likely cost around $55 million.
When construction can begin for Phase Two depends when Advancement can finish fundraising the remaining $4 million left of the PNC loan, if PNC bank will be willing to issue another loan to Knox and how much fundraising PNC would want to see Knox secure for Phase Two prior to that loan.
“Hopefully, the bank will say, ‘You’re good people, we like you, you’re doing good work, and we’ll talk to you about the next phase,’” Holmes said. “But again, I would think they would want a significant portion of that $15 million we’re gonna need for the Phase Two raised before they would give us a loan.”
The SMC renovations have to be completely funded by donations. Revenue from tuition and student fees alone are not enough to keep the school from running on a deficit, much less be viable for funding capital projects. But Holmes is confident that Knox alumni will show up.
“It is a big task but our alums and our donors have been good to us. They have been good to us on Phase One, they have been good to us on Alumni Hall, the Whitcomb Art Center. So my people are out on the road,” Holmes said. “It’s just not everyone has the current amount of money I wish from them handy at this time.”
Fortunately, donors do not have to either make large donations at once or make none at all. Knox has found success in receiving pledges from alumni to donate over a series of years.
“We are very lucky as an institution that we have an extremely low default rate. They (alumni) may say I’ll give you two million dollars but I need three years to pay that. And at the end of that three years we have a very low default rate. It’s probably like one percent, two percent and usually those are some of your smaller gifts, it’s not usually somebody that said I’ll give you $2 million that defaults on it.”
Holmes said it is a good possibility Knox will have fundraised and secured the $20 million required to begin Phase Two by 2022.
But whether Phase Two, Three or Four can begin soon could hinge on the generosity of one hypothetical single wealthy donor. Holmes pointed to Iowa University, who was looking at a $34 million dollar project when they received a $19 million donation from one alumni. Large donations not only speed up funding but can lower project costs and build momentum for other alumni to make donations
“If somebody would come in and give me $19 million, I’d be a wing ahead and then I’m not raising while everyone is sitting waiting for me. The cost would come down if we could keep the construction crew here for three or four years,” Homes said.
Knox’s increased debt service is not to be confused with its deficit, which also increased last year to $4.5 million under the school’s falling enrollment. Still, both add a cost pressure to the school’s financial stability, one that the SMC renovation may help to assuage if it attracts science-seeking students to the school’s contemporary facilities.
“It adds a cost pressure so as you have the more debt you end up paying more interest on that debt and that interest is a charge to the operating budget cost” Eisenmenger said. “So the cost has increased because the debt has increased. And therefore it’s a cost pressure and that turns into where are we going to cover that from?”
When advancement officers meet with alumni, Holmes said they talk about how many Knox students go on to become doctors and how the building’s renovation will improve the school’s program.
“We talk about the need to make this building more interdisciplinary because when this building was built in the 70’s, the sciences were pretty much independent,” Holmes said. “The more we can renovate this building to make it easier for faculty from different disciplines to interact, for students with different majors to interact, that’s all a plus for us.”