After a decade of steady growth that’s left facilities bursting at the seams, Pasadena’s ArtCenter College of Design has sold $103 million in tax-free bonds to refinance its debt and renovate its buildings.
The bonds were expected to become available sometime this month, ArtCenter Senior Vice President and Chief Financial and Administrative Officer Richard Haluschak said early Tuesday afternoon. But by Tuesday evening, the bond sale had already been completed, Art Center officials confirmed.
“ArtCenter has delivered consistently strong financial results over the past ten years, making it possible to deliver on its strategic plan, which includes enrollment growth and campus improvements,” Haluschak said.
“Approximately $61 million will be used to finance existing debt, with the remaining amount of approximately ($42) million to be used for renovations at the 950 S. Raymond (Ave.) and 1700 Lida Street buildings,” Haluschak said.
And while major renovations are about to take place, there won’t be many significant changes visible from the outside.
The largest piece of the renovations will take place inside a building facing Raymond Avenue on the ArtCenter’s South Campus sometimes referred to as the “wind tunnel,” and for good reason.
“The interior is… was a wind tunnel about four stories tall. Clear, open space because when it was built in the 1940’s by McDonald Douglas, they tested airplane components in there,” Haluschak said.
“We’re going to construct inside of it. It won’t be visible from the exterior; sort of building within a building, you might call it,” he said. “That’ll give us three floors of student studio classrooms.”
Much of this is expected to house the college’s Transportation Design program.
“There will be ramps so they’ll have the ability to drive full sized vehicles up into the studio spaces,” Haluschak added. “We may also do some other energy upgrades to that building while we’re at it. So that’s one project.”
The rest of the renovation portion of the bond money will go to upgrading the ArtCenter’s massive building on Lida Street.
“This building, of course, is 42 years old and needs new electrical, air-conditioning, all new mechanical systems, so that’s what we’ll be doing up there,” Haluschak said. “Again, it won’t be anything that would be really visible, but it’s needed so that we can continue, so we can use this building for another 40 years.”
The lion’s share of the funds raised by the bond sales will be used to refinance the debt already owed by the school, according to Doug Brown, a director at Wells Fargo Financing who is helping with the process.
Brown said the bond sale allows the college to refinance with much more favorable terms and interest rates. It’s possible because of the school’s solid credit history.
“They received the investment grade rating from Moody’s Investor Service of BAA1. So the bonds will be obligations of ArtCenter College based on that credit rating,” Brown said.
“It’s tax exempt on a long-term fixed rate,” he said. “The final maturity will be 30 years out, and they’ll be priced and sold to institutional and retail investors, primarily in California,” he said.
ArtCenter’s current debt is financed at a higher, adjustable rate, Haluschak said.
He said the renovations were about expanding the facilities to meet the current needs, rather than growing the student body in the future.
“We have grown significantly over the past 10 years. There’s no question about that,” Haluschak said. “But we’re not looking at significant growth in the next few years. We’re looking at being able to accommodate where we are.”
ArtCenter’s enrollment jumped steadily, year-over-year, by 30 percent between 2010 and 2017, from 1,737 students to 2,045, according to the school’s figures. Many other colleges are struggling to meet enrollment goals, and tightening their spending as a result.
But Haluschak said he and the Trustee are confident the decision makes financial sense.
“The demand for admissions is still very strong,” he said. “Even during the recession, we were fortunate that we didn’t lose any enrollment. We have been growing our balance sheet. We’ve been, adding to reserves so… we could get the best possible rate on financing, to do this kind of campus expansion while still maintaining a healthy amount of cash and reserves.”
Haluschak said he believes ArtCenter’s emphasis on career-ready education is part of its draw.
“We have grown the number of majors that we have over the past 10 years. We’ve started some new graduate programs in addition to the ones that we’ve already have. We started Programming in Entertainment Design, a new major in Entertainment Design,” he said. “We have just had demand that has outstripped the room that we had to admit students.”
“We’re making these investments to be here in Pasadena,” Haluschak said. “We’re here for the perpetuity, as far as we can tell. We want to make these improvements to our existing buildings so they worked for us for the long run.”