David Jesse

Detroit Free Press

Wayne State University officials say they are in a Catch-22 situation after a leading bond credit rating agency recently gave the school a negative financial outlook, but stopped short of downgrading its bond rating.

The university has been dipping into its cash reserves to catch up on deferred maintenance and to upgrade its facilities, but Moody's likes schools to have more cash on hand.

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"This is not a crisis," Bill Decatur, Wayne State's chief financial officer, told the Free Press.. "It's a two-edge sword. They would like us to have more reserves. The plans and upgrades are designed to grow the university and also increase enrollment. It's that or contract and we're not looking to do that."

The university has also seen dips in its reserves from losses in the medical school — something university officials hope will turn around this coming year. It will also be embarking on a new campus facilities master plan which in addition to identifying work that needs to be done, will also identify possible funding sources, Decatur said.

Moody's Investor Services issued the ratings and outlook for Wayne State in June, as the university was refinancing $100 million in bonds in order to take advantage of lower interest rates.

It kept the school's bond rating at Aa3, but changed the outlook to negative. The negative outlook rating will likely have no impact on the cost of borrowing for Wayne State.

"The revision of the outlook to negative reflects the incremental weakening of Wayne State University's fundamental credit through the spend-down of financial reserves and multi-year decline in enrollment," Moody's wrote in its report. "The outlook also incorporates our expectation that the university's ambitious strategic plan will place additional pressure on operations and financial reserves."

In order to improve the outlook, the university could increase its reserves, known as unrestricted net assets.

As of Sept. 30, 2015, Wayne State had $124 million in unrestricted net assets, records show. That's money that can be spent anywhere the university wants to spend it — much like a savings account for a person. That's down from $155 million in 2014 and $183 million in 2013.

That's enough money to cover about 119 days of operations, Decatur said. The average for other universities rated the same as Wayne State is about 153 days.

Major projects undertaken by the university in recent years include the $93-million Integrative Biosciences Center on Woodward and major renovations to the Student Center.

The university also broke ground recently on the new Mike Ilitch business school, to be built near the Red Wings arena. That project will cost about $50 million. The Ilitch family gave $35 million towards construction. University officials are close to raising another $10 million in funding from other private donors and the rest will be financed by the university. The ratings decision had nothing to do with that construction project, Decatur said.

Contact David Jesse: 313-222-8851 or djesse@freepress.com. Follow him on Twitter: @reporterdavidj