It's official: Grand Canyon University has its non-profit status back

Rachel Leingang | The Republic | azcentral.com

Grand Canyon University is officially a non-profit school again.

The university's owner sold off assets necessary to convert the school back to a non-profit, officials announced at a press conference Monday.

The for-profit venture that owns the university, Grand Canyon Education Inc., sold academic assets to a non-profit with the same name as the school.

That sale happened July 1.

Here's how it happened: A newly formed non-profit corporation purchased academic operations and related assets from the public parent company, Grand Canyon Education Inc.

The parent company transferred property and improvements on the west Phoenix campus to GCU, along with other academic assets. The purchase price was about $875 million. GCU will pay using a seven-year loan.

The parent company will still provide services like marketing, accounting and human resources to GCU.

GCU could be the largest Christian university The two largest Christian universities in the U.S., Grand Canyon University and Liberty University, are disagreeing over which is the biggest.

About 35 percent of the for-profit company's full-time employees, or 1,400 people, transferred their employment to GCU, as did most of the company's part-time employees, adjuncts and student workers.

Grand Canyon Education Inc. will still employ about 2,600 full-time workers.

Brian Mueller, GCU's president, said the school wanted to be a nonprofit again to benefit its students and ensure the long-term legacy of the institution.

GCU and the parent company will have separate governing boards, though Mueller will serve as the chairman of the for-profit company's board and will remain president of GCU.

Federal rules on for-profit colleges didn't spur the nonprofit conversion, Mueller said. GCU is below the so-called "90/10 rule," which bars for-profit colleges from getting more than 90 percent of their revenues from federal student aid. At GCU, it's 72 percent.

IRS, state board have OK'd change

The university also received approval from the Internal Revenue Service and the Arizona State Board for Private Postsecondary Education.

The U.S. Department of Education has yet to weigh in on the conversion and could add some restrictions.

"We haven’t got their letter that says that there are no restrictions, but we would be very surprised, based on our discussions with them, if there were," Mueller said.

The asset sale came after the Higher Learning Commission, the school's accreditor, approved the conversion in March.

The university has tried for several years to convert back to a non-profit entity. In 2015-16, the conversion was denied by the Higher Learning Commission. At the time, Mueller said the school was "extremely disrespected" by the commission.

The private, Christian school was a non-profit from 1949 until 2004. A group of investors then purchased the school, and it went public in 2008.

The school has said being a non-profit again will help it accept philanthropy, pursue grants and become a full voting member of the National Collegiate Athletic Association.

Financial benefits of being a non-profit

The non-profit status means the school will no longer pay property taxes for its campus at 33rd Avenue and Camelback Road. The school has previously sought state legislation to lower its property taxes. At one point, Mueller said the tax issue could send the campus to another city.

The parent company, Grand Canyon Education Inc., will still pay property taxes, which GCU estimates at $1.7 million in 2019. The university paid more than $9 million in property taxes in 2017, it said, which was "unsustainable long-term."

As a for-profit university, the school has seen massive growth in enrollment on its west Phoenix campus. It now has more than 90,000 students, though most are online. Its real estate footprint has also expanded and now includes a hotel and an office complex, in addition to new dorms, sports facilities and academic buildings.

Sports changes with ASU?

The nonprofit conversion could mean GCU and Arizona State University face each other in sports, something that’s been off the table for several years as ASU refused to schedule games against GCU since it was a for-profit school.

ASU President Michael Crow is open to the idea, ASU said in a statement today.

“As each of us evolves, we see opportunities to work together across a spectrum of activities in academics and athletics,” ASU said.

But ASU said it is most interested in working with GCU to boost the community as a whole.

“Arizona needs more high-quality college graduates, and we recognize the role GCU plays in contributing to our graduate pool and strengthening the Phoenix metropolitan area overall,” ASU said.

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