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Deeply in Debt, Georgia Universities Look to Privatize Dorms and Parking Decks

The new dorm, expanded parking deck and combination dining hall/health center will be located between Legion Field and the existing Baxter Street dorms.

Georgia voters may have overlooked—or simply clicked “yes” on—a tax referendum that will change the way many university dorms and parking decks are managed in 2015. 

Statewide, two-thirds of voters who went to the polls agreed with the referendum that said, “Shall property owned by the University System of Georgia and utilized by providers of college and university student housing and other facilities continue to be exempt from taxation to keep costs affordable?” Athens-Clarke was the only one of Georgia’s 159 counties where the referendum didn’t win a majority. At that, only 500 more ACC voters said “no thanks” rather than “yes, please.” 

In recent years, the University System of Georgia—the 31 Georgia colleges, including the University of Georgia, that operate under the Board of Regents—has taken on $3.8 billion in real estate debt by binging on construction as class sizes grow. At the same time, enrollment system-wide has been declining for two years (though not at UGA), meaning that the system is taking in less revenue to pay off the debt.

This change would move that debt from under the system’s responsibility by allowing it to lease dorms, parking decks and other services to private firms that would operate the buildings and collect revenue. “It is an ongoing challenge to build and finance large projects such as student housing and keep costs affordable,” says Charlie Sutlive, Board of Regents spokesman. “We are always looking at ways to keep costs down.”

Phase One, coming up in 2015, includes 6,195 existing dorm beds and 3,000 new beds across the state at Abraham Baldwin Agricultural College, Armstrong State University, College of Coastal Georgia, Columbus State University, Dalton State College, East Georgia State College, Georgia Regents University (formerly the Medical College of Georgia and Augusta State), Georgia State University and the University of North Georgia (which has a Watkinsville campus). The University of Georgia won’t see any changes in the first phase, and several UGA officials declined to talk about future plans.

The change was first proposed by state lawmakers under House Bill 788, nicknamed “USG P3” at the Capitol for “public-private partnership.” The key words, to legislators, are “tax exempt,” which should encourage private companies to step up and bid on contracts. “The University System of Georgia will still retain ownership of the dorms, but this is attractive to the investment world,” says Rep. Chuck Williams (R-Watkinsville), vice chairman of the House Higher Education Committee and one of the representatives who sponsored the bill. “This is simply a financing vehicle that will allow us to roll some debt off the books.”

As he researched the effects of the bill, Williams talked to tax officials in Athens-Clarke and Oconee counties to discuss how it might affect local tax digests or the schools or county services that depend on ad valorem taxes. Essentially, digests will remain the same, because university-owned property already is tax-exempt. “This won’t take taxable property off the tax rolls or allow private investors to build tax-exempt student apartments in downtown Athens,” Williams says. “It’s not legally structured that way, and there will be no net loss to the tax base.”

In recent years, the University of Georgia has borrowed millions to build new dorms, parking decks and a dining hall. The University of Georgia Real Estate Foundation, which buys and manages real estate on behalf of UGA, borrowed $40 million in 2012 for two major projects seen on campus today — Rutherford Hall, a dorm built by the federal Works Progress Administration in 1939 that was torn down and rebuilt with 100 more rooms, and Bolton Hall, a massive new dining hall on Lumpkin Street. The new projects bring the foundation’s total debt to nearly $350 million. Created by President Michael Adams 15 years ago, the foundation is paying off other expensive bond projects, including $130 million for East Campus residence halls, $12 million for fraternity houses on East Campus and $24 million for two parking decks. The real estate foundation pays off the loans by leasing the buildings to the university, which pays the foundation about $30 million each year. In turn, UGA collects the money through dorm rents and parking fees.

The referendum change should keep costs down for students, who would likely bear the burden of higher dorm costs in the future. “A large part of the cost of going to college is paying for housing,” Sutlive says. “This measure will ensure that student housing located on our state’s college and university campuses will remain untaxed in the future, just as it is currently, regardless of how on-campus student housing is financed in the future.”

The bill saw bipartisan support among Georgia Republicans and Democrats, with 166 in favor and 5 opposed in the House and 44 in favor and 7 opposed in the Senate. Still, the term “privatization” continues to unsettle some lawmakers. Rep. Sam Moore (R-Ball Ground) voted against the bill because he sees it as giving preferential tax treatment. Plus, the referendum that went before voters had biased wording, he says. “It should simply state the legal change. However, it ends with an argument for voting yes,” he says. “The property in question is affordable in the first place, which makes the last line of the referendum even more disingenuous.”

The Board of Regents also hopes the changes will encourage “design innovation” and “operating efficiencies” in the dorms. But the bill and referendum don’t address building plans, security or other aspects of housing or parking management. “I believe in local control, and I do not understand why the state House should be involved in such details,” Moore says. “I have no opinion otherwise, nor do I think anyone else at the state House should, either, in an official capacity.”

State lawmakers and University System officials will watch Phase One projects in 2015 as they consider larger projects at Georgia Tech and UGA, though UGA parking and housing officials declined to talk about future plans. “UGA has seen a lot of construction due to the growth in student population, especially with parking and housing,” Williams says. “Chancellor Hank Huckaby realized we need to take a look at this debt and that we may be carrying more than we’re comfortable with. Privatization is one way to deal with that.”