University assets worth $1.66 billion

varsity_s_1_66b_in_assets_5357a5b3a5.jpg
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The University of Otago's position as the ''biggest business in town'' has been highlighted by a report showing it has $1.66 billion in assets.

Its financial statements for last year, tabled at the latest university council meeting, showed the university group, which includes subsidiary companies and controlled trusts, had set aside $277 million worth of ''other financial assets'', which included cash, short-term deposits and shares.

This was in part set aside for the university's unprecedented building programme worth ''more than $600 million''.

Otago University accounting professor David Lont told the Otago Daily Times the university's strong financial position was hugely positive for Dunedin and testament to ''very solid'' management.

However, having the university as the ''biggest business in town'' was a ''double-edged sword'' for the city, because it did not pay full commercial rates and paid only for water, drainage and other services.

''If we keep growing our footprint that means the city has to bear greater cost,'' he said.

There was a need for a conversation about whether it was appropriate government organisations did not pay full rates, but ultimately that was a decision for Parliament.

On the flip-side, the Government and research providers were ''essentially pouring in hundreds of millions of dollars'' into Dunedin through the university.

''It's a wonderful thing for the city to have a financially strong university, which students from outside the city want to come to.''

David Lont.
David Lont.
Given times were tight at present, the university could have been faced with having to cut courses and slash budgets if it had run up large amounts of debt in the ''good times''.

Instead, it was looking to spend more than $600 million on new buildings, most of which would be in Dunedin.

''It really is pretty remarkable that a university of our size has largely almost always been debt free and that we have been able to finance expansion from our operating budgets.

''It could have been a hell of a lot worse if we weren't well managed.''

There was nothing untoward about $277 million of the university group's assets of $1.66 billion being made up of ''other financial assets'', including cash, shares, bonds and short-term deposits, Prof Lont said.

''I don't think it's out of kilter. We are a big organisation. If you think of Air New Zealand, they have about a billion sitting there in cash.''

Chief operating officer John Patrick, speaking at the council meeting, said the university's accumulation of cash had been a ''deliberate strategy'' so it could fund its construction programme.

The programme, which included replacing the university's dental school, its ''largest construction project'', would have a huge impact on the university.

''I think over the next 10 years, the face of this campus is going to change quite dramatically.''

In another financial report tabled at the meeting, acting director of financial services Gavin Logie said construction would begin on priority development projects ''later this year and in 2015''.

- vaughan.elder@odt.co.nz

Not correct

The University pays targeted rates and rates for which it is found not to be exempt (I think the Executive Residence falls into this category, see ODT report here 

See also:   

Annex A paragraph 1 and section 8, paragraph 57 and 59, for example. 

Not going away?

People say "the University is not going away".  Well, yes it is, it just hasn't realized it yet.

Billions of dollars of "assets" in buildings whose value would be to an education provider.  Not the easiest property portfolio to liquidate.

A small decrease in EFTS?  Try going online and seeing how many FTEs you could host in a world that does not require bricks and mortar. 20,000 student enrolments - per paper - not in total is feasible.

A major input into the local economy?  Show me the programmes in local health and education fully-funded or sponsored by the University?  Show me the constant stream of successful startups that retain students in the local economy.  Show me that University staff do not moonlight as local IT repairment, tutors, music teachers etc.

Invest in people and lightweight technologies that can be vastly leveraged, not buildings. 

What are these discounted rates?

So tell us, QsRC, what are these 'discounted rates' and what is their justification? While I can appreciate that there may be a justification for a special rate structure for truly educational facilities, such as lecture halls, laboratories, library facilities, etc, I can't see why any special and advantageous formula should apply to university owned rental facilities, cafes etc, which directly compete with private businesses.

Restrain University trade

You better. The Free Market is only for private enterprise.

Rates relief

Could people stop making out the university pays zero in rates. They have discounted rates, not completely rate free. I know it makes your whinge sound better, but try to stick to the truth, it's a better story.

What about the others?

Take your issues up with the government. At the same time you might ask that the law be changed to include churches, schools, and early childhood centres, amongst others. The rates relief currently being granted to the stadium might also be mentioned.
I agree the university is not going anywhere. Pity really, Dunedin is one of the least likely places I would choose to live. However, the fact is that I work at one of the best universities in the country, which just happens to be situated here.
I'm quite happy to pay my ever increasing rates, participate in the Dunedin culture and make the best of the weather. I'll also be happy to move once I retire!

University core business

IGN: You are correct, if the university is taking on private enterprise head on how can that be fair? How can accommodation providers and local landlords compete against a business that pays no rates? What will be next? Cafes, pubs, sponsoring more rugby teams? There is theoretically no stopping them from buying up any property and competing against anyone. In fact they can paddle in any pool without fear of the overhead all other businesses face. Council have shown when it comes to the wants and needs of the university boot licking is the order of the day.

It won't happen - the uni closing

Why do we keep reading "if the uni closes" Dunedin will die?

What utter rubbish I hear from some and complete scare mongering as the uni will be here long after we are gone and pushing up daisies. 

There is no reason at all and there not any rumblings or hints that the uni is unhappy here and add to it the very healthy profits they make every year.

Should they pay full rates on their investemnts? Yes they should just like any other business. 

Really?

There is no denying that the University of Otago is a major contributor to Dunedin's economic wellbeing. But is it the biggest business in Dunedin? Is this just self promotion parroted by the ODT? Does the DCC's Economic Development Unit still maintain that healtcare for the elderly is the biggest business in town? Certainly the ODT wouldn't bother to find out if the university press releases are factually correct.

pay your way or get out of Dunedin

Come on people do you really think that if the university had to pay rates etc it would up and leave Dunedin?. I don't think so. As  the biggest landlord of student accommodation in Dunedin it should have to pay rates and tax on its rental earning just like myself and every other landlord in Dunedin. The university is slowly taking over all the student accommodation in Dunedin. Which means there is now less rates and  tax being paid by the landlords who used to rent to this demographic  as landlords sell up their university investments to the university itself before CGT.

I have already sold one of my houses to them, so that $2373 in rates that the DCC no longer gets add to this the tax I no longer pay on this house's earnings, along with the landlord's insurance and GST  I no longer pay and you can add the tax and GST my insurance company no longer pays to the government, the money I no longer pay to trades for work done on said house and that gst and tax those trades no longer pay because the university employees it own maintains staff. It starts to add up to a fair amount of cash.

Why should the university get a free ride on its business investments...because that's what its rental properties are all about making money. Rentals is not the university core business, education is. And as such anything not to do, directly with education  the university should be paying it way on.

[Abridged] 

Aberystwyth

Been there & yes it's buzzy, but the streetscape & town layout is good, unlike Dunedin. On the other hand Aberystyth also hasn't a gross glass apartment tower bung in the middle just like Dndn.

It's confirmed then?

Dunedin is a service town, here to service the university and the odd tourist.

Already only the fifth

Already only  the fifth centre in NZ, and rapidly heading towards being the eighth. I don't know what the solution is, if there is one. Without the university, Dunedin will become as irrelevant as...Oamaru or Balclutha or Gore. Or maybe even ..... Ashburton! The tides of history run strong.  Can the slide be arrested? Maybe we should look at how some other small centres have sorted out their relationship with the institution that keeps them alive. Like Invercargill, or Cambridge ... Or Aberystwyth.

I'm okay with it

Craypot: I do not get rates relief either. I live in Dunedin because of my job. Not sure what your issue is re pensions as I don't know anyone at the university who gets this type of handout. Given that many university staff are from outside of Dunedin, the loss of the largest employer would have a substantial impact on the Dunedin economy. Your issue would be better taken up with the government. The stadium is the biggest leech on Dunedin. 

Everybody else

Missy222: You point is a bit abstract .. every homeowner in Dunedin also does their bit to grow the local economy, in exactly the same way. Only thing is though, they don't get rates relief, subsidized housing, gilt-edged pension schemes or any other of the perks.  They struggle to keep Dunedin alive. The University is obviously awash with assets and  money ... taxpayers money , Dunedin is in need of some financial relief right now, Sound like its all fair to you?  

Dunedin without the university

Might do to think on about the rates and economic contributions of 3754 staff and 18, 000 plus students before the bleating starts. Dunedin without the University of Otago is... Balclutha!

Would make a genuine cash cow blush

Hmm, so what exactly are we looking at here? A large business that does not pay is fair share of rates, but uses the city infrastucture and services nevertheless. It gets Govt funding on almost a daily basis , it has buildings that are empty or not at capacity.. and it doesnt have to pay tax. And it boasts about it! Given those set of parameters even the corner dairy would become a world entity. How about just paying your way? You obviously have the means.  

Uni pays no rates

I read with interest the crowing about how successful the university is. It would be different if they paid the millions and millions they should be paying in rates like the rest of us. We pay $24,000 pa on a couple of acres used for our business. In addition they open up the Halls of Residence and places like the old Living Space as commercial accommodation in competition with Hotels and Motels who already pay sky high rates. How good would it be to run a business which has little or no overhead? Little wonder it is debt free. The rest of us would be debt free if we didn't have to pay rates, water, rubbish collection and all the little things the university bean counter never even has to consider.

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