As president of Hamline University here, Linda N. Hanson is not eager to look back at her years leading the College of Santa Fe, which collapsed under heavy bond debt and a bleeding balance sheet.
Faculty members, students, and others at Hamline, however, now can’t help looking back, with the worry that history is repeating itself.
This spring the university broke ground on a 75,000-square-foot student center, a project that became a focal point for concerns about Hamline’s direction. The gamble is a common one in higher education: Ms. Hanson and others here hope that the University Center, as it’s called, will become a beacon to draw students to this historic, often undernoticed institution. “I hate to even say this because it’s too cliché and it’s almost silly, but it’s almost like a Field of Dreams,” Ms. Hanson says in describing the building. Once people see it, she says, they will know why Hamline needed it.
But what many people have seen so far has not inspired confidence. Hamline did not meet the fund-raising goals Ms. Hanson had promised for the facility, critics say. In February, as the university pushed ahead with the project, Moody’s Investors Service downgraded Hamline’s bond rating, citing accumulating debt and Hamline’s vulnerabilities in the Twin Cities market.
Professors here talk about skewed priorities, unsteady enrollment, and turnover among key administrators. Inevitably they bring up the specter of Santa Fe—which was taken over by a for-profit company in 2009, a little more than four years after Ms. Hanson left—and they cite what they see as parallels, like a never-realized plan to build a student center on the New Mexico campus.
“There are a lot of similarities there that made many of us nervous indeed,” says John A. Mazis, an associate professor of history at Hamline and chair of the department. “There is no question we need a university center. The question is the timing.”
The situation highlights the crucial roles of identity, vision, and leadership at a time when tuition-driven colleges like Hamline are under pressure. It also calls attention to the risks of debt—along with the need to take advantage of windows of opportunity. If Ms. Hanson’s bet on the student center pays off, she could be credited with having bravely pushed the university to define itself in the Midwest higher-ed market. If the plan fails, people will line up to say, “I told you so.”
Defining Characteristics
One of Hamline’s main problems over the years has been its struggle to define itself, even though it outranks many other regional colleges in the Midwest, according to U.S. News & World Report, which puts it in ninth place, the highest in its category in Minnesota.
Four colleges, including Hamline, sit on or near Snelling Avenue, a main road running through St. Paul—and the other three have been very successful at carving out their identities. Macalester College has a national profile as a highly selective liberal-arts institution. St. Catherine University is known for its women’s college and the nursing program there. The fast-growing University of St. Thomas started a law school 10 years ago that competes with Hamline’s. (Both St. Thomas and St. Catherine are Roman Catholic institutions in a state where nearly 30 percent of the population is Catholic. Hamline is Methodist-affiliated.)
Beyond Snelling Avenue, other Minnesota campuses have niches as well. Augsburg College is a Lutheran institution that appeals to minority and first-generation students, a population that Hamline also serves. Hamline also competes directly with some of the 32 constituents of the Minnesota State Colleges and Universities system. And less than five miles away sits the big gorilla, the University of Minnesota-Twin Cities.
Hamline does have competitive assets. Although many of its buildings are dated, the well-manicured campus sits in a vital blue-collar neighborhood in central St. Paul, not far from the state fairgrounds and a new light-rail line. Faculty members point to the work that education students are doing with a neighborhood school as part of the civic engagement that Hamline has been promoting lately.
Some on campus say Ms. Hanson has helped Hamline find an identity, in part through a strategic-planning process she pushed in 2006, her second year on the job.
“The strategic planning we went through five years ago really got us thinking that we were a university, not a college with add-on programs,” says Andrew Rundquist, an associate professor of physics and chair of the department. “We have a much better sense of who we are, and the selling and the PR is catching up to that.”
The University Center is also an attempt to distinguish the campus. Designed by the prominent firm Shepley Bulfinch, and being built by a firm owned by a life trustee of Hamline, the center will feature a curving glass wall to reveal some of the activity inside. The university will use the building as a dining hall, event venue, and meditation center, with offices for student activities and space for underground parking. Hamline’s existing student center, from the 1960s, is small and does not function well for modern needs—and it pales in comparison to what some of Hamline’s nearby competitors have built in recent years. The strategic plan supported by Ms. Hanson identified a new student center as one of many goals for Hamline.
Hoping to Turn Heads
A hole in the ground perhaps 150 feet wide and 200 feet long, with steel rods poking out of a concrete foundation, takes up the southwest corner of campus. If the stoplight at the intersection there is green, says a Hamline spokeswoman, you might speed past the university’s nondescript buildings along Snelling without knowing what it was. Administrators are betting that heads will turn after the University Center is built.
But while the building might be an asset, it may not be the campus’s most important asset. A 2005 report from APPA, the association for higher-education facilities managers, said prospective students looked first at the buildings associated with their majors, at the library, and at even at residence halls and open space. Dining halls and student centers landed near the bottom of the list. Richard A. Hesel, who consults for colleges in marketing and enrollment at the Art & Science Group, says new student centers are “not game-changers.”
Hamline’s fine-arts building has long been in line for a renovation. A science building from the 1990s was never built with the third floor that was originally planned. Faculty members say although Ms. Hanson wants to raise undergraduate enrollment from around 1,900 to 2,200 in the coming years, the university is too tight on space to accommodate them. (Hamline also enrolls about 3,000 students in graduate programs.)
And at $36-million, the University Center comes at quite a cost—even beyond its price tag. In taking on the project, the university almost doubled its debt, to $60-million, a sum that worried more than a few people on the campus. Professors and students had expected the university to raise more money before breaking ground. “I think there are some who think that it’s a zero-sum game—that if you are doing something over here, something else has to be penalized,” Ms. Hanson says. “And that is simply not the case.”
However, the building does have an opportunity cost. The donor pool of an institution like Hamline does not have a great many deep pockets. Ms. Hanson had been quoted in the student newspaper saying that the university would not break ground until it had secured $18-million of the $24-million that she had planned to raise for the building. When Hamline pushed ahead with the building early this year, it had raised only $12-million. (Officials say they had $15-million as of last week, including the major naming gift.)
Ms. Hanson and Douglas P. Anderson, vice president for finance, say people on campus do not fully understand their timing—that the goal was not set in stone, and that there are advantages to starting construction before the funds were in hand. For example, with an early start, contractors won’t have to build through two Minnesota winters, which could add to the cost.
“The whole environment of debt is bad, bad, bad,” Ms. Hanson says. “We are working in that environment to say, It’s difficult, we understand that. But we have the capacity and we have the confidence that we will be able to do this, and in the end we are going to be in a much better competitive situation having taken those opportunities and moved forward.”
In a statement, Kita McVay, chairwoman of Hamline’s Board of Trustees, says that although faculty members have raised concerns about the construction, “we have not made decisions in haste.”
“We reviewed all of the financials in depth,” she says. “We’ve had the banks and auditors look at the numbers, we’ve weighed the risks and opportunities, including those presented by faculty, and we’ve made the strategic decision to move forward with this project.”
‘Very Difficult Environment’
The university’s debt has been on the radar at Moody’s for some time. In the summer of 2010, the bond-rating agency gave Hamline a negative outlook and noted that its rating could drop if the institution borrowed more. In February, it followed up with the downgrade. Ms. Hanson says Moody’s is skittish because of the agency’s problems in recent years.
“After the financial crisis of 2008 and Moody’s own issues with how they were rating various institutions, for-profit and not-for-profit, I think it’s a very difficult environment,” she says.
Officials at Moody’s say that is not the case, and they emphasize that they have affirmed the ratings of most higher-education institutions. Diane Viacava, a vice president at Moody’s who oversees analysis of the Hamline portfolio, says the doubling of debt was only part of Hamline’s problem. Hamline has a thin balance-sheet cushion, thin operating liquidity, and only $16-million in monthly liquidity (any investment that can be sold for cash with a high degree of confidence within 30 days), substantially less than other institutions with a Baa1 credit rating, she says. (Moody’s has lowered the rating to Baa2.) A substantial chunk of its long-term debt—most of which has accumulated since 2005—is in variable-rate bonds, which adds to the risk, Ms. Viacava says.
In 2009, Hamline missed its enrollment goals in its undergraduate and law-school programs, leading it to cut more than $2-million from its $82-million operating budget, in large part by laying off more than a dozen employees, offering early retirement to others, and slashing benefits to staff and faculty members. Revenue growth from tuition and fees was flat from 2009 to 2010, and money from auxiliary sources of revenue, like dormitories and bookstores, has been going down since 2006, according to financial statements included with the recent bond issue.
Undergraduate enrollment is back up—in fact, Hamline expects a record enrollment this fall, administrators say. But the region will see a demographic decline in coming years, which will intensify competition for students. In the past three years, Hamline drew nearly 90 percent of its students from Minnesota, Iowa, North Dakota, and Wisconsin. Its law school is one of the university’s best-known components, but law-school enrollments everywhere are suffering, with the weak job market for lawyers.
In all, Hamline is “in a challenging, highly competitive market,” Ms. Viacava says. “We believed that they would not be able to grow financial resources well.”
Looking Back
The Moody’s downgrade and Hamline’s resolve to press ahead with the University Center ignited worried talk late last year. Faculty members say many people were thinking of the College of Santa Fe, which racked up $40-million in debt before declining enrollment led it to declare a financial emergency. It was eventually taken over by Laureate Education Inc. and is now known as the Santa Fe University of Art and Design.
“There were a lot of people that were afraid that Hamline was going to go the way of Santa Fe,” says Wojciech Komornicki, a professor of mathematics who has been at the university since the 1970s. Junior faculty members are most worried about the situation, he says, but they are reluctant to talk openly about it.
Faculty members like Mr. Komornicki have also noted turnover in prominent positions: Four people have cycled through the job of dean at the School of Education since 2005. The dean of the College of Liberal Arts, who was hired by Ms. Hanson, left after three years.
Julian Schuster, dean of the School of Business (which Ms. Hanson founded) left for Webster University, where he is now provost, and later hired the woman who had replaced him as interim dean. In an interview, Mr. Schuster says he left only for the opportunity at Webster. “I would be very dishonest if I did not say that Linda Hanson gave me a chance to grow that enterprise,” he says. “How she is managing the rest of the university, history will tell. That’s as fair as I can be.”
These events unsettled Mr. Komornicki, but he remains optimistic. “I am not sure if I am being Pollyanna-ish, but I think we will survive Linda Hanson’s presidency,” he says. “It’s what we look like coming out on the other end.”
In an interview, Ms. Hanson bristles at the suggestion that she may be carrying baggage from New Mexico. “I feel proud of what I did at Santa Fe,” she says. “After I left the College of Santa Fe, there were decisions that were made by the Board of Trustees and my successors that had nothing to do with me. ... It was in the red by over $2-million when I got there. By the third year they were in the black, and when I left they were in the black.”
But tax forms from the last year Ms. Hanson was in office in Santa Fe indicate that the college was still running a $2-million deficit. Bond debt also grew substantially during her time as president—from $11-million to $19-million, according to news reports. (Ms. Hanson has said the borrowing was for much-needed renovations. As it turned out, Santa Fe accumulated an additional $20-million in debt under the presidents who succeeded her.)
Ms. Hanson was certainly walking into a difficult situation at Santa Fe, but hopes were high. She was hailed as a “master at fund raising” who was “unfazed by the budgetary challenges ahead” when she arrived from Seattle University, where she had been vice president for university relations, assistant provost for executive education, and president of the university foundation at Seattle University, where she helped raise $66-million. But those impressions soured after she left and Santa Fe crashed.
Several years after she left Santa Fe, a lawsuit filed by faculty members claimed that Ms. Hanson had been unqualified for the presidency. The plaintiffs sued her, among others, including the presidents who succeeded her, and members of the Board of Trustees and of the Christian Brothers, which founded the college. Ms. Hanson was dismissed from the lawsuit, which was settled recently. Faculty members say they cannot comment on the case because of a nondisparagement clause that was part of the settlement.
Sharon Bain, comptroller during Ms. Hanson’s tenure at Santa Fe, remembers the president fondly. “She was doing an excellent job for what she had to deal with,” Ms. Bain says. “It was a balancing act of how to stay above water and still move forward.”
Others who worked at Santa Fe say they aren’t surprised to hear about Hamline’s problems, although few will speak on the record. They recall that Ms. Hanson had plans for a student center while at Santa Fe—a newspaper article from 2001 listed it as one her top priorities. (Ricardo Legorreta, the Mexican star architect, drew up designs for it.) With a $4-million gift from a donor, she also built a tennis center and started a tennis program that struck some people at the college as a mysterious diversion. The program was shut down shortly after she left.
Brian F. Dailey, a former fund raiser at Santa Fe, says that shortly before Ms. Hanson left, she printed up publicity materials for a $36-million campaign. Some of the proceeds were to be used for the student center. Consultants had recommended against starting that campaign, he says.
Ms. Hanson went on a monthlong sabbatical from the college in 2004 for “rest and renewal,” reported The Santa Fe New Mexican. Shortly after her return, she announced that Hamline had lured her away. She had been president for four years.
Many former faculty members at the College of Santa Fe have not been so fortunate; they were not hired back by Laureate.
In an interview, Ms. Hanson suggests that she is done talking about Santa Fe, and that its history has no relation to Hamline. Last month she was on her way to a sabbatical for the summer, with plans to travel to Europe.
Correction (7/6): This article originally misreported one aspect of the outcome of a lawsuit filed by faculty members at the College of Santa Fe against Ms. Hanson and others. Ms. Hanson was dismissed from the lawsuit, which was settled recently. The article has been updated to reflect this correction.