The head of Hawaii Pacific University maintains the school is in solid financial shape despite concerns raised about the tens of millions of dollars the private college borrowed to redevelop Aloha Tower Marketplace amid declining student enrollment.

HPU President John Gotanda acknowledges the university took out “significant debt” to finance the acquisition and makeover of Aloha Tower — its outstanding bond debt is $75 million — but says the university’s endowment is healthy and student counts are starting to rebound.

“We’re financially sound. We have $67 million on our balance sheet,” Gotanda told the Honolulu Star-Advertiser, referring to the university’s cash assets. “It’s not unusual for businesses, educational institutions and many others to borrow to finance large building projects.”

The author of an article that ran this week in The Atlantic used HPU as a leading example of a national trend: private colleges saddling themselves with massive debt to build dormitories and student facilities in hopes of boosting enrollment, with little success. The result being that these colleges and universities are left with large debts and fewer tuition-paying students to help pay them off.

“The picture that was painted was inaccurate,” Gotanda said. “We’re actually not at all a good case for the point he was trying to make.”

HPU bought the buildings at Aloha Tower Marketplace in 2013, investing about $50 million to renovate and revitalize the waterfront property with dormitories, classrooms and office and community spaces. The former shopping complex opened to students two years ago.

Campus consolidation

The effort was launched under previous leadership to begin consolidating HPU’s downtown and Windward campuses into a single urban campus with Aloha Tower as its anchor. Late last year the private, not-for-profit university completed the sale of its 132-acre Hawaii Loa campus in Kaneohe to Castle Medical Center for an undisclosed price.

“Building the Aloha Tower Marketplace campus was part of a plan in the end to help increase our first-time, full-time freshman students and to create, really, a better student experience,” said Gotanda, a Roosevelt High and University of Hawaii alumnus who joined HPU as president last summer.

Enrollment increase

He said preliminary numbers show HPU’s freshman class enrollment is up by 10 percent this fall. Overall, the university says it enrolled more than 1,000 new students this semester, including undergraduate, transfer and graduate students. “It goes contrary to the point that enrollment keeps declining,” Gotanda said.

Total enrollment for the current semester has yet to be finalized, but last fall the school had 4,081 total students, down from 7,436 students five years ago. Nationally, enrollment at colleges and universities has been dragged down in recent years by a decline in birthrates, which has reduced the overall college-age population, and an increase in the number of young adults entering the job market amid a healthier economy.

HPU has historically relied heavily on international students; its student body includes students from 60 countries. And despite the anti-immigration policies implemented by the Trump administration, Gotanda says its international enrollment appears to be holding flat this year, while enrollment of U.S. students has declined an average 5 percent.

He disputes the idea that the university’s long-term debt is driving annual tuition increases. HPU’s annual full-time resident tuition for the 2017-18 academic year is $24,200, up 4 percent from the year before.

“We do have cash that could finance most of this,” he said of the Aloha Tower debt, “but we prefer to finance it through the bond issue.”

The university used municipal bonds known as special-purpose revenue bonds authorized by the state Legislature for its renovation work. The bond program allows for eligible private capital improvement projects like education and energy projects to take advantage of cheaper interest rates, but the debt is repaid by the private entity and not taxpayers.

Kalbert Young, who was the state’s finance director when HPU sought the bond authority, said revenue bonds in general require dedicated revenue streams for repayment.

“Whenever you embark on taking on a large amount of debt, you obviously have to have revenue to support it. And if you didn’t have that revenue to begin with, your expectation is that that new investment is going to generate additional revenue, which is what HPU was counting on,” said Young, who is now chief financial officer for the University of Hawaii system.

“Their financial plan has been challenged,” he added. “What they thought they could generate from the new dorms has been difficult to get to. They’ve pretty much admitted that in what they’ve relayed to credit agencies in terms of how much revenue they’re going to generate.”

Dorms at capacity

HPU says the 270-bed dormitory is 99 percent full — the 1 percent vacancy is purposely kept available — and there’s a waitlist. Rates start at $8,568 for a shared studio for the 2017-18 school year.

Waipahu resident Michael Lasquero, 23, said even with scholarship assistance, he had to put his college education on hold last year because of increasing tuition at HPU.

“Since enrolling at HPU (in 2011), the cost of tuition has increased annually, and it doesn’t seem like it will ever stop,” Lasquero said, noting that his family’s out-of-pocket tuition cost was more than $5,000 per semester.