University cuts capital plan by $300 million

Correction Appended

The deferred projects include the creation of a storage facility for the Princeton University Art Museum, the building of an art-museum satellite building slated to be part of the Arts and Transit Neighborhood, a renovation of Green Hall, the development of new faculty and staff apartments, and assorted renovation and landscaping projects, according to the statement. The start date for the construction of the new neuroscience and psychology buildings will also be postponed until June 2010.

The changes, approved by the University Board of Trustees at a meeting with top administrators this weekend, were not meant to reach a specific dollar figure in savings, President Tilghman said in an interview.

Instead, those involved in the decision “asked [themselves] a very difficult question: Which [parts of the capital plan] could we defer without threatening the core mission … of the University?” she explained.

The capital plan is separate from the 10-year Campus Plan: The former allocates funding to projects, while the latter outlines the specifics of new construction and renovation.

The trustees had originally approved $3.9 billion in funding for the plan, which went into effect in 2006. The University has already spent or “irrevocably committed” $1.47 billion of that allocation, University spokeswoman Cass Cliatt ’96 said.

Cliatt explained that delaying projects could save the University money if building costs decrease as prices of both raw materials and contractors’ services fall because of a national decline in the demand for construction.

Though University officials decided against postponing other parts of the capital plan, including other elements of the Arts and Transit Neighborhood and the planned reconstruction of the Butler Apartments, the University is “constantly reassessing [the University’s financial situation] as the year goes on,” Tilghman said, adding that additional cuts could come as early as this spring.

“We want to have the right equilibrium between resources and expenditures,” University Executive Vice President Mark Burstein said in the statement. “The University is making prudent adjustments at this point, recognizing that further changes may become necessary later when we have a fuller understanding of general economic conditions.”

In addition to reducing capital spending, the University will slow the rate of salary increases to faculty and staff for the fiscal year 2010, Provost Christopher Eisgruber ’83 said at the annual public meeting of the Priorities Committee (PriCom) on Nov. 17.

This move will offset increased financial aid spending in the 2010 operating budget, he explained, noting that the University is planning on spending $3 million to $4 million more than it budgeted for this year’s undergraduate financial aid expenses because of increased family needs. The he University does not have a firm projection for future increases in financial aid demand, he added.

Eisgruber, the chair of PriCom and the University’s chief budget officer, explained in an interview following the PriCom meeting that the operating budget is partially insulated from market fluctuations because of the University’s spending model. Instead of tying its annual spending levels to short-term fluctuations in endowment growth, the University sets its long-term average annual spending target between 4 and 5.75 percent, he said.

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Because of its conservative spending model and strong endowment returns in recent years, the University will not be forced to make changes to its spending model in the next budget year, Eisgruber added.

From 2003 to 2007, when Princeton’s endowment returns ranged from 16.8 to 24.7 percent, the University launched a number of construction projects, including the construction of Whitman College, Lewis Library, Sherrerd Hall and the new Butler College. It was during this time that the University announced the 10-year Campus Plan.

The $1.75 billon Aspire capital campaign, announced in 2007 as the primary funding mechanism for the University’s various capital projects, had taken in $925 million as of late October. In an interview last month, University Vice President for Development Brian McDonald ’83 said that there was “absolutely no plan to change the time frame” of the campaign, which is slated to end in 2012.

“[The Aspire] campaign continues to go forward with enthusiasm,” Eisgruber said at a meeting of the Council of the Princeton University Community earlier this month. “Yes, there are headwinds there, there are challenges, but this is a marathon, not a sprint.”

In spite of the heavy reliance on private donations, “literally no capital project is paid for 100 percent by a gift,” Tilghman explained, adding that “the University itself makes a major investment in each one of these projects.”

Therefore, no spending project is immune from challenges to the University’s overall economic position.

Princeton is not alone among Ivy League schools in announcing plans to control costs and scale back capital investments.

Columbia will also conduct a review of its capital projects, and only those that are already underway or have been funded by private donation are guaranteed to continue as scheduled, Columbia President Lee Bollinger announced earlier this month.

Likewise, Harvard announced that it is considering cutting parts of its capital program, including expansion efforts in Allston, a Boston suburb that Harvard wants to redevelop into “an entirely new urban, community and campus environment,” according to the website of Harvard’s Allston Initiative.

Senior writer Kelly Lack contributed reporting.

Correction:

The original version of this article stated that $1.74 billion has been spent or "irrevocably committed" as part of the capital plan. In fact, $1.47 billion has been spent or "irrevocably committed." The Daily Princetonian regrets the error.