NUI GALWAY SPORTS CENTRE LEVY 2021
NUI GALWAY
SPORTS CENTRE LEVY
Student Contribution to Sports Centre outlined in 2005: €15.7m NUI GALWAY SPORTS CENTRE LEVY 2021
Amount Collected up to 2020: €20.8m
€15.7m €20.8m
NUI GALWAY SPORTS CENTRE LEVY 2021 The Sports Centre Levy The Sports Centre Levy was introduced by referendum in 2003 as a €100 contribution towards the construction costs of the Sports Centre and the Cultural Centre (Áras na Mac Léinn). It was first collected in September 2007 and over the past fourteen years has yielded €20.8m. The construction of the Sports Centre and renovation of Áras na Mac Léinn were very positive developments for the university community. Students were excited at the prospect of state of the art facilities and were eager to play a part in securing them. Generous funding from Atlantic Philanthropies, which was reportedly dependent on students paying a levy, helped secure a 70% positive result in the levy referendum. The portion of costs to be covered by the €100 levy is unclear. Amounts from other funding streams, and changes therein, have also caused confusion. However, the main source of frustration amongst students who pay €100 every year is the 5% interest rate which has been applied to the sports centre costs. Based on the most recent statement from the Director of Management Accounting, the interest to be paid by students via the €100 levy is €6.89m. Students have contributed €20.8m to the construction cost of the Sports Centre. Bear in mind the levy is for construction costs only. Students who wish to use the Sports Centre must pay additional membership fees. Students feel they have paid more than their fair share and wish to draw a line under their €20.8m contribution.
NUI GALWAY SPORTS CENTRE LEVY 2021 The Sports Centre Cost The Sports Centre opened for business in September 2008. Although the budget was €21.844m, a conciliation process to address delays and shortfalls resulted in the budget being re-set to €22.711m at the end of 2012. However, the difference of €0.867m was funded by surpluses on other projects, so for the purposes of this paper, the cost to be funded can be considered to be €21.844m. The cost of renovating Áras na Mac Léinn, was budgeted at €4.993m. It is generally accepted that the €100 student levy would fund €2m of that cost. The remainder was to be funded by Atlantic Philanthropies, the University, Gifts and state grants. Funding The funding of the Sports Centre is outlined in updates of the Infrastructural Development Programme 2005 / 2010. Regular updates of this Programme were presented to FRC meetings. The Sports Centre and Cultural Centre were to be funded by the Student Levy as well as state grants and gifts, including €8.5m from Atlantic Philanthropies. One such update in November 2005 outlined a total of €15.7m to be funded by the student levy (€13.7 for the Sports Centre and €2m of the Cultural Centre). However, the amount to be funded by the levy became something of a moveable feast. Statements relating to “C1000-University Sports Centre” first shared with the Students’ Union in October 2014, outline sports centre expenditure at €21.930m with funding of €6.007m, resulting in a deficit of €15.9m to be covered by the Student Levy (Appendix 1). It is interesting that the portion of costs to be covered by the Student Levy is presented as the deficit after other fixed sources of funding have been counted. It almost suggests that the amount is whatever “debt” is left over after other funding sources are counted, or re-counted. It is important to remember that at the time of the first statement, the Sports Centre had been operational for six years at that point, so it would be expected that construction costs and funding had been finalised by then. The next statement in February 2017 obviously carry the same construction costs and funding figures, but by October 2018 there was a change. In October 2018, the funding total had been reduced to 4.95m and the expenditure had increased to 22.699m resulting in much larger deficit of €17.749m (Appendix 2).
NUI GALWAY SPORTS CENTRE LEVY 2021 The explanation received from the University for the reconciliation in October 2018 is as follows: “These journal entries represent the reversal of previous entries funding the Sports Centre from the University Income & Expenditure account. The original plan to fund the Sports Centre did not envisage any financing directly from the Income & Expenditure Account. The two entries referenced above should never have been posted to the Sports Centre account in 2008/2009 and 2009/2010. The removal of the monies was simply correcting a posting made in error.” The process of correcting the posting made in error, ten years after the supposed error, has added an additional €1.827m to the Sports Centre deficit. It is unclear how the costs reported in the Infrastructural Development Programme Updates presented to FRC did not include this amount. Interest The interest element of the sports centre levy is probably the most contentious issue in any discussions between the Students’ Union and the University. The amount of funding to be covered by the levy ranges from €15.7m to €16m to €17.749m. Whatever the figure is, the Students’ Union is of the view that the €20.9m collected so far covers the cost. However, we are told that the costs to be covered by the levy are not paid off, because interest has been applied which has added almost €7m to the bill. The peculiar thing about the interest is that it is being charged by the University. The University didn’t borrow the money needed to build the Sports Centre from any financial institution. The University effectively lent the money to itself to build the Sports Centre and is now charging interest on the repayments from the student levy to pay for the building that it owns. There is absolutely no record of any agreement between the Students’ Union and the University regarding any interest rate being applied to the levy. This is not in dispute. The University claims that references in FRC minutes referring to self-funded borrowing forms an “implied contract” on the basis that the Students’ Union holds one seat of thirteen seats on FRC. The references to self-funded borrowing were also made several years after students agreed to the levy by referendum. Students who voted to increase the levy by €100 had no idea that the University would charge an extra €7m to provide sports facilities.
NUI GALWAY SPORTS CENTRE LEVY 2021 It has been suggested that because the University used cash reserves to fund the Sports Centre it incurred an “opportunity cost”. The €15.7m paid upfront by the University could have generated a return by being invested elsewhere. In any commercial arrangement that would be an understandable course of action. But it seems strange to charge students for the opportunity cost, particularly when the Sports Centre is a university asset. It is also important to note that the Sports Centre is a revenue generator for the University. It produces a guaranteed annual return of approximately €100k in the form of licence fees from the operator. The operator is also responsible for paying all rates, utilities and maintenance costs for the building. Even if students had been aware that the University would charge an interest fee to cover the opportunity cost, and even if they had agreed to it, 5% is excessive. Perhaps as an admission that the rate should not have been applied, a change to the rate was applied in March 2019. The rate was dropped from 5% to 1.704%. The decision appears to have been made by the University Bursar and is outlined in an email to the Students’ Union President (Appendix 3). University management maintains that the 5% interest rate was agreed because it was alluded to at FRC meetings at which the SU President was in attendance. University management has noted that this formed an “implied contract”. Under the “implied contract” the 5% interest rate equates to €8.42m in interest. The unilateral change to the interest rate, (and presumably to the “implied contract”) reduces the amount of interest to €6.88m, a difference of €1.54m. Conclusion The Sports Centre is an excellent facility and provides considerable benefits to the NUI Galway community. It is also a significant revenue generator for the University which collects annual licence fees from the commercial operator. Also, the operator is responsible for the complete running of the Sports Centre which means the University does not have to pay maintenance costs or rates. The construction costs have been met as agreed it’s time to stop charging students for a building that has been paid for.
NUI GALWAY SPORTS CENTRE LEVY 2021
Appendix 1 Statement of Sports Centre Account, October 2014
NUI GALWAY SPORTS CENTRE LEVY 2021
C1000 ‐University Sports Centre
2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Totals
DMA
Op Funding Deficit ‐20,863,954 ‐15,384,509 ‐13,560,376 ‐11,457,378 ‐12,655,092 ‐11,868,127 ‐10,978,085 ‐10,043,540 ‐9,062,268 ‐8,031,933 ‐6,950,080 ‐5,814,135 ‐4,621,393 ‐3,369,014 ‐2,054,015 ‐673,267
Estimated Levy Int Rate Funding 4,869,291 1,138,000
6,007,291
Expenditure 5% Int Charge ‐20,863,954 ‐147,239 ‐732,596 ‐63,858 ‐732,596 1,262,177 ‐641,389 ‐2,064,071 ‐572,869 ‐53,240 ‐632,755 ‐593,406 ‐548,904 ‐502,177 ‐453,113 ‐401,597 ‐347,504 ‐290,707 ‐231,070 ‐168,451 ‐102,701 ‐33,663 ‐21,930,185 ‐6,951,834
1,483,449 5% Levy 1,489,989 1,482,587 1,482,210 1,439,226 1,472,959 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 1,483,449 700,000 22,201,461
Cl Funding Deficit ‐20,863,954 ‐15,384,509 ‐13,560,376 ‐11,457,378 ‐12,655,092 ‐11,868,127 ‐10,978,085 ‐10,043,540 ‐9,062,268 ‐8,031,933 ‐6,950,080 ‐5,814,135 ‐4,621,393 ‐3,369,014 ‐2,054,015 ‐673,267 ‐6,930
Condition of Levy
€100 pa per student ‐ No Provision for inflation
Levy Estimated
From 2014 figures based on student numbers of 13,000 Students @ €100 for 18 years
October 2014.
NUI GALWAY SPORTS CENTRE LEVY 2021
Appendix 2 Statement of Sports Centre Account, October 2018
NUI GALWAY SPORTS CENTRE LEVY 2021
Oct‐18
Estimated Levy Int Rate
University Sports Centre (C1000)
Op Funding Defici
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25
‐€19,657,221 ‐€15,476,641 ‐€13,693,744 ‐€12,908,441 ‐€14,178,708 ‐€13,467,925 ‐€12,657,872 ‐€11,822,980 ‐€10,896,077 ‐€9,907,352 ‐€8,812,805 ‐€7,664,545 ‐€6,458,873 ‐€5,192,916 ‐€3,863,662 ‐€2,467,945
Funding
€3,811,502 €1,138,000
4,949,502
Expenditure
‐€20,367,901 ‐€138,050 ‐€63,858 ‐€12,220 ‐€2,064,071 ‐€53,240
‐22,699,340
5% Int Charge
Levy
€0 €0 ‐€982,861 ‐€773,832 ‐€684,687 ‐€645,422 ‐€708,935 ‐€673,396 ‐€632,894 ‐€591,149 ‐€544,804 ‐€495,368 ‐€440,640 ‐€383,227 ‐€322,944 ‐€259,646 ‐€193,183 ‐€123,397
€1,302,616 €1,408,064 €1,489,989 €1,482,587 €1,482,210 €1,439,226 €1,472,959 €1,483,449 €1,467,786 €1,518,052 €1,533,528 €1,589,915 €1,588,900 €1,588,900 €1,588,900 €1,588,900 €1,588,900 €1,588,900
‐8,456,385
27,203,781
Condition of Levy €100 pa per student ‐ No Provision for inflation Estimated Levy
€1,588,900 5.00%
Based on Student numbers of 15,889 x €100 = €1,588,900
Tfr to Cultural Centre
Cl Funding Deficit
‐€2,000,000
‐€19,657,221 ‐€15,476,641 ‐€13,693,744 ‐€12,908,441 ‐€14,178,708 ‐€13,467,925 ‐€12,657,872 ‐€11,822,980 ‐€10,896,077 ‐€9,907,352 ‐€8,812,805 ‐€7,664,545 ‐€6,458,873 ‐€5,192,916 ‐€3,863,662 ‐€2,467,945 ‐€1,002,442
‐2,000,000
NUI GALWAY SPORTS CENTRE LEVY 2021
Appendix 3 Email from University Bursar reducing interest rate from 5% to 1.704%
NUI GALWAY SPORTS CENTRE LEVY 2021 From: Bailey, Sharon Sent: 05 March 2019 09:29 To: Students Union President <su.president@nuigalway.ie> Cc: Gaffney, John <john.gaffney@nuigalway.ie> Subject: RE: Levy interest figures Hi Megan, Apologies for the delay sending on these figures. I’ve shown the figures with the historic 5% interest and the new proposed 1.704% interest with effect from financial year 2018/19. I’ve copied John so that he can confirm that I’m operating from the correct opening balance.
Kind regards, Sharon Sharon Bailey Bursar / Chief Financial Officer, NUI Galway Chair, European Association of Research Managers & Administrators (EARMA)
NUI GALWAY SPORTS CENTRE LEVY 2021
NUI GALWAY SPORTS CENTRE LEVY 2021
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