Why Cooper Union can’t be trusted

By Felix Salmon
April 25, 2012

Remember the murky finances of Cooper Union, which went from healthy to disastrous in no time at all? There’s a lot of controversy about what went wrong, where exactly the problems lie, and what’s the best way to fix them. But one thing’s abundantly clear: the management and trustees of Cooper Union have been unhelpfully opaque about the college’s finances for years, and the college’s students and alumni are fed up with the “trust us, we’ve worked it out this time” approach.

The first thing that’s needed, before any big decisions about things like tuition fees, is transparency about Cooper Union’s finances, and generally much more openness and clarity from management. After all, this is the place where contractor Jonathan Rose got a $2 million contract to oversee the new flagship academic building, while before* his mother Sandra Priest Rose sat on Cooper’s board of trustees — all without any kind of disclosure as to how he was selected. Was Sandra Priest Rose’s pledge of $5 million towards the building contingent on her son getting that contract? No one knows.

But transparency, it turns out, is exactly the opposite of what we’ve ended up getting. Yesterday, Cooper Union’s president, Jamshed Barucha, posted a “framework for action” on the college’s website. In it, we’re told that something called the Revenue Task Force has released an “interim report” which has “recommended” that Cooper “explore” charging fees for “academic programs that build on our unique strengths”, which “may include master’s and other professional programs”.

All of which sounds rather tentative, but in principle the timing here is propitious. Tomorrow sees the Second Community Summit at Cooper Union where the Task Force’s report could be discussed and debated.

Except, discussion and debate isn’t really what Cooper is looking for here. Barucha has not released the Task Force report, and shows no sign of doing so. And for all the qualifiers in his note, it’s quite clear that the decision has already been made. “Cooper Union to Charge“, says the WSJ; “Cooper Union Will Charge Tuition for Graduate Students“, says the NYT.

The WSJ is a good guide to the official Cooper Union line:

The school’s economic troubles date to the early 1990s, when rent it received from the land it owns under the Chrysler Building decreased from $13 million to $11 million while school expenses increased.

It’s far from clear that this is even true: Barry Drogin, for one, who has looked into this issue very deeply, says quite unambiguously that “the Chrysler Building rent and payments in lieu of taxes (PILOT) have risen steadily every year, with large increases scheduled every ten years starting in 2018.” In any case, the Chrysler-building-rent problem is long solved. Revenue from the building will be $32.5 million in 2018, $41 million in 2028, and $55 million in 2031. Cooper’s fiscal problems have nothing to do with insufficient income from the Chrysler Building, and the fact that Cooper still seems wedded to that storyline is worrying.

And then there’s this:

Mr. Bharucha said he has received backing for the plan in recent discussions with faculty and alumni nationwide. “There is very strong, if silent, majority who are highly supportive of a plan that energizes the institution,” he said.

I love the idea of a “very strong” majority which is “highly supportive” of this plan — and yet, for all their incredible support, are somehow completely silent. Bharucha might as well have said that pigs fly when you’re not watching them: his statement might be unfalsifiable, but at the same time it’s also completely implausible. Cooper’s stakeholders are incredibly mistrustful of Bharucha and the trustees, and it’s hard to see how even a silent majority could be supporting a plan which exists only in the vaguest possible form.

After all, we’ve been here before. In 2006, Cooper Union filed something called a cy pres petition, in a successful attempt to get New York to allow it to borrow money against the Chrysler Building. That petition only came to light years later: the whole process, at the time, was shrouded in secrecy. And you can see why that might be: even as Cooper was loudly proclaiming its health in public, the petition was saying that “The Cooper Union currently faces the possibility that it will become unable to carry out its statutory mission in the not-too-distant future”; that it “currently faces a grave fiscal crisis”; and that even faced a real risk of losing its academic accreditation.

As part of that petition, Cooper committed to implementing something called a Master Plan, which involved cutting spending, raising $250 million, increasing the amount that alumni donate to the school, and other things, none of which really happened. As the board of trustees reported in 2011, “three key components of the Master Plan were not achieved as anticipated” — all of which were vastly more germane to the current fiscal crisis than any change in Chrysler Building rents in the early 1990s.

In other words, there’s really no reason why anybody should trust Bharucha or the trustees — to have any faith that they’re being fully truthful with the rest of the school, or that they’re in any position to successfully execute on their promises.

And what of the huge new $160 million (ish) academic building? The trustees still say that it has nothing to do with the fiscal crisis, despite the fact that it’s responsible for some $10 million a year in interest payments:

It is also important to state that 41 Cooper Square was not the cause of the current financial dilemma. Its construction relieved Cooper Union of the costs that would have had to be incurred to renovate the old engineering building and the Hewitt Building to make them acceptable sites for a 21st century education and meet accreditation standards.

This just doesn’t pass the smell test. There’s some small possibility that it’s true, but unless and until the trustees show how they arrived at this conclusion, I have no reason to believe them. The engineering faculty actually voted against the construction of the new academic building, saying that they were more than capable of staying where they were at significantly lower cost. (This fact was, of course, not included in the cy pres petition.)

More to the point, there’s never been a coherent account of how exactly Cooper Union ever intended to pay off the massive $175 million loan it took out to construct the new building. It needed its income from the Chrysler Building to pay its annual costs; and of course it doesn’t have any tuition revenue, since it doesn’t charge tuition.

This is the main thing that has never been adequately explained — by constructing the new building, Cooper Union added on a permanent $10 million annual expense, without any stated means of being able to cover that expense. The new academic building is a sunk cost at this point, of course. But until the trustees explain their logic surrounding its construction, it’s going to be extremely difficult to trust them to do the right thing going forwards.

*Update: Finally, some clarity on the Jonathan Rose/Sandra Priest Rose question. Tellingly, it comes from Roxanne Donovan, a representative of Jonathan Rose Companies, rather than from Cooper Union. She says that Jonathan Rose was hired more than a year before his mother was invited to join Cooper’s board; she also says that there was a formal RFP process for the selection of Jonathan Rose Companies.

Why Cooper Union wasn’t able to be transparent about this itself simply baffles me, and really makes my point. Just because you’re being secretive doesn’t mean you have something to hide.

Comments
14 comments so far

“… the management and trustees of Cooper Union have been unhelpfully opaque …, and the college’s students and alumni are fed up with the “trust us, we’ve worked it out this time” approach.” (FS)

Are all of the trustees of the school economists?

Posted by MrRFox | Report as abusive

Isn’t Cooper Union a private institution? Why does it need to be transparent to anyone, especially the media?

Posted by right | Report as abusive

It needs to be transparent because it is a public charity, a 501(c)3, to which substantial public benefit accrues (like no property taxes).

Additionally, I would argue that if they want alumni to contribute to their endowment, their own enlightened self interest would push them in that direction.

FWIW, I’m wondering if that academic building was built with a goal of forcing tuition on the institution.

Trustees at colleges are always big on pushing their schools into “elite” status, and they might have seen making the institution pricier would make it more prestigious.

Posted by Matthew_Saroff | Report as abusive

Should add: Cooper Union has a repution as a top 10 Engineering School in the country, which is pretty damn prestigious anyway, at least to this engineer.

Posted by Matthew_Saroff | Report as abusive

Since the announcement on Halloween last year that our school was basically in the shitter, the president and trustees have continuously blamed ALUMNI for not donating to the school enough to keep it running.

How are alumni supposed to feel safe donating to an administration that messed things up so badly and for so long, with — as you have explained very clearly here — no transparency??? Unless the mismanagement ends, the situation will continue to get worse.

Students and faculty have had to dig relentlessly into public reports and documents in order to determine fact from fiction. This isn’t how a charitable institution should be run.

Posted by belemily | Report as abusive

After watching this unfold since 2005 (from my point-of-view), it was blindingly obvious the schol was having issues with cash — dating back to the 2001 dot.com crash and even further back during the 1970s with the loss of the green space that CU once owned.

The finances have never been visible to the public – and the activities/actions that were necessary were often hidden under the guise of “not important”, “all is fine”, “the new real estate will generate the revenue”.

There are some sources of revenue that have not been discussed at all. Cooper Union has (supposedly):

1. The Piano Building – does it make any revenue from that building?
2. The commercial spaces on the ground floor of the Academic Building – any revenue figures? The head of that effort on the Administrative side always suggested that would be a terrific source of revenue.
3. The parking garage by the Bowery Club (end of Cooper Square)?
4. The new building going up where the old Engineering Building was (51 Astor Place)? Any revenue there? Recurring revenue?
5. Reality of the Chrysler Building revenue – at one point, it was discussed that the “mortgage” on the tax revenue from the Chrysler Building curtailed the increasing revenue since they needed a large sum to handle the $160M build. So, even if the Chrysler revenues are increasing, Cooper Union may not benefit.

So – where is the info? Where is the revenue? Why doesn’t these sources of revenue help keep Cooper Union in the black? And, why was it so important to sell off our future to have a building now?

Yes – the Engineering Building was in disrepair – and sick. The maintenance cost was quite sizeable. But was it on the order of $160M + $10M per year? And the loss of additional space for artists in regards to the Hewlett Building was also a serious impact.

For some reason, the past decisions do not give confidence to the future direction. But the people who were part of it – former President George Campbell Jr., former VP Robert Hawks – what happened? Why are they not part of this discussion explaining the choices and how, by their direction, we can move forward? They architected this plan – where is the ownership of the outcome?

Posted by SanfordMD | Report as abusive

“Trustees at colleges are always big on pushing their schools into “elite” status, and they might have seen making the institution pricier would make it more prestigious.”

Matthew, my fear is that if Cooper starts to charge tuition, it will have exactly the opposite effect. Most Cooper students are smart enough to get into pretty much any school they choose, including schools with much greater “name recognition” than Cooper. While the quality of the education undoubtedly draws many of them to Cooper, the full tuition scholarship is also a hell of a selling point. For instance, many of my friends at Cooper were accepted to Ivy League schools, but chose to attend Cooper instead because it was “free.” Take away the scholarship, and Cooper will suddenly have much more competition to attract the quality of students that it has in the past.

Posted by So-crates | Report as abusive

By the way, I’m glad that I’m not the only one who was bothered by the inconsistencies between President Barucha’s letter and the subsequent WSJ and NYT articles. It was kind of jarring to read his email, which seemed to imply that charging for certain programs (like the masters program) was simply something that was being considered, and then to hear from someone else that it was pretty much a done deal mere hours later.

Posted by So-crates | Report as abusive

I can’t help but think this building exists for the same reason as the war in Iraq or Netflix streaming. Somebody with clout got enamoured with the idea, and pointing out its flaws became career-limiting. Like most boondoggles, the idea was grand, inspiring, and financially unrealistic.

It’s just a guess, but that’s a pattern I’ve seen over and over.

Posted by JayCM | Report as abusive

Felix, thank you for your clear expression of the issues and facts and allow me to provide some additional information to your readers.
1. Transparency of previous administrations – Throughout the early 80′s, when I was a reporter on the student newspaper, we were provided with the financial statements of the school. All we had to do was ask for them. For all of those years, Cooper had a surplus – the “decades of deficit spending” story is a total lie. In December 2011, the board admitted that Cooper had a surplus for 6 of the past 12 years, in agreement with an analysis I had published on Thanksgiving.
2. Jonathan Rose story – Although it may be true that Jonathan’s mother was not on the board until after their selection, William Sandholm, COO of Rose Associates, was on the board and was CEO of the Astor Place Holding Corporation, the not-for-profit arm of Cooper in charge of its real estate holdings. The Alumni Pioneer asked Cooper public relations to clarify the selection process and declined to comment. Over Christmas break, Sandholm was removed from the Cooper board (his name was removed from the Cooper website, no formal announcement was made).
3. The Cooper Union got $97 million as a payment in lieu of rent for the vacated Engineering Building. This money, in addition to capital campaign fundraising, was supposed to replenish the hole left by funding the creation of the new academic building and the retirement of DASNY bonds from construction of student housing. Unfortunately, the huge cost overruns from Jonathan Rose’s management of the construction, and huge losses in hedge funds in the 2008 crash, resulted in a non-real estate endowment in 2011 equal to its value in 2000, adjusted for inflation (using CPI). Three quarters of the “$600 million endowment” figure cited everywhere are the “fair value of the Chrysler Building,” an income source whose rent you have already accounted for (there is also a significant “payment in lieu of [property] taxes.” or PILOT, bringing in over $17 million a year, at present. You are correct that there was a rush to build the new academic building, accompanied by a false story that to not do so would threaten the engineering school’s accreditation (in fact, it was lack of individual studio space for artists and architects that had been criticized by the accreditors).
4. The largest source of mistrust of the administration is that the alumni were told that austerity measures would be instituted after the 2008 crash, but instead Cooper expenses increased by 10% PER YEAR. The new president told the students that Cooper could run out of operating cash in two years, then instituted no layoffs or salary cuts until the following year. He announced a hiring freeze, hired people anyway, and deleted reference to the hiring freeze from the Cooper website (this is becoming a repeated Cooper tactic). He announced the graduate tuition plan one day before an OWS protest featuring Cooper and two days before release of the Friends of Cooper Union publication of “The Way Forward,” a community consensus document created by all stakeholders over a five month period. At this writing, the strategy worked – every news outlet has covered the President announcement, and none have read “The Way Forward” and described the co-opting of the community process by the administration. With classes ending on May 9, many in the Cooper Community are working to stay focused on the real story, which you have so eloquently expressed. Thank you,
Barry Drogin Cooper EE ’83
Publisher, The Alumni Pioneer

Posted by AlumniPioneer | Report as abusive

FWIW, if the Cooper charges tuition, it will lose its elite status; its no-tuition status makes it a great school, attracts the great students, which in turn attracts the great professors. Once it starts to charge tuition, it becomes just like Parsons, Pratt, SVA, etc; those are okay schools, but in no-way elite. And the quality of the students that come out of those schools is – on average – middling at best.

Posted by JamesHicks | Report as abusive

Kind of reminds me of NYU’s massive $6 billion expansion a few blocks away. No transparency and an Board of Trustees that just wants to build, build, build.

Posted by OceanDrive | Report as abusive

My son is a serious artist who chose to go to Cooper Union because he wanted a rigorous environment that valued art as highly as engineering, architecture and outside of the this school as high as our society values medicine, business and/or finance.His first year of 2011 was fantastic and then the politics began. The art department seemed to lead the protests sacrificing the value of its mission which was to guide young serious artists into serious careers. My son was first very active in the protests because of his love for Cooper Union, but later he began to see what really was happening. The Cooper administration/educators did not seem to value art education and allowed the art students to destroy their own program. My son said how his critiques changed. If you were not involved with the politics your art was irrelevant. Exhibitions were no longer that important. He watched the tragic demise of a once strong art department all in the disgusting name of politics. No one seems to realize the true tragedy of Cooper Union. It is what all this has done to the current students who chose this school above others because they believed in its intense process and pure values. My son refused many scholarship offers to other schools to accept the promise of Cooper Union. I am sure he is not alone in his frustration and disillusionment.

Posted by jlj212 | Report as abusive

continuously i used to read smaller posts which also clear their motive, and that is also happening with this paragraph which I am reading at this time.

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