FKCC dormitory at center of financial disagreement
At the recent meeting of the Board of Directors of the Florida Keys Community College (FKCC), board members expressed strong disagreement with the state Auditor General’s (AG) finding that it was unlawful for the college to transfer funds to the Campus Foundation for the final construction stages of Lagoon Landing, the college dormitory. The board members’ frustration was heightened by the fact that the transfer of funds was made under another administration and they were now responsible for mopping up the mess.
Not only were they being pressed by the AG to correct this financial situation, the board will also face a Southern Association of Colleges and Schools (SACS) visit in a couple weeks and this accrediting association has told the college that it’s accreditation may be in jeopardy if this financial anomaly is not corrected to its satisfaction.
In addition there was general agreement that apparently “No one truly knows what it costs to operate [the dorm] and what the potential income is,” as stated by the college attorney, Ken Atin. There are currently 77 students residing in Lagoon Landing, with 20 registered for the summer and 40 for the fall semester. It was agreed dorm enrollment needs to be increased to come close to covering the costs of operation, which have been taken on by the college. The Campus Foundation is in default on payments to bondholders due to the low dorm occupancy and auditor’s fees.
The bondholders have put forth a forbearance resolution in which for two years they agree to take less, not take a principle payment and let the dorm revenues pay for operations, which are the responsibility of the college. In addition the bondholders want the college to accept financial responsibility for audits and other administrative costs amounting to about $35,000 per year. A forbearance resolution is essentially a letter of agreement between a lender and a borrower to change the terms of their original agreement. This new agreement will allow the college potentially to recoup $262,000 of the $800,000 transferred to its direct support organization (DSO), which is the Campus Foundation. The board members appeared to agree that at the end of the two-year agreement the remaining amount would have to be written off.
In exchange for agreeing to the financial terms of the forbearance agreement, the bondholders are also requiring the college to take specific steps to ensure the financial viability of the dormitory. 1-Review and adjust the rates “to the highest the market will bear;” 2-Require students to execute a two-semester lease; 3-Require students to pay a security deposit; 4-Create a committee to explore new revenue generating items such as food and beverage; 5-Develop leasing programs to attract more summer residents; 6-Conduct a capital campaign through the Campus Foundation; 7-Create pilot programs for at risk students; 8-Explore refinancing and restructuring bonds; 9-Develop more accurate financial reporting moving forward, including monthly reports and more detailed financial information on the status and progress being made.
The forbearance agreement received unanimous approval by the FKCC Board of Directors. In other action, the board approved Shadrach Neiss as Director of Human Resources and as attorney to offer legal council to President Gueverra. Attorney Ken Artin will continue to advise and represent the board. The board also approved Gueverra’s recommendation to increase the Board of Directors from its current 5 members to 7 members, which is allowed by state statute. He will recommend to the governor that three members represent Key West, two for the Middle Keys and two for the Upper Keys. Finally, Gueverra also reminded board members that his second year evaluation is coming up.