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Last year, a controversial referendum to institute a $500 student fee on commerce undergraduates in order to fund Phase 2 renovations to the Sauder building was a major topic of discussion on this blog due to the fact that we viewed it as a backdoor tuition increase. Amidst ample debate, the referendum passed easily and the board of governors held an extraordinary meeting to put the fee in place. Student fees would fund the entirety of Phase 2, and it was understood by everyone that the completion of Phase 2 represented the end of the Sauder renovation project. Although we were disappointed with the outcome, it appeared that a definitive conclusion had been reached.
Earlier today, the board of governors approved a Phase 3 of Sauder Renovations.
Two weeks ago, no one knew Phase 3 existed. Construction will be starting in April. However, it was discovered that Sauder has cash reserves of $24M, which would have been enough to pay for all of Phase 2, making the entire $500 fee unnecessary. As part of the conditions for Phase 3 to go ahead, Sauder will have to pay $2M back to UBC and $2M towards the mortgage backed by student fees.
Manufacturing Crisis
Phase 3 consists largely of cosmetic improvements to staff and faculty areas of the building.
This additional renovation work includes: academic and administrative office layout and finishes, elevator lobby finishes, washroom upgrades, electrical upgrades, exterior envelope repairs, and window replacement.
Despite the fact that the upgrades proposed in Phase 3 have never previously been considered part of the overall Sauder renovation project, calling it Phase 3 allows Sauder to piggyback these new upgrades onto the project structure of the overall Sauder renovation project. While this approach does make a sense from the perspective of having the same project management and contractors working on everything as a unified whole, it’s also a way of going around the regular approval process for capital projects at UBC.
Normally, building projects go through a multi-step approval process at the Board of Governors. “Board 1″ and “Board 2″ approval levels are concerned with project conception, planning, and design. “Board 3″ approval is a green light to go ahead an execute the project. It took Phase 1 of Sauder almost two years to progress from Board 1 to Board 3.
For Phase 3, the board simply revised the previously granted Board 3 approval for phases 1&2 to now include a Phase 3. This effectively skips the Board 1&2 approval levels altogether. In the documentation, it states: “Executive approval for Phase 3 was granted in November 2010.” The project will go from conception to full approval in the span of a few short months, while avoiding almost all of the checks built into the system.
In the lead up to the fee referendum, Phase 2 was portrayed as extremely urgent. In fact its urgency was due only to the fact that it was already underway; Sauder had started construction without securing the necessary funding. Phase 3 was once again being portrayed as urgent for a similar reason: that it’s necessary to take advantage of the fact that construction crews are already swarming around the building completing Phase 2. It’s urgent because it’s already underway. It’s another manufactured crisis.
What disaster could result from not redecorating office and elevator lobbies? The washrooms still serve their purpose in their current state. The building won’t collapse without immediate exterior and electrical upgrades. It could all be done at a later date. The board was backed into a corner and forced to decide on an “urgent” project in a very short time frame with little or no advance notice.
Sadly, it worked, just like it worked with commerce students. Phases 1, 2 and 3 are all going forward. At the same time, it has significantly eroded the Board’s trust in Dan Muzyka. But it’s commerce students who should feel most betrayed. They were swindled out of millions.
Fool me once, shame on you; fool me twice, shame on me
Phase 3 is projected to cost $5.7M. (Phase 1 was $46.4M; Phase 2 was $17.9M) Where is the money coming from?
The Phase 3 renovation has an estimated capital cost of $5.684 million. Funding for the project will come entirely from Sauder School of Business reserves. No UBC Central Administration funds will be required. No debt financing will be required.
Translation: Sauder has $5.7M sitting in their piggy bank. The original board documentation contained no other details about financing, which simply raised more questions than it answered.
Scenario A:If Sauder had millions in the bank at the time, why didn’t they volunteer any of it to contribute to Phase 2 renovations in order to cut the student fee by hundreds of dollars? Last year’s student fee referendum amounted to a bailout of the project; why was the fee portrayed as the only available option?
Scenario B: If these funds were generated in the past year, how was such a large surplus accumulated? Why does renovating their own offices instead take precedence over paying back some of the $23M of debt backed by student fees, or any other projects that would improve the student experience?
This post was held back upon request in order to give the board an opportunity to react to the proposal without the administration going on the defensive as a result of public scrutiny. We’re happy to report that in the version ultimately passed by the board more information was provided regarding Sauder’s reserve funds:
“Sauder, which benefitted from better than expected market conditions and from the very strong performance of its programs (…) is expected to end the 2010/11 fiscal year with $24 million in unrestricted reserves.”
Scenario A was true. No hard numbers have been made available but it seems safe to say that at the time of the referendum Sauder likely had enough cash on hand to pay all of Phase 2′s $17.9M cost outright! Sauder told students the project was vital to the future of the school. But it wasn’t vital enough for the faculty to put any of their own money towards it. The faculty dishonestly cried poverty while sitting on substantial cash reserves. At a bare minimum, the student fee should have been hundreds of dollars lower.
Scenario B was also true. Sauder earned a large surplus in the last year although again, hard numbers were not made available. Rather than paying back students who funded an unnecessary bailout, they hatched yet another renovation project. The most detailed FAQ from last year’s referendum asks “Will the Dean continue to seek funding from UBC and the provincial government if the student fee is passed?” The answer starts “Yes, the Dean will continue to raise money from every possible source.” Commerce students should be absolutely furious that Sauder does not consider themselves to be a possible source of funding for the project, then or now. Through the building fee, students were cheated out of millions that the faculty could have paid for, but simply didn’t want to.
To give an indication of how substantial Sauder’s reserves are, the board didn’t ask them to divert any of the funds going towards Phase 3. Instead, they modified Sauder’s proposal to include what amounts to a $4M tax on the project. From its reserves, Sauder must pay back $2M to UBC for their contribution towards Phase 1. Sauder must also pay $2M towards the debt backed by student fees: $440k towards the MBA/ECM/MMOR mortgage on Phase 1 and $1,560M towards the CUS mortgage on Phase 2. This is expected to reduce amortization by 7 years. However, the student fees are still in place and have not been reduced. It’s simply that fewer students will have to pay them. The only beneficiaries are students in years 29 through 35 of the mortgage, who will now pay nothing.
In approving the student fee last year, it seemed that most people knew the rules were being bent, but that the events around the Sauder renovation project were an exception, never to be repeated again. People would have to do better in the future. Less than a year later, Sauder managed to conjure another project out of thin air with questionable funding, presented in a way designed to exploit the system and avoid scrutiny.
Because the project was relatively minor, the board let it go ahead. But they made it clear that what was originally proposed was unacceptable, and caused $2M to be given back to students. The board should be cautiously applauded for this turn of events. The immediate Board 3 approval still gives pause for concern and we wish the funds could benefit students much sooner than 30 years from now. As well, if Sauder continues to run multi-million dollar surpluses, they should pledge to devote a fixed portion of those surpluses to further paying down student debt.
However, it’s a step in the right direction. A few years ago, a proposal like this would have simply been approved as-is and the CUS certainly cannot be counted on to pressure the Sauder administration to repay even a penny. Not only that, the board found a creative solution and was not afraid to use their authority to ensure student interests were taken into account.
On the other hand, Sauder’s administration has been a model of unscrupulous behaviour throughout the entire renovations process. The project’s scope was expanded from $41M to $69M and was pushed ahead even when proper funding wasn’t accounted for, manufacturing a crisis that others were expected to clean up. They attempted to institute their own student fee, and then when that failed, bent the rules by going through the CUS, while misleading students about the urgency of the project and withholding their own substantial cash reserves. Unfortunately, most commerce students are unlikely to be upset by all of this, publicly at least. They should be thankful that the board stood up for them, and perhaps they should try it themselves.
Good work. Really good work.
I have new-found respect for UBC Insiders. Fantastic job.
Sharp stuff.
I honestly dont see a problem with this. Our tuition fees are relatively low already, and the extra funding could probably have helped improve the faculty as a whole, so an increase of $500 per student does not really strike me as huge of an issue as this article makes it out to be.
solid work guys
http://www.gov.bc.ca/su/minister.html
So Sauder had/has the money to pay for the project entirely, and they’re still making students pay it off for the next 28 years?
I worry if this is the how the next generation of business leaders are learning…
I’m going to waiting out for Phase 4.
Renovation projects like these are always a disaster. If preplanning isn’t done correctly, you can be out of budget big time. Especially since most of the trades will tack on an extra percentage for work post construction.
@Johnathan
I will gladly let you pay for my tuition, thanks, since you’re so rich and can just pull $500 out of your bum bum. =) while the rest of us have to work one and a half weeks to earn that much part time ^_^
^Like
One of the main issues is that 3rd and 4th year students who wouldn’t have to pay the $500 fee were able to vote in the referendum. Being good “business people” they saw an upgraded building as being of value to their Sauder degree at a cost of $0.
Dean Dan is actually still very respected by Sauder students. He has increased the visibility of our school in the business world and has improved our graduate programs. I think you’re right in saying that commerce students won’t really care about this news, even though they should.
@Commerce student
I completely agree with your point about 3rd and 4th year students being able to vote in the referendum when they would not be affected by the fee.
In addition to this I was in first year when this happened, and I remember very clearly at the time that the evening the information session for the referendum was held was the night of a financial accounting midterm that ALL first years had to write. This meant that NO first years were able to attend the important information session on the referendum which also informed us of voting procedures and when to vote.
Whether this was done on purpose or not I do not know, but the point is that last year’s first years are affected by the increase in student fees, and none of us were able to attend the information session, which took place on the Wednesday night of the accounting midterm.
Following this, the only email that was sent out informing students of how and when to vote was sent out around 8-30 pm the Friday night after the Wednesday information session which none of us attended. Needless to say, most first year students would not be checking their email on a Friday night at 8-30pm. The voting then closed at 11:59pm that same night. Again I cannot say that this was necessarily done on purpose, but regardless I can definitely say that hardly any first years voted in the referendum because of these circumstances.
At the time I felt that this was very sly and unfair. If you are going to hold a referendum, fine, but at least make sure that the students who it is going to affect are well informed and know when to vote. Things should have been done properly and in a fair way and they weren’t. In theory and according to the CUS constitution everything was in order, but in reality the interests of the students were not put first and this is a problem.
I agree that commerce students should really take more of an interest and responsibility for what is going on in their faculty.
This isn’t just an issue that Commerce students should be concerned with. All students ought to be concerned. I fear the next time a faculty desperately needs to make improvements or additions to the academic plant, that they will now view student levies as a legitimate source of funding. That’s not acceptable for a public university.
Also, I’d hope the business leaders of tomorrow in the Commerce faculty are learning to exercise some critical thinking. Ask yourselves this – if the Dean was so successful in “raising the profile” of the school in the business community, why was there insufficient support from that community to make these upgrades?
If a law firm charged its clients additional “retainer fees” to plate its desks in gold instead of spending it on improving quality of its staff – all the while sitting on a pile of cash, what would the customers say?
Sad.
Like Commerce Student, I was unimpressed by the fact that 3rd and 4th years were allowed to vote in a referendum that will not represent them nor affect them. In fact, I remember that students will not have to start paying the $500 fee until Phase 2 is completed, and the expected completion was September 2013, which means that many of last year’s 2nd years would not be affected either. So, they just had to target the 1st years, the graduating class of 2013.
Concerned Commerce Student had already commented on the Accounting midterm “coincidence” and I’d like to add that the COMM 299 (a course every student had to take) professor at the time almost threatened us by saying something along the lines of “If the referendum is not passed, we will cut your services such as the career center and other programs.” Obviously, 1st years would be frightened because there’s still a long way to go and we need these programs/services, especially later on. Even 3rd and 4th years who felt compelled to vote No would be swayed to the other side. If Sauder’s programs and services are cut, then Sauder’s reputation or “value” drops. Therefore, their BCom’s “value” also drops. Why would they allow their own degree’s value to drop if they don’t even have to pay for the $500 fee?
According to my memory, the results for 3rd and 4th years were both 90%
+ for Yes.
A few comments/clarifications:
@Concerned Commerce Student: While I agree that more advertising/communicating could have been done, and that the process was (in my opinion) rushed, there were actually 6 sessions:
Tuesday March 9 from 1-2
Wednesday March 10 from 11-12 and 4-5
Thursday March 11 from 11-12 and 3-4.30
Friday March 12 from 1-2.
So lots of opportunity for you to check it out, both before and after your midterm.
As for the voting period, the referendum opened Wednesday night just after midnight, and didn’t close until Friday at midnight. So 48 hours in which to vote.
@TLG: this went to referendum. I don’t know what required voter turnout and percentage of votes in favour are for the other faculties to pass a referendum, but I doubt they could rally students to the same extent as Commerce, due to their larger size and lesser engagement. Note that this is not to say that other faculties don’t have engaged members, but Commerce elections turnout was about 30%. In comparison, Science, which is considered to have strong turnout, got 10% last year.
@COMMERCE STUDENT
You think the Dean has increased the visibility of the program and done good things for students?
Wrong.
The average quality of students exiting the program has declined. Some of his public comments and positions have been laughable.
Some employers broadened their search horizon for students as a result of poor candidate classes.
Alumni receive calls every year requesting donations. I know a number of alumni who refuse on the basis that they despise the Dean and his dishonest tactics. Why would you donate money to someone who puts an additional financial burden on future students who already pay considerably more than students of other programs?
If I was the head of the CUS, I would hold a new vote to repeal the fee increase. Nothing could be done to stop this. And if the CUS guaranteed the debt, the only thing current CUS members can lose is whatever hard assets they hold (a microwave and a few desks). It’s called appropriations risk; the Dean would have been wise to consider it before relying on a student-funded fee to pay for his personal ambitions.
A quick note about fundraising for the project which didn’t make it into the post:
$24M of fundraising has been confirmed for Phase 1. However, an additional $3M of fundraising remains unfulfilled despite the fact that the project is already complete.
$1.95M is listed as “verbal commitment” and $1M is listed as “underway”.
This is identical to what was listed in the budget in April 2010. The “verbal commitment” money has not come through since that time.
A second point was not mentioned in the post (it was long enough as-is) is that the CUS board of directors was aware of this project before it went public. They discussed it at their Jan 10, 2011 meeting. (http://www.cusonline.ca/wp-content/uploads/2009/09/January-10th-2011.pdf)
I don’t think that commerce students will ignore this issue, it IS their money on the line. We should stop trying to make students sound absolutely ignorant.
I think we should give the Dean a chance to reply before making any quick judgements.
And yet one more piece of additional information about the $24M dollar reserve fund and how it breaks down (It’s all in the board document linked to near the top of the post.)
$6-8M has been earmarked for upgrades to A/V and the MBA program.
$6M is for Phase 3.
$4M is the “tax” going back to UBC and students.
The remainder, $6-8M is to be kept in the reserve because “the University administration believes that leaving $6-$8 million in structural reserves at Sauder is necessary to protect against the revenue volatility from the Real Estate Program and to allow its next Dean to build and expand on the current Dean’s legacy.”
What Sauder will say about it is that at the time of the referendum, they didn’t have part of it (the part going towards Phase 3), and that another large portion of it is already committed to the MBA program and AV upgrades. However, that still would have left them with about $10-$12M in unrestricted funds. As well, if Phase 2 was as important as portrayed – accreditation-losing importance – the AV and MBA expenses should be considered less of a priority than the building.
One quick thing in response to Insulted, while I agree the referendum should have been voted down, the only liabilities for backing out of the commitment are not the CUS microwave and what not.
Legally speaking the CUS does not exist as an independent organization. It does not hold liabilities indepedently. It is technically a unit of the AMS, and the AMS has all kinds of hard assets including a lodge in Whistler, and a multi-million dollar art collection featuring works from Group of Seven painters.
So while I feel entering into this agreement was a mistake, I’m not sure how reversible it would be now.
That’s really good business Sauder is doing there.
I hope one day I’ll be able to force my shareholders to cut dividends to fund my projects while I’m sitting on my cash reserves. Without a sweat.
@Kyle: In ordinary circumstances, you’d probably be right. The AMS has a contract to collect and transfer the fee.
However:
1. The AMS is bound by the will of its constituents and if a vote overturns the fee, I really have no idea how the AMS could continue to be responsible for the contract.
2. More importantly, it would seem that Dean Dan (and Sauder) misrepresented the financial situation when negotiating/entering into the original contract (ie. during the referendum vote and process). That’s either negligent or fraudulent misrepresentation. Either can potentially be a basis for overturning a contract.
The AMS/CUS have options. The real question is whether they will exercise any of them and, if so, how that would look to an outsider? Being sued by your own students is a hell of a “legacy” for Dean Dan to leave.
In sum: http://www.urbandictionary.com/define.php?term=Edifice%20Complex
I agree with many of the comments above, the overall process of the referendum vote was biased, sly, and unfair.
I’m not surprised at all when the 3rd and 4th years unanimously voted yes. Why wouldn’t they? They wouldn’t be paying.
Now that the BoG has stood up for students against the Sauder Administration regime this time, I’m hoping further action will be taken to address other issues.
Why are students paying $200+ more than arts or science students for the same course? Why are our tuition fees considerably higher than other faculties? I understand that it goes towards the ‘better services and faculty’ that we have, but I’ve heard the phrase “that’s just the way it is” far too many times and want solid answers.
These are just some of the questions that many students want the answer too, and I hope that like the referendum controversy, students will be heard.
http://www.sauder.ubc.ca/News/News_Listing/News_Item_-_Financing_the_Sauder_Building_Renewal_Project
Hello, damage control.
When the Dean came to visit students, it is abundantly clear now that there was an asymmetric information effect going on. We were not going to lose our accreditation simply because we had “insufficient” facilities. If anything, the stress on facilities should’ve been less about new cafes and more about earthquake upgrades. (While the building’s collapsing on me, I’ll go enjoy an eight dollar sandwich, thanks. At least the DLam computers support Google docs now… oh sorry, Canaccord Learning Commons.)
Shady Stuff: The career programs are not funded from that fee, since that was supposed to go to the building. Obviously, since the programs were intact before, during, and after this fiasco, it’s not that money they need. The career programs is funded out of our already existing payments.
The “loss of accreditation” thing was always a red herring.
I’ve been involved in this building project fiasco for nearly 5 years (including a year on CUS Student Council) and I have yet to see any credible documentation (ie. something from the accrediting agencies) attesting to the possibility of losing it. It’s all been hearsay by the Dean without actual proof.
But that’s not the issue at hand. The building is built, referendum done.
The actual question is whether Sauder/Dean Dan lied (or knowingly omitted) while drumming up the case for the fee. That’s the real deal-breaker.
@Kyle Warwick
I highly doubt that the AMS signed on to any agreement binding themselves as a guarantor for the loan. A subsidiary cannot bind the parent without the actual consent of the parent. A “non-entity”, and I highly doubt that the CUS is not SOME form of legal entity, cannot bind anyone to anything.
If I have a wholly-owned-subsidiary that goes out and binds themselves to an agreement on MY behalf, I can repudiate that agreement in an instant.
So I will say it again: Hold a referendum to get rid of the fee. You can do it. There is nothing standing in your way.
The CUS is not a legal entity on its own. It is indeed merely a subsidiary of the AMS.
As well, the AMS did in fact sign an agreement guaranteeing the loan. It was approved by council on May 12, 2010 and I’ve uploaded the draft copy (which was ultimately approved) here:
http://ubcinsiders.ca/wp/wp-content/uploads/2011/02/CUS-Sauder-Final-Agreement.pdf
Clause #6 is the one to look at.
“6. If for any reason the AMS ceases to collect the Student Fee, or instructs UBC to cease collecting the Student Fee (a “Student Fee Default”), then the AMS agrees that it will pay each year to UBC, no later than October 15th of each year, an amount equal to $500 for each student defined in the Referendum Documents until the earlier of a) the entire Loan Amount plus accrued interest thereon being repaid in full or b)35 years from the first date the Student Fee was collected. The AMS agrees that these payments shall be a debt owing to UBC. In addition to other ways it may fund these payments, the AMS may within its legal authority choose to collect these amounts from the CUS or its members.”
So to the extent the CUS has a referendum and scraps the fee the AMS is on the hook. Does the AMS have the right to collect a discriminatory fee from only one faculty?
who cares, $500 is chump change. or as some would say “the cost of business”. If you want you attract the best, you have to spend money. Otherwise we will be like that other business school on the hill, whats its name now? BEEDIE school of business or something. We have to step in the right direction like RICHARD IVEY.
During the debate on this, the main arguments are ‘we need to support the dean’ and ‘it doesn’t matter because we won’t be paying for it.’ The argument that these upgrades improve education was spurious at best. If someone tried to debate the issue, they were insulted and treated like children by the student society. The issues raised in the article are not a surprise to me.
Having recently completed my MBA degree at Sauder I find it ironic that one of the most important lessons I have learned from the School comes not from the Faculty but from the Administration, namely ‘beware the snake-oil salesman’.
While I find it troubling that Sauder has been sitting on these reserves and on this plan for some time, it’s not the fact that they exist that bothers me. More importantly, I believe, is the fact that we, as students, were guided down the wrong path by someone (some people?) who we placed our trust and faith in. More troubling still is that we did not challenge these presumptions, which we had a responsibility to do, particularly given the decision we were asked to make on behalf of future students.
I think a lot of the reaction that is being conveyed here today is not merely outrage, but also, to some degree, embarrassment that we had the wool pulled over our eyes…
Sauder Admin has some explaining to do. I’d like to see Phase 4 of the building project (sure to be unveiled only after the students are told that Phase 3 simply can’t be completed without an additional $6 gajillion dollars levied on their tuition… that’s right, I said ‘gajillion’) incorporate good old medieval stocks in a centrally-located public place for our illustrious ‘leaders’ spend some time in.
Do Sauder admin has to scam the student’s tuition just to be at the same level with.. Richard Ivey? That’s pretty sad.
And where are the CUS people that were yapping “we will be your voice” when the students’ interest is being violated? Why do we even have this so-called CUS in the first place.
It’s mind boggling to think they could get away with this unscathed because apparently people are still thinking “what’s the big deal”.
Sauder only wishes they could charge a $15,000 tuition! And that was before Ivey began our new renovations!
Really though, this whole situation is quite BS and students should be absolutely appalled–where’s all the marketing majors posting this amazing article up on the latest social media forum?? This needs to get out in the open and it needs to happen right now!
Great Article. I think the lack of honesty and transparency at Sauder is appalling as these are the things it teaches it students. Thinking back to first year now, I can’t believe I was convinced to vote for that referendum by what now seems like propaganda instigated by Dean Dan and a group of easily swayed Sauder students. Moreover, I don’t see any reason why Sauder shouldn’t regularly report it’s accurate financial position all of it’s students. Some regular accountability would only make things better.
So nice to read a piece of investigative journalism.
“Oh what a tangled web we weave when first we practice to deceive.”
Sir Walter Scott
Well written article! Good job guys.