CBC spent nearly half its reserves. It wasn’t what they planned on

Columbia Basin College is now in the housing business.

The public community college spent $11.2 million to buy a recently opened 126-bed dormitory.

What began as a private-public partnership turned a different direction when college officials learned that they couldn’t lease the complex without special or particular legislative approval — something they apparently didn’t initially realize.

Trouble was the 46-apartment building was built already and the rooms were not getting snapped up because the private owners were charging market prices.

By buying the building, the college could make the rent more affordable for students.

But to do so, it had to raid much of its $28 million reserve fund.

“We were not just wanting to provide housing for our students where we take their rent and keep the building safe and clean,” said CBC board Chairman Kedrich Jackson. “It is an extension of the support services we provide on campus that help students succeed.”

Sigma Financial Group owned and financed the $7 million building on land bought from the city of Pasco for $796,000.

“We were surprised when CBC approached us about acquiring Sunhawk this past fall, but the college obviously made an economic choice that made sense for them,” said John Crook, founder of Paragon Corporate Housing and one of Sigma’s leaders.

The dorms opened in August, but talks about buying the building started quietly months before in the late spring or early summer, said Jackson.

They had the option to lease or buy Sunhawk Hall. They soon learned that any long-term lease would require the Legislature to sign off on it.

College officials contacted the state Department of Enterprise Services in late July to begin looking at buying the building. The department acts as the real estate agent for community colleges and other state agencies.

The discussions about the leasing or buying the building continued through the summer in closed-door executive sessions, and within days of the apartments opening, the board settled on buying the building during an Aug. 25 board retreat.

The decision was made before its new CBC president, Rebekah Woods, began and after long-time CBC President Rich Cummins left for another position in Western Washington. Former CBC President Lee Thornton was serving as the interim president.

The state Board of Community and Technical Colleges signed off on the deal in September.

“It was the best financial solution,” Jackson said.

Sigma’s financial institution, the Bank of Eastern Oregon, provided the appraiser who valued the project at $11.2 million, said Jennifer Reynolds, spokeswoman for the Department of Enterprise Services.

“It’s not unusual to base the fair market value on a single appraisal,” Reynolds said. “The state reviewed the appraisal and was satisfied with its conclusion.”

The sale quietly closed on Dec. 18.

The purchase put a dent in the college’s savings but Jackson said the board is careful to follow its policies to make sure to keep a responsible amount in reserves.

“The reserves fluctuate, but we do our best to maintain them,” he said.

The Pasco and Richland campuses serve about 6,900 students, including more than 1,000 high school students participating in Running Start.

“It was determined that it would be easier for the college to directly own that facility,” said Brooks.

Little has changed at Sunhawk Hall since it switched hands, but college officials are looking at ways to improve its lackluster rental performance.

The hall’s late summer opening — shortly before school started — meant they weren’t able to market it to the people who would be most interested including athletes, said Tyrone Brooks, the assistant vice president for administrative services, and Dan Quock, the director of residence life.

Students lease for a spot in a one-, two-, three- or four-bed units. Each of the units comes furnished and with its own stove.

The college started with roughly a quarter of the beds full. The number has grown to 40 percent, Brooks said.

One of the biggest changes is about a 31 to 34 percent drop in the rent.

In August, a yearlong lease ranged from a high of $950 a month for a one-bed apartment to a low of $535 a month for a bed in a quadruple. Each student has an individual lease.

Now the high is $625 a month to a low of $371.

Brooks and Jackson are optimistic demand for the student housing will grow. Brooks expects it to be filled by fall 2019.

Officials are working to get it there, possibly by adjusting rents again.

“We’re going to be doing a deeper dive now that we have 100 percent control of the facility,” Brooks said.

It will continue to be staffed by a director of residence life, two resident hall assistants and a part-time office assistant.

Plans for two other residence halls, for a total of about 375 beds, is on hold until the college has a waiting list for Sunhawk Hall, he said.

Officials plan to follow a more traditional bid process for the next housing units, Jackson said.

Columbia Basin College is not the only college to partner with a private developer to build housing.

“In general, colleges can have public-private partnerships for capital projects,” said Laura McDowell, Washington State Board for Community and Technical College’s director of communications.

This is part of a larger trend across the country where colleges, especially those without the ability to borrow and with little state funding, are turning to private companies for help, according to the Inside Higher Ed website.

In many cases, the rooms are earmarked for students, but not guaranteed.

Washington State University Tri-Cities’ agreement with Corporate Pointe is similar. The Pullman-based development company leased the land near the college’s Consolidated Information Center for a multiphase housing project.

The first 162-bed apartment complex is scheduled to open this fall.

While students are getting the priority for the single-family apartments, they will be open to anyone.

This story was originally published February 3, 2018 at 4:46 PM with the headline "CBC spent nearly half its reserves. It wasn’t what they planned on."