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VLS Receives Millions In Federal Loan



Valley News Staff Writer
Saturday, May 06, 2017

Royalton — Vermont Law School officials say a $17 million loan from the federal government is helping the school to restructure debt and invest in a fundamentally different education model in which year-round and online courses offer more flexibility for students.

“The loan itself is less significant than what it’s for,” said Marc Mihaly, who plans to step down as president and dean this summer after five years of service.

While the school has been developing its online offerings for six years, there is now a renewed emphasis on the option, as part of the larger strategy to be more flexible for students.

“Our students may be on a Coast Guard ship. Or running a bank in Ohio,” Mihaly said. “They’re doing all sorts of things. They’re not going to quit their jobs and move their families to Vermont.”

The school is directly investing roughly $2.5 million of the loan into the services, staff and technology needed to support the new direction, Mihaly said.

Mihaly said U.S. Sen. Patrick Leahy, D-Vt., brokered talks between the school and the U.S. Department of Agriculture, and that the idea for a loan grew out of the USDA’s interest in investing in the educational model, which the school’s board formally adopted as a strategic plan in May 2016.

“They were attracted because we’re an economic engine, and a part of rural America that needs investment,” Mihaly said. “Also, they were attracted because there was a crisis in law schools. There was a rapid decline. We had been through that and more than stabilized.”

The loan comes after a period of financial hardship for the school, which began cutting staff and trimming expenses in 2013 to cope with a downturn in enrollment.

In 2014, Moody’s Investors Service downgraded $10.3 million in 2011 revenue bonds from Baa2 to Ba1, a rating that led VLS to technically default on a loan agreement from TD Bank.

But Mihaly said the school’s applications and enrollment have rebounded in recent years, and that this will be the third consecutive year of growth in the student body.

Mihaly said the environmental law school has experienced “a bit of a Trump bump” — the school has seen a 6 percent increase in applications spurred by President Donald Trump’s election — since January, bucking the continued nationwide trend of declining law school applications.

The online offerings have helped the school expand its student base, and Mihaly said that some two-thirds of 187 master’s students are fundamentally online students, though there is some crossover that makes categorization difficult.

The 2.4 percent interest rate on the loan will allow the school to save roughly $600,000 annually in interest payments on about $13 million in debt, according to Mihaly. The remaining $14.5 million of the loan is going to the restructuring of the school’s debt.

Last year, the school applied for the loan from the USDA’s Rural Development Community Facilities Direct Loan Program.

Leahy issued a statement on Friday in which he said the lack of congressional action on a full-year budget threatened funding in late 2016.

“In collaboration with the Obama administration, we were able to ensure that USDA prioritized funding for this loan program to allow the application to move forward in a timely way,” he said.

Larry Trottier, chairman of the Royalton Selectboard, welcomed the news about VLS, which he said has grown into an integral part of the town’s identity since the school was founded in the mid-’70s.

Today, the school has 135 faculty and staff and a 2016-17 enrollment of 383 JD students in its 22 buildings.

“It creates a lot of jobs, and it keeps a lot of apartments rented,” Trottier said. “Without the law school, it wouldn’t be the same, by any means.”

Though the loan was approved four months ago, neither the school nor the USDA announced it publicly.

The approval letter was released by the USDA on Friday in response to a Freedom of Information Act request by the Valley News.

The USDA’s failure to announce the loan sooner was driven by a desire to wait until the arrival of the then-unnamed secretary of agriculture, who turned out to be Georgia Gov. Sonny Perdue, according to Pollaidh Major, a spokesperson for the Montpelier-based regional office of the USDA Rural Development program. Perdue took office on April 25.

“Typically, we give the secretary of agriculture the first chance to announce loans, and when we get the go-ahead that they’re not going to take us up on that, then we go ahead,” she said. “With the change of administration, they did ask that we hold announcements, probably because we didn’t have a secretary in place.”

The approval letter is dated Jan. 6, during the final weeks of the Obama administration, and was sent by then-USDA State Director Ted Brady, who was recently named by Gov. Phil Scott as the deputy secretary of the Vermont Agency of Commerce and Community Development.

Major said VLS was under no restrictions, and could have announced the loan at any time.

Mihaly said the school didn’t announce it earlier because he didn’t consider the loan itself to be newsworthy, and instead wanted to wait until there was tangible progress made on the new strategic plan.

Mihaly said the timing worked out the way it did because the school wanted to take advantage of low interest rates in December, before an anticipated January increase.

Matt Hongoltz-Hetling can be reached at mhonghet@vnews.com or 603-727-3211.

Correction

Vermont Law School has 135 faculty and staff, 383 students enrolled in its juris doctor degree program, and 187 students in its master's degree program. An earlier version of this story imprecisely described the number of employees at the law school and understated enrollment.