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Dartmouth Budget Takes Hit on Rennie Farm

Valley News Staff Writer
Published: 11/22/2017 10:13:58 PM
Modified: 11/24/2017 11:16:12 AM

Hanover — Dartmouth College has booked $27 million in its latest financial statement for future cleanup costs at Rennie Farm, contributing to a $12 million operating deficit for the fiscal year that ended on June 30.

Administrators added the money to the fiscal year 2017 financial results in anticipation of future costs to remediate environmental contamination and calm the real estate market around the former lab waste site near Hanover Center, an effort that may take five years or longer.

Dartmouth’s operating numbers nevertheless represent an improvement from the fiscal year 2016 deficit of $112 million, according to an audited financial statement released by the college this fall.

Mike Wagner, chief financial officer at the college, pointed to growth in net tuition revenue, along with an increased distribution from the school’s $4.96 billion endowment, as factors in this year’s results.

In fiscal year 2016, Dartmouth also was contending with a large one-time cost — about $53 million — associated with the restructuring of the Geisel School of Medicine, Wagner noted.

“That’s certainly a positive indication for fiscal year ’17 versus fiscal year ’16,” he said in an interview earlier this week.

Roughly $5 million of the $27 million in Rennie-related expenses comes from actual costs incurred during the 2017 fiscal year, according to a note in the financial statement. Actual costs prior to 2016 were about the same — $5,168,544, according to college spokeswoman Diana Lawrence.

Wagner said the money for future costs hadn’t been set aside in a literal sense. Rather, the line item follows standard accounting practices that call for institutions to estimate totals for long-term expenses in the statement for the year in which they arise.

Dartmouth during fiscal year 2017 installed a “pump-and-treat” system on the roughly 200-acre wooded hillside off Hanover Center Road where its medical school buried carcasses and lab chemicals half a century ago.

The network of pumps is designed to siphon off and treat groundwater contaminated with 1,4-dioxane, a chemical solvent component and likely human carcinogen that started leaking into the surrounding rural neighborhood after a 2011 excavation.

To prop up the real estate market, the college this year also instituted a “value assurance program” to compensate eligible nearby homeowners for selling their property below value or buy homes outright if they won’t sell.

Ellen Arnold, an associate general counsel who helps manage the program, said little had changed since September, when college officials said they had bought about five properties near Rennie Farm under the program.

She revised that number up to six properties on Tuesday, but said none had closed since September.

Dartmouth will landscape the properties, plow snow and install security systems, among other maintenance and basic improvements, she said.

But the school has not yet put the land on the market. Arnold said she had let area realtors know that property was available, and expressed openness to hearing ideas on how to use the land, including renting it out.

“If somebody wants to approach me with a good proposition for using those properties, we would consider it,” she said.

Meanwhile, a proposal to tax nonprofit endowment returns currently under consideration by congressional Republicans also could have an effect on Dartmouth’s operating budget.

Wagner said he and other administrators had been attempting to estimate what the measure might cost Dartmouth, although the actual scope of the tax could vary widely, depending on how Congress and the Internal Revenue Service choose to implement it.

Bloomberg News earlier this month reported that high-end private college endowments could be taxed 1.4 percent on net investment income, which would increase federal revenue by $3 billion between 2018 to 2027, according to the congressional Joint Committee on Taxation.

“It’s really hard to measure the impact because it’s really hard to define what income is,” Wagner said, noting that, for instance, it was still unclear whether the tax would affect unrealized gains — profits that exist on paper before an investment is sold.

Dartmouth is working with figures of an extra annual $3 million to $5 million, assuming that unrealized gains won’t be taxed and also that colleges can deduct some costs, such as the cost of earning returns, Wagner said.

Even less certain is the potential cost to graduate students from a proposal in the tax package to treat tuition waivers as taxable income, which could greatly increase their yearly bills.

In other tax and endowment-related news, Dartmouth recently became one of several institutions of higher education to be swept up in the so-called “Paradise Papers” leak of internal documents from offshore tax havens.

Dartmouth, along with Colgate, Duke and Stanford, was revealed by The New York Times to have invested in a “blocker” corporation, which shields endowments from taxable investment revenue by having an intermediary entity, the “blocker,” pay taxes in a low-tax Caribbean location and then pass profits to investors.

Lawrence, the Dartmouth spokeswoman, on Monday declined to comment on the specific fund, H&F Investors Blocker, but said it was “common for universities, foundations, and other nonprofit organizations to have a portion of their endowments invested in offshore funds.”

She added that the school was following its fiduciary obligations under state law that requires that institutional fund management take into account “total investment return” and “expected tax consequences of investment decisions or strategies.”

“Dartmouth reports all taxable income as required by IRS rules and regulations regardless of its country of origin and discloses all offshore investments on the Form 990 in compliance with IRS requirements,” Lawrence said. “The significant majority of Dartmouth’s total investments are domiciled in the U.S.”

Rob Wolfe can be reached at rwolfe@vnews.com or 603-727-3242.




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