Transcription of remarks made by Michael Brokowsky at 1/29/2018 Alumni Town Hall:

First, in regarding that chart, what I find fascinating on that [CFI] chart [on page 9] is that in the Cash & Investments to Debt and Available Cash & Investments to Liabilities Net, it does not include the Chrysler Building. The Chrysler Building is a $600 million dollar asset. The premise is that because it is not liquid, for the purposes of this metric, it's not included. I think we should be pushing back against the Financial Monitor and the CFI on that premise, because if the Chrysler Building was sold and we got 5 or 6 hundred million dollars for it, suddenly those ratios would look extraordinarily better. I think a lot of the decisions we are making based on a ratio that I think needs to be discussed in great detail, I think is premature.


The Chrysler Building is better than having $600 million in cash investments. You would assume you're getting a 5% return, or $30 million dollars a year, but that's very uncertain. We all know that investments can generate more than that or less than that. One nice thing about the Chrysler Building in its lease is that it's a reasonably certain stream of income for at least about 20 more years, and I think that has a lot of value, and its minimized or eliminated from this analysis.


I have one question, but it may take me a while to get there. I'm very impressed with the ideas about cost reduction and generating additional [revenues]. I think there's been a very good effort in both of those areas. I also want to say I think it's a great effort to increase the awareness and the use of the Great Hall in generating more interest and more involvement at Cooper. I don't want to get into the discussion of the cost reduction ideas or incremental revenue ideas because we could be here all night talking about it. But I want to talk about what I think the fundamental issue which is driving the plan. It's a question of very conservative financial management versus the need and urgency to get back to free. Those are the primary competing issues which need to be resolved. I recognize that we need to cover debt service, loans, balloon payments, unfunded retirement and health benefits, deferred maintenance - those are all valid needs for the institution, in addition to our annual operating costs. I also recognize that there have been significant reductions in both the number of applicants and the yeild we are achieving. So there's a concern about the long-term effect of not being free on the reputation of the school and the quality. Those are the competing issues.

The current projections show that annual surpluses averaging more than $12 million dollars a year after covering all of these incremental expenses that need to be covered, plus all of the operating expenses. Those are going to build this $152 million dollar reserve which comes out of the analysis of those metrics and formulations brought to us by the Financ[ial] Monitor. Tuition in the plan contributes a little over $6 million dollars average over the life of the plan, or about half of that surplus. So, one way to look at it, in effect, is that tuition, over the planning period, is not covering expenses. It's actually contributing to the surplus that we expect to generate every year if we meet our operating goals. In effect, if we drop tuition immediately and met all of our operating goals, we could cover all of these additional spending requirements and have an annual surplus of close to 5 or 6 million dollars. So why can't we do that? Because we are required, according to the report, to build a reserve, a cushion, of $152 million dollars before we can return to free. That number's been determined, as we saw, based on a whole series of metrics and benchmarks. The question I raised before is I think a valid one, about how the Chrysler Building should be looked at in the computation of those metrics, but I believe they are overly stringent and may not be as directly relevant to Cooper Union as they might be to other institutions. I would venture to say that if you looked at Cooper Union over its history, it probably has never met a CFI of 4.0, and for 133 years, it was free with no annual operating deficits. So we need to really take a hard look at how important it is to build that reserve.

We do have a modest amount of cash in our endowment, nonrestricted cash. If we maintain the discipline and the diligence to manage our operations so that we no longer face chronic operating deficits, those funds do remain available as a reserve. I've done a spreadsheet myself, using the operating revenues and expenses in the Plan, which includes all of the debt service, the $39 million dollar balloon payment in 2034, the $48 million dollars in retirement and health benefits, a million dollars a year in deferred maintenance, and that plan has a $5 million dollar annual surplus and no tuition beginning in 2020. So, given that we have a modest amount of nonrestricted cash, an annual surplus of 5 or 6 million dollars in our operating projections, why is it not possible - and I'm getting to my question - why is it not possible to significantly reduce the 10 year waiting period before we can once again be free?