UTAS at the crossroads

UTAS is at a pivotal moment in its history, facing a dramatic outflow of local students, controversy around its management decisions and mounting financial pressures.

STT 's bogus sustainability

 

The following contain background notes to assist local groups in their efforts to prevent clear-felling by STT of their favourite bits of remaining Tasmanian native forests.

First there’s a detailed summary of the accounting issues which relate to STT’s approach to valuing its native forests which are shown to underpin STT’s highly questionable claim to being sustainable.

Second there’s a brief note looking at a particular coupe planned for logging in 2026 indicating the likely social losses that will ensue.

 

UTAS' sustainability: A comment on the 2024 Annual Report

 

It’s a toss up between UTAS and the State government as to who is in worse financial shape.

UTAS’ 2024 Annual Report has now been released. It reports on a calendar year basis so it’s only 8 months since the year ended. Unreasonably slow nevertheless.

The following are some observations about the 2024 financials and some of the slides from a recent PowerPoint presentation to staff titled Our financial context.

UTAS' broken model

 

It cannot be stressed how crucial it is for interested parties to understand the earnings challenges confronting UTAS.

Parliament is about to resume consideration of a Bill that relates to UTAS’ Sandy Bay land which UTAS wishes to sell to fund its future plans.

It is ludicrous however to assert that Policy A will have Beneficial Effect B without an adequate understanding of UTAS’s current position.

But that’s what’s happening.  

UTAS’ unique status of being able to stack its own Board and not have to report to members as does every other public entity of any significance, has meant it has operated with less constraints than other public bodies.

As a consequence, the public understanding of UTAS’s financial position is woeful. Asking UTAS to explain the mess they’ve created for itself is unlikely to produce full and transparent disclosure.

An attempt by the Public Accounts Committee (PAC) to obtain info from UTAS about its financial position via a short inquiry led to a snow job from UTAS. UTAS took advantage of an under resourced and overworked committee dominated by party members either disinterested, unable or unwilling to look at issues other than through a party political lens and flooded the committee making it difficult for members to distinguish wood from trees.

UTAS gave PAC a slide show back in August 2024 (posted on the PAC website) which contains much useful information even though a little inaccessible at times. It was essentially a lecture from Rufus, basically telling the committee what he wanted them to hear.

UTAS' STEM is a furphy

 

There’s a eerie similarity between UTAS’s current predicament and that of the State government.

In the case of the latter, it has been made blindingly obvious by Saul Eslake and others that the State is on an unsustainable path. The Government’s Strong Plan for 2030 is not simply a smokescreen. It’s a blatant untruth. There is no possible way the State will be able to run cash deficits at any stage in the foreseeable future without radical changes. Debt servicing and paying other past liabilities is taking an increased share of the stagnant pool of State government revenue leaving less to fund current services.

The government knows it. So does the opposition. Although they don’t readily admit it. Both are united by omerta, the code of silence adopted because neither have a clue what to do.

Fortunately brush fires keep flaring which distract mug punters. The TTLine debacle for instance diverted attention and whilst symptomatic of our woes helped everyone avoid discussion of the terminal diagnosis of the body politic. For a time at least.

 Likewise, the Mac Point Stadium debate acts as a distraction. Although important as a sub-issue it lulls people into thinking it’s part of the main game. It’s just a side show. There are much more serious problems which our current head in the sand approach to future sustainability is helping us avoid.

Likewise, in the case of UTAS the elephant in the room is the lack of sustainability of its current model.  Current attention is focussed on funding a $500 million STEM building as if that is the only thing needed to secure UTAS’s future.

But just like the $775 million Mac Point Stadium the cost of STEM hasn’t changed for 8 years. Are we supposed to take these guys seriously? UTAS has been talking about new STEM facilities for at least 12 years.  Buildings at 62-82 Argyle St Hobart first valued by UTAS in 2013, purchased for STEM purposes for $9.8m in 2015 are still unused for their intended purpose.

Minister Ferguson lost his job over his failure to deliver Berth 3 on the Mersey River Devonport in time for the new Spirit ferries. STEM is UTAS’ Berth 3.

UTAS:Things must be bad -- Part 2

 

Tasmanian Labor continues to berate anyone not supporting the disposal by UTAS of its Sandy Bay land for residential housing. Liberals, Lambies and Greens are all portrayed as being disinterested in solving the housing crisis by building 2,000+ new homes and/or helping to fund a new STEM building.

UTAS’ surrogate spokesperson Dean Winter has been instagramming images of the proposed development taken from Deloitte’s two reports into the feasibility of the development of Sandy Bay dated November 2021 and March 2022. It’s reasonable therefore to conclude the development plan Dean has been spruiking is the same as described in those Deloitte reports.

In summary this is what we learnt from the Deloitte Reports:

·        The planned development is a 30-year project, mostly for 2,656 new residences, a combination of 1, 2 and 3 bedroom units with an average area of 88 square metres to be sold at an average price of $880,000 (2021 prices).

·        The project will be conducted in stages. Needless to say, outlays will occur before revenue so funds will be required to fund the deficits in the early years. Peak project debt of $234 million will occur in year 5, in 2027, but the project is already 2 years behind schedule. The funds squirrelled away by UTAS to fund the project’s debt have all but disappeared, due to cost overruns and delays with the Hobart rebuilding and the increasing losses from core activities of teaching and research which UTAS is yet to fix. UTAS can’t borrow more without the Treasurer’s permission.

·        The project will reach cash break even in Year 17, after which time the project will start to rebuild UTAS’ equity. Over the ensuing 13 years cash profits of $800 million are predicted. That’s $800 million in future $s, which roughly translates to possibly $400 million in current $ terms. Not a great deal seeing UTAS’s current equity stands at $1,341 million.

·        UTAS initially hoped to run the project itself but due to its deteriorating financial position is now looking at ways to take on a joint venture JV partner and/or selling properties on a leasehold rather than freehold basis. The latter may result from restrictions that may be placed on UTAS by the recently tabled Bill in State parliament.

·        The Deloitte Reports stress that the project is currently only at the 5% design concept stage. To listen to politicians spruiking the deal one could easily start believing they’re ready to turn the first sod.

·        The project doesn’t even manage to meet the minimum target return if land and buildings to be redeveloped are given a zero value. For the project to achieve the target rate of return UTAS will have to pay the developer to take the land off its hands. This won’t occur of course, but what it means is that UTAS will have to accept a lower rate of return if a JV partner wishes to achieve a target rate.

·        If the project proceeds and the project land is given a value whatever that may be, whether it’s zero or $26 million, it will likely be far less than the current book value of the land and buildings. In which case UTAS will suffer a large drop in its equity position, which won’t start to be recovered until Year 17. Sceptics of the redevelopment have been labelled reckless if they don’t sign up as UTAS cheerleaders. It’s much easier to establish recklessness where existing assets are trashed in the hope of getting some back 17 years later. Its craziness on steroids.

·        Given that any surplus cash from the development won’t occur until at least year 17, that’s 2042 at the earliest, the redevelopment proposal has nothing whatsoever to do with funding a new STEM building. For the Labor Party to suggest otherwise reveals a wilful ignorance of reality.

·        Given that the existing land and buildings obviously have a value as part of a continuing institution for learning and research, it is that value that needs to be plugged into any model when trying to assess a rate of return on a project to convert a valuable asset to an above ground cemetery for cashed up baby boomers. It will certainly paint a different picture than the misinformed messaging from the Labor Party.

 

UTAS: Things must be bad when Labor is asked to assist

 

One has to overlook lots of evidence on the public record to pretend as the Labor Party has that UTAS can be trusted to embark on the largest housing development in Tasmania’s history just so it might be able to fund a new $500 million STEM facility in Hobart City.

A memory refresh is needed.

UTAS, like a lot of universities, has accumulated lots of assets over the years thanks to land gifts, land revaluations, bequests and endowments, and capital grants for building.

Historically any losses from core operations of teaching and research were covered by income from investments mostly bequests and endowments entrusted to UTAS to be spent as per the wishes of the donors.

Universities are mostly publicly owned and have had the freedom to operate without restrictions that are normally applied to public bodies, like say, reporting and being answerable to Parliament.

The one restriction that was imposed on UTAS was via Section 7(2) of its governing Act which required the permission of the State Treasurer if it wished to borrow money. Ivory tower academics who used to run universities were presumably thought to need a fail-safe mechanism.

Paradoxically the fail-safe mechanism failed when it was most needed.