Universities and polytechnics have embarked on a building spree which will raise their debts by more than half and risks creating overcapacity.
The Tertiary Education Commission’s briefing to Education Minister Chris Hipkins, released today, says the collective debts of state-owned tertiary institutes will rise from $452 million at the end of last year to $697m next year.
“Some [institutes] are engaged in significant capital developments to build modern facilities to help them attract additional students,” it said.
“A risk exists that multiple developments of this kind across the network could result in capacity exceeding demand.”
About 80 per cent of the new building appears to be in Auckland. Latest financial information shows that Auckland University, AUT, Unitec and the Manukau Institute of Technology (MIT) had committed credit lines totalling $613m out of a national total of $792m.
Massey University accounted for a further $28m, with most of its development likely to be on its Auckland campus at Albany.
Auckland University is creating a new campus for engineering and related faculties on the old Lion Brewery site in Newmarket, and recently announced a new $116m health sciences building opposite Auckland City Hospital in Grafton, replacing its Tāmaki campus which will be sold off.
Unitec has the most ambitious plans outside the universities, with a $250m campus redevelopment under way that will be partly funded by selling much of its current Mt Albert site for housing.
Universities NZ director Chris Whelan said most of the universities’ capital spending was to replace ageing science and engineering buildings dating from the 1950s and 60s.
“That was the single biggest period of massive ballooning of the universities,” he said.
“It was all done by the Ministry of Works, and it was all done with huge amounts of asbestos, even mixed into the concrete.
“All the buildings have reached the end of their life, and often for science and engineering facilities refurbishment is not an option. You actually have to replace them.”
He said the new buildings were smaller in total than the old ones, reducing the universities’ total floor area from 1.89m square metres in 2013 to 1.71m last year.
“They are replacing with a lot more efficient buildings, getting rid of surplus space,” he said.
He said NZ university buildings provided only 8.5sq m per student compared with 10sq m per student in Australia.
The Tertiary Education Commission (TEC) briefing expresses concerns about the long-term viability of some polytechnics, especially in smaller regions.
“These institutions lack the economies of scale of larger organisations, often serve the needs of a geographically dispersed population, and struggle to attract international students outside Auckland,” it said.
“Limited financial resources also mean these institutions are susceptible to external shocks, and some struggle to invest in innovations that would support them to better deliver to the needs and expectations of 21st-century learners.”
It said TEC was in “active conversations” with polytechnics about addressing these issues and expected this “will lead to considerable change in the ITP [institutes of technology and polytechnic] subsector over the next three years”.
A Crown manager was appointed for Greymouth’s struggling Tai Poutini Polytechnic last year, Northtec plans to close its Rawene and Kerikeri campuses and cut other courses to stem a $4.5m loss, and Western Institute of Technology at Taranaki has asked an external adviser to help it overcome a $2.4m deficit.
However the independent chairman of NZ Institutes of Technology and Polytechnics, Charles Finny, said he did not believe that the new Labour-NZ First Government would allow any regional polytechnics to close.
“Everyone is looking at the impact of the zero-fees policy, hopefully that will lead to increased demand which will be very positive,” he said.
“If it doesn’t, then we are going to have to engage very quickly with the Government on possible creative actions.”
Committed credit lines, 2015
- Auckland University $300m
- Auckland Institute of Technology (AUT) $153m
- Victoria University $80m
- Massey University $28m
Total universities $561m
- Unitec $105m
- Manukau Institute of Technology (MIT) $75m
- Wintec $33.5m
- Bay of Plenty Polytechnic (now Toi Ohomai) $10m
- Whitireia Polytechnic $4m
- Otago Polytechnic $3m
Total polytechnics $231m
- Wānanga nil
Total state tertiary institutes $792m