Contrary to the expected financial success of an on-campus arena, the construction of the planned research building at the Health Sciences Center will create a negative cash flow for Saint Louis University.
A recent operating and business plan done by PricewaterhouseCoopers, SLU’s business planning consultant, included a summary of revenues and expenses for the building over the coming years. It found that the University would incur a cumulative $29.6 million deficit over the next 10 years.
This number was determined by reviewing building plans created by Canon/HERA Design, industry data, space needs and other key factors. The original plans outlined by Canon/HERA Design set the total cost of the project at approximately $72 million, with completion of the building in 2005.
“We knew before we retained PricewaterhouseCoopers as our business planning consultant on this initiative that the results would reflect a deficit,” said Rob Altholz, vice president of business and finance. “We didn’t know exactly how large that deficit would be. It is well known in university research that ‘research does not make a profit.'”
Altholz explained that federal grants do not cover all of the costs related to research. Instead, it is based on the idea of ‘cost-sharing,’ meaning the University has to contribute its own non-federal funds to the support provided by federal agencies such as the National Institute of Health or the National Science Foundation.
A committee composed of Altholz, Interim Provost Joseph Weixlmann, Ph.D. and SLU School of Medicine administrators and faculty will review the findings over the next few months to make sure they are accurate, as well as look at ways to reduce the projected deficit.
“The number will be lowered,” Altholz said. The committee will concentrate on issues such as the size of the project and who will be working in the building, whether it will be younger faculty with the potential to receive future grants or senior faculty who are already well-funded.
The committee’s results will be presented to the board of trustees at their May meeting.
According to Altholz, a construction timeline is not known yet due to fund-raising concerns. “Frankly, fund raising for this project is anticipated to be difficult,” he said. “It will require a concerted effort by the development staff and School of Medicine administrators and faculty to be successful.”
Fund raising must be mostly complete before construction can start, Altholz said.
