(Bloomberg) -- While US colleges are borrowing billions from the debt market to fund campus upgrades, an Indiana university is taking a unique route: selling a Georgia O’Keeffe painting.
Valparaiso University received court approval last month for its contentious plan to sell three works of art from its Brauer Museum of Art collection, most notably “Rust Red Hills” by the famed modernist painter, that’s estimated to be worth as much as $15 million. It intends to use the proceeds to finance renovations for freshman dormitories, expecting these upgrades to cost between $12 million and $20 million.
The maneuver comes as the university, much like its peers, is contending with a decline in enrollment. Several other higher-education institutes have embarked on a borrowing spree — selling $23 billion of muni debt so far this year, an increase of more than 100% over the same period in 2023. It’s a precarious situation: if they fail to lure new students, they might have to raise tuition fees for existing ones or risk shouldering a heftier financial burden.
Smaller colleges are stuck in a “catch-22 situation”, where they either can’t make investments to strengthen their programs or don’t have the enrollment to support these improvements, said Dora Lee, director of research at Belle Haven Investments.
In Valparaiso’s case, headcount dropped 26% since 2019, according to the university’s website. Its unusual path to raise money has come with its own complications after it faced backlash from the art world and its own community.
“I think their decision to sell the paintings for dorm renovations kind of points to — I wouldn’t say a last ditch effort — but a desperate attempt to reverse its enrollment declines, which is really the cause of its financial troubles,” Lee said.
The university garnered ire from art institutions over its decision to deaccession the art. It was also sued by two retired professors — Richard Brauer and Philipp Brockington — last year over the matter. Brauer, the first director of the university’s museum and its namesake, said in a statement that he will ask to have his name removed if the paintings are sold. Brockington has since died, his lawyer said.
Valparaiso said it will respect Brauer’s request.
“This has been a difficult decision throughout,” a spokesperson for the school said in an emailed statement, adding that the move to sell is “the best possible future for the Sloan trust, our students, and our university as a whole.”
The university — citing an operating deficit because of declining enrollment — deemed it “impractical and wasteful” to spend on capital improvements needed to securely display the paintings, according to a petition shared by the New York Times. It also said it should be able to sell the pieces because the Percy H. Sloan trust — through which the paintings were acquired — was established with the intention of purchasing conservative art, which two of the paintings it wants to sell are not.
Lisa Washburn, a managing director at Municipal Market Analytics, said the art sale underscores the lack of financial resources currently at the school’s disposal.
“It’s not credit positive to see any organization have to resort to one-time measures in order to be able to fund necessary improvements,” she said.
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