Cornell is moving to sell roughly $1 billion in taxable bonds, according to a filing on the municipal market’s disclosure system reported by Bloomberg on Nov. 4.
A bond sale allows Cornell to borrow money from investors. The University will then pay the investors interest over time until the bond matures, at which point the $1 billion must be repaid in full. Cornell is effectively borrowing about $1 billion, providing the University with a significant pool of funding to use in the near term.
According to reporting from Bloomberg, Cornell has authorized up to $1.7 billion of new debt as universities face continued funding pressures from the federal government. This is in addition to the $3.2 billion in debt and liabilities the University had outstanding as of June 30.
On Nov. 7, Cornell reached a settlement with the Trump administration to reinstate approximately $250 million in paused federal research funding. Amidst the funding freeze, which had been active since last Spring, the University announced that it faced profound financial challenges in a June 18 statement. Despite the reinstated funding, President Michael Kotlikoff said at a virtual town hall on Nov. 7 that the University remained financially insecure.
Colleges borrow in two main ways: tax-exempt debt and taxable debt. With tax-exempt debt, investors typically do not pay taxes on the interest they earn and are willing to accept a lower interest rate from the issuer. The American Association of Universities says that “tax-exempt bonds are often the preferred option,” as they “carry lower interest rates and more favorable terms … reducing a university’s overall borrowing costs.”
However, Cornell’s Office of the Treasurer webpage states that taxable debt can be used to fund “capital projects” — large, long-term investments in physical infrastructure— while tax-exempt debt and current assets are unable to fund such projects. As a result, taxable debt, though associated with higher borrowing costs than tax-exempt bonds, offers more flexibility in how funds can be used.
The sale of Cornell’s taxable bonds could provide the University with a wide range of support for its institutional needs.
In a statement to The Sun, Chris Cowen, executive vice president and chief financial officer, wrote, “Cornell will use the proceeds from bond sales for general corporate purposes, including funding previous real estate purchases, addressing unfunded litigation reserves, and refinancing a portion of short-term debt.”
Real estate has been a major site of spending for the University. In October, the University purchased Sotheby’s New York Office for $510 million to allow for the expansion of Weill Cornell’s New York City campus. Cornell has also purchased multiple properties in Collegetown, buying 301 College Avenue for 15 million dollars in March, among other recent sales.
Cornell’s preparation for the bond sale comes as top universities navigate financial uncertainty amid federal cuts to research funding. In late August, Cornell’s leadership warned that “urgent action” was needed to reduce costs and restructure operations amid multiple pressures, including federal moves affecting research funding under the Trump administration.
The University has also voiced concern over the costs of several ongoing lawsuits. In a June 18 statement from President Michael Kotlikoff and other top administrators, he wrote that Cornell faced “profound financial challenges” that included “rapidly escalating legal expenses.”
This would not be Cornell’s first large sale of taxable bonds. Last year, the University issued $500 million taxable bonds for general corporate purposes. Bloomberg reported in May that elite colleges have taken on more than $4 billion in debt since March, as they respond to financial pressures from the administration.
Both MIT and Harvard sold $750 million each in taxable bonds earlier this year. The $1 billion bond sale would be Cornell’s largest to date.
Cornell’s own credit rating remains strong, according to Cowen. The Association of Corporate Treasurers explains that “a credit rating is a formal, independent opinion of a borrower’s ability to serve its debt obligations.” These ratings are mainly provided by agencies like Moody’s and S&P, and affect the interest rates Cornell faces when borrowing and the overall financial flexibility of the University.
“Moody’s and S&P have affirmed the university’s credit ratings and credit strengths, supporting our commitment to ensure Cornell’s long-term financial strength through proactive actions we have taken and continue to pursue under Resilient Cornell,” Cowen wrote.
Resilient Cornell is a University-wide initiative launched in October “to reduce costs across all campuses through a restructuring of the University’s workforce and operations.”
It is unclear whether the recent settlement Cornell has reached with the federal government to reinstate frozen research funds will change investment plans. However, in a virtual town-hall following the settlement announcement, Kotlikoff stated that the Resilient Cornell initiative remains active as Cornell’s financial insecurity — which he said was not solved by the settlement — continues.
Aryan Batada is a member of the Class of 2028 in the School of Industrial and Labor Relations. He is a staff writer for the News department and can be reached at abatada@cornellsun.com.
