An exterior shot of Irvington House, the second of two residence halls constructed by American Campus Communities at Butler. Collegian file photo/Emma Laux

ANDRES SALERNO | OPINION COLUMNIST | asalern1@butler.edu

In fall 2016, Fairview House opened its doors, marking a stark departure from the cinderblock walls of Ross Hall and the prison-like walls of ResCo. Two years later, first-year students are entering Irvington House, a dorm so jam-packed with amenities that it would probably qualify as the premier modern hotel in Indianapolis. These two new buildings are part of the university’s oft-touted 2020 plan to radically improve campus by the end of the decade.

Other plans include an extensive expansion and renovation of Gallahue. And then, of course, the most expensive Einstein’s Bagels in the world, funded with the late Andre B. Lacy’s $25 million endowment.

However, these projects will cost the university over $100 million dollars, while the brand-new dorms cost the university nothing. So what’s the trade off?

“Opportunity cost” is a term many of us remember as perhaps the only concept retained from high school economics. Opportunity cost is the concept of quantifying how much a transaction costs in terms of what you don’t receive from the transaction.

A classic example of this — or, at least, the one most compelling for college students — is how attending college not only “costs” tuition payments but also the lost money that could’ve been made from working a job straight out of high school.

This principle is how American Campus Communities makes its money. ACC is a student housing development and investment company based in Austin, TX, with whom Butler chose to work with for the construction of the two new dormitories. To better understand how ACC works with the university, I sat down with Bruce Arick, Butler’s vice president of finance and administration.

“The way it’s structured is they bring forward the capital to build the two buildings… in return for that we have a long term lease with [American Campus Communities],” Arick said. “They obviously get a first right or priority on the revenues off those facilities.”

ACC pays for the development of the buildings, which the Indiana Business Journal reported to be $86 million for the construction of Irvington and Fairview House, in exchange for an undisclosed share of revenue generated by room and board costs.

Though certain information — such as the length of the lease — is confidential, because ACC is a publicly traded company, at the end of every fiscal year, they must publish a 10k, showing how much revenue they made off of all of their properties. This allows us to put together some sort of idea of the specifics of the deal as the deal happens. In the 2017 fiscal year, ACC reported making almost $4.8 million off of the Fairview House building, showing that they are receiving near-to-all of the revenue.

If this was their share of revenue over the course of eight years, this would be enough to pay off  ACC’s development costs. However, their share of revenue isn’t fixed.

“There is a point where by once they hit certain ceilings we share revenue above that point,” Arick said.

These “ceilings” fall under the aforementioned confidential specifics. Without access to this information, it is impossible to speculate about time table or formulate any concrete opportunity cost.

Arick said he understands this kind of deal comes with trade-offs.

“Now if Butler had been in a position where capital wasn’t an issue… we may have looked at it very differently,” he said. “I can guarantee we would have at least considered the trade-offs of doing it the traditional way and doing it on our own versus in a partnership. It comes down to capital and preserving capital. We’re really in the timeline where we wanted to accomplish that we really did not have sufficient capital to do both at the same time. We were either not going to be able to do one or the other, or do it on a very different timeline than what we wanted.”

For the university to complete its vision of extensive renovation around campus, this was the way to finance it without possibly negatively affecting the university’s ability to take out debt in the future. That being said, Arick said he sees there being advantages to the partnership with ACC outside of it being what we can afford.

“I think with a partner like ACC I think we were able to bring the halls online quicker, design them quicker than what I think we could have on our own under the traditional manner,” he said. “I think we got [the dormitories] an academic year earlier than we would’ve otherwise.”

So far this deal has brought us two incredible facilities that bring a level of glitz and glamor to the campus that simply wasn’t present in the old oft-flooded carpets of Ross or the always-present odd smell of ResCo.

Just as President Danko announced to Indianapolis Business Journal in July, “Turn student housing over to the experts, just like we do food services.”

But glitz and glamor don’t make the school. Speaking with sophomore dance major Cody Maggiore, he told me, “I didn’t come to Butler for Irvington House or Fairview, I came for the dance program and academics.”

I don’t think he is alone in that sentiment. The new dorms are luxurious, but no amount of arcade machines or 60 plus inch TVs — showing the weather channel exclusively — will improve this campus the way that the other investments going into academics will.

While the university needed new housing — and there is no doubt that the extensiveness of the amenities in Fairview and Irvington House — everyone on campus except those involved with this deal have no idea how much money from Butler students will go to Austin, TX, and ACC shareholders.

Butler students for the next however many years will only be able to understand how much money ACC made off of Butler students above their cost of development for the two buildings by reviewing 10k forms every fiscal year and being vigilant with the skills they learned in “Intro to Accounting.”

This may have been a fantastic deal, where ACC makes a reasonable profit over the $86 million they spent and the university gets two incredible facilities financed in a way that allowed them to invest in education concurrently.

This also may be the university equivalent of a payday loan. The devil is in the details, and unfortunately, as students — the source of revenue — I guess, is not for us to know.