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june 2012

Industry Study

Canada’s Universities: No Break from Challenging Environment

CONTACT INFORMATION Julius NyarkoSenior Financial AnalystPublic FinanceTel. +1 416 597 [email protected]

Travis ShawVice PresidentPublic FinanceTel. +1 416 597 [email protected]

Eric Beauchemin, CFAManaging DirectorPublic FinanceTel. +1 416 597 [email protected]

DBRS is a full-service credit rating agency established in 1976. Privately owned and operated without affi liation to any fi nancial institution, DBRS is respected for its independent, third-party evaluations of corporate and government issues, spanning North America, Europe and Asia. DBRS’s extensive coverage of securitizations and structured fi nance transactions solidifi es our standing as a leading provider of comprehensive, in-depth credit analysis.

All DBRS ratings and research are available in hard-copy format and electronically on Bloomberg and at DBRS.com, our lead delivery tool for organized, Web-based, up-to-the-minute infor-mation. We remain committed to continuously refi ning our expertise in the analysis of credit quality and are dedicated to maintaining objective and credible opinions within the global fi nancial marketplace.

Canada’s Universities: No Break from Challenging EnvironmentJune 2012

3

Canada’s Universities: No Break from Challenging Environment

TABLE OF CONTENTS

Executive Summary 4

DBRS Canadian University Peer Comparison Table 5

Rating Considerations 6

Strengths 7

Challenges 7

Review of 2011 and 2012 Rating Actions 8

History of University Credit Ratings 2002-2012 9

Operating Results (DBRS-adjusted) 10

Enrolment 12

Enrolment Trends 14

Revenue (DBRS-adjusted) 15

Government Funding 17

Operating Grants 17

Research and Capital 18

Tuition Fees 19

Fundraising 21

Expenditures 22

Financial Obligations 25

Pension and Post-Employment Benefi t Plans Liabilities 27

Financial Resources 29

Appendix A: Key Related Research 32

Rating Reports 32

Commentaries 32

Methodologies 32

Appendix B: DBRS Rating Scales 33

Long-Term Obligations 33

Appendix C: Selected Indicators 34


4

Executive Summary

Canadian universities rated by DBRS have generally maintained sound credit profi les, supported by solid enrolment growth, and stable and predictable revenue sources. Of the thirteen DBRS-rated universities, eight recorded surpluses in 2010-11, and all have experienced improved operating performance since the last economic downturn. Nonetheless, three rating changes occurred in 2011, including two down-grades, as expansionary capital plans boosted debt needs and coincided with an operating environment showing increased signs of strain. The year 2012 has seen two trend changes to date, both to Negative. DBRS expects operating conditions to remain tight going forward, as rising labour costs and pension challenges add meaningful spending pressures, while opportunities for revenue growth remain limited. In light of these challenges, many universities have introduced cost-containment measures and new multi-year budget planning models. Such prudent management approaches will become increasingly important in a constrained funding environment.

Enrolment has been growing steadily, with average annual gains of 3.7% at DBRS-rated universities over the past fi ve years. Solid enrolment growth at most DBRS-rated universities has been a key driver of fi nan-cial performance. Rising educational requirements in the labour market and adult learning levels will help support enrolment growth over the years to come. However, a gradual decline in the university age cohort beginning within the next decade will provide an offset over the longer term. As a result, an institution’s academic profi le and location will play a greater role in drawing new students, and their accompanying revenue streams.

The tightened funding environment across the sector stems from fi scal challenges at senior government levels. Funding for health care tends to crowd out other programs, and the fi scal defi cits faced by most provincial governments suggest that they are unlikely to strengthen per student funding, at least in the near term. As belts tighten on campus, universities are increasingly keen to tap into the international student market, especially as these students are typically exempt from provincial tuition regulations. Other non-governmental sources, such as fundraising and donations and ancillary operations, should also continue to gain importance.

Fortunately, debt levels remain moderate at most DBRS-rated universities, providing support to credit profi les. However, sustained deferred maintenance and other infrastructure needs have led to additional debt requirements as universities try to take advantage of the current low interest rate environment. As new debt is added, it is likely to erode fl exibility and, in some cases, amidst the existing challenges could lead to fi nancial metrics no longer consistent with current ratings.

By and large, credit profi les remain sound within the sector. However, DBRS expects opportunities for improvements to be fairly limited over the years to come, as new revenue generation tools are limited, and funding growth will be weak as most provincial governments grapple with their own fi scal challenges. Recent steps to improve fi scal management are encouraging, and will be instrumental in maintaining sound credit profi les in light of heightened debt needs.


5

DB

RS

Rati

ng

sB

rock

Co

nco

rdia

Gu

elp

hLau

rier

McM

ast

er

Ott

aw

aQ

ueen

’sS

imo

n F

rase

rTo

ron

toU

OIT

UQ

AM

Win

dso

rY

ork

Long-t

erm

deb

tA

AA

AAA (

low

)AA

AA

AA (

low

)AA

BBB (

hig

h)

A (

low

)A (

hig

h)

AA (

low

)

Tren

dSta

ble

Sta

ble

Sta

ble

Neg

ativ

eSta

ble

Sta

ble

Sta

ble

Sta

ble

Sta

ble

Sta

ble

Sta

ble

Neg

ativ

e Sta

ble

Last

updat

eM

ar. 6, 2012

Apr. 2

3, 2012

Dec

. 14, 2011

Apr. 2

, 2012

May

24, 2012

Mar

. 23, 2012

Oct

. 13, 2011

Jan. 30, 2012

Nov

. 3, 2011

Mar

. 30, 2012

Aug. 17, 2011

May

10, 2012

Sep

. 28, 2011

Gen

era

l In

form

ati

on

Prov

ince

Onta

rio

Québ

ecO

nta

rio

Onta

rio

Onta

rio

Onta

rio

Onta

rio

B.C

.O

nta

rio

Onta

rio

Québ

ecO

nta

rio

Onta

rio

-Pro

vinci

al r

atin

gAA (

low

)A (

hig

h)

AA (

low

)AA (

low

)AA (

low

)AA (

low

)AA (

low

)AA (

hig

h)

AA (

low

)AA (

low

)A (

hig

h)

AA (

low

)AA (

low

)

City

St.

Cat

har

ines

Montr

éal

Guel

ph

Wat

erlo

oH

amilt

on

Ott

awa

Kin

gst

on

Van

couve

rTo

ronto

Osh

awa

Montr

éal

Win

dso

rTo

ronto

-Loca

l popula

tion

(1)

404,4

00

3.9

mill

ion

138,2

00

492,4

00

750,2

00

1.2

mill

ion

162,5

00

2.4

mill

ion

5.7

mill

ion

364,2

00

3.9

mill

ion

330,9

00

5.7

mill

ion

Enro

lmen

t (F

TEs)

18,1

80

26,7

77

20,6

51

15,5

51

25,3

99

42,2

11

19,8

65

25,4

92

66,6

11

6,7

61

28,2

16

14,0

29

47,8

94

Type

of

inst

itution

(2)

Com

pCom

pCom

pCom

pM

edM

edM

edCom

pM

edCom

pCom

pCom

pCom

p

Op

era

tin

g P

erf

orm

an

ce (

CA

D m

illi

on

s)

Ref

eren

ce Y

ear

2010-2

011

2010-2

011

(5)

2010-2

011

2010-2

011

2010-2

011

2010-2

011

2010-2

011

2010-2

011

2010-2

011

2010-2

011

2009-2

010

2010-2

011

2010-2

011

Surp

lus

(defi

cit)

($5.8

)$8.8

$25.9

$11.3

$22.0

$51.5

($

8.7

)$52.3

$7.2

$15.4

$9.2

($

9.4

)($

3.5

)

-% o

f re

venues

(2.2

%)

1.9

%3.8

%4.1

%2.6

%6.0

%(1

.2%

)8.5

%0.3

%10.5

%1.9

%(3

.1%

)(0

.4%

)

Rev

enues

$257.6

$457.9

$678.4

$276.2

$859.5

$861.6

$742.5

$616.1

$2,3

21.1

$147.3

$497.6

$300.7

$923.0

-Yea

r-ov

er-y

ear

chan

ge

5.0

%1.0

%7.0

%9.1

%3.8

%7.3

%1.1

%4.3

%5.0

%28.5

%7.4

%1.8

%3.7

%

Rev

enue

mix

Gov

ernm

ent

(pro

v.

& fed

.)42.6

%59.5

%51.6

%40.8

%44.4

%55.9

%52.2

%48.5

%43.9

%55.2

%69.3

%45.5

%42.1

%

Stu

den

t fe

es41.1

%32.7

%20.2

%45.1

%19.5

%28.9

%28.2

%30.9

%32.9

%27.3

%12.5

%37.6

%43.8

%

Endow

men

t &

dona-

tions

0.3

%1.6

%1.7

%1.8

%6.2

%2.5

%2.1

%3.2

%5.6

%2.2

%1.1

%0.5

%0.8

%

Oth

er16.0

%6.2

%26.5

%12.3

%29.9

%12.7

%17.4

%17.4

%17.6

%15.4

%17.1

%16.4

%13.3

%

Exp

enditure

s$263.3

$449.1

$652.6

$265.0

$837.6

$810.1

$751.2

$563.8

$2,3

13.9

$131.8

$488.4

$310.2

$926.6

-Yea

r-ov

er-y

ear

chan

ge

4.1

%(1

.3%

)2.5

%8.6

%2.6

%6.9

%1.6

%5.2

%6.9

%13.3

%6.1

%4.8

%3.5

%

Deb

t an

d L

iqu

idit

y (

CA

D m

illi

on

s)

Tota

l deb

t (u

niv

. su

p-

port

ed)

$125.0

$234.7

$185.1

$116.5

$152.1

$199.3

$237.7

$167.1

$526.8

$248.1

$490.9

$95.6

$310.9

-Per

FTE (

$)

$6,8

76

$8,7

65

$8,9

61

$7,4

90

$5,9

90

$4,7

22

$11,9

67

$6,5

56

$7,9

09

$36,6

89

$17,3

99

$6,8

17

$6,4

92

Inte

rest

cov

erag

e (t

imes

)1.3

5.4

6.5

4.6

8.8

6.9

3.1

9.3

5.2

2.9

2.0

2.7

3.9

Tota

l en

dow

men

t$50.0

$121.9

$218.0

$64.8

$513.1

$177.9

$557.8

$208.6

$1,5

39.4

$12.5

$14.1

$65.3

$331.3

-Per

FTE (

$)

$2,7

48

$4,5

51

$10,5

57

$4,1

68

$20,2

01

$4,2

14

$28,0

77

$8,1

83

$23,1

10

$1,8

46

$499

$4,6

52

$6,9

17

Exp

endab

le r

e-so

urc

es(3

)$36.4

$17.9

$35.0

$69.3

$217.7

$184.9

$404.4

$126.4

$872.1

n.m

.$9.0

$46.5

$299.6

-% o

f to

tal deb

t29.2

%7.6

%18.9

%59.5

%143.1

%92.8

%170.1

%75.6

%165.5

%n.m

.0.9

%49.0

%96.4

%

Pensi

on f

und s

tatu

s(4)

($7)

($112)

($221)

($82)

($289)

($147)

($25)

($73)

($1,3

93)

$0

($54)

($77)

($273)

Post

-em

plo

ymen

t ben

efi t

s($

17)

($91)

($264)

($51)

($192)

($63)

($64)

($55)

($455)

$0

n/a

($44)

($89)

Note

: FT

E =

Full-

tim

e eq

uiv

alen

t. A

ll fi gure

s ar

e D

BRS-a

dju

sted

.(1

) Sta

tist

ics

Can

ada

censu

s m

etro

polit

an a

rea

dat

a.(2

) Com

p =

com

pre

shen

sive

(no m

edic

al p

rogra

m a

nd u

sual

ly lim

ited

and s

cien

ce a

nd e

ngin

eering p

rogra

ms)

; M

ed =

med

ical

(m

edic

al p

rogra

m a

nd f

ull

range

of

scie

nce

and e

ngin

eeer

ing p

rogra

ms)

.

(3)

Exc

ludes

ext

ernal

ly r

estr

icte

d e

ndow

men

t as

sets

as

wel

l as

unsp

ent

bond p

roce

eds,

sin

ce a

lrea

dy

com

mitte

d t

o o

ngoin

g c

onst

ruct

ion p

roje

cts.

(4)

Acc

ounting b

asis

. Pr

esen

ted b

efore

unam

oritize

d g

ains/

lose

s.

(5)

Conco

rdia

chan

ged

its

fi s

cal ye

ar-e

nd t

o A

pril 30 fro

m M

ay 3

1,

star

ting in 2

010-2

011.

In 2

010-2

011,

resu

lts

refl ec

t an

11-m

onth

yea

r an

d a

re n

ot

direc

tly

com

par

able

with p

rior

year

s.

DBRS Canadian University Peer Comparison Table


6

Rating Considerations

DBRS ratings provide an indication of a borrower’s expected ability to meet its future fi nancial obliga-tions in a timely manner, and are based on a wide range of quantitative and qualitative factors.

The following table presents some of the key factors taken into consideration when assessing the credit-worthiness of universities, along with the relative risk that each of them currently represents for the credit profi le of each university rated by DBRS. The darkest box indicates a source of higher risk to the credit profi le of a university, while the lightest box indicates a low risk or source of strength for a university relative to its peers.

Note that the table focuses primarily on quantitative factors, which are mostly fi nancial in nature. It excludes more qualitative factors such as academic profi le, reputation and management prudence, which, although very important considerations in the analysis, tend to be more challenging to measure. Also note that each of the factors is allocated a different weighting by DBRS. As a result, university ratings are not perfectly correlated with the number of shaded boxes presented below.

DBRS Rating Considerations

Long-TermRating

Provincial Rating

Enrolment Outlook Debt

OperatingPerfor-mance

Financial Resources

Fee Setting

FlexibilityPension

Plan Other**

Brock A AA (low)

Concordia A A (high)

Guelph A AA (low)

Laurier A* AA (low)

McMaster AA (low) AA (low)

Ottawa AA AA (low)

Queen’s AA AA (low)

Simon Fraser AA (low) AA (high)

Toronto AA AA (low)

UOIT BBB (high) AA (low)

UQAM A (low) A (high)

Windsor A (high)* AA (low)

York AA (low) AA (low)

Relative Risk High Moderate Low

*Negative trend. **By virtue of location, Brock, Guelph and Queen’s have smaller catchment areas. Ottawa incurs additional costs as-sociated with administering its bilingual mandate. UofT has substantial real estate holdings. UOIT is still establishing its reputation.


7

Strengths Challenges

(1) Stable revenue base (2) Track record of sound results and prudent

management(3) Generally supportive enrolment outlook (4) Moderately low tuition fees relative to U.S. peers(5) Strong public support for universities

(1) Rising debt due to capital needs(2) Sizeable employee benefi t liabilities(3) Limited fee setting autonomy(4) Sustained salary pressures(5) Dependence on provincial policies and funding

STRENGTHS(1) Due to the nature of their activities, Canadian universities generally benefi t from a stable and predict-able revenue base, which consists of substantial grants from provincial and federal governments, as well as growing tuition fee, donation and ancillary revenues. While the sector must compete for funding with health care, which consumes the largest share of provincial budgets, education remains a priority of the public, and of provincial governments. This makes governments generally supportive of their institutions and has at times encouraged governments to provide one-time funding or fi nancial help to institutions in diffi culty.

(2) DBRS-rated universities generally follow fairly conservative management practices, including multi- year capital and operating planning horizons, prudent investment and endowment payout policies, close monitoring of operating units and demonstrated ability to implement cost-reduction initiatives to protect fi scal soundness. This is evidenced by the spending cuts frequently implemented to achieve budget targets, and the sound operating performances displayed by most DBRS-rated universities over the past few years.

(3) Rising educational requirements in the labour market and elevated adult learning levels will help support demand, and keep participation rates steady. However, this will be offset by a gradual decline in the university age cohort beginning within the next decade before rising again, as projected by Statistics Canada. The location of most DBRS-rated universities in or close to Canada’s largest urban centres is also a positive consideration, since large cities tend to benefi t the most from international migration and urbanization trends.

(4) Undergraduate tuition fees continue to compare favourably with those charged for professional programs, such as law and MBAs, and with the average tuition charged at U.S. universities, which suggests that there remains considerable room for upward fee adjustments, if necessary. In addition, in most juris-dictions demand for university education has so far shown little sensitivity to recent fee increases.

(5) Due to the strong public support for universities, any sustained funding defi ciencies within the edu-cation system would likely carry with it negative political consequences for provincial governments. Education is one of the key budget priorities for provincial governments.

CHALLENGES(1) Despite increased funding for capital in recent years, which was largely for growth requirements, uni-versities have generally underinvested in infrastructure maintenance. As a result, many universities carry signifi cant deferred maintenance needs, especially the older institutions, which is putting pressure on debt requirements. Other universities are operating at full capacity following several years of solid enrolment growth, or have facilities that are inadequate to meet current research and teaching requirements, which is also translating into new capital and debt needs.

(2) Low interest rates and volatile fi nancial markets have caused signifi cant growth in unfunded pension liabilities in recent years, thus increasing annual funding requirements and putting an added strain on operating results and cash fl ows. Some universities have taken considerable steps to address the challenge, but solving the issue will take time as it requires diffi cult negotiations with labour groups.


8

(3) Of the three provinces represented by DBRS-rated universities – Ontario, Québec and British Columbia – all have government policies in place limiting tuition fee increases. These policies impair the ability of universities to address cost pressures and maintain quality of service. This exposes universities to changes in provincial policy that can adversely affect fi nancial profi les and credit ratings, and can add an element of uncertainty into the annual budget planning process.

(4) Accelerating retirements and growing enrolment are expected to lead to competition for faculty among Canadian universities and growing salary pressures, particularly in high-demand programs. The Association of Universities and Colleges of Canada (AUCC) estimates that 21,000 faculty will need to be replaced between 2007 and 2017. Salary and benefi ts costs, which are rising faster than government grants, will continue to put pressure on university fi nances in the years ahead.

(5) Despite efforts to broaden revenue generation in recent years through fee increases, expanded research activities, commercialization of certain services, and fundraising activities, Canadian universities continue to rely heavily on provincial operating funding, which exposes them to changes in the fi scal position of governments and to unfavourable changes in funding formulas. Although provincial governments remain supportive of university education, they have historically been slow at responding to the funding needs of their universities. The current fi scal challenges of senior levels of government will further exacerbate the issue.

Review of 2011 and 2012 Rating Actions

The graph below presents the DBRS credit ratings of each university in relation to its debt-to-full-time equivalent (FTE) ratio. Although an important variable in the assessment of universities, debt is only one of the numerous factors incorporated into a university’s credit rating. Other key factors include academic profi le, provincial funding framework and tuition fee setting autonomy, and management prudence to contain expenditure growth and protect fi scal soundness.

University Ratings versus DBRS-Adjusted Debt-to-FTE Ratios

A A A A*AA (low)

AA

AA

AA (low) AA

BBB (high)

A (low)

A (high)* AA (low)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Bro

ck

Conco

rdia

Guel

ph

Laurier

McM

aste

r

Quee

n's

Ott

awa

Toro

nto

SFU

UO

IT

York

UQ

AM

Win

dso

r

DBRS-A

dju

sted

Deb

t-to

-FTE (f

or 2

010-1

1)

*Negative Trend Source: DBRS.


9

As a result of its approach to rating “through the cycle”, DBRS does not penalize an issuer at market troughs nor reward it at market peaks unless such changes are structural and expected to materially alter future fi nancial metrics and/or qualitative rating considerations. In 2011, there were three rating changes and in 2012, two trend changes to date. The negative rating actions have largely been due to increased debt expectations resulting from expansionary capital projects and growing unfunded pension liabilities compounded by a tighter operating environment and relatively weak operating results. Certain ratings could face some pressure, as belt tightening at the provincial level will undoubtedly constrain funding to the sector; as well, salary and pension funding pressures and intensifying debt needs pose meaningful headwinds and could erode fi nancial fl exibility.

History of University Credit Ratings 2002-2012

DBRS Long-Term Debt Ratings (for the year ended December 31)

2012t

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Brock A A A (H)* A (H) A (H) A (H) A (H) A (H) NR NR NR

Concordia A A A A A A A A A A A

Guelph A A A (H)* A (H)* A (H)* A (H) A (H) AA (L) AA (L) AA (L) AA (L)

Wilfred Laurier A* A A A A A A A NR NR NR

McMaster AA (L) AA (L) AA (L) AA* AA* AA AA AA AA AA AA

Ottawa AA AA AA AA AA AA AA AA AA AA NR

Queen’s AA AA AA AA (H) AA (H) AA (H) AA (H) AA (H) AA (H) AA (H) AA (H)

Simon Fraser AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) NR

Toronto AA AA AA AA AA AA AA AA AA AA (H) AA (H)

UOIT BBB (H) BBB (H) BBB (H) BBB (H) BBB (H) BBB (H) BBB (H) BBB (H) BBB (H) NR NR

UQAM A (L) A (L) BBB (H)** BBB (H) BBB (H) BBB (H)* BBB (H)* A A NR NR

Windsor A (H)* A (H) A (H) A (H) A (H) A (H) A (H) NR NR NR NR

York AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L) AA (L)

University Long-Term Debt Rating Changes

Number of Upgrades

0 1 0 0 0 0 0 0 0 0 0

Number of Downgrades

0 2 2 0 0 0 3 0 1 0 0

t = at June 5, 2012. (H) = High. (L) = Low. * Negative trend. **Positive trend.


10

Operating Results (DBRS-adjusted)

Canadian universities are mostly public not-for-profi t institutions and as such budget for balanced results. This translates into relatively tight operating cash fl ow generation, although this is mitigated by the relative stability of revenues and expenditures, resulting in predictable cash fl ows.

DBRS-rated universities continue to rebound from losses posted in 2008-09. Since then, most DBRS-rated universities have posted sound operating results, amid sustained spending pressures. In 2010-11, only fi ve of the 13 DBRS-rated universities posted defi cits, with surpluses averaging 2.4% of revenues, and eight universities recording year-over-year improvements.

Net Operating Results* as a Percentage of Total Revenue

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2010-11 Five-year Average

Broc

kCo

ncor

dia

Gue

lph

Laur

ier

McM

aste

r

Que

en's

Ottaw

a

Toro

nto

SFU

UOIT

York

UQAM

Win

dsor

*Excluding extraordinary items.Source: DBRS.

Growing enrolment and improved provincial grants supported sound fi nancial results for most Ontario universities in 2010-11, with UOIT posting the strongest results relative to revenues, though primarily due to one-time provincial support. Ottawa and SFU also posted strong results and have done so consis-tently over the past decade. Conversely, Windsor, Brock and York posted their fourth consecutive defi cits, while Queen’s posted its third; however, all have credible plans in place to restore budget balance within the near term, further evidenced by recent improvements in their operating results.

Operating results have also improved in Québec, although year-over-year comparisons were compli-cated by a change in the fi scal year-end to April 30 from May 31. Still, solid enrolment growth at both Concordia and UQAM provided support to revenue growth.


11

Net Operating Results Before Interfund Transfers*

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock (5.766) (7.636) (16.107) (4.619) 7.412 10.820 10.185 13.153 (1.651) 2.892

Concordia 8.758 (1.844) 15.103 (10.575) 4.329 (6.122) (1.880) 28.340 26.934 35.044

Guelph 25.851 (2.590) (6.379) (10.927) (2.900) (10.905) (17.154) (14.597) 0.480 24.416

Laurier 11.275 9.288 (2.487) (2.247) 5.693 (0.997) 0.030 (2.614) (9.869) (2.742)

McMaster 21.951 11.650 (53.953) (13.519) 23.662 8.562 6.091 47.931 13.263 (0.805)

Ottawa 51.525 44.601 (0.731) 59.631 89.457 58.822 42.877 45.393 14.583 20.791

Queen’s1 (8.687) (5.053) (62.682) 0.700 38.444 41.273 38.894 24.094 14.770 22.384

SFU 52.320 54.998 (62.211) 6.716 23.602 23.522 25.035 24.332 24.737 20.497

Toronto 7.200 45.400 (169.200) 50.600 134.500 75.000 41.200 46.600 (164.400) (116.300)

UOIT 15.431 (1.728) (1.534) (6.939) (11.200) (6.592) 0.730 2.394 - -

UQAM (0.177) 20.892 2.919 (24.484) (20.532) 6.623 (1.751) 9.896 20.841 24.576

Windsor (9.429) (0.518) (5.013) (9.289) 8.150 7.206 (2.807) 11.528 5.051 0.758

York (3.535) (4.418) (11.707) (1.039) 40.580 30.482 32.988 35.641 24.862 19.054

*DBRS adjusts to exclude extraordinary items. Note: At the direction of the province, Concordia and UQAM changed their fi scal year-end to April 30 from May 31, starting in 2010-2011. In 2010-2011, results refl ect an 11-month year and are not directly comparable with prior years. All other DBRS-rated universi-ties have an April 30 fi scal year-end, except for SFU and UOIT which have a March 31 fi scal year-end. 1. In 2007-08, Queen’s adopted a new standard regarding the treatment of fi nancial instruments to recognize unrealized gains and losses on all investments not externally restricted. In 2009-10, Queen’s removed affi liated hospital operations from fi nancial results and restated 2008-09 comparative fi gures.

Net Operating Results Before Interfund Transfers* as a Percentage of Total Revenue

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock (2.2%) (3.1%) (7.0%) (2.1%) 3.3% 5.3% 5.2% 7.5% (1.2%) 2.4%

Concordia 1.9% (0.4%) 3.4% (2.5%) 1.1% (1.6%) (0.5%) 7.6% 7.9% 11.7%

Guelph 3.8% (0.4%) (1.0%) (1.9%) (0.5%) (2.1%) (3.4%) (3.1%) 0.1% 5.9%

Laurier 4.1% 3.7% (1.0%) (1.0%) 2.7% (0.5%) 0.0% (1.6%) (7.7%) (2.4%)

McMaster 2.6% 1.4% (7.4%) (1.8%) 3.2% 1.2% 1.0% 7.9% 2.6% (0.2%)

Ottawa 6.0% 5.6% (0.1%) 8.5% 13.4% 9.7% 7.5% 8.8% 3.1% 4.9%

Queen's1 (1.2%) (0.7%) (10.0%) 0.1% 5.2% 6.1% 6.0% 3.9% 2.6% 4.3%

SFU 8.5% 9.3% (12.9%) 1.3% 4.7% 4.9% 5.9% 6.2% 7.1% 6.5%

Toronto 0.3% 2.1% (8.8%) 2.6% 6.9% 4.2% 2.5% 3.0% (13.8%) (10.1%)

UOIT 10.5% (1.5%) (1.4%) (7.2%) (15.9%) (11.9%) 1.6% 10.4% - -

UQAM (0.0%) 4.2% 0.6% (5.0%) (4.3%) 1.4% (0.4%) 2.5% 5.5% 7.0%

Windsor (3.1%) (0.2%) (1.8%) (3.3%) 2.9% 2.8% (1.2%) 5.1% 2.6% 0.4%

York (0.4%) (0.5%) (1.4%) (0.1%) 4.9% 4.0% 4.6% 5.5% 4.3% 3.6%

*DBRS adjusts to exclude extraordinary items. Note: At the direction of the province, Concordia and UQAM changed their fi scal year-end to April 30 from May 31, starting in 2010-2011. In 2010-2011, results refl ect an 11-month year and are not directly comparable with prior years. All other DBRS-rated universi-ties have an April 30 fi scal year-end, except for SFU and UOIT which have a March 31 fi scal year-end. 1. In 2007-08, Queen’s adopted a new standard regarding the treatment of fi nancial instruments to recognize unrealized gains and losses on all investments not externally restricted. In 2009-10, Queen’s removed affi liated hospital operations from fi nancial results and restated 2008-09 comparative fi gures.


12

DBRS expects the operating position of universities to remain tight going forward due to rising salary and benefi ts costs and aging infrastructure, while opportunities for revenue growth remain limited. Provincial governments have generally been supportive, allowing modest-to-moderate increases in tuition fl exibility. However, direct provincial operating funding in recent years has been limited compared with historical levels, as governments look to slow spending in an attempt to resolve their own fi scal challenges.

Spurred by the negative impacts of the fi nancial crisis and an increasingly tight operating environment, many institutions have introduced new multi-year budget planning models. These new models seek to align faculty budgets with enrolment growth, and give faculties direct responsibility over their own revenues and expenses. This has acted as an incentive to ensure prudent management, and in many cases has resulted in substantial build-ups of divisional carry-forward reserves. DBRS notes that such prudent management approaches will become increasingly important in an environment characterized by a constrained funding environment, rising deferred maintenance, looming pension-related expenses, and infl ationary labour cost pressures.

Enrolment Internationally, Canada has one of the highest percentages of post-secondary graduates in the work-force among G7 and OECD nations, and according to Statistics Canada, the proportion of working-age Canadians with a university education has risen steadily over the past 15 years. Most provinces have seen solid growth in university enrolment in recent years, providing support to revenues while also putting pressure on existing infrastructure and labour expenses. Over the past fi ve years, DBRS-rated universities have averaged enrolment growth of 3.7% per year on an FTE basis.

Canadian universities generally benefi t from limited local competition and relatively sizable local catch-ment areas, providing a steady supply of students. Factors expected to infl uence university enrolment in the years ahead include: (1) shifts in the workplace in favour of continuous learning and skills upgrading; (2) rising university participation rates resulting from the continued shift toward knowledge-based industries; and (3) the aging of the echo boom generation, who make up the majority of the current university age cohort. Part-time enrolment has also been a positive contributor in recent years, though it remains more volatile.

University Enrolment (FTE), by Province

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06

B.C.* 124,679 122,143 116,345 111,679 110,391 108,888

Alta.* 119,073 115,774 110,483 107,097 105,978 104,531

Sask. 26,600 26,187 25,620 26,210 26,592 27,028

Man. 34,401 33,867 32,716 33,215 33,456 33,607

Ont.1 430,265 418,656 401,315 394,595 390,710 380,326

Que. 212,411 204,078 196,819 192,628 191,708 190,119

N.B. 20,233 20,027 19,966 20,356 20,647 21,487

N.S. 37,404 36,359 35,569 36,012 37,091 37,884

P.E.I 3,887 3,740 3,588 3,442 3,555 3,517

N.L. 15,495 15,401 15,155 14,808 15,117 15,278

All Provinces 1,024,448 996,231 957,575 940,043 935,244 922,665

Note: Fall enrolment, including undergraduate and graduate students. Excludes continuing education students. Generally: FTE = Full time + (Part time/3.5), though defi nition may vary. *Several institutions granted university status starting in 2007-08 in British Columbia and 2009-10 in Alberta, prior years include en-rolment at these institutions before receiving university status.1. DBRS estimate for 2010-11. Source: BC Ministry of Advanced Education; Government of Alberta; Government of Saskatchewan; University of Saskatchewan; Gov-ernment of Manitoba; Council of Ontario Universities; Conference of Rectors and Principals of Quebec Universities; Maritime Provinces Higher Education Commission; Memorial University (excludes Marine Institute).


13

In 2010-11, DBRS estimates that university enrolment in Canada reached 1,024,448 FTEs, an increase of 2.8% over the prior year and 11% higher than fi ve years ago. Québec experienced the strongest year-over-year growth in 2010-11, at 4.1%, while enrolment growth in Newfoundland was the lowest, at 0.6%. The larger provinces have experienced the most notable increases in enrolment over the past fi ve years, generally refl ective of demographic trends. Although somewhat dated, the latest data available from Statistics Canada suggests that the Atlantic provinces maintain relatively high university partici-pation rates, whereas below-average participation is observed in the western-most provides. Québec’s participation rate is somewhat dampened by the existence of a well-integrated network of colleges, which offers alternatives to university education. Ontario has consistently had one of the highest participation rates in the country, despite relatively high tuition fees.

Enrolment at DBRS-Rated Universities (FTEs)

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Brock

Concordia

Guelph

Laurier

McMaster

Ottawa

Queen's

SFU

Toronto

UOIT

UQAM

Windsor

York

2005-06 2010-11Source: DBRS

Growth in Enrolment (FTE) at DBRS-Rated Universities

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Brock 3.2% 5.8% 1.0% (2.1%) 1.4% 6.1% 9.0% 17.4% 11.4%

Concordia 2.9% 4.9% 1.4% 1.4% 0.2% 4.0% 0.0% 4.7% 7.8%

Guelph 4.4% 5.9% 2.0% 0.0% 4.3% (0.7%) 2.4% 8.2% 5.8%

Laurier 5.2% 7.5% 4.9% (0.1%) 6.5% 6.9% 7.4% 16.0% 4.1%

McMaster 1.6% 3.7% 2.4% 2.7% 3.4% 6.4% 5.2% 12.4% 10.4%

Ottawa 4.9% 4.9% 2.8% 4.2% 3.6% 5.5% 4.7% 11.2% 8.0%

Queen’s 2.9% 3.6% 4.7% 0.3% (0.6%) 2.7% 1.3% 4.7% (0.6%)

SFU 2.2% 8.5% 4.2% 5.6% 3.6% 4.4% 3.8% 1.5% 8.0%

Toronto 1.8% 3.9% 1.0% 1.8% 1.7% 4.0% 3.8% 9.3% 7.5%

UOIT 11.8% 17.4% 9.2% 15.2% 41.2% 59.1% 98.2% - -

UQAM 4.5% 0.3% 0.7% (1.2%) (0.2%) 0.7% 14.1% 5.2% 1.7%

Windsor 2.5% (0.5%) (0.3%) (4.6%) 0.5% 1.6% 2.8% 15.1% 6.6%

York 2.7% 3.0% 1.0% (1.7%) 1.5% 4.3% 5.4% 10.9% 9.9%

Note: Fall enrolment, including undergraduate and graduate students; excludes continuing education students. Full-time equivalent student (FTE). Generally: FTE = Full time + (Part time/3.5). 1. Excludes Guelph-Humber program, OMAFRA diploma and non-credit courses.


14

The largest DBRS-rated universities are UofT, York, and Ottawa, which all have over 40,000 FTEs. Located in large metropolitan areas, these universities benefi t from sizeable local catchment areas, which provide a steady supply of students.

Among DBRS-rated universities, Ontario institutions showed the strongest increases in 2010-11, ranging from 1.6% at McMaster to 11.6% at UOIT, on an FTE basis. Gains were also solid at UQAM (4.5%) and Concordia (2.9%), while growth at SFU was limited to 2.2%. Enrolment growth is expected to remain healthy at most DBRS-rated universities in 2011-12, although some universities are planning to moderate growth in the years ahead in order to better manage the rapid growth that has been experienced in recent years.

UOIT has experienced the most signifi cant growth among DBRS-rated universities since its inception in 2003-04, averaging 19% annually over the last fi ve years. Laurier and SFU have also grown notably, averaging nearly 5% growth over the same period. Conversely, UQAM and York have experienced slower enrolment growth in recent years, down from solid enrolment growth in the earlier part of the decade. In recent years, Windsor has been the only DBRS-rated university to experience stagnant enrolment growth, which prompted it to initiate a campus renewal project to address its enrolment challenge.

ENROLMENT TRENDSInternational student enrolment has also grown markedly in Canada, doubling between 1992 and 2008, from 4% to 8% of total enrolment. The overwhelming majority of these students study in Ontario, British Columbia and Québec, as Canada’s largest metropolitan cities and universities are located in these provinces. International students are typically exempt from provincial tuition regimes. As such, the growing number of these students on university campuses has been a boon for many universities as it adds additional fl exibility in a tight operating environment.

Graduate student enrolment has grown even faster than undergraduate enrolment over the last 30 years, rising from about 77,000 in 1980 to almost 190,000 in 2010. Government funding cuts to the sector in the early 1990s contributed to subdued growth in graduate enrolment through much of the 1990s. As government funding picked up in the late 1990s, universities were able to increase the number of faculty hires. Due to the close collaborative and supervisory relationship between faculty and graduate students, the number of graduate students also rose. In recent years, a growing need for additional skills develop-ment in the labour force has prompted governments to increase their focus on continuing education as well as on graduate enrolment, and advance research initiatives on university campuses.

The peak of the baby boom echo generation is currently working its way through Canadian universi-ties. Students within the 18 to 21 age group (primarily undergraduate students) make up a majority of full-time enrolment. According to the AUCC, over the next decade, this age group will decline by about 10%, thus reducing the pool from which universities typically draw new students. However, the popula-tion in the 18 to 21 age cohort is then projected to rebound in the decade from 2020 to 2030 to the point where it will slightly exceed 2010 levels. In contrast, the older cohort, the 22 to 34 age group, which typi-cally makes up the graduate student population, is expected to grow over the coming decade. Assuming constant participation rates, the AUCC estimates that enrolment will fall by about 4% from current levels by 2020, with all provinces experiencing declines during this period, but will then rebound by 3% beyond current levels by 2030, with British Columbia, Alberta, Manitoba and Ontario seeing a larger cohort of 18 to 21 year-olds after 2030.

The structural shifts occurring in labour markets are expected to act as a suffi cient counterbalance in most provinces. Increasingly, the fastest-growing occupations in Canada are those in the service and knowledge sectors. In response to this, university participation rates have risen across the country. Additionally, over the next two decades, the number of Canadians aged 65 and older will double, and more than six million baby boomers will retire. This will create greater demands for health-care, social, legal and other services


15

– sectors where a university education is often a basic requirement. These changes in the labour market will encourage sustained growth in participation rates, as an undergraduate degree becomes common-place and graduate-level education becomes more coveted in in the labour market.

Nevertheless, trends vary notably across regions and infl uence specifi c institutions differently. DBRS notes that Atlantic Canada and Québec face relatively soft growth outlooks in their university-age cohort. While steadily improving participation rates may provide a partial offset, this slowly unfolding trend may have an adverse effect over the long term on institutions in these provinces with weaker academic profi les and limited ability to attract out-of-province or international students.

Revenue (DBRS-adjusted)

Canadian universities have stable revenue streams, supported by signifi cant funding from the provincial and federal governments, and a well-diversifi ed range of academic programs. Most rely predominantly on three key revenue sources to fund their core activities: (1) government grants; (2) tuition revenues; and (3) fundraising and endowment income. Combined, these sources generally provide over 70% of total revenues. Universities also have access to smaller additional sources such as miscellaneous student fees and profi ts from ancillary operations, such as residences, bookstores and parking facilities.

The relative importance of the three key revenue sources varies by institution, depending on a number of factors:(1) Provincial operating funding policies and resources available for post-secondary education.(2) The level of tuition fee autonomy granted by provincial governments.(3) The ability of each university to attract supplementary income such as research funding and donations.(4) The signifi cance of ancillary operations.

2010-11 Revenue Mix of DBRS–Rated Universities

0%

20%

40%

60%

80%

100%

Tuition Prov. Operating Grants Other Gov't Grants* Donations & Endowment Other

*Includes federal and provincial non-operating grants. Source: DBRS.

Broc

kCo

ncor

dia

Gue

lph

Laur

ier

McM

aste

r

Que

en's

Ottaw

a

Toro

nto

SFU

UOIT

York

UQAM

Win

dsor

Universities in Québec are generally the least reliant on tuition fee revenues, largely due to protracted periods of tuition freezes in place from the years 1995-96 to 2006-07, which has made them the most dependent on government operating grants. Since 2007-08, Québec universities have been allowed modest nominal annual increases in tuition fees. The 2011 provincial budget proposed to accelerate tuition fee increases from $100 to $325 annually, over the next fi ve years, starting in fall 2012. However, the govern-


16

ment is revisiting this policy in response to strong resistance from student groups. Québec universities also have relatively low donation levels and small endowments, which do not generate signifi cant revenues.

Universities in Ontario, on the other hand, are more reliant on tuition fees and less so on government operating grants. They also have greater revenues from other sources, such as endowments, research and ancillary operations. Since 2006-07, tuition fees have been permitted to increase by an average 5% per year. Generally, universities with larger offerings of science and engineering programs and greater research activities, such as Queen’s, McMaster, UofT, and Guelph, generate the most revenue per student. Yet this does not necessarily lead to stronger results as they tend to have higher costs and funding can be more volatile. Older universities with large alumni bases, strong academic profi les and research capabili-ties such as UofT, Queen’s and McMaster have stronger revenues from donations and investment income. While a positive rating consideration, these sources can introduce considerable volatility in results during economic downturns. These institutions experienced some of the largest defi cits in 2008-09, primarily due to sharp losses in investment income.

In 2010-11, revenue growth remained solid, averaging 5% at DBRS-rated universities, a slight dete-rioration from the average of the last fi ve years. Largely driven by enrolment growth, tuition revenues remained a key driver, with solid increases at most universities. This trend is expected by DBRS to have been maintained by most in 2011-12, although volatile fi nancial markets likely dampened investment income.

Revenue Statistics

Total 2010-11

($ millions )2010-11

Annual change Five-year Change

2010-11Revenue-per-FTE

($)2010-11

Annual Change Five-year Change

Brock 257.6 5.0% 26.0% 14,168 1.8% 15.0%

Concordia 457.9 1.0% 18.3% 17,100 (1.8%) 6.4%

Guelph 678.4 7.0% 32.8% 32,851 2.4% 12.8%

Laurier 276.2 9.1% 47.1% 17,764 3.7% 16.4%

McMaster 859.5 3.8% 25.4% 33,840 2.2% 9.3%

Ottawa 861.6 7.3% 41.7% 20,411 2.3% 16.1%

Queen’s 742.5 1.1% 9.5% 37,376 (1.8%) (1.6%)

SFU 616.1 4.3% 28.6% 24,169 2.0% 1.9%

Toronto 2,321.1 5.0% 30.1% 34,846 3.1% 17.6%

UOIT 147.3 28.5% 166.6% 21,784 14.9% 14.4%

UQAM 437.1 (12.2%) (7.1%) 14,826 (15.9%) (10.7%)

Windsor 300.7 1.8% 17.5% 21,435 (0.7%) 20.5%

York 923.0 3.7% 20.0% 19,272 1.0% 12.6%

Note: At the direction of the province, Concordia and UQAM changed their fi scal year-end to April 30 from May 31, starting in 2010-2011. In 2010-2011, results refl ect an 11-month year and are not directly comparable with prior years.


17

Government Funding

Under the Constitution of Canada, provincial governments are responsible for education policy and funding and are the primary source of revenue for universities. Generally, provincial funding accounts for 40% to 60% of total revenues. Government funding is provided for three main purposes: operating, research and capital.

OPERATING GRANTSOperating grants are the primary source of government funding and are provided by provincial govern-ments. In some provinces, such as Ontario, Québec and Saskatchewan, operating grants are distributed based on student enrolment and the types of programs in which students are enrolled. Other provinces, such as British Columbia and Manitoba, use a “block funding” approach, which takes the previous year’s funding and adjusts for infl ation and other cost pressures. Basic operating grants are often supplemented by targeted grants aimed at expanding enrolment in high-demand programs.

Of the three provinces represented by DBRS-rated universities, Québec has the highest operating grants per FTE, in part due to higher grants required to compensate for protracted periods of tuition freezes, and marginal allowable tuition increases thereafter. Likewise, low tuition fees in Newfoundland make it the nation’s biggest recipient of government funding as a proportion of total revenues. Student fees are above the national average in Ontario and Nova Scotia, and both provinces have historically lagged most of their counterparts in per-student operating funding. In 2010-11, operating grants grew by 5% year-over-year at DBRS-rated universities, compared with an average growth of 6.2% over the last fi ve years.

Provincial Operating Funding per FTE

($) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 4,762 4,793 4,853 4,819 5,056 4,642 4,407 4,471 3,986 4,168

Concordia 7,910 8,612 8,667 8,070 8,222 7,789 7,958 7,901 7,919 7,436

Guelph 8,568 8,518 8,900 8,338 8,715 8,081 7,646 7,328 7,014 7,158

Laurier 6,489 6,399 6,913 6,382 6,272 5,576 5,156 4,898 4,462 4,491

McMaster 9,171 8,912 8,657 8,496 8,747 7,582 7,199 7,058 6,837 7,072

Ottawa 8,623 8,102 7,542 7,583 7,842 6,876 6,339 6,081 5,906 5,946

Queen's 9,072 9,321 8,974 8,408 8,744 7,854 7,349 7,122 6,898 6,310

SFU 8,706 8,641 8,542 8,603 8,510 8,495 8,353 8,720 8,320 8,515

Toronto 10,374 10,367 10,265 10,257 10,735 9,754 9,562 8,685 8,287 8,351

UOIT 11,582 8,856 10,939 9,687 8,680 8,449 16,582 16,438 - -

UQAM 8,199 9,958 9,155 9,246 8,924 8,278 8,296 8,485 8,213 7,443

Windsor 7,913 8,095 7,890 7,695 7,522 7,039 6,085 5,938 6,018 5,930

York 6,803 6,822 6,989 7,190 7,125 6,473 6,178 5,852 5,406 5,562



18

RESEARCH AND CAPITALThe federal government typically provides 65% to 75% of all public research funding, while the prov-inces provide the bulk of the capital funding. Private sources (both individuals and corporations) also provide additional resources to support capital projects or endow research chairs, although this source is not only less sizeable but also more volatile and less reliable as it is linked to economic conditions. Research funding has increased steadily in recent years, driven by greater public emphasis on innovation and commercialization, and efforts by universities to bolster their research capabilities. However, avail-able research funding does not typically cover the indirect costs of research, which can be substantial.

Government grants for capital projects are also an important source of funding. As the stock of facilities on university campuses continues to age, the need for capital-related funding is becoming more pressing across the sector. Many campuses across Canada were built in the 1960s and 1970s (or earlier) and some facilities are near the end of their lifecycle, or are inadequate to meet the technological requirements of the current teaching and research environment. In 2009, the Canadian Association of University Business Offi cers estimated that the deferred maintenance backlog at Canadian universities was well over $5 billion, and close to half of this was considered urgent. As part of its Economic Action Plan, the federal government created a $2 billion Knowledge Infrastructure Program (KIP) in 2009 to fund up to 50% of qualifying capital expenses incurred by post-secondary institutions across Canada, with additional top-up funding from provincial governments. Through KIP, 183 projects were completed at 79 universities to renew and expand facilities. Both KIP and provincial stimulus programs have since been wound down, resulting in a notable decline in capital funding, even as considerable work remains to address sizeable on-campus physical infrastructure defi cits.

2010-11 Operating Grants and Tuition Fee Revenues per FTE

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Operating Grants Tuition FeesSource: DBRS.

Broc

kCo

ncor

dia

Guelph

Laur

ier

McM

aste

r

Quee

n's

Otta

wa

Toro

nto

SFU

UOIT

York

UQAM

Winds

or

By and large, there has been a decline in the proportional contribution of provincial government funding to revenues over the past decade, and in nearly all provinces, this has coincided with signifi cant increases in the share of revenues provided by tuition fees. Recent announcements by provincial governments suggest that although post-secondary education remains a priority, the appetite for continued growth in operating funding is waning. The recent success of the KIP projects, and recognition of the increasing capital needs of universities may help to garner additional governmental support for infrastructure renewal projects. However, DBRS expects that a large part of the burden will fall on individual institutions to fi nance the renewal of their campuses. Given the tight fi scal environment currently faced by provincial governments, and the tendency for health-care funding to crowd out funding for other programs, revenues from non-governmental sources (e.g., student fees, donations, ancillary operations) will likely continue to gain importance in the years ahead.


19

Tuition Fees

Tuition fees account for a sizeable and growing share of revenue at Canadian universities, second in importance after operating grants. However, reliance on student fees tends to vary considerably across provinces, primarily refl ective of the level of fee setting autonomy provided to universities in each jurisdic-tion and the level of provincial funding available.

Student Fees as a Percentage of Total Revenues1

0%

5%

10%

15%

20%

25%

30%

35%

Source: Statistics Canada1. For 2008-09 (latest year for which data is available). Includes miscellaneous student fees.

B.C. AB. SASK. MAN. ONT. QUE. N.B. N.S. P.E.I. NFLD

Among DBRS-rated universities, Ontario universities generally exhibit above-average dependence on tuition fees, driven by sustained annual increases in tuition fees as allowed under the province’s fee setting regime. Notable exceptions are McMaster and Guelph, due in large part to their research activities and signifi cant ancillary activities. In contrast, the below-average dependence on tuition revenue of Québec universities refl ects protracted periods of tuition freezes imposed by the provincial government. Despite the fl exibility of Québec universities to set miscellaneous fees, such as application fees, registration fees and service charges, these fees provide minimal additional uplift to university revenues.

In 2011-12, Canadian undergraduate students paid on average $5,366 in tuition fees up 4.3%, from the prior year, and about 50% higher than a decade ago, far exceeding the rate of infl ation over that period. Increases started in earnest in the mid-1990s and have continued at a solid pace in most provinces, except where tuition freezes or other such restrictive tuition policies have been in place. Professional programs such as dentistry, law, medicine and business have generally been the hardest hit in recent years, as the restrictions imposed on tuition increases are generally more relaxed for these programs.

Tuition fees are also complemented by compulsory fees for items such as athletic facilities, health services and student associations. Nationally, on average students paid an additional $820 in compulsory fees in 2011-12, up from $777 in the prior year. These fees have grown signifi cantly in popularity in recent years and, according to Statistics Canada, ranged from $212 in Newfoundland to a high of $1,399 in Alberta in 2011-12.

According to Statistics Canada, tuition fees for undergraduate students remain the highest in Ontario (24% above the national average), which overtook Nova Scotia in 2008-09 after a short-lived tuition freeze in the Atlantic province. Québec residents benefi t from the lowest fees. Likewise, Newfoundland has also managed to keep tuition fees relatively unchanged due to a tuition freeze in place since 2003-04, following two successive years of tuition cuts. Tuition fees in British Columbia have remained relatively stable in recent years, following an annual 2% tuition fee increase limit introduced in 2005-06, which has kept increases generally in line with infl ation.


20

Average Undergraduate Tuition Fee by Province

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2007-08 2011-12

B.C. AB. SASK. MAN. ONT. QUE. N.B. N.S. P.E.I. NFLD

Source: Statistics Canada.

International students are generally exempt from tuition limits and do not attract provincial funding, leaving universities with the autonomy to set fees and annual increases charged to these students. As such, international students can pay upwards of three times the fees Canadian students pay at the same institution. As belts tighten on campus, post-secondary institutions are increasingly keen to tap into the international student revenue stream. Universities located in and around major metropolitan areas tend to benefi t the most from this lucrative additional revenue stream.

DBRS believes that despite resistance from student groups, tuition fees are likely to continue to grow at a faster pace than public funding in the years ahead, as spending pressures intensify and resources remain limited at the provincial level to fund university education.

The table below provides a more detailed overview of the tuition regime in place in each province.

Overview of Provincial Tuition Fee Policies

British Columbia Domestic tuition fee increases limited to 2% annually since 2005-06. No limit on international fees.

Alberta Domestic fee increases limited to the annual growth in the province’s rate of infl ation. In 2011-12, a one-time tuition fee adjustment was allowed for six professional programs (business, pharmacy, and engineer-ing) at the two largest universities, to set a new base for future increases. No limit on international fees.

Saskatchewan Universities have full fee setting discretion, although increases are usually set to match government ob-jectives. For 2012-13, fees are expected to rise by 4% for most undergraduate programs, and by 9% for some high-demand undergraduate and graduate programs.

Manitoba Domestic fees frozen from 1999-2000 through 2008-09. Since 2009-10, fees permitted to increase by 4.5%, and 5% the following year. In the 2011-12 budget, the province capped future tuition fee increases at the rate of infl ation. No limit on international fees.

Ontario Domestic fees frozen in 2004-2005 and 2005-06. Since 2006-07, universities are permitted to raise fees by an average of 5% annually, with fee-increase limits varying across programs and years of study. 30% tuition rebate offered to qualifying undergraduate students. No limit on international fees.

Québec Domestic fees frozen from 1995-96 through 2006-07. Starting in 2007-08, tuition fee increases permit-ted but capped at $100 annually, over a fi ve-year period. In its 2011 budget, the Québec government proposed to raise the cap to $325 annually from 2012-13 through to 2016-17; however, this policy is being revisted in response to strong resistance from student groups. For non-residents, fees increases collected in excess of the fees paid by Québec residents are appropriated by the province and re-invested in the post-secondary education system. Since 2008-2009, however, international student fees in excess of levels set by Québec are retained by the university.

New Brunswick Three-year tuition fee freeze was lifted. Starting in 2011-12, annual tuition fee increases will be capped at $200.

Nova Scotia Three-year tuition freeze lifted. Starting in 2011-12, fee increases are limited to 3% annually. Additional bursaries will be provided to domestic students studying in the province; out-of-province Canadian stu-dents will receive a smaller bursary. No limit on international fees.

P.E.I. University has full fee setting discretion.

Newfoundland Domestic fees frozen since 2003-04, with compensation from the province. No limit on international fees.


21

Fundraising

In contrast to the United States, Canada has a fairly short history of university fundraising. For most Canadian universities, large-scale fundraising efforts only started gaining momentum in the late 1990s, in response to public funding cuts and, later on, to benefi t from the emergence of matched funding programs at both the federal and provincial levels. This explains the still-modest share of revenue originating from donations at most Canadian universities and the generally small, though growing, university endow-ments relative to large U.S. institutions. In 2010-11, unrestricted donations and endowment contributions (which include expendable restricted donations and related investment income) accounted for 1% to 7% of total revenues at DBRS-rated universities; this has been fairly consistent over the past decade. Relatively younger institutions generally receive limited benefi t from this revenue source.

Annual fundraising performance tends to differ greatly among universities, mainly infl uenced by: (1) the age and prominence of the institution; (2) the size of the alumni base; (3) relationships with the private sector, especially through research; and (4) the resources devoted to fundraising operations. Among DBRS-rated universities, UofT continues to lead the group in terms of revenue generated, although McMaster and Queen’s generated more on a per-student basis in recent years.

2010-11 Donations per FTE

$0

$500

$1,000

$1,500

$2,000

$2,500

Note: Includes expendable donations as well as externally restricted donations directly added to endowment assets. Source: DBRS.

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Particularly at the older universities with historical success in fundraising, greater attention has been paid to enhancing advancement operations, including expanded human resources and improved data mining techniques. Nonetheless, donation revenues remain highly correlated with the broader economy. As such, economic conditions, stock market performance, and the fi nancial situation of large donors such as cor-porations tend to infl uence donations from one year to the next.

Several sizeable fundraising campaigns have been announced in recent years. In an effort to show momentum and solidify uptake, universities have been securing substantial amounts of pledges, before announcing a much larger campaign target. For example, UofT had raised nearly half of its target before announcing a $2 billion campaign in November 2011. This fi gure would surpass UofT’s previous campaign milestone, eight years prior, which was the most successful in Canadian history.

Universities with less-established fundraising histories have benefi ted from using naming rights as an inducement to secure capital for infrastructure expansion projects. DBRS expects that as capital needs intensify and public funding becomes more constrained, increasing attention will continue to be devoted


22

to fundraising to fi ll the void. However, DBRS notes that conservative fundraising estimates should be maintained within university capital plans as there is elevated risk with respect to whether these revenues will materialize.

Expenditures

The level of spending per student tends to differ considerably across universities, refl ecting: (1) the research-intensity of the institution; (2) the program mix, as science disciplines, for example, are much more expensive to offer; and (3) the size of ancillary operations. Queen’s, UofT, McMaster and Guelph have the highest spending levels, partly explained by their relatively large research and ancillary activities and, for the former three, the presence of medical programs. Spending per student is lowest at UQAM, Brock and Concordia, which are largely teaching-oriented. Ottawa’s spending level is somewhat low for a medical school, due in part to the exclusion of hospital spending from consolidated spending.

Expenditures per FTE – 2005–06 versus 2010–11

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

($ m

illio

ns)

2005-06 2010-11Source: DBRS.

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DBRS notes that higher expenditure per student does not necessarily translate into weaker operating results, as the additional costs are generally covered by dedicated revenue sources. This is the case for research expenditures, which are usually matched by distinct revenues and only incurred when funding is available. Ancillary activities are also typically run on a near break-even basis.

Average expenditure growth at DBRS-rated universities was 3.5% year-over-year in 2010-11, compared with an average growth of 5.6% in the last fi ve years. This was primarily driven by: (1) increases in salary and benefi t expenses; (2) robust enrolment growth; (3) growing research activities; and (4) greater emphasis on offering more bursaries and scholarships to students.

In 2010-11, the sharpest increases in expenditure were recorded by UOIT, Laurier, Ottawa and UofT, while the Québec universities showed the smallest change. However, this is distorted by a change in fi scal year-end in Québec. Spending increases exceeded revenue growth at four DBRS-rated universities in 2010-11, up from two the year before, when a strong rebound in the fi nancial markets led to notable improvements in investment income. In 2010-11, Windsor, Brock, UofT and Ottawa had expenditures that were 20% higher on an FTE basis than fi ve years prior, outstripping revenue growth at each institu-tion over the same period. In contrast, UOIT experienced a notable decline in expenditure-per-FTE over the same period, as the university has moved beyond start-up phase, and increased enrolment.


23

Expenditure Statistics

Total 2010-11

($ millions) Annual Change Five-YearChange Per FTE ($) Annual Change

Five-YearChange

Brock 263.3 4.1% 36.1% 14,485 0.9% 24.2%

Concordia 449.1 (1.3%) 14.3% 16,773 (4.1%) 2.8%

Guelph 652.6 2.5% 25.1% 31,599 (1.9%) 6.2%

Laurier 265.0 8.6% 40.3% 17,039 3.2% 11.0%

McMaster 837.6 2.6% 23.8% 32,976 1.0% 7.9%

Ottawa 810.1 6.9% 47.5% 19,191 1.9% 20.8%

Queen's 751.2 1.6% 17.9% 37,813 (1.3%) 6.0%

SFU 563.8 5.2% 23.8% 22,117 3.0% (2.0%)

Toronto 2,313.9 6.9% 35.4% 34,738 4.9% 22.3%

UOIT 131.8 13.3% 113.2% 19,502 1.3% (8.5%)

UQAM 421.9 (13.6%) (9.0%) 14,309 (17.3%) (12.5%)

Windsor 310.2 4.8% 24.6% 22,107 2.2% 27.9%

York 926.6 3.5% 25.4% 19,346 0.8% 17.7%


For 2011-12, university budgets generally point to slower, though still notable, spending increases. By far the largest spending item for universities is labour and benefi ts costs, which typically account for over 60% of total expenses at DBRS-rated universities. Labour-related expenses have increased year-over-year at most institutions, and in 2010-11 were on average 25% higher than in 2005-06 at DBRS-rated univer-sities. These expenses are expected to continue to drive expenditures over the foreseeable future, refl ecting increased pension contributions and salary pressures. Additionally, over the next decade, the upcoming raft of faculty retirements will continue to fuel demand to hire new faculty. Expected growth in graduate enrolment will create direct pressure on full-time faculty hiring requirements, as these students require more direct faculty support. The AUCC estimates that retirement and attrition will require Canadian universities to replace an additional 21,000 faculty members between 2007 and 2017. Higher staffi ng levels to address the steady increase in enrolment, and rising demand for academics across universities, will continue to make managing salary pressures diffi cult in the years ahead.

Infrastructure renewal and upgrades should also continue to pressure budgets in the years ahead, as most universities have accumulated sizeable deferred maintenance defi cits. Recent government investments in research and teaching infrastructure have gone a long way to address growing capacity and refurbishment needs. Despite this, due to the age of most Canadian universities and the present stage in the lifecycle of existing facilities, deferred maintenance needs at many universities still exceed $100 million.

Encouragingly, most DBRS-rated universities have demonstrated an ability to take tough measures in challenging times to protect their fi nancial integrity. Many have introduced base budget cuts, as well as new budget models in recent years with particular emphasis on incentivizing faculties to focus on both revenue generation and expenditure management. Furthermore, multi-year budgeting adds a measure of certainty to the yearly budget planning process. DBRS believes that the forward-looking nature of these new budgeting approaches will be integral in enabling universities to maintain stable operating perfor-mances in the years ahead.


24

The current environment of low interest rates and volatile fi nancial markets has caused considerable growth in unfunded pension liabilities. Increased mandatory contributions associated with these obliga-tions will continue to pressure university operations. However, in light of the pension challenges facing the sector, some provincial governments have enacted measures that could substantially minimize the cash fl ow pressures related to funding requirements, and additional measures are being contemplated which could alleviate the burden further, in exchange for structural changes, to improve plan sustainability. Additionally, DBRS notes that even moderate increases in interest rates, and, to a lesser extent, improve-ments in fi nancial markets, could reduce the size of university pension defi ciencies considerably.

Growth in Total Expenditures

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Brock 4.1% 3.1% 8.8% 3.8% 12.1% 3.2% 16.3% 20.1% 15.5%

Concordia (1.3%) 4.7% 0.1% 6.7% 3.6% 5.1% 9.3% 9.3% 18.5%

Guelph 2.5% 1.5% 8.1% 3.0% 8.0% 0.9% 5.3% 10.2% 14.3%

Laurier 8.6% 1.4% 10.1% 5.3% 9.8% 10.5% 5.5% 17.4% 16.7%

McMaster 2.6% 3.9% 5.0% 5.8% 4.5% 7.2% 13.0% 11.0% 10.4%

Ottawa 6.9% 7.9% 9.8% 10.9% 5.1% 4.1% 12.8% 3.7% 11.6%

Queen's 1.6% 7.7% (11.9%) 12.2% 9.1% 3.7% 4.7% 7.5% 8.4%

SFU 5.2% (1.6%) 6.5% 7.0% 5.0% 14.0% 9.3% 12.8% 10.5%

Toronto 6.9% 3.4% 10.3% 5.0% 5.7% 6.0% 6.0% 12.1% 7.0%

UOIT 13.3% 2.4% 9.8% 26.9% 31.9% 36.0% 120.5% 80.7% -

UQAM (13.6%) 6.1% (10.0%) 3.3% 6.7% 6.0% 12.1% 9.2% 9.8%

Windsor 4.8% 1.8% 1.5% 6.3% 8.4% 7.5% 7.8% 12.9% 9.9%

York 3.5% 4.2% 1.3% 8.1% 6.1% 7.2% 11.6% 11.7% 9.2%


Key spending pressures in the sector will continue to include salaries and benefi ts, deferred maintenance, and expenditures on scholarships and bursaries, especially as the number of graduate students rises. In the absence of higher interest rates in the medium term, and government intervention to alleviate or minimize the annual funding requirements, pension liabilities will also continue to be a challenge. Cost-containment measures and newly implemented budget models are encouraging. Nonetheless, steady demand and a tight funding environment will drive continued spending pressures at Canadian universities; as such, a sustained commitment to prudent fi nancial management will be required to maintain sound credit quality.


25

Financial Obligations

The emergence of Canadian universities in the public debt markets in the late 1990s was prompted by growing infrastructure needs and the failure of provincial funding to keep up with capital needs amid budget cuts. These same factors are at play once again, as many DBRS-rated universities return to the markets and other sources to raise capital to fi nance expansion and rehabilitation projects. However, bond issues remain a rare occurrence among Canadian universities, as government grants are still a key funding source across the country. Only seventeen are currently publicly rated, including thirteen by DBRS.

Among the DBRS-rated institutions, UOIT had the highest debt level at year-end 2010-11, at $36,689 per FTE. This is due to the relative youth of the university, as it was established within the last decade. Its high debt burden has traditionally translated into sizeable debt servicing requirements and limited fi nan-cial fl exibility, as demonstrated by UOIT’s low interest coverage ratio of between 0.8 times and 1.7 times in recent years. UQAM has also had a sizeable debt burden in the past years, due to the debt incurred to fi nance an ambitious real estate project. However, in November 2010, the Québec government fully repaid the project-related debt. Consequently, UQAM’s university-supported debt fell substantially to below $5,000 per FTE in 2010-11 from over $17,000 per FTE in the prior year, providing considerable relief to fi nancial metrics.

2010-11 Debt per FTE

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Source: DBRS.

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UOIT

York

UQAM

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$36,689

Ottawa had the lowest debt burden in 2010-11 at $4,722 per FTE, followed by UQAM, McMaster and York. However, a new fi ve-year capital plan at Ottawa could add up to $100 million in new borrow-ing needs, raising its debt burden to approximately $7,000 per FTE, a level still manageable within its current rating.

In addition to their direct debt, Québec universities often carry on their balance sheets debt issued by the province in their name to fund provincial capital grants awarded to them, or other province-driven initia-tives. These securities have no provincial guarantee, but are treated by DBRS as provincial obligations and, as long as reasonable, are excluded from the calculation of university debt, as the province dictates their issuance and directly services them. At the end of 2010-11, provincially-supported debt amounted to $342 million for Concordia and $41 million for UQAM.


26

All debentures outstanding are bullet structure, with the exception of UOIT’s issue, which is amortizing. The most recent debt issues by McMaster and UofT have the longest terms to maturity, 50 years. Other terms to maturity range from 30 to 40 years. Except for UQAM, all institutions have in place an internal debt retirement fund to accumulate the sums necessary to retire their debenture(s) at maturity. UQAM has already allocated with a trustee the funds estimated to be suffi cient to generate over a 40-year period the amount necessary to retire the debenture.

Many facilities on university campuses require rehabilitation, or are not adequate to meet current research and teaching requirements. Given the market environment, universities are increasingly seeking to take advantage of current low interest rates to lock in long-term debt fi nancing to address existing capital needs and repay accumulated internal loans. As such, many DBRS-rated universities have developed capital plans which will add varying levels of debt, and reduce fl exibility within current ratings.

Brock: Borrowed an additional $23 million under its bank facility in 2011-12 to fund construction of the new health sciences building. Including additional fi nancing needs for the performing arts building and a potential new business building, Brock’s debt-per-FTE ratio is now expected to peak at around $10,000 by 2013-14.

Concordia: Considering potential building acquisitions for additional academic space, and modernization of information systems. These projects could add to university-supported debt, boosting debt-per-FTE to almost $10,000.

Guelph: Currently in the fi rst year of a fi ve-year capital plan with total potential debt needs of $121 million; debt burden would peak at $11,700 per FTE by 2015-16.

Laurier: Launched a new capital program totalling approximately $270 million, $110 million of which may be funded through a combination of long-term debt and draws on a line of credit. Debt could peak at over $15,000 per FTE by 2013-14 before decreasing again, eroding the university’s comparative debt advantage. In addition, there is the possibility of further capital projects beyond those identifi ed in the current plan.

McMaster: Contemplating the option of borrowing up to $100 million over the next few years, which could push its debt burden to around $10,000 per FTE. However, there is currently no formal plan in place to do so.

Ottawa: A new fi ve-year plan could include additional borrowing needs of up to $100 million, which could lead to a rise in the university’s debt burden to approximately $7,000 per FTE. This is adequate within the current rating, given Ottawa’s considerable level of fi nancial resources, sound operating track record and diversifi ed revenue base.

SFU: May undertake public-private partnerships for new residence projects. Although specifi c amounts would likely be modest, they would still add to the calculated debt ratios. However, the sound metrics maintained by the university over the years provide meaningful fl exibility at the current rating level.

UofT: Raised $200 million in fi scal 2011-12 in the public debt market to fi nance upcoming capital projects. This brings UofT’s debt burden to approximately $11,000 per FTE, high in relation to AA-rated peers, but supported by a strong academic profi le, substantial fi nancial resources and prudent manage-ment practices.

Windsor: A new capital plan could add up to a combined $44 million, in two phases, toward the con-struction of an International Student Centre, a combined parking facility and innovation centre, and the development of a new campus site in downtown Windsor, leading to a peak debt burden of approximately $9,900 per FTE by 2013-14.


27

Interest coverage is expected to remain in excess of 2.0 times for most universities going forward, which is adequate for a not-for-profi t organization. However, as indicated by the Negative trends recently placed on the ratings of Laurier and Windsor, DBRS believes that the current credit profi les of some institutions will be pressured by the new debt envisioned under their current capital plans. Additionally, DBRS notes that, for some institutions, a growing pension defi ciency, a tight funding environment, and/or the poten-tial for further capital projects beyond the current plan exacerbates the impact of new debt and points to a potential erosion in fi nancial metrics to levels no longer consistent with current ratings.

The credit profi les of many DBRS-rated universities maintain modest fl exibility to add new debt. However, in light of the headwinds already highlighted, prudent management will be ever more important to maintain sound credit profi les in light of heightened debt needs.

2010-11 Financial Obligations Statistics

Total Debt ($ millions) Debt per FTE

Interest Coverage (times)

Interest Costs as a % of Total Expenditures

Brock 125.008 6,876 1.3 2.4%

Concordia 234.701 8,765 5.4 2.9%

Guelph 185.060 8,961 6.5 1.8%

Laurier 116.483 7,490 4.6 2.6%

McMaster 152.143 5,990 8.8 1.2%

Ottawa 199.327 4,722 6.9 1.7%

Queen’s 237.722 11,967 3.1 1.7%

SFU 167.117 6,556 9.3 1.8%

Toronto 526.800 7,909 5.2 1.4%

UOIT 248.056 36,689 2.9 11.3%

UQAM1

145.800 4,945 5.5 2.4%

Windsor 95.644 6,817 2.7 2.1%

York 310.941 6,492 3.9 2.1%

Note: Interest coverage is defi ned by DBRS as DBRS-adjusted cash fl ow from operations plus interest charges, divided by interest charges. For Quebec universities, only includes university-supported debt charges.1. Between 2005-06 and 2009-10, interest ratios adjusted to include the full impact of the Ilot Voyageur debt using the coupon on the debt issued by the University Finance Trust (5.72%).

Pension and Post-Employment Benefi t Plans Liabilities

Although not given the same weighting as debt in DBRS’s credit analyses, pension and post-employment benefi t plan defi ciencies may also affect the credit profi le of a university if excessive, as they represent future cash requirements.

In recent years, deteriorating unfunded liability positions have caused considerable growth in required annual pension payments, making them one of the fastest-growing expense items faced by universities. Persistently low interest rates and the diffi cult investment environment encountered by universities fol-lowing the recent fi nancial crisis brought pension defi ciencies to the forefront of the challenges faced by universities. Excluding UOIT, whose defi ned contribution plan has helped it weather the storm (as the


28

investment risk is borne by employees), all other DBRS-rated universities have faced erosion in their plan funding status, although to varying degrees.

The universities facing the most severe challenges are those with defi ned benefi t (DB) plans, under which the investment risk is borne by the employer, although universities with hybrid plans, which provide a high level of guaranteed minimum benefi ts to retired members, face similar challenges. Among DBRS-rated universities, Queen’s, UofT and Guelph are facing the largest defi ciencies, while Brock, SFU and Ottawa have the lowest shortfalls on a per-FTE basis.

2010-11 Employee Benefi t Liabilities

Plan Type

Unfunded Pension Liabilities

($ millions)

Pension Defi cit-per-FTE

($)

Unfunded Post-Employment Benefi t

Plan Liabilities ($ millions)

Other Post-Employment Benefi t

Defi cit-per-FTE ($)

Brock Hybrid 7.200 396 16.558 911

Concordia* DB 184.615 6,895 83.287 3,110

Guelph* DB 220.737 10,689 263.509 12,760

Laurier Hybrid 82.100 5,279 50.740 3,263

McMaster* DB 281.700 11,091 192.403 7,575

Ottawa DB 147.187 3,487 62.815 1,488

Queen's* Hybrid 325.000 16,360 64.155 3,230

SFU* DB 72.661 2,850 54.970 2,156

Toronto DB 1,057.600 15,877 454.700 6,826

UOIT DC - - - -

UQAM*1 DB 185.494 6,292 67.643 2,294

Windsor2 DB/Hybrid 76.745 5,470 44.492 3,171

York Hybrid 272.500 5,690 89.497 1,869

*Reported on a solvency basis. All others shown on an accounting basis. Pension plan defi cits presented are before unamortized gains/losses, as of F2011 (or latest actuarial valuation). Other post-employment benefi t obligations presented on accounting basis. Note: DB = defi ned benefi t plan; DC = defi ned contribution plan; Hybrid generally means DC, with DB component that provides mini-mum level of pension benefi ts. FTE = full-time-equivalent1. UQAM participates in the DB plan of the Université du Québec network. UQAM’s pension fi gure represents its pro-rata share of the network’s pension defi cit which is incorporated into DBRS’s analysis of the university. 2. Windsor: Employee Plan is a DB plan, while Faculty Plan is a Hybrid.

Many have taken steps to address the challenge. Specifi cally, McMaster has increased employee contribu-tions and retirement dates, as well as closed DB plans to new entrants of certain employee groups, opting instead for new group registered retirement savings plans. UofT has elected to make two large $150 million payments into its pension plans, and substantially boost its annual pension payments. Many other universities have secured contribution increases from employee groups, which will help to expedite the path toward long-term plan sustainability. In Ontario, these plans were largely prompted by the govern-ment’s two-stage program that would allow qualifying universities to defer solvency payments for three years while structural plan changes are implemented. After the three years, if approved to proceed to the next stage, the university could amortize its defi ciency over a ten-year period rather than the current fi ve, which would substantially decrease the annual required solvency payments and allow the university to benefi t from potential improvements in interest rates and investment returns, the prime drivers of the current challenge.


29

In its most recent budget, the Ontario government signaled that public sector pension plans could see further reforms. Recent changes to pension plans by universities have largely been focused on securing increasing contribution rates; however, much of this cost continues to be borne by the government. As such, proposed changes could require adjustments to benefi ts as well. Additionally, smaller public sector pension plans, like those of universities, could be converted to joint sponsor plans with a 50/50 cost-sharing formula, and legislation could be introduced that would pool university plans (and other smaller public sector DB plans) together under one administrative roof, in an effort to reduce investment manage-ment costs and potentially improve investment returns.

Other provinces are also making large-scale changes to their university pension funding frameworks. In March 2012, the Nova Scotia government provided permanent solvency relief to provincial universi-ties with DB plans. The move was prompted by intense lobbying by Dalhousie University, which had an assessed solvency defi ciency of $270 million at September 2011. Under the regulation change, Nova Scotia university plans are exempt from the solvency test, joining a growing list of provinces including Alberta, Manitoba, Québec, New Brunswick and Newfoundland which have granted their universities permanent solvency funding exemptions.

Defi ciencies in post-employment benefi t plans are generally more modest, ranging from $911 per FTE at Brock to $12,760 per FTE at Guelph. Most post-employment benefi ts are related to medical, dental and life insurance. They have also been consistently growing over the years, due to the absence of government requirements to fund earned benefi ts, in contrast to pension plans. Employers often have some fl exibility to unilaterally modify post-employment benefi ts for employees still active, if necessary, which is not the case for pension benefi t liabilities. Nonetheless, defi ciencies could pose a risk if allowed to grow exces-sively, as they signal potential future cash requirements.

In an environment where universities are being forced to fi nd additional savings and effi ciencies in their operating budgets, increased payments for employee benefi t obligations pose some concern. The pension defi ciency challenge will also be compounded by the limited ability of universities to offset these pressures on their already stretched budgets. Barring developments in fi nancial markets that result in an improve-ment in actuarial assumptions, or major pension reform imposed by provincial governments, universities will likely continue to grapple with this challenge.

Financial Resources

Financial resources can provide signifi cant enhancement to a credit profi le by increasing the institution’s ability to internally fund capital needs or absorb unforeseen shocks. These generally include cash balances, unrestricted short- and long-term marketable securities, operating reserves and, most importantly, endow-ment assets. These exclude unspent bond proceeds, however, as they are generally committed to ongoing capital projects.

Among DBRS-rated institutions, Queen’s, UofT and McMaster have the highest level of expendable resources as measured by DBRS, covering more than 1.4 times total debt each in 2010-11. Furthermore, these metrics have experienced a steady increase over the past decade. As such, although these universities have sizeable debt levels on an FTE basis, their signifi cant fi nancial resources provide considerable support to their credit profi les. In contrast, UQAM, Concordia and UOIT have fairly low levels of expendable resources relative to debt, partly explained by their small endowment funds and, for the latter, its relative youth. Guelph, Brock, Windsor and Laurier also have relatively low levels of expendable resources on a per-FTE basis.


30

2010-11 Expendable Resources as a Percentage of Total Debt

0%

40%

80%

120%

160%

200%

Source: DBRS.

n.m

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York

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UofT maintains the largest university endowment fund in Canada, estimated at $1.54 billion at March 31, 2011. Queen’s has a higher level of endowment per FTE, however, at $28,077, compared with $23,110 for UofT. Endowments are generally comprised of funds set aside in perpetuity to fund specifi c initia-tives, such as student assistance, research projects, or library acquisitions. As such, attempts are made to protect the endowment principal, with related investment returns generally used to preserve the purchas-ing power of the fund and meet the objectives identifi ed by donors.

2010-11 Endowment Market Value per FTE

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Internally Restricted Externally Restricted *UOIT based on book value.Note: DBRS estimate for Concordia's endowment asset breakdown.Source: DBRS.

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York

UQAM

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Via set payout ratios or policies, endowments provide a consistent source of revenues to fund teaching, research, and other strategic initiatives of universities. Within the sector, payouts to operations tend to range from 4% to 5% of an endowment’s market or book value, or some measure linked to infl ation growth. Payout ratios tend to be fairly stable, although minor downward revisions have been made by some institutions in recent years in response to weak investment performance in an attempt to ensure the long-term stability of endowment assets following the fi nancial crisis.


31

2010-11 Endowment Assets Breakdown

($ millions)Internally-Restricted

Externally-Restricted Total

Total Endowment per FTE

Annual Return (2010-11) Payout Ratio:

Brock 9.0 41.0 50.0 2,748 20.2% other

Concordia* 18.3 103.6 121.9 4,551 10.0% 5.0%

Guelph 20.9 197.1 218.0 10,557 15.2% 3.5%

Laurier 5.2 59.7 64.8 4,168 18.4% 4.0%

McMaster 114.8 398.3 513.1 20,201 11.4% 4.0%

Ottawa 22.3 155.6 177.9 4,214 8.1% 4.0%

Queen's 194.9 362.9 557.8 28,077 5.8% other

SFU 48.0 160.6 208.6 8,183 12.3% 4.0%

Toronto 237.7 1,301.7 1,539.4 23,110 9.9% 4.7%

UOIT - 12.5 12.5 1,846 11.2% n/a

UQAM - 15.8 15.8 537 12.6% 5.0%

Windsor 6.7 58.6 65.3 4,652 9.9% 5.0%

York 40.5 290.8 331.3 6,918 12.8% 5.0%

Note: Based on market value, except UOIT, which reports based on book value. Externally restricted endowment assets consist of funds that are subject to restrictions imposed by the donors. Internally restricted endowment assets are funds whose use is restricted internally by the university’s Board of Trustees.*DBRS estimate for Concordia’s endowment asset breakdown.

Donations support endowment growth, especially at UofT, Queen’s and McMaster, which have well-established fundraising operations. Unrestricted donations are recognized as revenue in the year they are received, while funds subject to external restrictions or designated by the board of governors are directly recognized as increases to endowment assets (externally-restricted and internally-restricted, respectively).

Although much less liquid, non-core real estate assets also provide some element of fi nancial fl exibil-ity. UofT, Ottawa, York, Guelph and SFU have particularly sizeable holdings. Concordia, Laurier and Windsor are also contemplating acquiring additional real property assets to develop new residences and expand their academic footprints. Intensifying fundraising efforts and investment returns are expected to provide moderate support to endowment funds and fi nancial resources. In a tight operating environment, this will be a welcome revenue source in support of university credit profi les for the foreseeable future.


32

Appendix A: Key Related Research

Below is a list of research related to the universities that DBRS rates. Each title is linked to the document on our website at www.dbrs.com.

RATING REPORTS Brock University Concordia University Guelph University Wilfrid Laurier University McMaster University University of Ottawa Queen’s University Simon Fraser University University of Toronto University of Ontario Institute of Technology (UOIT)Université du Québec à Montréal (UQAM)University of Windsor York University

COMMENTARIES The Next Big Test for Universities: Addressing Pension Defi cits

METHODOLOGIESRating Canadian Universities


33

Appendix B: DBRS Rating Scales

LONG-TERM OBLIGATIONSThe DBRS long-term rating scale provides an opinion on the risk of default. That is, the risk that an issuer will fail to satisfy its fi nancial obligations in accordance with the terms under which an obligations has been issued. Ratings are based on quantitative and qualitative considerations relevant to the issuer, and the relative ranking of claims. All rating categories other than AAA and D also contain subcategories “(high)” and “(low)”. The absence of either a “(high)” or “(low)” designation indicates the rating is in the middle of the category.

AAAHighest credit quality. The capacity for the payment of fi nancial obligations is exceptionally high and unlikely to be adversely affected by future events.

AASuperior credit quality. The capacity for the payment of fi nancial obligations is considered high. Credit quality differs from AAA only to a small degree. Unlikely to be signifi cantly vulnerable to future events.

AGood credit quality. The capacity for the payment of fi nancial obligations is substantial, but of lesser credit quality than AA. May be vulnerable to future events, but qualifying negative factors are considered manageable.

BBBAdequate credit quality. The capacity for the payment of fi nancial obligations is considered acceptable. May be vulnerable to future events.

BB Speculative, non-investment-grade credit quality. The capacity for the payment of fi nancial obligations is uncertain. Vulnerable to future events.

BHighly speculative credit quality. There is a high level of uncertainty as to the capacity to meet fi nancial obligations.

CCC / CC / CVery highly speculative credit quality. In danger of defaulting on fi nancial obligations. There is little dif-ference between these three categories, although CC and C ratings are normally applied to obligations that are seen as highly likely to default, or subordinated to obligations rated in the CCC to B range. Obligations in respect of which default has not technically taken place but is considered inevitable may be rated in the C category.

DA fi nancial obligation has not been met or it is clear that a fi nancial obligation will not be met in the near future or a debt instrument has been subject to a distressed exchange. A downgrade to D may not immedi-ately follow an insolvency or restructuring fi ling as grace periods or extenuating circumstances may exist.


34

Appendix C: Selected Indicators

Enrolment at DBRS-Rated Universities (FTE)

($) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 18,180 17,613 16,646 16,474 16,831 16,594 15,642 14,348 12,217 10,970

Concordia 26,777 26,026 24,811 24,473 24,134 24,083 23,159 23,158 22,118 20,511

Guelph1 20,651 19,772 18,664 18,290 18,286 17,538 17,653 17,247 15,936 15,056

Laurier 15,551 14,777 13,747 13,104 13,112 12,306 11,517 10,725 9,245 8,877

McMaster 25,399 25,007 24,104 23,530 22,903 22,140 20,807 19,777 17,591 15,930

Ottawa 42,211 40,246 38,372 37,345 35,837 34,593 32,804 31,326 28,179 26,089

Queen’s 19,865 19,298 18,635 17,805 17,745 17,850 17,379 17,154 16,378 16,475

SFU 25,492 24,951 23,005 22,081 20,907 20,188 19,345 18,638 18,366 16,998

Toronto 66,611 65,402 62,934 62,301 61,210 60,203 57,887 55,763 51,008 47,446

UOIT 6,761 6,045 5,148 4,716 4,095 2,900 1,823 920 - -

UQAM 29,482 28,216 28,130 27,921 28,273 28,341 28,142 24,666 23,441 23,046

Windsor 14,029 13,685 13,749 13,796 14,464 14,390 14,163 13,772 11,963 11,226

York 47,894 46,644 45,273 44,824 45,611 44,954 43,108 40,910 36,901 33,565

Note: Fall enrolment, including undergraduate and graduate students; excludes continuing education students. Full-time equivalent student (FTE). Generally: FTE = Full time + (Part time/3.5). 1. Excludes Guelph-Humber program, OMAFRA diploma and non-credit courses.

Total Revenue

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 257.582 245.227 229.257 220.801 224.480 204.383 197.747 174.481 132.730 119.256

Concordia 457.893 453.351 450.004 423.988 411.415 386.964 372.253 370.516 340.122 299.410

Guelph 678.404 634.034 620.798 569.267 560.491 510.789 499.739 476.487 446.271 414.264

Laurier 276.248 253.244 237.990 216.095 213.102 187.831 170.871 159.247 127.985 115.369

McMaster 859.507 828.373 731.819 735.034 730.966 685.372 637.186 606.233 516.318 454.929

Ottawa 861.576 802.702 702.139 699.857 666.987 608.191 570.517 513.253 465.911 425.073

Queen’s 742.467 734.561 624.220 779.961 733.246 678.139 653.284 611.039 560.736 525.924

SFU 616.119 590.995 482.760 518.505 501.732 479.008 424.621 389.759 348.664 313.721

Toronto 2,321.100 2,210.900 1,924.700 1,948.900 1,942.000 1,784.300 1,653.800 1,568.100 1,192.700 1,152.100

UOIT 147.280 114.595 112.079 96.545 70.356 55.242 46.191 23.010 13.484 -

UQAM 437.111 497.587 463.178 486.802 474.347 470.298 435.587 400.126 378.331 350.273

Windsor 300.722 295.541 285.857 277.400 277.831 256.026 228.615 226.257 195.193 173.794

York 923.016 890.385 846.709 846.060 824.481 769.315 722.151 653.344 578.087 525.464

Note: At the direction of the province, Concordia and UQAM changed their fi scal year-end to April 30 from May 31, starting in 2010-2011. In 2010-2011, results refl ect an 11-month year and are not directly comparable with prior years. All other DBRS-rated universi-ties have an April 30 fi scal year-end, except for SFU and UOIT which have a March 31 fi scal year-end.


35

Growth in Total Revenue

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Brock 5.0% 7.0% 3.8% (1.6%) 9.8% 3.4% 13.3% 31.5% 11.3%

Concordia 1.0% 0.7% 6.1% 3.1% 6.3% 4.0% 0.5% 8.9% 13.6%

Guelph 7.0% 2.1% 9.1% 1.6% 9.7% 2.2% 4.9% 6.8% 7.7%

Laurier 9.1% 6.4% 10.1% 1.4% 13.5% 9.9% 7.3% 24.4% 10.9%

McMaster 3.8% 13.2% (0.4%) 0.6% 6.7% 7.6% 5.1% 17.4% 13.5%

Ottawa 7.3% 14.3% 0.3% 4.9% 9.7% 6.6% 11.2% 10.2% 9.6%

Queen’s 1.1% 17.7% (20.0%) 6.4% 8.1% 3.8% 6.9% 9.0% 6.6%

SFU 4.3% 22.4% (6.9%) 3.3% 4.7% 12.8% 8.9% 11.8% 11.1%

Toronto 5.0% 14.9% (1.2%) 0.4% 8.8% 7.9% 5.5% 31.5% 3.5%

UOIT 28.5% 2.2% 16.1% 37.2% 27.4% 19.6% 100.7% 70.7% --

UQAM (12.2%) 7.4% (4.9%) 2.6% 0.9% 8.0% 8.9% 5.8% 8.0%

Windsor 1.8% 3.4% 3.0% (0.2%) 8.5% 12.0% 1.0% 15.9% 12.3%

York 3.7% 5.2% 0.1% 2.6% 7.2% 6.5% 10.5% 13.0% 10.0%

Note: At the direction of the province, Concordia and UQAM changed their fi scal year-end to April 30 from May 31, starting in 2010-2011. In 2010-2011, results refl ect an 11-month year and are not directly comparable with prior years. All other DBRS-rated universi-ties have an April 30 fi scal year-end, except for SFU and UOIT, which have a March 31 fi scal year-end.

Total Provincial Operating Funding

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 86.574 84.418 80.789 79.394 85.094 77.032 68.934 64.146 48.692 45.726

Concordia 211.795 224.145 215.035 197.501 198.422 187.572 184.306 182.961 175.151 152.511

Guelph 176.936 168.427 166.107 152.510 159.354 141.733 134.983 126.387 111.776 107.777

Laurier 100.918 94.564 95.033 83.632 82.238 68.623 59.383 52.535 41.253 39.868

McMaster 232.938 222.865 208.673 199.915 200.340 167.864 149.787 139.594 120.270 112.664

Ottawa 364.000 326.054 289.402 283.172 281.038 237.863 207.931 190.488 166.412 155.115

Queen’s 180.210 179.868 167.229 149.705 155.160 140.200 127.716 122.167 112.983 103.958

SFU 221.945 215.612 196.499 189.968 177.924 171.495 161.593 162.516 152.798 144.738

Toronto 691.000 678.000 646.000 639.000 657.100 587.200 553.500 484.300 422.700 396.200

UOIT 78.303 53.532 56.313 45.683 35.545 24.502 30.229 15.123 9.280 --

UQAM 241.731 280.986 257.536 258.172 252.299 234.619 233.453 209.286 192.531 171.525

Windsor 111.014 110.782 108.471 106.160 108.789 101.294 86.177 81.787 71.999 66.569

York 325.800 318.200 316.400 322.300 325.000 291.000 266.300 239.400 199.500 186.700



36

Growth in Provincial Operating Funding

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Brock 2.6% 4.5% 1.8% (6.7%) 10.5% 11.7% 7.5% 31.7% 6.5%

Concordia (5.5%) 4.2% 8.9% (0.5%) 5.8% 1.8% 0.7% 4.5% 14.8%

Guelph 5.1% 1.4% 8.9% (4.3%) 12.4% 5.0% 6.8% 13.1% 3.7%

Laurier 6.7% (0.5%) 13.6% 1.7% 19.8% 15.6% 13.0% 27.3% 3.5%

McMaster 4.5% 6.8% 4.4% (0.2%) 19.3% 12.1% 7.3% 16.1% 6.8%

Ottawa 11.6% 12.7% 2.2% 0.8% 18.2% 14.4% 9.2% 14.5% 7.3%

Queen’s 0.2% 7.6% 11.7% (3.5%) 10.7% 9.8% 4.5% 8.1% 8.7%

SFU 2.9% 9.7% 3.4% 6.8% 3.7% 6.1% (0.6%) 6.4% 5.6%

Toronto 1.9% 5.0% 1.1% (2.8%) 11.9% 6.1% 14.3% 14.6% 6.7%

UOIT 46.3% (4.9%) 23.3% 28.5% 45.1% (18.9%) 99.9% 63.0% --

UQAM (14.0%) 9.1% (0.2%) 2.3% 7.5% 0.5% 11.5% 8.7% 12.2%

Windsor 0.2% 2.1% 2.2% (2.4%) 7.4% 17.5% 5.4% 13.6% 8.2%

York 2.4% 0.6% (1.8%) (0.8%) 11.7% 9.3% 11.2% 20.0% 6.9%


Other Government Funding (Federal & Provincial)

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 23.211 17.987 19.153 15.940 17.446 16.170 20.091 13.031 13.466 9.874

Concordia 60.726 53.462 72.555 60.775 52.082 52.523 53.164 52.290 36.955 33.961

Guelph 172.823 165.514 165.890 147.894 147.674 126.905 125.017 113.708 109.112 108.875

Laurier 11.730 12.128 10.946 8.575 9.199 7.321 6.106 6.840 6.767 6.441

McMaster 148.745 146.881 151.269 138.957 142.783 127.370 124.544 112.088 99.833 91.047

Ottawa 117.822 115.382 117.008 109.710 100.350 96.478 110.317 86.475 87.890 83.621

Queen’s 207.674 199.552 200.424 372.266 350.365 322.427 301.691 284.391 257.068 244.661

SFU 91.084 93.189 85.882 93.666 97.083 94.549 70.281 55.739 54.634 46.345

Toronto 327.152 318.700 329.004 273.620 244.962 250.033 225.561 237.636 178.791 170.016

UOIT -- -- -- -- -- -- -- -- -- --

UQAM 48.088 63.748 57.025 73.072 75.598 98.376 69.214 68.724 72.708 74.435

Windsor 25.695 28.205 34.722 23.858 25.814 28.496 24.880 21.980 17.212 14.432

York 63.163 60.924 72.674 59.035 52.626 48.261 47.118 36.545 38.420 33.603



37

Average Undergraduate Tuition Fees for Canadian Full-time Students, by Province

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

B.C. 4,852 4,758 4,706 4,746 4,922 4,740 4,867 4,735 4,098 3,176 2,527

AB. 5,662 5,505 5,240 5,308 5,122 4,763 4,838 4,940 4,511 4,165 4,030

SASK. 5,601 5,431 5,173 5,064 5,015 4,774 5,063 5,062 4,644 4,286 3,879

MAN. 3,645 3,593 3,408 3,238 3,271 3,319 3,333 3,236 3,155 3,144 3,243

ONT. 6,640 6,316 5,985 5,667 5,388 5,155 4,933 4,831 4,911 4,665 4,492

QUE. 2,519 2,411 2,309 2,180 2,026 1,932 1,900 1,888 1,865 1,851 1,843

N.B. 5,853 5,647 5,516 5,479 5,590 5,470 5,037 4,719 4,457 4,186 3,863

N.S. 5,731 5,497 5,752 5,877 6,110 6,422 6,323 6,003 5,556 5,214 4,855

P.E.I 5,258 5,131 4,969 4,530 4,440 4,920 4,645 4,374 4,133 3,891 3,710

NFLD 2,649 2,649 2,624 2,619 2,632 2,633 2,606 2,606 2,606 2,729 3,036

Can. Avg. 5,366 5,146 4,942 4,747 4,558 4,400 4,211 4,140 4,018 3,748 3,577

Source: Statistics Canada.

Total Expenditures

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 263.348 252.863 245.364 225.420 217.068 193.563 187.562 161.328 134.381 116.364

Concordia 449.135 455.195 434.901 434.563 407.086 393.086 374.134 342.176 313.188 264.366

Guelph 652.553 636.624 627.177 580.194 563.391 521.694 516.893 491.084 445.791 389.848

Laurier 264.973 243.956 240.477 218.342 207.409 188.828 170.841 161.861 137.854 118.111

McMaster 837.556 816.723 785.772 748.553 707.304 676.810 631.095 558.302 503.055 455.734

Ottawa 810.051 758.101 702.870 640.226 577.530 549.369 527.640 467.860 451.328 404.282

Queen’s 751.154 739.614 686.902 779.261 694.802 636.866 614.390 586.945 545.966 503.540

SFU 563.799 535.997 544.971 511.789 478.130 455.486 399.586 365.427 323.927 293.224

Toronto 2,313.900 2,165.500 2,093.900 1,898.300 1,807.500 1,709.300 1,612.600 1,521.500 1,357.100 1,268.400

UOIT 131.850 116.324 113.613 103.484 81.556 61.834 45.462 20.617 11.409 --

UQAM 421.863 488.351 460.259 511.286 494.879 463.675 437.338 390.230 357.490 325.697

Windsor 310.151 296.059 290.870 286.689 269.681 248.820 231.422 214.729 190.142 173.036

York 926.551 894.803 858.416 847.099 783.901 738.833 689.163 617.703 553.225 506.410



38

Total Expenditures per FTE

($) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 14,485 14,357 14,740 13,683 12,897 11,664 11,991 11,244 11,000 10,608

Concordia 16,773 17,490 17,528 17,757 16,868 16,322 16,155 14,776 14,160 12,889

Guelph 31,599 32,198 33,604 31,722 30,810 29,746 29,281 28,474 27,974 25,893

Laurier 17,039 16,509 17,493 16,662 15,818 15,344 14,834 15,092 14,911 13,305

McMaster 32,976 32,660 32,599 31,813 30,883 30,570 30,331 28,230 28,597 28,609

Ottawa 19,191 18,837 18,317 17,144 16,115 15,881 16,085 14,935 16,016 15,496

Queen’s 37,813 38,326 36,861 43,766 39,155 35,679 35,352 34,216 33,335 30,564

SFU 22,117 21,482 23,689 23,178 22,870 22,562 20,655 19,607 17,638 17,251

Toronto 34,738 33,111 33,271 30,470 29,529 28,392 27,858 27,285 26,606 26,734

UOIT 19,502 19,243 22,069 21,943 19,916 21,322 24,938 22,410 -- --

UQAM 14,309 17,308 16,362 18,312 17,504 16,361 15,540 15,821 15,251 14,132

Windsor 22,107 21,634 21,156 20,781 18,645 17,291 16,340 15,591 15,894 15,413

York 19,346 19,184 18,961 18,898 17,187 16,435 15,987 15,099 14,992 15,087


Total Debt

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 125.008 115.679 124.568 122.122 122.552 123.176 83.897 81.666 76.979 69.419

Concordia 234.701 238.518 221.464 228.338 233.391 224.441 227.412 222.385 219.158 45.591

Guelph 185.060 179.082 175.473 167.654 159.307 158.607 161.197 164.664 167.965 76.600

Laurier 116.483 126.722 126.986 127.470 127.922 128.403 129.186 96.890 85.632 38.871

McMaster 152.143 153.270 154.331 155.329 156.265 157.146 157.974 158.752 157.828 23.861

Ottawa 199.327 201.197 202.946 204.582 209.002 210.541 211.980 213.326 214.586 65.764

Queen's 237.722 193.642 120.133 93.719 93.981 95.784 96.120 96.440 96.907 29.975

SFU 167.117 170.381 175.888 178.742 170.104 168.206 168.058 168.743 25.080 27.787

Toronto 526.800 528.200 558.900 558.400 556.700 483.700 410.600 415.100 216.700 218.600

UOIT1 248.056 212.749 215.259 219.583 223.375 217.431 220.000 76.260 - -

UQAM2 145.800 490.933 484.977 639.930 653.312 564.542 208.090 185.904 39.473 40.385

Windsor 95.644 104.251 105.695 107.241 108.789 43.008 45.912 49.060 44.682 25.931

York 310.941 315.123 345.477 349.201 352.716 361.283 369.419 275.860 283.296 290.346

Note: Québec universities often carry debt issued by the Province in their name on their balance sheets. For Concordia and UQAM, fi gures presented above represent university-supported debt portion only. 1. Includes capital leases entered into in 2010-11. 2. Between 2005-06 and 2009-10, debt is adjusted by DBRS to include the full debt issue related to of University Finance Trust 2006.


39

Total Debt per FTE

($) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 6,876 6,568 7,484 7,413 7,282 7,423 5,364 5,692 6,301 6,328

Concordia 8,765 9,165 8,926 9,330 9,671 9,319 9,820 9,603 9,909 2,223

Guelph 8,961 9,057 9,402 9,166 8,712 9,044 9,131 9,547 10,540 5,088

Laurier 7,490 8,576 9,237 9,728 9,756 10,434 11,217 9,034 9,263 4,379

McMaster 5,990 6,129 6,403 6,601 6,823 7,098 7,592 8,027 8,972 1,498

Ottawa 4,722 4,999 5,289 5,478 5,832 6,086 6,462 6,810 7,615 2,521

Queen’s 11,967 10,034 6,447 5,264 5,296 5,366 5,531 5,622 5,917 1,819

SFU 6,556 6,829 7,646 8,095 8,136 8,332 8,687 9,054 1,366 1,635

Toronto 7,909 8,076 8,881 8,963 9,095 8,034 7,093 7,444 4,248 4,607

UOIT1 36,689 35,194 41,814 46,561 54,548 74,976 120,680 82,891 - -

UQAM2 4,945 17,399 17,241 22,919 23,107 19,920 7,394 7,537 1,684 1,752

Windsor 6,817 7,618 7,688 7,773 7,522 2,989 3,242 3,562 3,735 2,310

York 6,492 6,756 7,631 7,790 7,733 8,037 8,570 6,743 7,677 8,650

Note: FTE = Full-time equivalent students. Québec universities often carry debt issued by the province in their name on their balance sheets. For Concordia and UQAM, fi gures presented above represent university-supported debt portion only. 1. Includes capital leases entered into in 2010-11. 2. Between 2005-06 and 2009-10, debt is adjusted by DBRS to include the full debt issue related to University Finance Trust 2006.

Interest Coverage Ratio

(times) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 1.3 1.2 (0.0) 1.5 3.3 4.4 4.9 5.6 2.3 4.2

Concordia 5.4 3.8 2.9 1.2 2.0 1.7 2.1 2.7 3.3 14.9

Guelph 6.5 10.3 6.5 5.0 3.5 4.0 1.9 0.2 6.1 13.6

Laurier 4.6 4.1 2.5 2.0 3.3 2.6 2.4 2.4 1.2 4.3

McMaster 8.8 7.7 0.3 4.2 7.0 5.9 4.8 6.6 15.9 2.1

Ottawa 6.9 6.1 2.6 6.5 8.7 6.3 5.1 5.3 6.8 9.8

Queen’s 3.1 (0.9) (0.1) 4.5 13.1 13.0 12.5 9.7 11.8 19.4

SFU 9.3 4.4 2.3 4.8 8.8 7.0 6.4 6.4 19.5 10.9

Toronto 5.2 4.8 4.7 6.1 6.8 4.4 3.7 5.2 4.5 2.4

UOIT 2.9 1.7 1.7 1.3 0.8 0.9 1.4 4.3 - -

UQAM1 5.5 2.0 1.7 0.9 0.9 3.2 3.0 7.2 20.8 25.6

Windsor 2.7 3.1 2.4 1.8 4.4 7.9 3.7 9.7 7.1 6.5

York 3.9 2.3 1.8 2.5 3.6 3.8 3.7 5.4 4.0 4.8

Note: Interest coverage is defi ned by DBRS as DBRS-adjusted cash fl ow from operations plus interest charges, divided by interest charges. For Quebec universities, only includes university-supported debt charges.1. Between 2005-06 and 2009-10, interest ratios adjusted to include the full impact of the Ilot Voyageur debt using the coupon on the debt issued by the University Finance Trust 2006 (5.72%).


40

Interest Charges as a Percentage of Total Expenditures

2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 2.4% 2.6% 2.9% 3.1% 3.2% 2.8% 2.6% 2.9% 3.0% 2.2%

Concordia 2.9% 3.2% 4.4% 4.2% 4.0% 3.4% 3.4% 4.5% 3.0% 0.9%

Guelph 1.8% 1.8% 1.7% 1.9% 1.9% 2.0% 2.1% 2.2% 1.9% 0.8%

Laurier 2.6% 3.1% 3.1% 3.5% 3.5% 3.9% 4.4% 3.5% 2.6% 2.1%

McMaster 1.2% 1.2% 1.3% 1.4% 1.6% 1.7% 1.6% 1.8% 1.1% 0.3%

Ottawa 1.7% 1.8% 2.0% 2.2% 2.4% 2.6% 2.7% 3.1% 1.2% 1.1%

Queen’s 1.7% 0.9% 1.0% 0.7% 0.8% 0.8% 0.9% 0.9% 0.6% 0.5%

SFU 1.8% 1.9% 1.9% 2.1% 1.5% 1.8% 2.3% 2.3% 0.7% 0.9%

Toronto 1.4% 1.5% 1.6% 1.7% 1.7% 1.7% 1.6% 1.3% 1.1% 1.1%

UOIT 11.3% 12.3% 12.7% 13.6% 16.1% 18.7% 18.7% 3.6% - -

UQAM1 2.4% 5.6% 6.6% 7.0% 6.8% 3.6% 2.7% 1.3% 0.6% 0.6%

Windsor 2.1% 2.4% 2.6% 2.5% 2.4% 1.2% 1.3% 1.2% 1.1% 1.2%

York 2.1% 2.4% 2.7% 2.7% 3.0% 2.9% 3.1% 1.9% 2.6% 1.9%

Note: For Quebec universities, only includes university-supported debt charges.1. Between 2005-06 and 2009-10, interest ratios adjusted to include the full impact of the Ilot Voyageur debt using the coupon on the debt issued by the University Finance Trust 2006 (5.72%).

Endowment Assets

($ millions) 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02

Brock 49.968 41.577 33.219 33.370 33.392 30.119 24.013 19.365 14.559 15.037

Concordia 121.861 110.827 87.685 113.329 119.557 103.307 78.706 71.481 69.726 66.223

Guelph 218.003 189.311 144.167 171.924 184.896 164.198 149.713 139.463 120.700 133.800

Laurier 64.821 54.738 45.463 50.792 35.808 29.265 24.300 19.518 17.738 17.076

McMaster 513.095 460.734 417.096 490.100 498.500 449.300 385.500 334.000 272.800 223.736

Ottawa 177.895 164.571 129.151 141.150 128.416 100.470 86.258 69.746 57.229 57.981

Queen’s 557.751 527.241 466.277 624.754 649.500 574.129 516.810 461.453 395.500 429.500

SFU 208.600 185.800 178.100 211.800 204.300 193.500 161.700 128.900 108.600 118.500

Toronto 1,539.400 1,437.200 1,286.300 1,754.800 1,822.700 1,628.800 1,422.800 1,287.700 1,062.300 1,199.700

UOIT 12.483 11.230 10.137 8.957 7.540 4.790 1.994 0.371 - -

UQAM 15.845 14.068 11.910 12.399 10.806 7.044 1.105 0.496 2.338 2.729

Windsor 65.261 59.356 50.649 59.866 56.039 46.083 34.970 29.524 23.323 24.287

York 331.300 293.800 235.900 303.000 305.000 264.800 219.357 161.100 145.167 150.863

Note: Based on market value, except UOIT, which reports based on book value.

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