Despite Harvard deficit, university grows in Allston

Although it had a reported deficit of $34 million from last year, Harvard University is moving forward with plans to expand the Harvard Business School, residences and athletic facilities in Allston.

On Friday, Harvard University President Drew Faust and Chief Financial Officer Daniel Shore released the university’s financial report for the 2013 fiscal year, showing a $34 million budget deficit, up from the $7.9 million deficit reported for 2012.

“[The deficit is] not going to affect anything that’s already been proposed because … they had the funds for [the project] when they proposed it,” said Ray Mellone, chair of the Harvard-Allston Task Force. “I don’t think there are going to be embellishments to it, but the proposal is rock solid because they don’t take things lightly … they don’t make stupid mistakes with expenses they can’t handle.”

The report comes within a month of the Boston Redevelopment Authority’s approval of Harvard University’s Institutional Master Plan for development in Allston on Oct. 17. The plan includes projects for increased green space, improved transportation networks and pedestrian access, redevelopment of Barry’s Corner and a science building as additions to the Allston campus.

With a $32.7 billion endowment, Harvard University has the largest of any university, but Faust said in the report that Harvard is not immune to dependency on revenues that face pressures caused by the economy.

In September, the university launched the Harvard Campaign, which is intended to raise $6.5 billion to provide support for various advancements, including the developments in Allston.

Randall Ellis, professor of economics at Boston University, said Harvard’s high fundraising goals shows that the university can find money in other places and does not expect the deficit to cripple their projects.

“[They want] to motivate the donors to give huge amounts of money to Harvard,” he said. “You don’t motivate donors by saying, ‘Things are looking good, we have a very rosy future.’ The donations were more than the size of their deficit and on net they increased their endowment by $3 billion. This has nothing to do with being needy, it’s just how you do marketing to try to get money from your wealthy alumni.”

Ellis said all universities suffered due to the recession, including BU, but the difference is that unlike BU, Harvard gets only 20 percent of revenue from tuition, compared to BU’s 50 percent.

“Every university needs to have a strategy of how to cope with the new electronic age, where some people are learning online, and willingness to pay high tuition is going down,” he said. “What’s missed in that argument is that Harvard offers substantial amounts of financial aid, so very few people are paying the list price.”

Another difference is Harvard’s reliance on the university’s endowment, Ellis said.

“BU had a large reduction in its endowment, but since it was only counting on its endowment for roughly 10 percent of spending, they only had to make up a few percentage points in that decline,” he said. “By not being dependent on endowment, we’re less sensitive to stock market decline, but it does mean we are more dependent on enrollment, revenue, tuition or grants since we don’t have the deep pocket to fall back on.”

Some residents said they did not see the deficit as an issue for Harvard’s expansion into Allston.

Hillary Gospodarek, 23, of Allston, said she hopes the project would not change the neighborhood.

“They’re Harvard and they have billions of dollars, so I don’t understand how they’re even in debt to begin with, especially with all of the rich people that go there,” she said. “I hope [redeveloping Allston] doesn’t put rent up further, but that’s my only real concern about it. I think it could make Allston nicer.”

Lauren Thacker, 28, of Brighton, said Harvard will be able to raise the money and the project will move forward.

“I think donor cultivation is something they need to work on,” she said. “They have one of the largest endowments in the country, so I’m sure that they must have alums who are willing and able to donate. For an institution of that size [the goal of $6.5 billion] is a reasonable figure to raise over a period of a few years.”

Duyen Nguyen, of Brighton, said she couldn’t image the project not moving forward and Harvard will find other ways to ensure the development is completed.

“The deficit isn’t going to affect it in a significant way,” he said. “They might scale down, but [the project is] still going to happen. They are a really large, prestigious institution and they have alumni who are well off, so it will be successful.”