Severe and ongoing enrollment declines have pushed Dowling College's credit rating down to where its debt is "likely in, or very near, default," according to the latest report from Moody's Investors Service.
The rating downgrade to Ca from Caa1, detailed in a report released Monday, "reflects the magnitude of Dowling's financial challenges as well as the higher probability of default," analysts said.
The action affects more than $13 million in bonds issued to the Oakdale institution by the industrial development agencies of Suffolk County and the Town of Brookhaven.
The report comes at a time when trustees and the interim president they hired last summer have streamlined operations and are optimistic about the college's fiscal fitness -- posting a modest operating surplus from 2013.
"The college has never missed a debt payment and is actively working to ensure this never happens," Michael Conte, spokesman for the Dowling board of trustees, said Tuesday.
Dowling officials eliminated and consolidated staff positions, closed its Brookhaven dorm building and launched an aggressive marketing campaign to attract students from off Long Island.
The school's operating revenue declined 25 percent over the past five years and an increasing portion of the college's budget -- more than 8 percent -- went to paying off that debt in the 2013 fiscal year.
Dowling's interim president, Norman Smith, said yesterday that applications are up more than 20 percent for the 2014-15 academic year and the report focused unfairly on Dowling's recent past.
"Moody's seems to believe that being ahead for the fall is still subject to proving out. Next October and November, when we indeed sustain that progress, we will be subject, perhaps, to reconsideration," said Smith, who has written a book about bringing Wagner College in Staten Island back from the brink of closure when he was president there in the 1980s.
Dowling has $54.5 million worth of debt. Meanwhile, its operating revenue is $56.7 million and the school has about $9.6 million in financial resources and about 30 days of cash on hand, according to Moody's.
Since the fall 2009 semester, Dowling's enrollment plummeted 45 percent from 4,435 full-time equivalent students to 2,438 students enrolled in the fall 2013 semester. In the report, analysts called the declines "unsustainable."
Like the majority of private colleges in the country, about 90 percent of Dowling's budget relies on student tuition.
The net tuition -- price after scholarships and grants -- per student is about $16,320. The 2013-14 tuition "sticker price" is just under $27,000. Any increase for the 2014-15 academic year would be less than 3 percent, Smith said.
The college admits about 74 percent of the students who apply. Since 2006, the college has had five presidents.
The school ended fiscal year 2013 with a $447,000 surplus, according to another report issued by the external auditing firm KPMG at the end of last year.
In a statement, Dowling College board chairman Michael Puorro said the surplus resulted when the board "right-sized" the college for a smaller enrollment.
"However, maintaining the ongoing financial success of the college requires the realization of greater enrollment, which is the specific mandate under which Norman Smith was hired," Puorro said."The board is eager to see President Smith's plans come to fruition in the form of a higher, stabilized enrollment."