Declining enrollment, stagnant tuition revenue and weak fundraising at St. Joseph's College have caused a downgrade in the school's debt rating, according to a new Moody's Investors Service report.
The college, with campuses in Patchogue and Brooklyn and a mostly commuter student population of about 4,500, received a negative financial outlook. Its credit rating slipped two spots, from Baa1 to Baa3, just above junk bonds.
"The negative outlook incorporates our expectation that the college will be challenged to grow net tuition revenue at or greater than the pace of expenses, thereby limiting its ability tobuild liquidity," analysts said in the report issued Monday.
The rating action affects $26.5 million of Series 2010 bonds, issued through the Dormitory Authority of the State of New York, the report said.
Between fall 2010 and 2013, the college's enrollment dropped more than 9 percent, Moody's said.
The report, however, pointed to the college's marketable real estate holdings in the Clinton Hill section of Brooklyn, saying their potential value "is not reflected in Moody's financial ratios."
During the last two fiscal years, the college used investments to fund capital and operating deficits that contributed to a 36 percent decline in cash and investments, which now total $37 million.
The college ran an operating deficit for the past three years, requiring it to dip into its financial reserves, the report said.
St. Joseph's President S. Elizabeth Hill said the downgrade was based on the school's 2012 financial situation and "came during the time of a downturned economy."
"Since then, we have taken significant steps and cost-saving measures to remedy the situation, including the introduction of several new academic programs that we believe will have a positive impact on enrollment," said Hill, who plans to retire in June.
The school received several large gifts and grants over the past few months and will end the year with a modest surplus, she said.St. Joseph's has an average gift revenue of $2.2 million, the Moody's report said.
College administrators reported last month that the college's endowment is valued at $32 million.
The college is expected to be challenged financially, and the negative outlook and the school's credit rating is unlikely to improve unless enrollment stabilizes and administrators build a strong financial cushion, the Moody's report said. Analysts noted the school is in a competitive market with a "price-sensitive" student population.
Tuition and mandatory fees at St. Joseph's for the 2013-14 academic year were $21,880.
The school froze budgets and offered voluntary buyouts over the last year, administrators have said.