USDA has loaned seven Iowa universities millions over decade

MOUNT PLEASANT — The U.S. Department of Agriculture’s Rural Development office over the years has lent billions to colleges and universities — including at least seven in Iowa since 2013 — often because it wants the smaller communities in which they reside to thrive.

Just because the money USDA lent Iowa Wesleyan University — $26-plus million — wasn’t enough to save the 181-year institution doesn’t mean the government plans to swoop in and bulldoze the 60-acre Mount Pleasant campus, which is peppered with historic sites like the 169-year-old “Old Main” building.

For now, the Wesleyan Board of Trustees will maintain ownership of the property — even after the university officially closes May 31 — and the USDA will continue in its role as “lender” and partner in supporting Mount Pleasant, which had a 2022 population of 9,132, according to the U.S. Census Bureau.

“In regards to Iowa Wesleyan University, I have directed our team to think as creatively as we can about how we can keep the campus intact so we can maintain as much of that added value as possible,” U.S. Secretary of Agriculture and former Iowa Gov. Tom Vilsack said. “This may mean selling to a larger university that would like a rural campus, or a foundation.”

Neither Vilsack nor community leaders have named potential buyers or collaborators — given the campus isn’t even officially closed and the process of gathering community feedback is just starting.

“It’s too early to say at this stage,” said Vilsack, a former resident of Mount Pleasant who served as the town’s mayor for five years. “But we know people are hurting, and it’s important that the community knows we aim to continue to be a partner to them.”

Although Iowa State University has an evolved network of 100 extension offices and deep USDA ties — receiving $48.4 million for research-related activities from the federal department in the last budget year — ISU officials said they haven’t heard discussion about the university “looking into the land of the former Iowa Wesleyan.”

Website encourages public to share ideas for the campus’ future

The Mount Pleasant Chamber of Commerce and Area Development Commission have formed a seven-member “Iowa Wesleyan Task Force” to work with the USDA on next steps for the shuttered campus — including Mount Pleasant Mayor Steve Brimhall, City Administrator Brent Schleisman, Henry County Supervisor Chad White, and Iowa Wesleyan Trustees Chair Bob Miller.

“We don’t know what Mount Pleasant looks like without Iowa Wesleyan University,” said Mount Pleasant Area Chamber Alliance Executive Vice President Rachel Lindeen, who also serves on the task force. “So navigating what does that look like has been an important conversation for all of us.”

Although the task force doesn’t have decision-making power, it is facilitating discussion and brainstorming by meeting with USDA officials, convening community members, and launching a website to collect ideas and feedback from the public.

ImagineMP.com invites community members to “imagine what Mount Pleasant will be” without Wesleyan — which for nearly two centuries has been a cornerstone of the southeast Iowa town.

“This page is designed to be a communication avenue as the campus of Iowa Wesleyan University finds its next purpose,” according to the website, which asks for names, contact information, and “your idea for Iowa Wesleyan.”

“There’s been some sadness,” Lindeen said about the community response to news in late March that Iowa Wesleyan will close in just weeks. “There’s been some anxiousness, anxiety. What do we look like post-Iowa Wesleyan?”

All the feedback the Iowa Wesleyan Task Force receives is being read and passed to the USDA, according to Lindeen, who said she’s also answering every question she can.

USDA officials — who told The Gazette that Wesleyan warned them of the looming vote to close — have visited the community since the decision became official.

“They came with open minds and they toured the campus,” Lindeen said. “They met with the school district, they met with the community college, they met with myself. They met with a lot of what I would phrase as community leadership to get a flavor of who we are.”

Although Vilsack said it’s too soon to determine what will come of the Wesleyan campus, valued at about $19 million, he cited the economic benefits the university afforded Iowa — generating about $18 million in total revenue in the 2022 budget year — in arguing for a cohesive path forward.

“People need to think creatively at this point to try to figure out how to keep it as a whole, if possible, and how can we continue to make it the economic driver that it has been,” Vilsack said. “One of the reasons we have invested in other colleges across the country is that they’re an economic driver. They’re a job creator.”

If keeping the campus together in next chapter doesn’t make sense — after investigating the options — Vilsack said they could parcel off the assets. But his preference is to keep it whole.

“Perhaps it’s a college or university; perhaps it’s a new venture that didn’t exist before; perhaps it’s a foundation that’s looking for a location; perhaps it’s a training center,” he said. “The point of this is that people need to be creative about it.”

USDA has loaned more than $100 million to Iowa institutions

The USDA “Community Facilities Programs” over the years have distributed billions in direct and guaranteed loans to help public entities, nonprofit organizations, and Native American Tribes construct, expand, or improve facilities that provide health care, education, public safety, and other services.

In the 2022 budget year alone, USDA distributed $1.7 billion through those programs — including $1 billion for 74 health care facilities; $343 million to 153 schools and educational facilities; and $148 million for 464 fire, rescue, and public safety stations.

The current community facilities portfolio, including all grants and loans, is $11.8 billion, according to Cathy Cochran, communications director for the USDA. Of that total, she said, “communities and universities” make up about 1.2 percent.

The USDA’s total direct and guaranteed loan obligations to higher ed institutions in the 2022 budget year was $1.5 billion. As of February, the USDA had 100 outstanding loans to universities — with an outstanding principal amount of $594.4 million.

Among those 100 university loans are several to Iowa institutions — including all three of the other campuses that joined with Iowa Wesleyan in February to request a total of $48 million in COVID relief funds.

Although Gov. Kim Reynolds denied Iowa Wesleyan’s more urgent request for $12 million, she hasn’t yet responded to the asks from Graceland, Upper Iowa, and William Penn universities.

Each of those also have outstanding debt with the USDA — Upper Iowa reporting the most after entering into a loan agreement with the department in August 2018 for $75 million.

Iowa Wesleyan’s 2016 USDA loans totaled more than $26 million, and Graceland in 2017 obtained a USDA loan for nearly $5 million “to buy out a lease for an on-campus apartment complex for our junior and senior students,” according to Chief Marketing Officer Shane Adams.

William Penn back in 2009 received $23 million in direct and guaranteed loans from the USDA to finance its activity and technology centers.

All are still paying off that debt, according to their most recent financial reports from fiscal 2022.

Upper Iowa, which recently announced layoffs and site closures, in 2022 was out of compliance with the loan’s required debt service coverage ratio — mandating administrators provide the USDA state office with quarterly financial reports, enrollment numbers, and other documents showing “the university’s plan to achieve the debt service coverage ratio requirement in the future.”

The colleges and universities sector of the USDA’s loan program has $1.9 million in “delinquent principal” — a small fraction of the total portfolio.

For the entire direct loan program, the USDA reports a delinquency rate of 1.6 percent — with 11 of its college and university loans qualifying as delinquent.

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com