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Harvard’s multi-million dollar Allston development fund has been all but wiped out by the financial crisis, University officials said last week—likely scuttling the hopes of some Harvard faculty and administrators that its money could be diverted toward their own strapped budgets.
The strategic infrastructure fund, an annual 0.5 percent levy on Harvard’s endowment created in 2002 to support capital projects in Allston, may fall short even of future expenses demanded by existing plans, due to a projected 30 percent drop in the endowment’s value this fiscal year.
Planned spending from the SIF had assumed a long-term average growth rate of 8.25 percent on the endowment—a target that Harvard would fail to meet given this year’s endowment return, said University President Drew G. Faust in an interview last week.
In recent years, the University has assumed long-term debts to finance property acquisitions and development planning in Allston, to be paid for in part by funds from the SIF.
Last year, the SIF contributed $168 million toward projects such as land purchases, construction, and community benefits.
Previous funding assumptions “must be reassessed and are unlikely to cover the same things in scale we initially envisioned for Allston,” said Harvard Chief Financial Officer Daniel S. Shore.
He added that the University will not renege upon any previous financial commitments.
University Provost Steven E. Hyman said that after subtracting funds already pledged for interest payments and other expenditures, the cash flow from the SIF is all but accounted for, with little money, if any, left over for discretionary purposes.
The current status of the SIF—which University officials voted in 2005 to extend through 2031—contrasts with a misconception perpetuated among some faculty members that slowing down construction in Allston would create a “windfall” for other projects by freeing up SIF funds, Hyman said.
At a Dec. 9 Faculty meeting, University President Drew G. Faust suggested that money previously allocated for Allston development could now be redirected, in response to a question from one professor.
“Depending on our decision about the planning and pacing of Allston over the next period of time,” Faust said, “we may decide that here are other necessary uses for those monies given the financial challenges we are facing at all levels.”
Harvard administrators formally announced their intention to slow down construction for the first science complex in Allston last month, citing financial pressures on all revenue streams.
Planning for the rest of Allston development, which has been slated to take place over 50 years, will also be slowed.
—Staff writer Athena Y. Jiang can be reached at email@example.com.
—Staff writer June Q. Wu can be reached at firstname.lastname@example.org.
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