Press "Enter" to skip to content

What is our burn rate?

This exchange regarding burn rate took place between Trustee Richard Landau and WCC Chief Financial Officer Bill Johnson at the March 31, 2020 WCC Board of Trustees Meeting.

Christina Fleming: OK. Any trustees with questions?

Richard Landau: Yeah, this is Landau.

CF: Go ahead Rick.

RL: Yeah, um, Bill – assume for the moment we’re shut down through September with anything other than online classes. What’s our burn rate, and when do we start to panic?

William Johnson: Uh, well the good news is the College – uh – has been – um – positioned well for online courses. And, so for Spring/Summer semester – on a typical Spring/Summer semester, our online credit hours would be about 40% of our credit hours. And that compares to a Fall or Winter where it’s 25%. We, uh, we believe that we’ll be able to capture the majority of our face-to-face enrollments for Spring/Summer through online, although we do believe that there will be some loss. My best guess is – and it’s just a guess – is that that loss for Spring/Summer will be somewhere in the 20 to 30 percent range in terms of credit hour loss. So that’s – uh – that loss would be about $2-$2.5M of revenue loss from tuition.

Uh, if you were to assume that our ML Building was closed through the summer, the most significant impacts of that would be related to our trades training programs – Ironworkers, Masons, uh, UA, and that’s not significant net revenue to the College, but of course has a significant impact on our trade partners and the surrounding greater Ann Arbor area. So I would say that the net impact of all that is significant, but it’s not so significant that we can’t readily weather that storm through September without any significant dilution to our reserves.

Direct questions deserve direct answers

So, the question is interesting because at least one trustee is worried about what a prolonged shutdown will do to the campus. WCC will very likely take a revenue hit it wasn’t expecting. It is presumably incurring significant costs while the campus is closed. Further, some of these costs – like the $436,000 Ellucian contract and payments on the bond debt – are due monthly, regardless of WCC’s revenue.

The answer is also interesting because Bill Johnson declines to answer Landau’s question.

The question was, “What is our burn rate, and when do we start to panic?” Landau is asking about expenses.

How much money are we losing every month, and when does the money run out?

Instead of answering this question, Johnson opts to discuss revenues. He travels down a long and winding road regarding potential revenue losses while dodging the all-important burn rate. WCC cannot deliver any of its occupational education classes online. That alone should flag Johnson’s prediction that WCC can “capture the majority of its face-to-face enrollments” with online instruction.

That aside, one would hope that when a Trustee asks a direct question of a College administrator, that the administrator would provide a direct, complete answer to the question being asked. One would also hope that the Trustees would insist upon receiving answers to their questions. The Trustees – and the community – deserve complete information about WCC’s current financial picture.

Photo Credit: Mussi Katz, via Flickr