Key Points

(NB: Full details and references/links are provided in the sections below Key Points)

UTAS’ borrowing of $350m through issue of a Green Bond was underpinned by credit ratings by Moody’s Investor Service (Moody’s).

Moody’s baseline/standalone (high) credit rating of a1 for UTAS (Aa2 with government support) confirms the financial health of UTAS, indicating that UTAS’ proposed Hobart CBD move is not necessary to maintain the financial viability of the University. This has been UTAS’ principal argument for the move.

  • Borrowing is necessary to fund the move; with completion of the move, redevelopment of the Sandy Bay campus site and repayment of the loan dependent on the “monetization of surplus assets” (that is, Sandy Bay).

  • This borrowing of $350m will require UTAS to make interest payments of approximately $14m a year for the next ten years and perhaps around $3m a year for the ten years thereafter.

There are obvious risks associated with UTAS’ proposed move to the Hobart CBD and redevelopment of the Sandy Bay site, but these seem severely underestimated by Moody’s.

  • There is only brief reference to the risk associated with the vast construction (and demolition) task envisaged by UTAS, and this seems to be considered in construction terms only.

  • In a glaring omission, Moody’s fails altogether to mention regulatory risk, for instance in relation to rezoning of the Sandy Bay campus, and specific building and demolition activity, which could significantly delay or even derail UTAS’ plan for a Hobart CBD move. This may indicate that Moody’s, or Moody’s on UTAS’ advice, has taken regulatory approvals for granted.

  • Moody’s also fails to mention the very considerable risk UTAS faces as an organisation diversifying from its core business of educator to property developer. Its education task will inevitably suffer, which will pose risk to UTAS’ future as an educational institution, able to attract students.

  • Moody’s also discounts environmental risk, which appears questionable in light of recent flood events, particularly in relation to the Inveresk campus, and the potential for release of noxious gases and hazardous substances arising from the proposed move to the Hobart CBD and redevelopment of the Sandy Bay campus site.

Moody’s makes a number of incorrect or highly contestable statements:

  • It claims that there are “high levels of oversight by the state and Commonwealth governments“. This is demonstrably wrong. I am not aware of the Commonwealth undertaking financial oversight of UTAS, and the Tasmanian Government undertakes no oversight of UTAS at all. Moreover, documents I have received under the Right to Information Act 2009 (the RTI Act) indicate that the Tasmanian Government has not undertaken any analysis of UTAS’ plans to move to the Hobart CBD and redevelop the Sandy Bay campus site; rather they indicate a willingness on the part of the State Government and agencies to accept anything UTAS says at face value.

  • Moody’s makes a comment that can be read as suggesting the Commonwealth and State Governments will provide (budgeted) capital funding support to UTAS’ proposed Hobart CBD move. If this is Moody’s intention, then this would also be wrong. The Commonwealth has made no funding commitment to UTAS in current budgetary documents, which extend to outyear 2025-26.

  • Moody’s refers to “a high likelihood of extraordinary support from the Commonwealth“. If this is merely a statement of likely capital support, then given the current Commonwealth budget, it is wrong. If, as seems more likely, Moody’s is alluding to a high likelihood of the Commonwealth providing financial support, in the event that UTAS runs into problems with the proposed relocation to the Hobart CBD, this would seem highly presumptuous. It would be a poor policy precedent for the Commonwealth to support UTAS in a totally unjustified and unnecessary Hobart CBD move (a ‘self-inflicted wound’). In these circumstances, it seems more likely that the Tasmanian Government would have to provide funding support.

  • Moody’s has also stated that UTAS has “strong governance” and high transparency. Along with others, I believe both statements are wrong and address the issues at length in the Discussion section below.

There is a major issue of who is responsible for the errors and other points of contention in Moody’s credit rating – is it Moody’s, UTAS, the Tasmanian Government, other parties or some combination thereof? Moody’s provides scant detail of its sources.

I am not aware of any public announcement by the Tasmanian Treasurer or Treasury of approval of UTAS’ borrowing of $350m. I have an RTI application currently with Treasury, but it is an open question whether Treasury has undertaken any form of due diligence on the matter, and to what extent it was involved in Moody’s rating process.

It is highly questionable how green UTAS’ Green Bonds really are. Based on my understanding of UTAS’ claims in this regard, the additional carbon emissions created by a number of aspects of the proposed relocation have been totally ignored, along with the prospect of additional pollution and impact on native habitat and heritage values.

Background

According to Yahoo!Finance, on 10 December 2021 Moody’s assigned a “first-time Aa2 rating to University of Tasmania“.

  • Aa2 is a high credit rating, making it possible for UTAS to borrow money at relatively low interest rates.

  • UTAS quite possibly paid to obtain this credit rating from Moody’s.

According to Yahoo!Finance, on 24 February 2022, Moody’s assigned a “first-time provisional rating to University of Tasmania’s AUD debt issuance programme” – again of Aa2.

On 23 February 2022, with obvious forewarning from Moody’s, but perhaps somewhat prematurely, UTAS announced the launch of its Green Bond.

Using the Commonwealth Bank and NAB as joint lead managers, UTAS raised (borrowed) $350m through the Green Bond with a mix of 10 ($280m) and 20-year ($70m) investments, with funds to be used for UTAS’ proposed Hobart CBD relocation.

Prior to requesting a rating by Moody’s UTAS must have secured the approval of the Tasmanian Treasurer, under section 7(2) of the University of Tasmania Act 2009 (the UTAS Act):

“…the University is not to exercise its power to borrow money unless it has first obtained the written approval of the Treasurer.“

  • I will comment further on the Treasurer’s approval in the Discussion section below but believe the Tasmanian Government should have publicly announced this approval and its involvement in the Moody’s rating process.

Yahoo!Finance has published what appear to be the full texts of Moody’s ratings announcements, although without proper formatting (see the links provided above). I take the texts as otherwise accurate. I will be drawing my post to Moody’s attention, so that it will have an opportunity to correct any errors in Yahoo!Finance’s texts.

In what follows I will quote and comment on the text of the Moody’s rating announcement of 10 December 2021 (hence “Moody’s rating”) rather than the “first-time provisional rating to University of Tasmania’s AUD debt issuance programme” of 24 February 2022, as the former is the more comprehensive document.

  • As the Moody’s rating advice is long and produced in a continuous prose format that is difficult to read on Yahoo!Finance, I will quote the passages I consider of most interest, formatted for ease of reading.

  • Readers may find matters of significant interest, including considerable financial detail, in the sections of text that I have not quoted here. I encourage all readers to review the Yahoo!Finance texts of the Moody’s documents in their entirety. Please feel free to raise additional issues in the Comments section on this page.

Where I have short comments, they are included in dot points under the quotes from Moody’s rating document. Longer comments follow in the Discussion section below.

Moody’s rating – quotes and short comments

“Rating Action:…December 10, 2021 — Moody’s Investors Service has today assigned a first-time Aa2 issuer rating (local and foreign currency) to the University of Tasmania (UTAS). The outlook on the rating is stable. At the same time, Moody’s has assigned a Baseline Credit Assessment (BCA) of a1 to UTAS.“

The next quotes are from under the heading: “RATINGS RATIONALE“

“The Aa2 rating reflects the university’s solid standalone credit quality and support provided by the stable institutional framework for universities in Australia. Under this framework, UTAS receives secure and predictable grants from the Government of Australia (the Commonwealth, Aaa stable). In contrast to its domestic peers, UTAS continues to benefit from a strong level of capital funding support from government, which reflects its very close ties to the Commonwealth and the state, which also incorporates the university’s role in state policy implementation.” [my bolding]

  • The Baseline Credit Assessment strongly indicates that UTAS’ proposed Hobart CBD move is not necessary to maintain the financial viability of the University – UTAS’ principal argument for the move.

  • There is no indication that UTAS will continue to benefit from a strong level of capital funding from government for the Hobart CBD move – quite the contrary. This is dealt with further in the Discussion section below, as are other aspects of UTAS’ relationship with the Commonwealth and State Governments.

“The NTP and Southern Campus Transformation (SCT) will incorporate both new campus development and the progressive transition of the existing Sandy Bay campus in Hobart into the new CBD campus by 2030. In addition to surplus operating cash flows and planned borrowing, funding for the SCT will also include proceeds from the monetization of surplus assets in line with the masterplan developed for the redevelopment of the current Sandy Bay campus which is designed to generate ongoing revenue streams to support the university deliver on its mission. The execution risks associated with this strategy are partly mitigated by UTAS’ conservative and proactive internal risk management. UTAS’ rating also considers some execution risks related to the greenfield development of the planned Sandy Bay campus relocation to the Hobart CBD that initially will be predominantly debt-funded. [my bolding]

  • Note that “monetization” of “surplus assets” from UTAS’ Sandy Bay campus is required to fund UTAS’ “mission”, which, whatever UTAS says, seems to amount to moving into the Hobart CBD to make money – an idée fixe if ever there was one. (UTAS’ other main argument for the Hobart CBD move, that it will lead to increased student accessibility, is a ‘red herring’, as I will demonstrate in a forthcoming post).

  • Moody’s briefly mentions “execution risks” here. Moody’s also deals with risk in a section on factors that may lead to a ratings downgrade quoted further on. I will deal with the risk issue more fully in the Discussion section below.

“UTAS’ leverage will remain moderate compared with its peers and the credit risks associated with it, tempered by its ample holdings of cash and investments (AUD452 million in fiscal 2020[1]). The rating is further supported by the university’s ample financial resources and liquidity when benchmarked against its peers, as well as by its proven flexibility in managing its costs. In addition, the rating is supported by the university’s strong governance, its unique offering in key educational areas, and robust liquidity and leverage metrics, notwithstanding an expected increase in leverage starting in 2022. Moreover, UTAS is the sole provider of higher education in Tasmania, the largest employer outside of the government in the state and is characterised by its very strong operating and research relationships with both the Commonwealth and the state. These characteristics bolster the university’s market profile.” [my bolding]

  • [1] is footnoted by Moody’s as “Public Audited Financial Statements 12-Feb-2021“

  • This is further indication that UTAS’ proposed Hobart CBD move is not necessary to maintain the financial viability of the University.

  • I will consider UTAS’ relationship with the Commonwealth and State and UTAS’ supposed “strong governance” in the Discussion section below.

“The issuer rating reflects the university’s BCA [Baseline Credit Assessment] of a1, considering the above standalone credit qualities and a two-notch uplift to reflect Moody’s assessment of a high likelihood of extraordinary support from the Commonwealth.” [my bolding]

  • I believe the reference to “a high likelihood of extraordinary support from the Commonwealth” is wrong and will consider this in the Discussion section below.

The next quote is from under the heading “RATIONALE FOR THE STABLE OUTLOOK“

“The rating outlook is stable, reflecting the strong institutional framework and high levels of oversight by the state and Commonwealth governments, as well as Moody’s expectation that over the next 12-18 months, the university’s credit metrics will remain at levels appropriate for its standalone credit profile consistent with its a1 BCA.” [my bolding]

  • The assertion regarding “oversight” is demonstrably wrong and will be considered in the Discussion section below.

The next quotes are from under the heading “ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS“

“Key environmental challenges relate to campus positioning around low lying areas and vulnerability to flooding and storm surges, although we assess this as not material to UTAS’ credit profile“.

  • In light of climate change and recent flood events, and the location of the UTAS campus at Inveresk, this assessment appears highly contestable. I will leave others with more knowledge to comment on this issue.

“Governance considerations are material to rated universities’ credit profiles. UTAS’ governance is considered strong, reflecting the strong institutional framework for the higher education sector in Australia. The Commonwealth and State governments play important roles in legislating and monitoring governance of the sector. UTAS’ standards of governance are considered high and are aligned with the general standards of governance for all Australian public universities. Data transparency is very high, with all material legislation, university statutes and policies published on its website, along with capital plans and accounts.” [my bolding]

  • I will consider the issue of university governance and particularly the governance of UTAS – which is poor at best – in the Discussion section below, where I will also consider UTAS’ lack of transparency.

The next quote is from under the heading “FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS” and relates to the factors that might contribute to a downgrade:

“A significant deterioration in its financial performance, as reflected in sustained lower EBIDA margins; materially higher levels of debt beyond Moody’s projections, which could arise from delays, cost overruns or risk management practices proving less effective than assumed in delivering the Northern and Southern transformation plans; and/or a deterioration in UTAS’ internal liquidity levels, would likely place downward pressure on the ratings. Moody’s could downgrade the ratings if it believes there is a reduced likelihood of extraordinary financial support from the Commonwealth or if the creditworthiness of the Australian sovereign weakens.“

  • Moody’s has mentioned a number of risk factors earlier in the document. As a treatment of the remaining risks this section is inadequate. I will comment on this in the Discussion section.

Discussion

“Oversight” and UTAS’ relationship with the Commonwealth and State Governments

Moody’s comment that UTAS is subject to “high levels of oversight by the state and Commonwealth governments” is demonstrably wrong.

While the Commonwealth oversees some aspects of UTAS’ performance in the educational domain, I am unaware of it undertaking any oversight of UTAS’ financial or property development activities (as distinct from receiving copies of financial statements), which should be a prime consideration in a document relating to credit risk.

The Tasmanian Government does not undertake any oversight at all, by anyone’s definition. On 27 October, repeating a mistake he had made in reply to correspondence, Premier Rockliff, told the Tasmanian Parliament that UTAS is “a private organisation“. On 8 November, correcting his previous mistake, Premier Rockliff made a point of (correctly) telling the Parliament that UTAS was a “statutory corporation governed by the University Council, not the state government.” However, immediately prior to this, he had stated:

“I know there are some who think the Tasmanian Government should intervene in the university’s plans under the mistaken belief that we have a responsibility for the university. This is incorrect.”

Regular readers will know that I believe the Tasmanian Government has ultimate responsibility for UTAS (although not a formal “oversight” role, as I understand it, as someone who performed an oversight role in relation to a Government Business Enterprise for several years). However, Premier Rockliff’s statement must be regarded as an accurate reflection of the Tasmanian Government’s attitude towards UTAS for, at least, the last seven years. Certainly, in papers that I have received under the RTI Act, I can find no evidence of Government agencies conducting any sort of oversight, let alone critical scrutiny of UTAS’ operations or financial activities, in that period.

Moreover, while UTAS’ decision to (largely) relocate from the Sandy Bay campus to the Hobart CBD is perhaps the most significant in its history, and a highly significant issue for Tasmania and the Tasmanian people, again I can find no evidence of critical engagement by the Tasmanian Government or its agencies with this issue, although I specifically requested this. Nor, for that matter, can I find any evidence in Hansard of any sort of engagement by the Tasmanian Parliament with the matter before this year.

I currently have an RTI application with the Treasury and Finance portfolio, which, among other things, requests records of any involvement with the Moody’s rating process and the Green Bond issue. It will be interesting to learn what, if any, due diligence was undertaken in regard to the highly exceptional situation of UTAS seeking approval to borrow $350m.

There are two other points, where Moody’s might claim the Tasmanian Government exercises, at least, some modest (not high) oversight:

  • The auditing of UTAS’ accounts by the Tasmanian Audit Office – This is a narrowly focused activity as can be seen in the Audit Opinion on p107 of UTAS’ Annual Report for 2021. It certainly does not amount to oversight of UTAS’ operations or financial activities. John Lawrence has anyway provided a withering critique of UTAS’ annual report for 2021 in his submission to the LegCo Inquiry.

Moody’s refers on several occasions to UTAS being an instrument of State policy, but I am unclear what the relevance of this is for Moody’s rating.

Funding support from the State and the Commonwealth

Moody’s rating mentions that “UTAS continues to benefit from a strong level of capital funding support from government” with perhaps an implicit suggestion that this is likely to continue for UTAS’ proposed move to the Hobart CBD.

Any suggestion of continuing strong capital funding support of the Hobart CBD move would be wrong. I can find no funding commitment to UTAS’ proposed move to the Hobart CBD in Commonwealth budget documents, which currently extend to outyear 2025-26.

The Tasmanian Department of State Growth’s infrastructure pipeline vaguely lists $13.5m+ for the UTAS’ Hobart city-centric campus, but with funding status to be confirmed.

Moody’s also mentions “a high likelihood of extraordinary support from the Commonwealth“. Moody’s really should be clear as to its meaning, but if by this, Moody’s is simply alluding to strong capital funding support as part of a budgetary process, this remains wrong.

If instead, as seems more likely, Moody’s is referring to a high likelihood of the Commonwealth intervening in the event that UTAS needs ‘bailing out’ I believe Moody’s is wrong to assume such Commonwealth support without some indication from the Commonwealth. It would be a poor policy precedent for the Commonwealth to support UTAS in a totally unjustified and unnecessary Hobart CBD move (a ‘self-inflicted wound’). Unless the Commonwealth has independently critiqued UTAS’ plans for the proposed CBD move, I suspect it would look to the Tasmanian Government, which should have (but has not) critiqued the move, to provide whatever support may be required in the event the CBD move goes ahead and requires funding support. The glib generalisation in Hobart City Deal progress reports about support for UTAS’ Hobart CBD move does not commit the Commonwealth to funding in any form.

UTAS Governance

(NB: for general sources on the issue of UTAS’ governance see my submission to the LegCo Inquiry and my blog post How UTAS got out of control – Part 2)

As regular readers will know, in looking at university governance in some detail since March this year, I have come to believe that the general university governance model in Australia is severely flawed.

Publicly listed companies in Australia are governed by, among other things, the Corporations Law, and are accountable to their shareholders and the market. Government Business Enterprises (GBEs) are, or should be, subject to strong oversight arrangements by government agencies and are accountable to shareholder ministers.

In comparison, Australian university accountability arrangements are less stringent. With the increasing emphasis on Australian universities as businesses – with “business” having become a sort of de facto function/objective for universities – I believe much more by way of formal accountability to government is required.

As it is, I believe the only things that definitively stand between most universities and disaster is the competence and character of their governing bodies. Where that competence and character is lacking, major problems are likely to emerge, with governments lacking a legislated ability to intervene.

UTAS represents what I consider a worst-case example of university governance. When, at the behest of Chancellor Damian Bugg, the Voluntary Code of Best Practice for the Governance of Australian Universities 2011 (the 2011 Code) was effectively incorporated by amendment into the UTAS Act in 2012, it was in its most extreme form, with academic skills and knowledge minimised and an emphasis put, on what have become highly questionable, business skills.

  • At the same time, UTAS has minimal reporting requirements to the Government and Parliament compared to other universities and has less restrictions on the sale or lease of property than other universities.

The changes in the makeup of the UTAS Council through amendments to the UTAS Act between 2001 and 2012 (particularly that in 2012) has created the potential for the Council to self-replicate (through the appointment of people with outlooks/skills similar to the people they replaced) and the institutionalisation of group think, particularly as many appointees to the UTAS Council from the early 2000s have served for long-terms (up to 10 years or more).

These trends have been exacerbated by an increased focus on ‘managerialist skills’ both within management and academic structures within UTAS and a significant reduction in the role and representation of academics in governance arrangements below the level of the UTAS Council (on this point see, for example, the submissions of Emeritus Professor Jeff Malpas and Professor Jamie Kirkpatrick to the LegCo Inquiry). 

It is also clear that a full time Chief Executive (the Vice-Chancellor: VC), with supportive senior staff, is well placed to exercise a strong – if not dominant – influence over the UTAS Council. In this regard it is notable that one of Chancellor Bugg’s reasons for ‘streamlining’ the UTAS Council in 2012, was so that it could meet monthly rather than seven times a year. The UTAS Council currently meets seven times a year (so much for that argument). The fewer the meetings, of course, the greater the opportunity for the VC to exercise control. There is strong evidence to suggest that the discredited VC Peter Rathjen exercised an undue level of influence over the UTAS Council and that this has continued under his successor (in addition to previous writings, I will be addressing this issue further in a forthcoming blog post – How UTAS got out of control – Part 4).

The decline in UTAS’ governance is an overwhelming theme in the submissions to the LegCo Inquiry and will no doubt be a major feature in hearings.

To cite some recent specific examples of poor governance:

  • In 2016 and 2017, UTAS staff undertook overseas trips with city councillors, seemingly to persuade them of the merits of city-based universities. However, according to documents I have received from UTAS, neither trip proposals nor trip reports, nor any form of documentation relating to the trips, were considered by the UTAS Council. This is even more serious when it is noted that, according to UTAS, $199,306 and $53,454 were spent on overseas trips in 2016 and 2017 respectively.
    • VC Rathjen was appropriately a participant in the overseas trips with city councillors, but there were major issues relating to his overseas travel generally that should have been identified in competent governance procedures.
    • VC Rathjen also was involved in the questionable appointment process for a staff member, who also participated in at least one of these trips.
    • Even if overseas travel was not considered at the UTAS Council (as at least strategically important/high-cost trips should have been), irregularities should have been apparent in the relevant committee.

  • The meeting of the UTAS Council on 5 April 2019, at which it was decided to adopt the Hobart CBD campus model was one of the most important meetings in UTAS’ history. This makes it all the more disturbing to note that of the 14 UTAS councillors present at this meeting, two joined the Council in January 2019 and two others in February 2019. That such an important decision was made with four new Council members can only be regarded as poor practice, particularly given that Chancellor Damian Bugg made it clear in briefings to Parliament in 2012 that it took about six months for new members of the UTAS Council to come up to speed.

UTAS’ lack of transparency

I totally reject Moody’s claim that UTAS’ “Data transparency is very high“.

Apart from UTAS’ annual report, there are many instances where UTAS seems committed to secrecy rather than transparency (see, for example, theutaspapers page, although this is in need of updating). For all the ‘transparency’ Moody’s sees on UTAS’ website, the documents UTAS has published in relation to its proposed move to the Hobart CBD are for the most part full of high-level statements and glib assertions with a total lack of hard evidence. I have requested copies under the RTI Act of what should be two of the most important documents in UTAS’ case for the Hobart CBD move – the STEM Business Case it submitted to Infrastructure Australia (which should include its assumptions on increased student accessibility deriving from a Hobart CBD move) and the Business Case on which the UTAS Council determined to move to the Hobart CBD on 5 April 2019. UTAS has refused this request. These are documents that really should be publicly available with only such redactions as are absolutely necessary.

My experience with UTAS in respect of this RTI application is typical of my experience with the eight RTI applications I have lodged – UTAS has been obstructive and obfuscatory, totally ignoring its obligations under the RTI Act. This seems to be a common experience for those who have sought information from UTAS (see, for example, Humphries v UTAS). I am in the process of seeking reviews from the Ombudsman relating to five applications, for which I have been accorded priority on public interest grounds.

I might also note that while I have strongly suggested that UTAS lied in stating that UTAS academic staff would bring expenditure of $15m a year to the Hobart CBD, I have not been rebutted and UTAS has continued to make this ludicrous claim.

Lack of transparency and deceitfulness is of course a poor reflection on UTAS’ governance and culture.

Risks

Throughout its rating assessment, Moody’s mentions a number of risk factors. While not specifically labelling them as ‘risks’, Moody’s also mentions a number of factors that could lead to a ratings downgrade:

It really only lists three such ‘risk’ factors at a very generalised level:

  • “materially higher levels of debt beyond Moody’s projections, which could arise from delays, cost overruns or risk management practices proving less effective than assumed in delivering the Northern and Southern transformation plans.” (Presumably this also includes “execution risk” mentioned by Moody’s previously).
    • Anyone ever involved with construction activity, as I have been, knows that levels of risk are extremely high and that this would be particularly the case in relation to the vast undertaking of the Hobart CBD move and redevelopment of the Sandy Bay campus site. I would have expected Moody’s to have looked at, and commented on, this issue in a more detailed fashion. Moody’s suggestion elsewhere in its rating that UTAS has managed previous construction tasks well may mean only that the tasks were more limited in scope and that UTAS included significant cost and time buffers in its project management – not necessarily a sign of competence.

  • “deterioration in UTAS’ internal liquidity levels” – again this is mentioned only fleetingly at a time when, for example, global markets are experiencing high volatility. The value of UTAS’ investment portfolio has fluctuated significantly in recent years.

  • “reduced likelihood of extraordinary financial support” – As I have already indicated, I am not sure whether this refers to future budgeted funding contributions towards capital works or financial support if UTAS runs into problems with its proposed Hobart CBD move. The Commonwealth has not budgeted any funding for a Hobart CBD move. As I have previously indicated, I also believe that in the event of UTAS running into problems, the Commonwealth would need to consider whether it would be appropriate to provide any support for what can be seen as amounting to a totally unnecessary and risky frolic by UTAS management. In these circumstances, the cost of any ‘bail out’ may fall on the Tasmanian Government, in which case the capacity of the Tasmanian Government becomes the relevant issue.

The most obvious issue in Moody’s risk assessment, is however, the glaring omission of any reference to regulatory risk, let alone any sort of considered treatment of the issue. Further building work in the Hobart CBD would require compliance with the Hobart Interim Planning Scheme 2015 for Development Applications and compliance with the National Construction Code 2022 for Building Approvals and other regulatory requirements. The regulatory approvals that would be required for rezoning and building (and demolition) works are least partly set out in UTAS’ own risk register, which also lists a number of other risks. Did Moody’s or UTAS take it for granted that UTAS would obtain every regulatory approval required to relocate the Sandy Bay campus to the Hobart CBD and redevelop the Sandy Bay campus? Were (inappropriate?) assurances received from third parties?

I would be interested in Moody’s or UTAS’ answer as to why this very significant risk factor – which could, conceivably, totally derail the Hobart CBD move entirely, has been ignored.

Moody’s also fails to identify the very considerable risk UTAS faces as an organisation diversifying from its core business of educator to property developer. Its education task will inevitably suffer, which will pose risk to UTAS’ future as an educational institution, able to attract students. I expect this to be a major theme in the forthcoming hearings of the LegCo Inquiry.

Moody’s methodology and sources

Methodology

Moody’s rating states:

“The methodologies used in these ratings were Higher Education Methodology published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1257002, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207“

Sources

Moody’s rating identifies only two source documents;

“REFERENCES/CITATIONS[1] Public Audited Financial Statements 12-Feb-2021[2] University of Tasmania Strategic Plan 2019-2024 Jul-2019“

Further on Moody’s adds, in what appears to be a generic comment, that:

“All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY’S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY’S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.“

It is clear that Moody’s has used source material extending beyond the two UTAS documents cited. To what extent it had access to other written UTAS material is not clear (although it indicates that it has looked at the UTAS website without any specific citations). It is also not clear to what extent Moody’s may have consulted with UTAS staff or third parties, such as Tasmanian Ministers or agencies. It can only be assumed that it had a copy of the Tasmanian Treasurer’s written approval for UTAS to borrow to the extent of $350m.

Moody’s largely disowns responsibility, and it is not clear to whom responsibility for the clear error in Moody’s statements on “oversight” is due. Equally it is not clear to whom the more contentious statements in Moody’s rating are ultimately attributable. These are matters on which I believe UTAS and the Tasmanian Government owe the public full disclosure, particularly as the risks of UTAS’ proposed Hobart CBD move may ultimately be borne by the Tasmanian taxpayer, if the move goes ahead.

Is the Green Bond really Green?

This is not an issue that Moody’s addresses, but it is an important question warranting consideration here.

In its media release of 23 February 2022, UTAS stated:

“The Green Bond Framework commits the University to a minimum target reduction of 20% in the upfront carbon emissions embedded in construction of new campus buildings.“

While I stand ready to be corrected, I am assuming that this means that UTAS’ proposed Hobart CBD campus will produce 20% less carbon emissions than its current southern campus configuration, or something like this. If this is correct, the Green Bond has been depicted as green on a very narrow basis, not reflective of many, let alone all, of the environmental impacts of UTAS’ proposed activities.

I ask the following questions of UTAS:

  • What would be the level of carbon emissions and other pollution produced in further building work (including renovations) in the Hobart CBD, including additional traffic involved in that work?

  • What would be the level of carbon emissions and other pollution produced by the destruction of the Sandy Bay campus site and the development of a new suburb within such confined spaces, including additional traffic involved in the work, and any requirement to transport equipment into Tasmania?

  • What would be the level of carbon emissions and other pollution produced by the inevitable gridlock (idling) and traffic delays that UTAS’ proposed CBD move would bring to the Hobart CBD, Churchill Avenue and Sandy Bay Road, which are all heavily congested at peak hours now.

  • In particular, what would be the level of noxious gases and other substances released by the relocation of UTAS’ Sandy Bay to the Hobart CBD?

  • What impact does UTAS anticipate having on green spaces and native habitat in redeveloping the Sandy Bay campus site?

  • A number of the buildings on UTAS’ campus site have clear heritage values. What will UTAS do to preserve such buildings?

There is also the issue of the Green credentials of those taking up the bonds. To what extent has UTAS vetted the environmental record of those taking up the Green Bond and what can it tell us about them? The only party purchasing the Bond that has been identified to my knowledge is the Dai-ichi Life Insurance Company, which invested $103m in the Green Bond (see the company’s media release, which considers the greenness of the UTAS project in very limited terms).

I am sure others will add to this list of questions and provide informed comments.

By : Robert Hogan