COEUR d’ALENE — The recent downgrade of North Idaho College’s bond rating could affect the college’s financial future, if NIC plans to build more student housing or if enrollment drastically declines.

Last week, Moody’s Investor Service downgraded NIC’s issuer rating from A3 to A1 and its revenue bond rating from A3 to A2, citing “a continuing period of significant governance and management dysfunction.”

“When they start downgrading, it’s really a black mark on an institution,” said Mic Armon, vice chair of the North Idaho College Dormitory Housing Commission and former NIC trustee. “You don’t want to have a downgrade.”

The NIC Dormitory Housing Commission is, by Idaho statute, appointed by the governor to oversee operations of dormitory housing projects for North Idaho College. Annual commission meetings are held in the spring to review and approve the proposed budget for operations of the NIC Residence Hall, Edminster Student Union Building and the Student Wellness and Recreation Center.

NIC carries no debt other than the bond issued by the Dormitory Housing Commission, which financed the Student Wellness and Recreation Center. Until the remaining $7.9 million debt is paid, the commission owns the building.

“It’s much more risky now as a bond than it originally was,” Armon said. “We never, ever thought this would be an at-risk bond. We always thought it was a super safe investment.”

The downgrade will likely have an impact if NIC wants to build something new in the future, such as more student housing.

“We’re getting to the point where if we chose to do that, it would be much more expensive for us to borrow money,” Armon said. “We have to pass that cost onto the user, which would be the students.”

Students now pay a $180 fee per semester that goes toward the recreation center’s debt, as well as maintenance and upkeep on the facility.

With NIC facing possible loss of accreditation, student enrollment is less certain than ever.

“Our biggest concern right now is what’s going to happen if there are not enough students,” Armon said. “We do have reserves, but those could be spent in a heartbeat, and then we’d be closer to default.”

If NIC and the Dormitory Housing Commission default on the debt, ownership of the building would revert to US Bank. Litigation would likely follow.

“They would own the rec center and have the ability to do whatever they wanted,” Armon said, adding that NIC owns the property on which the building sits. “It gets complicated.”

The Dormitory Housing Commission is expected to meet in April.

Armon said the commission deferred maintenance on the Student Union Building and dormitories last year — an unusual move — as a precautionary measure amid the coronavirus pandemic and ongoing turmoil at NIC.

With bond rating downgrades added to the mix, the commission’s budgeting decisions will be even more complicated.

“As a commission, we’re really looking at our preservation,” Armon said. “We’re going to have to really take a hard line on what maintenance we defer.”