Over the past few months, the College top brass has warned again and again of the danger of spending an increasingly large percentage of the College’s endowment on yearly operating costs. Since the end of the fiscal year on June 30, the endowment has lost some $400 million, roughly a quarter of its total. Without changes, the administration has warned, the yearly endowment spending rate will inevitably go up.

It may come as a surprise to some, then, that next year the College will in fact spend none of its endowment. On Feb. 26, the College issued a $100 million fixed-rate, taxable bond in the hopes of relieving the endowment of any operating budget funding for the next year to year-and-a-half.

According to College Treasurer Peter Shea, this is an unprecedented move by the College. While it has issued tax-exempt bonds for construction projects in the past, it has never issued a taxable bond for the purpose of operation capital. “It’s a way to preserve the endowment … to take pressure off of it,” Shea explained.

Essentially, the bond prevents the College from having to liquidate investments to obtain cash. The thinking goes that the expenses incurred for borrowing the money will be less than the long-term losses which would have accompanied the liquidation of what the College believes to be undervalued assets of the endowment.

“The additional liquidity provided by this most recent issuance actually gives the College more financial flexibility in managing its financial and investment affairs,” said Steven Gluckstern, Chair of the Board of Trustees’ Budget and Finance Committee. “This, coupled with the reasonable interest rate we were able to achieve (as well as our ability to maintain our extraordinary credit rating) made this decision quite easy and clearly in the College’s best interest.”

Amherst is not the first college to try this maneuver. In January, Princeton University raised $1 billion in a taxable bond sale, while Duke, Notre Dame and Harvard Universities have also had similar offerings.

According to an article from the Boston Business Journal, the College’s total debt now sits at $320 million. As a result, credit rating agencies Standard & Poor’s and Moody’s Corp. revised the outlook of the college to negative. Nonetheless, the College still has AAA ratings.

This year, the endowment contributed roughly 35 percent of the operating budget, which comes out to around $50 million. For next year, at least, that number will sit at zero.