Board of Visitors Finance Committee Meeting December 2016 Finance - - PowerPoint PPT Presentation

Board of Visitors Finance Committee Meeting December 2016

Finance Committee Agenda

Action n Items:

1. Issuance of General Revenue Pledge Refunding Bonds 2. 2017-2018 Tuition and Required Fees for Graduate, Professional, and Special Programs 3. Capital Project Financing Plans A. Pinn Hall Third Floor Renovation B. Emily Couric Cancer Center Fourth Floor Build Out

Repo eports:

1. Economic Impact Study Results

GENERAL REVENUE BOND ISSUANCE

Su Summa mmary

• The University plans to issue refunding bonds in late January or early February 2017
• Current market rates support issuing long-term, fixed-rate debt
• Planned issue of tax-exempt Series 2017 Bonds, in one or more subseries, to:

– maximize the allowance for taxable private-use under the bonds – distinguish Academic Division and Medical Center assets

• A convergence of long-term taxable and tax-exempt rates may provide an opportunity to issue taxable

debt at little or no incremental cost – Taxable bonds provide greater flexibility and are not subject to IRS tax-exempt debt requirements regarding use of proceeds and tracking

• As of 11/28/16, present value savings are approximately $30 million

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UVA A Debt Po Portfolio lio

(as of 11/30/ 30/16) 6)

5

UVa’s ’s H His istoric ical Po l Portfolio lio M Mix ix

Fiscal Year Million s

Over the past seven years, the University has held a small percentage of variable rate debt in its portfolio, primarily due to relatively low long-term rates 6

De Debt bt Co Compa parison - UVa a vs. Aaa Aaa-rat ated Publ Public Uni niversities

UVa’s variable rate debt % is in line with other Aaa-rated public universities

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Outs utstandi nding D g Debt and ebt and Debt ebt Capac apacity

($ millio lions)

* BOV-approved Projects Only * Cumulative Numbers

Debt (@ 11/30/16) Variable Rate Fixed Rate Total Debt Commercial Paper 149 149 Long-term Bonds 1,273 1,273 Total Debt 149 1,273 1,421 Percent of Total 10.5% 89.5%

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Proj

• jec

ects t to

• be

be Financ nanced and ed and Refunded efunded

($ millio lions)

Acad ademic Medical C l Center To Total Series 2008 Bonds $208 $23 $231 Commercial Paper $60 $90 $150 Transitional Care Hospital Reimbursement $0 $24 $24 Total Reimbursement $268 $137 $405

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Plac acing A ng Academ ademic D Division and

• n and Medi

Medical al Cent enter er A Assets i in n Disti tinc nct S Sub ub-series es of

• f Bonds
• nds
• The Medical Center’s growth may at some point put pressure on the University’s

AAA rating

• This would occur as Medical Center revenues approach 2/3 of total University
• revenues. (For FY16, MC revenues are 51% of total revenues)
• Series 2017 Bonds can be structured into one or more sub-series (i.e., Series

2017A and 2017B) to distinguish the assets of the two divisions

• Sub-series designations would have the same University general revenue pledge

with no resulting impact on pricing

• Distinguishing assets allows for greater financing flexibility in the future

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Bond

• nd Str

truc uctur ure O Opti ptions

• ns
• As of 11/28/16, long-term tax-exempt rates were about 30-40 bps cheaper than

equivalent taxable rates

• Rates have been volatile, with the 30-year rate difference having been only 6 bps at

the end of October

• We will continue to monitor the rate differential leading up to the bond issuance

Notes: Pricing estimated by J.P. Morgan and subject to change

Ta Tax-Exempt D Deb ebt (w/ pa par call o ll option

• n)

Taxable ble Debt bt (w/ p par c call o ll option

• n)

Maturity 20 years 3.63% 3.89% 30 years 3.80% 4.04% 40 years 3.91% 4.24%

1 1

Rec ecom

• mmenda

ndation

• ns
• Issue tax-exempt refunding bonds in one or more sub-series
• Embed par call options to allow for refunding opportunities
• Monitor rates to see if taxable rates converge with tax-exempt rates

Acad ademic D Division Medical C l Center Tax Type Tax-exempt* Tax-exempt Amount (proj.) $280 million $160 million Maturity

• Matched to maturities of Series

2008 Bonds

• 30+ years for CP
• Matched to maturities of

Series 2008 Bonds

• 30+ years for CP

Call Option 10-year @ par 10-year @ par Fixed/Variable Fixed Fixed

* Consider issuing taxable bonds if rates converge with tax-exempt rates 12

Rec ecom

• mmenda

ndation

• ns
• We ask that the Board of Visitors authorize the EVP-COO and the Chair of

the Finance Committee to approve the structure and pricing of long-term bonds.

• The Series 2017 Bonds will be established within the parameters listed

below:

• Maximum aggregate principal (par) amount shall not exceed $450 million
• Average true interest cost will not exceed 4.50% per annum
• Final maturity of the bonds will not exceed 41 years from the date of issue

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2017-2018 Tuition and Required Fees For Graduate, Professional, and Special Programs

2017 17-2018 Requi equired red Fee ee Propos

• posal

al For

• r Gr

Graduat aduate, P Prof

• fes

essional nal, and and Spec pecial al Program

• grams

Mandatory Student Fee: $66 increase (2.5% for in-state and 2.0% for out-of-state)

The proposed increase will:

• Meet increase in student health

volume

• Fund After Hours and alternative

program offerings

• Improve technology support in

classrooms and learning studios 15

2017 17-2018 T Tui uiti tion P

• n Propos
• posal

al For

• r Gr

Graduat aduate, P Prof

• fes

essional nal, and and Spec pecial al Program

• grams

Grad aduat ate P e Program ams: Majority of tuition rate increases are around 3.0%

• To better align rates with other programs and to reflect market conditions:
• Graduate Engineering (year 4) is increasing 13.9%
• Biomedical Sciences (years 1-3) is increasing 10-11%

Sch chool o

• f Me

Medici cine: Tuition rate increases range from 1.6% - 3.8% Sch chool o

• f La

Law: : Tuition rate increases range from 2.5% - 3.6% Darden S School of

• f Busi

siness ss:

• Tuition rates for full-time MBA students will increase by 3.6-3.8%
• Executive and PhD program tuition rate increases range from 4.6%-6.9%

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CAPITAL PROJECT FINANCING PLANS

Capi apital al P Proj

• jec

ect F Financ nancing P ng Plans ans

Pinn H Hall R ll Renovation, , Third F Flo loor

• Enabling project for the Health System Integrated Space Plan
• 1st phase creates state-of-the-art, flexible research space and increases research capacity by 30%
• Estimated project cost: $12.0 million to be paid from Medical Center Operating Cash

Em Emily Cour uric C Clini nical C Canc ncer C Cent nter, F Four urth th Fl Floor Bui uild O Out ut

• Expands scope of project by providing more high-intensity clinical functions to expand clinical

capacity, meet increased demands for cancer services, and realign services to meet new treatment protocols

• Estimated project cost: $14.75 million to be paid from Medical Center Operating Cash

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Economic Impact Study Results

Econ

• nom
• mic a

c and C Community ty I Impacts ts o

• f

The Un Univer ersity o

• f Vi

Virginia

December 2016

Study udy Go Goals

 Quantify the economic, employment, and tax revenue impacts of The University of Virginia within the Thomas Jefferson Planning District Commission region, the LENOWISCO and Cumberland Plateau Planning District region, as well as across the Commonwealth of Virginia.  Articulate various social and community benefits that result from

• perations of The University of Virginia (i.e. volunteer time, donations).

 Describe the impacts of the research activity of The University of Virginia in terms of the commercialization and business spin-offs occurring throughout the region and state.

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Study Ba Backgr ground

 Impact analysis completed for UVA (the combined impact of UVA Academic Division, UVA Health System, and UVA- Wise) as well as individual impact analysis for each entity.  Impacts provided at regional and state geographic levels  Study data provided for FY 2015.

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Calcu culati ting E g Econ

• nomic I

c Impact t wi with th IMPLAN

 The impacts were calculated based on data received from The University of Virginia and secondary data research.

Industry sector(s) for development Financial data collected to run analysis (actual

• r projected)

Analysis of impact with models and multipliers Economic impact findings 23

De Definitions o

• f Impact T

Terms

 Three types of impact are presented in the analysis: 1) Direct; 2) Indirect; and 3) Induced.

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Total University of Virginia Impact

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Generating Significant Economic Impact

 The impact of UVA can be felt through its academic rigor, its health care presence, its regional ties as well as its economic activity. UVA Academic, UVA HS, and UVA-Wise are major drivers of the Virginia economy.

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Economic Impact by Organization

 Impacts are generated by the three UVA entities – the UVA Academic Division, the UVA Health System, and UVA-Wise.  Impacts are felt throughout the Commonwealth.

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Economic Impact

 Operational impact consists of dollars that are generated from program spending that circulate within the state and local economies.  The University of Virginia had a $5.9 billion impact on the Commonwealth of Virginia in FY15.

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Creating and Sustaining Jobs

 In FY15, UVA supported 51,653 jobs in the Commonwealth of Virginia.  These jobs (both full-time and part-time) include not only direct employment by UVA (28,445 jobs), but also indirect and induced jobs (23,208 jobs) that are supported as a result of UVA, employee, student, and visitor spending.  One in every 76 jobs within the Commonwealth of Virginia is either held directly by a UVA employee or is supported as a result of UVA’s presence. 29

Supporting the State and Local Tax Base

 State and local government revenues attributable to the presence of UVA in FY15 totaled more than $239.9 million.

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Conducting Ground-Breaking Research

 One in five jobs created or supported by UVA are related to the research activity of the university.

31

Technology Transfer and Commercialization

32

Entrepreneurial Alumni*

*Based on 2014 Darden survey that extrapolated data received to include all alumni. 33

Providing Community Benefit

 In FY15, it is estimated that the community impact (through volunteer work and monetary donations) from faculty, staff and students of UVA amounted to $70.3 million.

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Attracting Visitors

 In FY15, the economic impact of visitors to the Commonwealth due to the presence of UVA amounted to $352.9 million, supported a total of 3,918 jobs, and generated $23.0 million in state and local government revenue.

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Combined Impacts of UVA Academic Division and UVA HS on the Thomas Jefferson Planning District

 Economic impact of the UVA Academic Division and UVA HS on the TJPD region totaled $4.8 billion for FY15.  UVA Academic Division and UVA HS supported a total of 44,601 jobs (directly and indirectly) throughout the TJPD region in FY15.  More than $199.2 million was generated in state and local tax revenue as a result of spending of the UVA Academic Division, UVA HS, their employees, students, and visitors to the TJPD region in FY15.

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QUESTIONS + ANSWERS

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Ec Econom

• nomic I

Impac pact: Commu mmunic icatin ing our

• ur Val

alue ue

December 8 8th

• Press release
• Media outreach and strategy (embargoed until later today)
• UVA Today lead story
• Release of information site to Chamber, corporate partners, City and County, and key state legislative

and administrative staff

Mi Mid-January

• Illimitable email to legislative audiences featuring the Economic Impact as main story
• Illimitable with Economic Impact story released to 220,000 alums, donors, parents, faculty, students
• Printed leave-behinds for in-person visits to Richmond (legislative breakfast, President’s visits, etc.)

Ong ngoing

• Editorial focus over next 12-18 months to include stories that continue to reinforce, with links back to

the Economic Impact site

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