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 • 4

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 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 Million s Fiscal Year 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 7

Outs utstandi nding D g Debt and ebt and Debt ebt Capac apacity ($ millio lions) Debt (@ 11/30/16) Variable Rate Fixed Rate Total Debt Commercial Paper 149 0 149 Long-term Bonds 0 1,273 1,273 Total Debt 149 1,273 1,421 Percent of Total 10.5% 89.5% * BOV-approved Projects Only * Cumulative Numbers 8

Proj ojec ects t to o 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 $0 $24 $24 Reimbursement Total Reimbursement $268 $137 $405 9

Plac acing A ng Academ ademic D Division and on and Medi Medical al Cent enter er A Assets i in n Disti tinc nct S Sub ub-series es of of Bonds onds 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 • 10

Bond ond Str truc uctur ure O Opti ptions ons 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 • Ta Tax-Exempt D Deb ebt (w/ pa par Taxable ble Debt bt call o ll option on) (w/ p par c call o ll option on) Maturity 20 years 3.63% 3.89% 30 years 3.80% 4.04% 40 years 3.91% 4.24% Notes: Pricing estimated by J.P. Morgan and subject to change 1 1

Rec ecom ommenda ndation ons 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 Matched to maturities of • • 2008 Bonds Series 2008 Bonds 30+ years for CP 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 ommenda ndation ons • 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 • 13

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

2017 17-2018 Requi equired red Fee ee Propos oposal al For or Gr Graduat aduate, P Prof ofes essional nal, and and Spec pecial al Program ograms 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 on Propos oposal al For or Gr Graduat aduate, P Prof ofes essional nal, and and Spec pecial al Program ograms 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 of Me Medici cine: Tuition rate increases range from 1.6% - 3.8% Sch chool o of La Law: : Tuition rate increases range from 2.5% - 3.6% Darden S School of of 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% • 16

CAPITAL PROJECT FINANCING PLANS

Capi apital al P Proj ojec 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 • 1 st 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 18

Economic Impact Study Results

Econ onom omic a c and C Community ty I Impacts ts o of The Un Univer ersity o of 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 operations 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. 21

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. 22

Calcu culati ting E g Econ onomic 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 Economic impact Financial data collected Analysis of impact with development findings to run analysis (actual models and multipliers or projected) 23

De Definitions o of Impact T Terms  Three types of impact are presented in the analysis: 1) Direct; 2) Indirect; and 3) Induced. 24

Total University of Virginia Impact 25

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. 26

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. 27

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. 28