Rutgers University General Obligation Refunding Bonds 2016 Series M - - PowerPoint PPT Presentation

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Rutgers University

General Obligation Refunding Bonds 2016 Series M (Tax Exempt) Investor Presentation

February 26, 2016

• J. Michael Gower

Executive Vice President for Finance and Administration and University Treasurer

Richard Aks

Vice President for Finance & Associate Treasurer

This document and any other materials accompanying this document (collectively, the “Materials”) are provided for your information. By accepting any Materials, the recipient acknowledges and agrees to the matters set forth below. The Materials are not part of the preliminary official statement or the final official statement as those terms are defined in SEC rule 15c2-12, and are qualified in all respects by reference to the Preliminary Official Statement. Prospective purchasers of the General Obligation Refunding Bonds 2016 Series M should rely only on the Preliminary Official Statement, and not the Materials, in making an investment decision. The Materials and statements contained in this presentation do not constitute an offer to sell or a solicitation of any offer to buy any securities of Rutgers University to any person in any jurisdiction, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. To the extent there are conflicts between statements made in the Preliminary Official Statement and this presentation, the information contained in the Preliminary Official Statement should be deemed more reliable. The Materials are not intended as investment advice or as a confirmation of any transaction. Externally sourced information contained in the Materials has been obtained or derived from sources believed to be reliable, but Wells Fargo Securities makes no representation or warranty, express or implied, with respect thereto, and does not represent or guarantee that such information is accurate or complete. Such information is subject to change without notice and Wells Fargo Securities accepts no responsibility to update or keep it current. Wells Fargo Securities does not assume or accept any liability for any loss which may result from reliance thereon. Wells Fargo Securities and/or one or more of its affiliates may provide advice or may from time to time have proprietary positions in, or trade as principal in, any securities or other financial products that may be mentioned in the Materials, or in derivatives related thereto. Any opinions or estimates contained in the Materials represent the judgment of Rutgers at this time, and are subject to change without notice. The Materials are not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations and does not constitute advice within the meaning of Section 15B of the Securities Exchange Act of 1934. No person providing the Materials is acting as fiduciary or advisor with respect to any transaction described or contemplated therein unless expressly agreed to in a written financial advisory or similar agreement. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the Materials. This presentation may contain statements that, to the extent they are not recitations of historical fact, may constitute “forward-looking statements.” In this respect, the words “estimate”, “project”, “anticipate,” “expect, “intend,” “believe” and similar expressions are intended to identify forward-looking statements. Any forward-looking statements made herein are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties which could affect the revenues and

• bligations of Rutgers include, among others, changes in economic conditions, mandates from other governments, reduced governmental

allocations, and various other events, conditions and circumstances, many of which are beyond the control of [name of issuer]. Such forward- looking statements speak only as of the date of the Preliminary Official Statement of February 25, 2016. The Rutgers University disclaims any

• bligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in

the Rutgers University’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is

• based. Given these uncertainties, readers are cautioned not to rely on forward-looking statements.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in the Materials is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, N.A., acting through its Municipal Products Group. .

Agenda

• New Issue Summary
• Recent Initiatives
• Financial Information
• Enrollment and Demand

Advance Refunding of Series 2009F Callable Maturities from 2020-2039 Amounts * Par Amount Refunded with Tax-Exempt Fixed Rate Debt: $163.6 million Par Amount Refunded with Taxable Commercial Paper: $2.6 million Total Par Amount to be Refunded: $166.2 million

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Aa3 (negative) from Moody’s/ A+ (stable) from S&P/ AA- (stable) from Fitch

Ratings Schedule

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Advisor

Prager & Co., LLC May 1, 2020 to May 1, 2039*

Principal Maturities Plan of Finance Underwriters

Wells Fargo Securities (Senior); Morgan Stanley (Co-Senior); BofA Merrill Lynch, Citigroup, Janney Montgomery Scott, Raymond James (Co-Managers)

* Preliminary and subject to change; when, as, and if issued

computing the federal alternative minimum tax. The form of Bond Counsel’s opinion is available in the Preliminary Official Statement. Before purchasing bonds, you should consult with your tax advisor concerning your particular tax situation

New Issue Summary: GO Ref Bonds 2016 Series M1

Exempt from Federal Income Tax and Certain New Jersey Taxes1

Tuesday, March 1: Price Series 2016 Series M Bonds* Thursday, March 31: Close Series 2016 Series M Transaction*

Covenant – Payment of Obligations

The University shall at all times charge and collect tuition, fees, rents, charges and other revenues which, together with other legally available funds, shall be sufficient to make all payments as the same become due of principal, interest and Sinking Fund Installments with respect to any and all Indebtedness of the University and to meet all other obligations of the University. Callable May 1, 2026*

Call Provision

Recent Initiatives

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• Rutgers is celebrating its 250th anniversary in November 2016
• The year-long celebration highlights Rutgers’ tradition of revolutionary teaching,

research and service and is embodied in our logo: RevolUtionary

250th Anniversary

• 2
• The Honors College of Rutgers opened in Fall 2015 to create a living-learning community

that supports academic achievement and encourages engagement in campus life and in larger communities.

• The inaugural class is currently 530 students with an average SAT score of 2160 out of 2400
• 19% of Honors College students are from out-of-state

Honors College

• f Rutgers
• The University completed a comprehensive strategic plan in 2014 combining an assessment
• f Rutgers’ institutional strengths with a vision of the opportunities for improvement to create

a five-year roadmap for excellence

• In 2015 the University completed its Physical Master Plan, Rutgers 2030, which envisions

development over a 15-year time frame

• Strategic plans have been completed for each of the four academic units and master plans

for three of the four units

Strategic and Master Plans

• Rutgers

Biomedical and Health Sciences (RBHS)

• RBHS was created following the 2013 integration with the University of Medicine and

Dentistry of New Jersey (UMDNJ)

• RBHS is the umbrella organization for the UMDNJ schools and clinical units, several pre-

existing Rutgers units with health-related missions, and two research units that historically were jointly operated by Rutgers and UMDNJ

• A key RBHS initiative is the creation of a health care faculty practice plan that will combine

service delivery at 12 separate schools, practices, divisions, and institutes into an integrated statewide practice that is aiming to be the market leader in delivering healthcare throughout the region

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• The University works with 29 separate unions covering over 18,000 employees
• The University has completed negotiations with unions representing over 98% of staff with
• verall salary and wage increases in the 2% range

Union Contracts

• Capital Projects
• $1 billion of capital projects, including $387 million of funding from the State of New

Jersey, are progressing on time and on budget

3

FY2015 Results

• The University achieved positive operating results in FY2015 with net tuition revenue

increasing over 5%, net patient revenue increasing over 6% and a record $187.9 million in gifts and pledges received

• Overall debt declined by $81 million since 6/30/2014 and $285 million is scheduled to be paid
• ff over the next five years
• Recent Initiatives (Continued)

Management Initiatives

• The University is undertaking a wide range of initiatives to improve management and

performance including: – Responsibility Center Management budgeting procedures implemented in July 2015 in

• rder to enhance accountability for financial performance throughout the University’s units

and central administration – Appointment of a Chief Enterprise Risk, Ethics and Compliance officer in December 2015 to identify critical risks and develop tools and techniques to manage risks – A new consolidated Administrative Information Systems for financial management, procurement, human resources, grants management and budgeting with the first modules expected to be on line in October 2016

Growth in Net Assets

Source Rutgers Audited Financial Statements

• Post integration, Rutgers net

assets increased by approximately $404 million in FY 2014

• Net assets increased by

approximately $195 million in FY 2015

1,126 1,202 1,230 1,351 1,458 374 375 429 548 564 453 446 383 460 471 683 669 622 709 771 2,637 2,691 2,664 3,068 3,263 500 1,000 1,500 2,000 2,500 3,000 3,500 2011 2012 2013 2014 2015

Invested in Capital Restricted - Nonexpendable Restricted - Expendable Unrestricted

Historical Net Assets(1)

FY 2011 – FY 2015 ($MM) Notes

• 1. Includes component units of the University. FY 2011– FY 2013 data is pre-integration with UMDNJ. FY 2015 is

net of GASB 68 impact; see next page

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Source Rutgers Audited Financial Statements

• In FY 2015, Rutgers recorded $1.35 billion in GASB 68 pension liabilities
• Unrestricted net assets changed from $770 million to ($578 million)
• GAAP margin reduced from $195 million to $127 million

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GASB 68 Implementation

Statement of Net Position 2015 GASB 68 Adjustment 2015 Net of GASB 68 Assets Total Assets 5,952,672

• 5,952,672

Deferred Outflows 171,594 (73,845) 97,749 Total Assets and Deferred Outflows 6,124,266 (73,845) 6,050,421 Liabilities Current Liabilities 598,164

• 598,164

Noncurrent Liabilities 3,543,956 (1,354,656) 2,189,300 Total Liabilities 4,142,120 (1,354,656) 2,787,464 Deferred Inflows 67,660 (67,660)

• Net Position

Net investment in capital assets 1,457,539

• 1,457,539

Restricted - nonexpendable 563,890

• 563,890

Restricted - expendable 470,931

• 470,931

Unrestricted (577,874) 1,348,471 770,597 Total Net Position 1,914,486 1,348,471 3,262,957 Statement of Revenues, Expenses and Changes in Net Position 2015 GASB 68 Adjustment 2015 Net of GASB 68 Operating revenues 2,402,636

• 2,402,636

Operating expenses 3,411,728 (67,973) 3,343,755 Operating loss (1,009,092) 67,973 (941,119) Nonoperating revenues 1,002,007

• 1,002,007

Other revenues 133,715

• 133,715

Increase in Net Position 126,630 67,973 194,603 Net Position, beginning 1,787,856 1,280,498 3,068,354 Net Position, end 1,914,486 1,348,471 3,262,957

Growth and Diversity of Revenues

Source Rutgers Audited Financial Statements and FY 2016 Budget

1,045 1,112 1,160 1,345 1,418 1,414 495 535 345 580 585 530 438 429 433 777 782 783 488 518 565 199 99 351 480 432 489 2,177 2,175 2,289 3,670 3,735 3,781 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2011 2012 2013 2014 2015 2016 (Budget)

Tuition and Auxiliaries Grants and Contracts State Appropriations Healthcare and Professional Services Other

Operating and Non-Operating Revenues(1,2)

FY 2011 – FY2015 Actual; FY 2016 Budgeted ($MM) Notes

• 1. Includes State-Paid Fringe Benefits
• 2. FY 2011 – FY 2013 data is pre-integration with UMDNJ
• 3. Other category includes other operating revenue, federal and state student aid appropriations, contributions, investment income,

fair value adjustments, and other non-operating revenue

• Post integration, revenues

became more diverse – Tuition & Auxiliaries declined from 51% in 2013 to 37% in 2014 (and 38% in 2015)

• Rutgers total revenues

increased by $1.38 billion in FY 2014

• The integration of RBHS with

Rutgers has provided a significant increase in – Tuition – State Appropriations – Healthcare – Research grants and contracts

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262,360 262,760 455,188 455,194 439,929 166,967 170,141 322,205 326,690 342,654 429,327 432,901 777,393 781,884 782,583 250,000 500,000 750,000 1,000,000 2012 2013 2014 2015 2016 State Operating Appropriations Fringe Benefits Paid by State State Appropriations

5-Year History ($, in Thousands)

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• State operating appropriations to the University for FY16 declined 3.4%

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State Appropriations

Source: Rutgers, and Rutgers Audited Financial Statements and FY16 budget

FY2016 ($, in Thousands) RU-NB & AES & RBHS RU - Newark RU - Camden Total Direct Appropriation $328,262 $30,630 $16,501 $375,393 Other State Appropriations $64,536 $0 $0 $64,536 State Operating Appropriations $392,798 $30,630 $16,501 $439,929 State Paid Fringe Benefits $309,551 $21,224 $11,879 $342,654 Total $702,349 $51,854 $28,380 $782,583

*May not tie to financials due to rounding

Research Grants and Contracts

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$, in Thousands FY 2014 FY 2015 Increase (Decrease) Percent Change

New Brunswick

268,231 307,805 39,573 14.8%

RBHS

218,015 270,935 52,920 24.3%

Newark

24,996 26,548 1,551 6.2%

Camden

6,453 7,231 778 12.1%

TOTAL

517,696 612,518 94,822 18.3%

• Annual research expenditures at Rutgers exceeded $677 million in 2014, which was among

the top 20 public universities nationally1

• Grant and contract awards increased in FY2015 by 18.3% year-over-year
• The increases occurred across all major funding sources including the NIH and NSF and

State and corporate support

Research and Sponsored Grants and Contracts Awarded2

($MM)

• The Rutgers University Foundation conducts fundraising

for the University

• The University concluded its “Our Rutgers, Our Future”

capital campaign in December 2014, raising $1.037 billion and exceeding its $1.0 billion goal

• During FY2015, the University raised a record $187.9

million in gifts and pledges

• This result represents an increase in gifts and

pledges of 27% over the previous year

Source Rutgers University

Fundraising Performance

Total Gifts Received ($MM)

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Fundraising

93.6 83.1 107.4 124.9 151.0 20 40 60 80 100 120 140 160 FY11 FY12 FY13 FY14 FY15

• Total Cash and Investments as of December 31, 2015:

$2.01 billion. –Working Capital and Liquidity Portfolio: $869.3 million –Long Term Investment Pool (LTIP): $939.8 million –Other endowments, restricted funds and plant funds: $200.1 million

• The University maintains a $100 million operating line of

credit with Bank of America

Historical Cash and Investments

FY11 – FY15 ($MM)

Notes: 1) FY11 includes component units 2) FY14 is first post-integration measure of cash and investments Source Rutgers University; unaudited data as of 12/31/2015

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Cash and Investments

1,815 1,634 1,636 2,369 2,289 2,009 500 1,000 1,500 2,000 2,500 FY11 FY12 FY13 FY14 FY15 12/31/2015

Endowment Investments

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US Equity 18% International Large Stocks 15% International Emerging Stocks 4% Fixed 12% Cash 5% Hedge Funds 23% Real Assets 14% Priv ate Equity 9%

Long-Term Investment Pool Asset Allocation

• The market value of the endowment and similar funds were $916.2 million as of June 30,

2015 and $939.8 million as of December 31, 2015

• The majority of endowment funds are in the Long-Term Investment Pool
• The University’s annual spending policy is 4.275% of the trailing 13-quarter average of

market value

Source Rutgers University Long Term Investment Pool Monthly Report, as of June 30, 2015

(As of June 30, 2015)

Long-Term Investment Pool Returns for 1, 3, 5, and 10 years 11 2.9% 10.0% 9.4% 6.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 1 3 5 10

Years

$166,185,000 to be refunded by 2016 Series M Bonds and Taxable Commercial Paper

*

Debt Outstanding

DEBT OUTSTANDING ($000) 6/30/2014 6/30/2015 Commercial Paper 48,475 65,833 Notes 2,276 1,655 General Obligation 1,557,145 1,510,495 Capital Leases 463,921 426,108 Total 2,071,817 2,004,091

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Rutgers University Debt Portfolio

Series Outstanding Par Amount ($000) Mode Call Provisions Final Maturity Series 2002 A 33,000 Synthetic Fixed Anytime 5/1/2018 Series 2009 F 194,735 Fixed 5/1/2019 5/1/2039 Series 2009 G 70,490 Synthetic Fixed Anytime 5/1/2039 Series 2010 H 390,990 Fixed MWC 5/1/2040 Series 2010 I 30,875 Fixed 5/1/2020 5/1/2029 Series 2013 J 328,840 Fixed 5/1/2023 5/1/2036 Series 2013 K 122,370 Fixed MWC 5/1/2033 Series 2013 L 339,195 Fixed 5/1/2023 5/1/2043 Series 2013 (Capital Lease Obligation) 237,055 Fixed 6/15/2023 5/1/2046 Commercial Paper 65,833 Synthetic Fixed N/A 5/1/2037 Other Notes and Capital Leases

TOTAL $2,004,091

190,708 Fixed

As of 6/30/2015

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Source Rutgers University *As of 12/31/2015

Debt Outstanding (Continued)

• 20

40 60 80 100 120 140 160 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 $ in Millions Interest Principal Fixed, $1,790.9 , 92% Synthetic Fixed, $161.4 , 8% Unhedged Variable, $4.7 , 0% Taxable, $546.4 , 28% Tax-Exempt, $1,410.6 , 72%

Variable Rate Mix Tax Status

• Over the next five years Rutgers will amortize $285 million in principal which amounts to 14.5% of its outstanding

debt portfolio

• Rutgers’ debt policy governs the management of debt and the preservation of debt affordability and capacity

Gffdgfd

Swap Exposure

As of May 1, 2013

Fair Notional Fixed Floating Value* Counterparty ($000) Maturity Rate Rate ($000)

33,000 5/1/2018 3.96% SIFMA (1,750) Merill Lynch 100,000 11/1/2038 4.08% 3M LIB (26,634) BNY 14,905 5/1/2027 3.82% SIFMA (3,028) BNY 13,500 11/1/2017 5.13% 1M LIB (1,025) Total $161,405 Morgan Guaranty

Swap Exposure

• The University had posted $12.6 million of collateral to secure its swap exposure as of 12/31/2015

New Brunswick

Enrollment History (000s)

Newark

Enrollment History (000s)

Camden

Enrollment History (000s)

Total

Enrollment History (000s)

Enrollment

Academic Years 2011-12 through 2015-2016 (includes RBHS 2013-14 through 2015-16)

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*RBHS undergraduate data includes Rutgers School of Nursing, Ernest Mario School of Pharmacy and Rutgers School of Health Related Professions. For federal reporting, these entities are included in New Brunswick. Note: SAT scores reported are for first-year students

10 20 30 40 50 60 70 11-12 12-13 13-14 14-15 15-16 Graduate & Professional Undergraduate 14 10 20 30 40 50 60 70 11-12 12-13 13-14 14-15 15-16 Graduate & Professional Undergraduate 10 20 30 40 50 60 70 11-12 12-13 13-14 14-15 15-16 Graduate & Professional Undergraduate 10 20 30 40 50 60 70 11-12 12-13 13-14 14-15 15-16 RBHS NB, N, C Total

New Brunswick Newark Camden RBHS Total Year SAT* Undergrad Grad & Prof SAT* Undergrad Grad & Prof SAT* Undergrad Grad & Prof SAT* Undergrad Grad & Prof Total 2011-12 1194 31,268 8,682 1069 7,465 4,339 1050 4,653 1,775

• 58,182

2012-13 1200 31,593 8,841 1047 7,666 4,345 1041 4,708 1,635

• 58,788

2013-14 1212 31,400 8,553 1058 7,217 3,995 1039 4,842 1,422 n/a 2,501 5,582 65,512 2014-15 1216 32,206 8,514 1043 7,408 3,906 1030 4,857 1,464 n/a 2,338 5,320 66,013 2015-16 1226 33,060 8,639 1031 7,713 4,007 1029 4,899 1,509 n/a 2,424 5,305 67,556

Applicants, Admissions and Enrollments 2011-12 2012-13 2013-14 2014-15 2015-16 Applicants 31,751 31,842 33,545 33,717 37,641 Admitted Students 21,050 21,459 22,368 23,050 25,242 Enrolled Students 7,476 7,707 7,888 7,856 8,236 % Admitted (selectivity) 66.3% 67.4% 66.7% 68.4% 67.1% % Enrolled (matriculation) 35.5% 35.9% 35.3% 34.1% 32.6%

Student Demand

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10,000 20,000 30,000 40,000 2011-12 2012-13 2013-14 2014-15 2015-2016 Applicants Admitted Students Enrolled Students

Rutgers Demand Statistics

2011-2015 30% 40% 50% 60% 70% 2011-12 2012-13 2013-14 2014-15 2015-2016

% Admitted (selectivity) % Enrolled (matriculation)

Rutgers Primary Selectivity and Matriculation

2011-2015

• For Fall 2015, overall applications increased 11.6%, with out-of-state applications increasing

14.6% and international applications increasing 40.9%

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Tuition and Fees

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*Undergraduate tuition, fee, room and board based on New Brunswick School of Arts & Science with double occupancy room and the minimum meal plan for a first-year student living on campus.

• During 2015, over 49,000 University students (75.0% of total enrollment) received some form
• f University-administered student aid.

Rutgers Undergraduate Charges (Full Time) Resident of New Jersey 2011-12 2012-13 2013-14 2014-15 2015-16 Tuition and Fees $12,754 $13,072 $13,499 $13,813 $14,131 Room and Board 11,262 11,412 11,578 11,748 12,054 Total Resident 24,016 24,484 25,077 25,561 26,185 % Increase 2.35% 1.95% 2.42% 1.93% 2.44% Non-Resident of New Jersey Tuition and Fees $25,416 $26,392 $27,523 $28,591 $29,521 Room and Board 11,262 11,412 11,578 11,748 12,054 Total Non-Resident 36,678 37,804 39,101 40,339 41,575 % Increase 5.01% 3.07% 3.43% 3.17% 3.06%

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Questions?

To arrange one-on-one calls, please contact your salesperson or: Name Richard Aks, Rutgers Phone 848-445-3787 Email richard.aks@rutgers.edu Name Sally Bednar, Wells Fargo Securities Phone 212-214-6770 Email sally.bednar@wellsfargo.com Name Craig Hrinkevich, Wells Fargo Securities Phone 212-214-6784 Email craig.hrinkevich@wellsfargo.com

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