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Rosa H. Renaud, Financing & Treasury Nancy Freelander-Paice, Capital Planning, Design & Construction.

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Presentation on theme: "Rosa H. Renaud, Financing & Treasury Nancy Freelander-Paice, Capital Planning, Design & Construction."— Presentation transcript:

1 Rosa H. Renaud, Financing & Treasury Nancy Freelander-Paice, Capital Planning, Design & Construction

2 SRB: Bond Financing & Debt Management Agenda: Debt Outstanding Process IRS Tax-Exempt Bond Requirements Debt Management 2

3 SRB Debt Outstanding 2002 – Systemwide Revenue Bond (SRB) program Bonds issued by the Board of Trustees June 30, 2013 – SRB debt outstanding: $3.6 billion All campuses plus Chancellor’s Office participate Programs benefiting from SRB bonds: Continuing Education HousingHealth Centers ParkingContinuing Education Student UnionsAuxiliary Organizations 3

4 Process Coordinated effort between: Campuses Campus Planning, Design and Construction (CPDC) Financing and Treasury (F&T) 4

5 CPDC Process Key Milestones Two Pathways for Trustee Approval of Non-state Projects Annual Call Letter for 5-Year Capital Improvement Program Spring Submit program request to CPDC Board of Trustees approve ‘Draft’ 5-Year program September Board of Trustees approve ‘Final’ 5-Year program Action year (year 1) Non-state projects de facto approved Amend non-state capital program at Board of Trustees’ Meetings Timing per due dates issued by CPDC/F&T Board of Trustees approve project 5

6 CPDC Process Key Milestones Continued Documents Required Project Description CPDC Form 1-4 Project Cost Estimate CPDC Form 2-7 Tax-Exempt Private Use Checklist Requisite related forms Other Hurdles Due Diligence Master Planned California Environmental Quality Act (CEQA) Compliance Approval of Schematic Plans 6

7 Financing & Treasury Process Key Milestones: Review of campus financial plans at key junctures Projects submitted per CPDC Annual Call Letter Amendment of the Non-state Capital Outlay Program Schematic plan approval Construction bid receipt Financing Approval by Board of Trustees. Housing projects Review/approve campus plan for Housing Proposal Review Committee consideration 7

8 Tax-Exempt Bond Requirements State and Non-state Projects: Completion of CPDC’s Private Use Checklist and other related forms Annual review per spring call letter Timely updates if changes to private use occur Call Letters Forms Resource Documents 8

9 Tax-Exempt Bond Requirements SRB Projects: Draft Allocation of Bond Proceeds form Final Allocation of Bond Proceeds form Completion of the project Prior to close construction account & release of surplus funds Form can be obtained at: 9

10 Tax-Exempt Bond Requirements Financing Policy – Key Benchmarks: Campus proposals in line with Executive Order 994 Debt Service Coverage Ratios* Campus: minimum 1.35 overall Program: minimum 1.10 Auxiliary organizations: 1.25 *[net income/annual debt service] 10

11 Tax-Exempt Bond Requirements Financing Policy – Key Benchmarks continued: Reserve Requirements Campus policy Major Maintenance & Repair/Capital Renovation & Upgrade Working Capital Capital Development for New Projects Catastrophic Events Reserve Review Campus required to conduct an in-depth review Assess reserves and policies at minimum every 3 years 11

12 Tax-Exempt Bond Requirements IRS requires documentation to substantiate eligibility of tax-exempt bond status Lower interest rate bonds but at the expense to the federal government Private Use limited to 10% Applies to facilities funded by tax-exempt bonds 10% calculated by Assignable square footage Time Cost 12

13 Tax-Exempt Bond Requirements Potential Private Use An outside operator, such as parking services or a housing operator Leases with outside parties, for example dining services and retail space Special economic benefits arranged, advertising and marketing of logos Grant funded research For guidelines see F&T website at: 13

14 Tax-Exempt Bond Requirements IRS requires record retention for life of bonds plus 3 years CSU has extended this to plus 5 years Maintain records for 35 years Construction start initiates record retention period 14

15 IRS Audit on the SRB Program 2011, IRS audits SRB program Series 2005A and 2005B 20 projects built in the timeframe Two prior bond refundings 15 projects originally built between 1983 and 1999 Favorable outcome Accepted with no findings Identified internal deficiencies Improved internal process 15

16 Debt Management Strategic CSU Plan Campus needs Financial viability of projects Continuous oversight Debt service coverage ratios Reserve balances Oversight and prioritization Board of Trustees Chancellor’s Office Campuses 16

17 Debt Management Secure lowest rate of borrowing for CSU Commitments by campuses and Chancellor’s Office Maintain strong financial benchmarks and credit ratings Meet IRS requirements for tax-exempt bonds 17


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