SRB: Bond Financing/ Debt Management
Download
Report
Transcript SRB: Bond Financing/ Debt Management
Rosa H. Renaud, Financing & Treasury
Nancy Freelander-Paice, Capital Planning, Design &
Construction
SRB: Bond Financing
& Debt Management
Agenda:
Debt Outstanding
Process
IRS Tax-Exempt Bond Requirements
Debt Management
2
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:
Housing
Health Centers
Parking
Continuing Education
Student Unions
Auxiliary Organizations
Continuing Education
3
Process
Coordinated effort between:
Campuses
Campus Planning, Design and Construction (CPDC)
Financing and Treasury (F&T)
4
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
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
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
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
http://www.calstate.edu/cpdc/Facilities_Planning/Space_Mgmt/
Call Letters
Forms
Resource Documents
8
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:
http://www.calstate.edu/ft/taxexemptbonds/
9
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
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
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
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:
http://www.calstate.edu/ft/taxexemptbonds/
13
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
IRS Audit on the SRB Program
2011, IRS audits SRB program
Series 2005A and 2005B
20 projects built in the 2004-2006 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
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
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