Board of Visitors Finance Committee Meeting …...Board of Visitors Finance Committee Meeting December 2016 Finance Committee Agenda Action Items: 1. Issuance of General Revenue Pledge

Board of Visitors Finance Committee Meeting December 2016

Finance Committee Agenda

Action 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

Reports: 1. Economic Impact Study Results

GENERAL REVENUE BOND ISSUANCE

Summary • 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 Debt Portfolio (as of 11/30/16)

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UVa’s Historical Portfolio Mix

Fiscal Year

Mill

ion

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

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Debt Comparison - UVa vs. Aaa-rated Public Universities UVa’s variable rate debt % is in line with other Aaa-rated public universities

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Outstanding Debt and Debt Capacity ($ millions)

* BOV-approved Projects Only * Cumulative Numbers

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%

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Projects to be Financed and Refunded ($ millions)

Academic Medical Center 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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Placing Academic Division and Medical Center Assets in Distinct Sub-series of Bonds

• 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 Structure Options • 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

Tax-Exempt Debt (w/ par call option)

Taxable Debt (w/ par call option)

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

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Recommendations • 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

Academic Division Medical 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

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Recommendations

• 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

2017-2018 Required Fee Proposal For Graduate, Professional, and Special Programs 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

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2017-2018 Tuition Proposal For Graduate, Professional, and Special Programs

Graduate Programs: 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%

School of Medicine: Tuition rate increases range from 1.6% - 3.8% School of Law: Tuition rate increases range from 2.5% - 3.6% Darden School of Business: • 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

Capital Project Financing Plans Pinn Hall Renovation, Third Floor • 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

Emily Couric Clinical Cancer Center, Fourth Floor Build Out • 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

Economic and Community Impacts of The University of Virginia

December 2016

Study 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.

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Study Background 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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Calculating Economic Impact with 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 or projected)

Analysis of impact with models and multipliers

Economic impact findings

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Definitions of Impact 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.

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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.

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Technology Transfer and Commercialization

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Entrepreneurial Alumni*

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

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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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Economic Impact: Communicating our Value December 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

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.)

Ongoing • 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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