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DRAFT
REPORT OF THE FINANCIAL AFFAIRS COMMITTEE June 25, 2020
The Financial Affairs Committee met (via teleconference) at 2:30
p.m. on June 25, 2020. Participating on the call were Committee
members Todd Black (Chair), Kass Ardinger, Christopher Pope, George
Hansel, Mike Pilot, Morgan Rutman, Alex Walker and Wally Stevens;
Trustees Joseph Morone, Amy Begg, Jamie Burnett, Jacqueline
Eastwood, Shawn Jasper, David Westover, Cathy Green, Marjorie
Smith, Scott Mason, Caliee Griffin, President Donald Birx,
President James Dean, President Mark Rubinstein, President Melinda
Treadwell and Chancellor Todd Leach. USSB: Victoria Bergstrom and
Tyler Minnich Staff: Susan LaPanne, Tracy Claybaugh, Lisa Shawney,
Jay Calhoun, Wayne Jones, Scott Stanley, Marlin Collingwood, James
McGrail, Catherine Provencher, Karen Benincasa, Ronald Rodgers, Tia
Miller, Ann McClellan, Robin Derosa, Lisa Thorne, Ockle Johnson,
MaryBeth Lufkin, Rosemare Carrie, Scott Stanley, and Lorna
Jacobsen. The following statement was made, and attendance taken by
Lorna Jacobsen: This meeting is being held by electronic means in
conformance with the Governor’s emergency declaration of March 13,
2020, and subsequent emergency orders, as well as the applicable
provisions of the New Hampshire Right-to-Know Law, RSA 91-A. If
during the conduct of this meeting, anyone has difficulty
connecting or staying connected to the video or audio feed please
contact Tia Miller at [email protected] or 603-862-0918. Call to
Order: At 2:30 pm, Chair Black called the meeting to order and
noted the presence of a quorum sufficient for the conduct of
business. He noted the need for a non-public session during the
discussion of the FY21 budget. He reviewed items on the consent
agenda asking if any of them needed discussion. Vice Chancellor
Provencher noted that the FY21 capital budget, one of the items on
the consent agenda, had been reviewed by the Investment Committee
in April. I. Approval of Consent Agenda (Moved by Trustee Black and
duly seconded)
VOTED, that the consent agenda for the Financial Affairs
Committee meeting on June 25, 2020 be approved. (The Committee
voted unanimously in favor of this motion}
Items on the Consent Agenda:
mailto:[email protected]:[email protected]
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A. Approve minutes of April 23, 2020 meeting
B. Approve FY21 Budget for Keene Endowment Association
C. Approve FY21 Budget for UNH Foundation D. Approve FY21
Capital Budget
Vice Chancellor Provencher made note that Investment (and
Capital Projects) Committee approved FY 21 capital spending at its
April 2020 meeting but there remains significant uncertainties
related to FY 21 spending. Accordingly, capital spending for FY 21
will be revisited.
End of Consent Agenda
II. Actual and Project Financial Results and Budgeting
A. Admissions Update
Campus presidents gave updates and commented on admissions and
paid deposits for incoming freshman and transfer students for Fall
Semester 2020. Discount rates for incoming students were reported
with UNH increasing by about 8% over prior year, PSU slightly above
and KSC slightly below prior year. Presidents and other trustees
expressed concern that the increase in discount rates at one
institution can create competition within USNH for the same
students. There was discussion on the overlap of applicants between
UNH, PSU and KSC. Chancellor Leach said the Clearinghouse data on
applicants will be evaluated as it has been in the past three
years. As was discussed at Educational Excellence Committee in the
morning, Chancellor Leach acknowledged they are data challenges
because USNH has disparate systems and definitions. The
Administrative Board was charged with bringing back a more complete
analysis of applicants and overlap within USNH to inform a more
coordinated admissions process with consistency in discount
rates.
B. Update on Federal Relief programs
Item not discussed.
C. Approve FY21 Operating Budget VOTED, on recommendation of the
Chancellor and Presidents, that the
following motion be presented for consideration of the Board of
Trustees. MOVED, on recommendation of the Financial Affairs
Committee, that the
operating budget for the University System applicable to the
fiscal year beginning July 1, 2020 and ending June 30, 2021 (FY21)
be approved in total by the Board of Trustees as presented in the
attachments; AND FURTHER that budget adjustments between
campuses/units are authorized within the total
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System-wide Expenses approved; AND FURTHER that any required
changes and modifications to the operating budget, including
revisions to the estimated COVID-19 and one-time costs, required
during FY21 are delegated to the Executive Committee of the
Board.
{The Committee voted unanimously in favor of this motion}
Chairman Black gave an overview of the FY21 budget calling
attention to significant components on the expense side including
one-time COVID costs of $38 million and a COVID enhanced retirement
and separation plan for employees. Several questions were posed
about items included or not included in the budget. He said the
projected loss in FY21 is $85 million including all the currently
estimated onetime costs. Vice Chancellor Provencher said the budget
is like no other before and contains a material amount of
uncertainty. She said the budget does not include an amount for
room and board refunds if the semester is interrupted. It also does
not include any reimbursement USNH may get from FEMA or any
additional CARES dollars. She said the expense of the separation
plan needs to be accounted for in the year it is offered and
accepted. Because of the accounting requirement, the cash impact of
the separation plan differs greatly from the income statement or
operating margin impact. USNH is estimating $33 million for this
expense in FY21, providing a tool for future years of salary
savings for campus restructuring. There was a discussion about the
students potentially ending the first semester at home after
Thanksgiving rather than returning to the campus. The Committee
discussed the need for disclosures about refund policies in advance
of accepting payments for the semester Concerns about the public
health risk of traveling and returning to campus were noted.
Chairman Black said unlike prior years when campuses had a set of
assumptions and parameters approved by the Board to guide budget
development, for FY21 campuses have used updated revenue estimates
based on most current information and the focus has been on
expenses and holding spending and employee compensation flat with
FY19. Trustee Rutman reported that the Investment Committee has
asked Prime Buchholz to build cash reserves in the endowment as a
contingency. It was pointed out that while conversations have
focused on finances and modeling, the decision to bring students
back to campus is not a financial decision and will be made with
public health and safety as the chief concern. Concern was
expressed that the budget reflects a best-case scenario and several
trustees said they would like to see other scenarios. It was asked
that other budget scenarios be developed to include: 1) what if we
do not come back to campus in fall 2) what if we need to ask
students to leave earlier than thanksgiving 3) what if we cannot
come back to campus at all for the academic year 20-21, Trustee
Morone stated that if students do not come back to campus said that
if students are sent
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home, the cost for one half a semester is approximately $50
million minus some level of variable expenses. At 4:35 p.m. the
following motion to enter nonpublic session was made by Trustee
Black and seconded by Trustee Rutman. The motion was approved by
roll call vote. In addition to trustees, system and campus
administrators attended the non-public session.
VOTED, that the Financial Affairs Committee go into nonpublic
session for the purposes of discussing employee salaries for FY2021
and employee benefits programs, as authorized under the NH Right to
Know Law pursuant to the provisions regarding (1) employee
compensation, and (2) matters likely to affect collective
bargaining strategy, as authorized by RSA 91-A:2, I (a); and
91-A:3, II (a).
Return to Public Session
Upon a motion to exit nonpublic session, made by Chairman Black,
duly seconded, and approved, Chairman Black reconvened the public
meeting at 5:00 p.m. and announced that the no actions were taken
while in nonpublic session. Trustee Morone said that the FY21
budget is different from prior budgets because of the unknowns. He
said it authorizes COVID expenses estimated to be $38 million,
rolls expenses back to FY19 and includes savings as a result of
benefit changes currently under consideration. Vice Chancellor
Provencher said the motion delegates to the Executive Committee of
the Board the authority to approve budget revisions as COVID-19
impacts and fall enrollment are known. Chairman Black thanked Mr.
McGrail for his work on developing benefit savings and Vice
Chancellor Provencher, her team and campuses for their hard work on
the budget. He said that next year’s work plan for the Committee
will include regular reports on the savings that are realized
through restructuring, benefit changes and separation plans. He
asked Vice Chancellor Provencher to develop metrics to track
savings.
D, Update on FY22-23 Planning Trustee Black said that planning
has been ongoing for FY22-23 and said that cost savings that need
to be achieved are $16 million in FY21, an additional $37 million
in FY22 and an additional $16 million in FY23. He expressed
appreciation to Trustees Morone and Pilot on their work with the
campuses and system staff on restructuring
E. Biennial Budget Guidelines and delegation to Executive
Committee
VOTED, on recommendation of the Chancellor, that the Financial
Affairs Committee delegate authority to the Executive Committee to
approve guidelines for the FY22-23 Biennial State Operating Budget
Request AND FURTHER to direct the Chancellor to prepare the
detailed request consistent with those guidelines, and with input
from the Administrative Board, for approval by the
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Board of Trustees or Executive Committee on behalf of the Board
of Trustees prior to submission to the Governor {The Committee
voted unanimously in favor of this motion}
Trustee Black said the State requires the University System of
New Hampshire to submit its FY22-23 request for State biennial
operating support in September. Guidelines for preparation of the
biennial budget are traditionally discussed and approved by the
Board in the spring but this spring responding to the COVID-19
pandemic has consumed the time and focus of trustees and
management. Coupled with great uncertainty surrounding both the
USNH and State budgets, development and approval of the guidelines
has been delayed. Since the Board of Trustees is not scheduled to
meet before October, the Executive Committee can act on their
behalf. The Executive Committee has been meeting weekly for the
last several months and will continue to do so over the summer to
provide guidance to the Chancellor and Administrative Board on
budget development.
F. Other Business
A. Comments by Chair
Trustee Black brought forward KSC’s request to replace the
surface on an existing turf field, an item discussed earlier by the
Investment Committee and deferred. He summarized the discussion of
the Committee noting that the issue is time sensitive if KSC plans
to use the field for fall sports. He said discussion centered on
spending the $1.1 million at this point when there is so much
uncertainty with the budget and the coming academic year and in
light of the efforts across the system to preserve cash. He said
the Committee recognized that safety is a priority, but the risk of
the surface is hard to evaluate without an independent safety
assessment. He said there was recognition that Athletics is
important to KSC’s brand and several trustees thought that the
decision should be the President’s given that under non-pandemic
circumstances, this project would have been within her authority.
get more input from trustees and that a safety assessment, and
clarity on the fall sports season is necessary before moving
forward with the project.
B. Next regularly scheduled meeting date of the FAC is June 25,
2020
C. The Committee adjourned at 5:10 p.m.
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1
UNIVERSITY SYSTEM OF NEW HAMPSHIRE BOARD OF TRUSTEES
Financial Affairs Committee
Motion Sheet
University of New Hampshire To: Financial Affairs Committee Re:
Suspend Enrollment Limitation of Out-of-State Undergraduates at
UNH
PROPOSED MOTION
SUMMARY OF PROPOSED ACTION
The motion recommends to the Board of Trustees suspension of the
25% limit for FY22 on the number of undergraduate students enrolled
at UNH from out-of-state.
RATIONALE FOR PROPOSED ACTION
State law RSA 187-A:10 authorizes the Board of Trustees to
suspend the limitation that out-of-state student enrollment at UNH
in any given year shall not exceed 25 percent of the maximum
capacity for undergraduate students at the university. The law
provides that the Board may suspend the limitation "whenever the
Trustees find that such suspension benefits the state and the
university without impairing the opportunity for qualified students
of the State of New Hampshire to attend the university." PREVIOUS
REVIEWS AND APPROVALS
None
RELEVANT GOVERNANCE DOCUMENTS, POLICIES, AND PRACTICES
A copy of the text of the State law RSA 187-A:10 is attached. It
has been the practice of the Board of Trustees for many years to
suspend the limitation.
RESOURCE IMPLICATIONS
Out-of-state enrollment above 25% is crucial to UNH’s ability to
function as a university as dependence on nonresident tuition and
auxiliary revenue is significant. Nonresident enrollment at UNH for
the Fall of 2020 is approximately 50%.
RISK MANAGEMENT CONSIDERATIONS
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President Dean’s letter describes impact to the programs and
academic offerings if out-of-state enrollment was capped. The
letter also describes economic considerations for the region and
for the families of New Hampshire resident students.
SUBSEQUENT ACTION REQUIRED
Approval by the Board of Trustees is scheduled for consideration
on October 23, 2020.
ATTACHED MATERIALS
- 10/6/2020 Letter from President Dean to the Vice Chancellor
for Financial Affairs and Treasurer
- Copy of State law RSA 187-A:10 Out-of-State Students
SUBMITTED BY: APPROVED BY:
Catherine A. Provencher Todd Leach Vice Chancellor for Financial
Affairs Chancellor and Treasurer
Date Prepared: October 9, 2020 For the Meeting of: October 22,
2020
-- End of Motion Sheet --
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Office of the President
105 Main Street Durham, NH 03824
V: 603.862.2450 F: 603.862.3060 TTY: 7.1.1 (Relay NH)
[email protected]
TO: Catherine Provencher, Vice Chancellor for Financial Affairs
and Treasurer
FROM: James W. Dean Jr.,
President DATE: October 6, 2020 RE: 25% Limitation on
Out-of-State Undergraduates at UNH In accordance with policy, I
formally request that the USNH Board of Trustees approve for fiscal
year 2022 suspension of the 25% limit imposed by State Law RSA
187-A:10 on the number of out-of-state undergraduate students
enrolled at the University of New Hampshire. This request has been
made annually to the Board of Trustees for years. The reasons for
recommending this action have consistently been financial,
academic, and social. UNH is a tuition-dependent institution, and
we rely on the revenue generated from tuition income to support the
University’s academic program. If our current out-of-state
undergraduate enrollment were reduced to the 25% cap, considerable
tuition income would be lost for education and general expense.
Non-resident students also have a direct economic impact on local
business and the seacoast area. Their travel to and from New
Hampshire, parent visitations, and the fact that their tuition
helps subsidize in-state students all contribute to their total
economic impact. UNH could not have the range of programs and
academic offerings for all students if it were not for the
non-resident enrollment. Many of our degree programs are dependent
on non-resident enrollment for success in their ability to
continue. Non-resident students are necessary for a university of
this magnitude and scope. Maintaining such programs for the benefit
of New Hampshire students directly relates to our continuing
ability to attract highly qualified out-of-state students for
admission to UNH, supports maintaining a high academic standard,
and contributes to the overall quality of academic life on campus.
Non-resident students also bring cultural enrichment to UNH in many
forms. These students tend to comprise the vast majority of our
urban students and those from other cultures and customs. They help
New Hampshire students experience the diversity they will encounter
in the years ahead. In addition, out-of-state students are also an
abundant source of talent for professional programs, student
leadership positions, and athletics.
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The estimated unofficial undergraduate enrollment totals as of
September 30th at UNH Durham and Manchester are as follows:
resident 50% and non-resident 50%.
It is important to suspend the 25% limit on out-of-state
enrollment for all the aforementioned reasons. In so doing, I would
like to stress that such action will not adversely affect the
opportunity for qualified New Hampshire students to attend their
state university. c Wayne Jones Jay Calhoun Pelema Ellis Lorna
Jacobsen Todd Leach
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TITLE XVEDUCATIONCHAPTER 187-A
STATE COLLEGE AND UNIVERSITY SYSTEM
University of New Hampshire
Section 187-A:10
187-A:10 Out-of-State Students. – The number of undergraduate
students enrolled in the university of New Hampshire from domiciles
outside the state in any year shall not exceed 25 percent of the
maximum capacity for regular undergraduate students at the
university as determined by the board of trustees. The limitation
on out-of-state enrollment at the university may be suspended by
vote of the board of trustees whenever the trustees find that such
suspension benefits the state and the university without impairing
the opportunity for qualified students of the state of New
Hampshire to attend the university. However, any such suspension
shall be made for not more than one year at a time but may be
continued from year to year upon vote of said trustees. The
limitation on out-of-state enrollment at the university of New
Hampshire shall not apply to the following divisions of the
university: Thompson school of applied science, summer school and
graduate school. Nor shall the limitation apply to students
attending the university under reciprocal agreements and contracts
with other educational institutions.
Source. 1981, 331:1, eff. Aug. 16, 1981.
Page 1 of 1Section 187-A:10 Out-of-State Students.
9/29/2017http://www.gencourt.state.nh.us/rsa/html/XV/187-A/187-A-10.htm
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University System of New HampshireDebt Report
PFM Financial Advisors 100 High Street, Suite 2300Boston, MA
02110
617-330-6914pfm.com
October 2020
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© PFM 2
Contents I . C U R R E N T D E B T O V E R V I E WI I . C R E D
I T A N A LY S I S
I I I . C O N C L U S I O N S & R E C O M M E N D A T I O N
S
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I. Current Debt Overview
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Debt Overview
The University System of New Hampshire currently has 9 series of
bonds outstanding
All bonds have been issued through the New Hampshire Health and
Education Facilities Authority
The System currently has $381.705 million in bonds
outstanding
• $258.77 million in fixed rate debt (67.8%)
• $122.935 million in synthetic fixed rate debt (32.2%)
• Overall weighted average cost of capital: 3.56%
Series Par Outstanding1 Current Structure Effective All-in Rate
Final Maturity Next Call DateSeries 2005 A 42,300,000 Synthetic
Fixed 4.10% 2035 N/A2
Series 2005 B 54,695,000 Synthetic Fixed 3.54% 2033 N/A2
Series 2011 A 6,000,000 Fixed 3.53% 2021 Non-Callable
Series 2011 B 25,940,000 Synthetic Fixed 5.00% 2033 N/A2
Series 2014 Direct Purchase 9,240,000 Fixed 1.97% 2024 Make
Whole
Series 2015 104,685,000 Fixed 3.79% 2045 7/1/2025
Series 2016 44,670,000 Fixed 2.66% 2046 7/1/2026
Series 2017 A 50,195,000 Fixed 3.13% 2037 7/1/2027
Series 2017 B (Taxable) 43,980,000 Fixed 3.42% 2037 7/1/2027
Total Bonds Outstanding $ 381,705,000 1. As of 9/30/20202. High
termination value makes the synthetically fixed bonds economically
non-callable. Synthetic fixed rate debt is variable rate debt that
has a fixed payor swap agreement. Under the terms of the swap
agreement, the System pays a fixed rate and receives a variable
rate.
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© PFM 5
Debt Overview (cont.) The University System of New Hampshire
currently has 3 swaps outstanding
The System’s outstanding swaps are all fixed payor with rates
ranging from 3.1199% to 4.490%
Current One-Year LIBOR rate of 0.39% results in receiver rates
of 0.26% for the Series 2005 A and 2011 B bonds and 0.54% for the
Series 2005 B bonds
The total notional amount of the swaps as of August 31, 2020 is
approximately $122.935 million
The mark to market value of the swaps as of September 30, 2019
is ($27.6 million)
• The System would have to pay the mark to market value to
terminate the swaps
The University System of New Hampshire’s underlying variable
rate debt is supported by various liquidity providers as summarized
below
Series Notional Amount¹ Fixed Rate Paid Variable Rate Received
Mark to Market Value¹ Termination Date Counter Party Counter Party
Rating
2005 A 42,300,000 3.5910% 67% LIBOR (11,494,198) 7/1/2035 BNY
Mellon Aa2/AA-/AA
2005 B 54,695,000 3.1199% 63% LIBOR + 0.29% (8,960,491) 7/1/2033
Goldman Sachs A1/A+/A+
2011 B 25,940,000 4.4900% 67% LIBOR (7,099,166) 7/1/2033 Morgan
Stanley A3/BBB+/A
Total $ 122,935,000 $ (27,553,854)¹ As of 8/31/20
Series Liquidity Provider Liquidity Type Liquidity Fee
Expiration Date Remarketing Agent Liquidity Provider Rating
2005 A State Street Corporation SBPA 0.42% 4/28/20211 Barclays
(A-1) / JP Morgan (A-2) Aa3/AA-/AA2005 B Wells Fargo SBPA 0.35%
3/22/2022 Barclays (B-1) / JP Morgan (B-2) Aa2/A+/AA-2011 B State
Street Corporation SBPA 0.42% 4/28/20211 Barclays Capital
Aa3/AA-/AA1. The System will begin working on a renewal or
replacement of the State Street SBPA's in November
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Fiscal Year Debt Service The graph below summarizes the System’s
current annual debt service obligations on a fiscal year basis
Maximum Annual Debt Service is currently in 2022 at $42.9
Million
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5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
Fiscal Year End 6/30
Series 2017B
Series 2017A
Series 2016
Series 2015
Series 2014
Series 2012
Series 2011B
Series 2011A
Series 2005B
Series 2005A
Please note the $6 million Series 2011A bullet maturity due in
2022
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Reminder: Historical Fiscal Year Debt Service Requirements in
2015 -before restructurings completed between 2015-2017
The University has a made a significant effort to pay down and
restructure its debt
The Series 2007 and Series 2009A bonds were restructured for
level debt service at lower rates
Maximum Annual Debt Service at the time was $74.4 Million in
FY2019
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10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
Fiscal Year End 6/30
Series 2014
Series 2012
Series 2011B
Series 2011A
Series 2009A
Series 2007
Series 2006B-2
Series 2005B
Series 2005A
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II. Credit Analysis
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Moody’s Higher Education Sector Outlook Shifted to Negative In
March 2020, Moody’s revised its outlook on the higher education
sector from stable to negative reflecting both the immediate
negative
financial impact of the coronavirus outbreak as well as other
significant downside risks. Moody’s rationale specifically
notes:
• Ability to respond to rapidly increasing downside risks varies
widely across the sector
• Coronavirus response will immediately hit revenues and drive
expenses higher
• Universities face multiple risks to revenue in 2021 including
disruptions in enrollment patterns, state support, endowment
income
and philanthropy, and research grants and contracts
• Financial market disruption presents several immediate and
longer-term challenges
• Investment losses will most immediately hit reserves and
sustained losses will increase unfunded pension liabilities
S&P Higher Education Sector Outlook Remains Negative In
January 2020, S&P maintained its negative outlook on the higher
education sector, noting the rationale below, among other
items:
• Even though top-tier institutions continue to thrive,
favorable investment markets have strengthened endowment spending,
and state
funding is growing, many regional colleges and universities face
persistent challenges meeting enrollment and revenue targets
• Key risks include:
• Shrinking pool of high school graduates and international
enrollment trends, and management and governance crises can
cause
disruptions
• Decreasing net tuition revenues amid affordability concerns
and costs and contributions continue to rise, stressing budgets
• Key Opportunities include:
• While state funding continues to improve, our economic growth
forecast is below 2%
• Gift-giving, research environments, and schools continuing to
pursue partners for efficiencies and enrollment, remain strong
• Low interest-rate environment provides broader financing
opportunities
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Moody’s Median Report – Public Universities In July 2020,
Moody’s reports that according to fiscal year 2019 median data,
public universities’ operating performance remained sound but
median expense growth outpaced revenue growth for the third
straight year, emphasizing the below rationale:• Overall revenue
growth improved, though not equally across the sector
• Operating revenue growth was below 3% for 47% of public
universities
• Larger universities had stronger revenue growth than smaller
peers
• Revenue growth trailed expense growth for the third year in a
row
• Median operating revenue grew at a stronger pace of 3.6% in
FY19 than FY18 but trailed the 3.9% in median expense growth
• Median net tuition per student growth fell to 1.6% in FY19,
the lowest level since FY2015
• Wealth and liquidity remained steady with median return on
cash and investments was just under 4%
• Capital investment growth exceeded depreciation as debt
remained manageable
• Median capital spending exceeded depreciation by 1.3x,
highlighting efforts to keep pace with essential investment
needs
• Debt to cash flow remained steady at a median 5.3x and debt
service accounting for a median 4.5% of operating expenses
• Pension liabilities continued to substantially add to adjusted
debt with median total adjusted debt to revenue of 1.25x
S&P Median Report – Public Universities In June 20191,
S&P observes that the credit quality of public institutions was
generally stable, although the disparity between higher- and
lower-
rated entities continues to widen, noting the following:
• In higher-rated categories, financial operations remained
steady or saw improvement due to continued favorable market
conditions and
positive investment returns; conversely, schools in ‘BBB’ and
speculative-grade categories continue to face enrollment
difficulties,
resulting in more stressed financial operations
• Available resources were largely stable or improving across
all rating categories
• Full-time equivalent median decreased by 1.0%, the first year
of a median decline after four consecutive years of increases
1. As of the date of this presentation, S&P had not released
their FY2019 median report
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© PFM 11
Moody’s Credit Overview As of the Moody’s rating report dated
February 25, 2019, the University System of New Hampshire has been
assigned a Aa3
(Stable) rating from Moody’s on its long-term bonds
Strengths
Sole provider of four-year public higher education throughout
New Hampshire, including flagship land-grant institution serving
over 25,000 students
Strong wealth and liquidity relative to operations
Demonstrated expense flexibility with consistent operating
performance and good debt service coverage
Manageable leverage, with fiscal 2018 debt to cash flow of 4.7x
and no near term additional debt plans
Weaknesses
Lagging net tuition revenue growth due to weak regional
demographics and stiff competition for students
Very low state funding, averaging 9% of operating revenue over
fiscal 2014-18, and limited prospects for substantial
improvement
Moderate research funding as a state flagship and land grant
institution, with fierce competition for federal grant funding
Narrow pledged revenues, as only system facility revenues
accounting for 19% of operating revenues, secure revenue bonds
What could make the rating go up?
− Strengthened growth in net tuition revenue leading to
sustained improvements in cash flow
− Substantial growth of reserves
− Improved student demand trends
What could make the rating go down?
− Sustained deterioration of operating cash flow and debt
service coverage
− Substantial erosion of liquidity
− Material increase in leverage
Source: Moody’s University System of New Hampshire ratings
report, dated February 25, 2019
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S&P’s Credit Overview As of the S&P rating report dated
May 14, 2020, the University System of New Hampshire has been
assigned a AA- (Stable)
rating from S&P on its long term-bonds
Strengths
Status as the major provider of public higher education in New
Hampshire
Adequate demand with full-time equivalent (FTE) enrollment
averaging about 25,490 students over the past five fall enrollment
periods, however, enrollment has declined slightly in each of the
past four fall enrollment periods and was 24,428 in fall 2019
Respectable adjusted financial operating margin that averaged
1.7% over the past five fiscal years and was 2.5% in the most
recent audited fiscal year ended June 30, 2019;
Experienced system management and adequate governance with
disciplined fiscal management practices
Very healthy available resource ratios for the rating
category
Weaknesses
Relatively flat to slightly declining annual net tuition revenue
indicative of competitive pressure and tuition sensitivity thathas
kept annual increases low
Historically very modest state support for higher education with
an annual appropriation that has been less than 10% of adjusted
operating revenue for each of the past five fiscal years
Limited support from fundraising, especially at UNH Durham
compared with public flagships in most other states
What could make the rating go up?
− Sustained enrollment improvements
− Operating and liquidity margins improve significantly
What could make the rating go down?
− Enrollment declines materially
− State support declines
− Operating and liquidity margins deteriorate
Source: S&P’s University System of New Hampshire ratings
report, dated May 14, 2020
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Moody’s Key Credit Ratios
Moody's Key Credit Ratios University System of New Hampshire
2Moody's Medians 1
Aa2 Aa3 A1
Fiscal Year 2017 2018 2019 FY2019
Total Debt ($, in millions) 479 458 437 1,115 434 147
Spendable Cash & Investments ($, in millions) 648 697 722
1,438 531 164
Total Cash & Investments ($, in millions) 918 961 1,003
2,024 738 221
Operating Revenue ($, in millions) 857 864 867 1,698 778 250
Operating Expenses ($, in millions) 830 849 844 1,745 773
253
Market Performance Ratios
Annual Change in Operating Revenue (%) -0.2 0.8 0.3 5.10 4.10
3.10
Operating Ratios
Operating Cash Flow Margin (%) 12.8 11.4 12.1 12.00 10.70
10.90
Revenue Diversity (Maximum Single Contribution) (%) 67.2 66.4
65.2 N/A N/A N/A
Wealth & Liqudity Raitos
Spendable Cash & Investments to Operating Expenses (x) 0.8
0.8 0.9 0.76 0.71 0.70
Monthly Days Cash on Hand (x) 223 228 239 154 151 170
Leverage Ratios
Spendable Cash & Investments to Total Debt (x) 1.40 1.50
1.70 1.41 1.35 1.24
Total Debt-to-Cash Flow (x) 4.4 4.7 4.1 4.88 4.75 5.87(1)
Moody's Fiscal Year 2019 Public Higher Education Medians.(2) USNH's
FY17-19 ratios were obtained from Moody's credit ratio database
dated 9/17/2020.
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© PFM 14
III. Conclusions and Recommendations
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© PFM 15
Conclusions & Recommendations PFM continues to monitor and
evaluate refunding opportunities for the University as the
market
changes
• Tax law currently prohibits tax-exempt advance refundings but
it is estimated that the Series 2015 bonds are producing savings on
a taxable basis
• Due to current market volatility surrounding the pandemic and
presidential elections, the System will wait and re-evaluate the
opportunity later this year
The System has SBPA agreements expiring in April 2021 supporting
the Series 2005A and Series 2011B bonds
• The System will need to either extend the SBPA’s with State
Street Bank or issue an RFP process to replace them with a new
provider
• The System will begin evaluating options in November
The Higher Education industry continues to face significant
challenges and uncertainty surrounding the COVID-19 pandemic
• Moody’s revised their outlook from Stable to Negative in March
of this year while S&P remains Negative on the industry
While earlier this year the municipal bond market was frozen for
all but the highest rated credits, it has largely settled back to
pre-pandemic levels
The upcoming presidential election may lead to some market
volatility but the current market opinion is that this should
decrease in the first couple weeks of November
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© PFM 16
Disclosures
A B O U T P F M
PFM is the marketing name for a group of affiliated companies
providing a range of services. All services are provided
through
separate agreements with each company. This material is for
general information purposes only and is not intended to
provide
specific advice or a specific recommendation.
Financial advisory services are provided by PFM Financial
Advisors LLC and Public Financial Management, Inc. Both are
registered
municipal advisors with the Securities and Exchange Commission
(SEC) and the Municipal Securities Rulemaking Board (MSRB)
under the Dodd-Frank Act of 2010. Investment advisory services
are provided by PFM Asset Management LLC which is registered
with the SEC under the Investment Advisers Act of 1940. Swap
advisory services are provided by PFM Swap Advisors LLC which
is
registered as a municipal advisor with both the MSRB and SEC
under the Dodd-Frank Act of 2010, and as a commodity trading
advisor with the Commodity Futures Trading Commission.
Additional applicable regulatory information is available upon
request.
Consulting services are provided through PFM Group Consulting
LLC. Institutional purchasing card services are provided
through
PFM Financial Services LLC. PFM’s financial modelling platform
for strategic forecasting is provided through PFM Solutions
LLC.
For more information regarding PFM’s services or entities,
please visit www.pfm.com.
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© PFM 17
Thank You
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1
Preliminary Work Plan for Financial Affairs Committee FY21
10-22-2020
October 22, 2020 Zoom
1. Consent Agenda a. Approve minutes of the June 25, 2020
meeting b. Approve/recommend suspension of statutory limitation on
out-of-state students at UNH c. FAC FY21 Workplan d. Debt
Report
2. USNH Systemwide Risks assigned to FAC (report on
monitoring/management) 3. Actual and projected financial
results,
a. Presentation on FY20 financial statements b. Review updated
enrollment and financial projections
4. Ongoing system-wide initiatives a. Strategic Procurement b.
IT Service delivery Collaboration c. Status of CERP d. Financial
Administrative Redesign
January 21, 2021
1. Approve Consent Agenda a. Approve October 22, 2020
minutes
2. Actual and projected financial results a. Campus FY1 (P1)
projected financial results b. Approve/recommend FY22 housing,
dining, and mandatory fees c. Approve/recommend FY22 resident and
non-resident tuition d. Approve FY22 budget planning assumptions
and parameters e. Approve FY22 proposal for endowment payout
3. Update on State operating and capital requests 4. Ongoing
system-wide initiatives
a. Strategic Procurement b. IT Service delivery Collaboration c.
Results of CERP d. Financial Administrative Redesign
April 15, 2021
1. Presentation of Brad Perry Award 2. Consent Agenda:
a. Approve January 21, 2021 minutes 3. Actual and projected
financial results
a. FY21 budget results (P2) b. Admissions report
4. Update on State operating and capital requests
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2
5. Ongoing system-wide initiatives a. Strategic Procurement b.
IT Service delivery Collaboration c. Financial Administrative
Redesign
June 25, 2021, Granite State College
1. Consent agenda: a. Approve April 15, 2021 minutes b.
Approve/recommend UNH Foundation FY22 Budget c. Approve/recommend
Keene Endowment Association FY22 Budget
2. Actual and projected financial results, a. Review updated
enrollment and financial projections b. Approve/recommend FY22
operating budget
3. Update on State operating and capital requests 4. Capital
Items
a. Approve FY22 capital budget 5. Ongoing system-wide
initiatives
a. Strategic Procurement b. IT Service delivery Collaboration c.
Financial Administrative Redesign