Regents Approve Resolutions Laying Groundwork for Possible Bond Issue
Renovation of Science Complex, Academic Hall Top Capital Priorities
CAPE GIRARDEAU, Mo., June 22, 2010 – The Southeast Missouri State University Board of Regents today approved two resolutions laying the ground work for a possible future bond issue that could fund science complex renovations, Academic Hall infrastructure upgrades, and major deferred maintenance and repair projects.
The resolutions declare the University’s intent to reimburse certain project costs with bond proceeds and authorize certain actions in connection with a proposed bond issue that would require future Board of Regents approval.
Kathy Mangels, vice president for finance and administration, said the issuance of traditional higher education tax exempt bonds and federal Build America Bonds, in which the federal government provides a 35 percent interest subsidy, are financing mechanisms that may be an alternative for the University to fund these capital projects if state funds are not made available. Mangels says based on current sources of funds dedicated to maintenance and repair which may be available to repay debt service and the current bond market, it is estimated the University could fund an approximate $40 million bond issue. Major deferred maintenance projects would have to be prioritized to determine those projects most critical to be completed in the next three years.
She said a possible bond issue would fund only the minimal critical components of the science complex and Academic Hall renovation projects. According to Mangels, $14 million is needed to complete minimal renovation of the Magill Hall and Rhodes Hall of Science laboratory spaces and $18 million for the minimum infrastructure improvements in Academic Hall.
She said $39 million is needed for deferred maintenance and repair projects necessary campus-wide over the next decade. Issuing bonds may be a viable long-term financing option for these projects which may be approved by the Board in the future, Mangels said.
Bond counsel provided the two resolutions approved today. The first resolution declares the University’s intent to reimburse certain project costs with bond proceeds, which is required by Treasury Regulations, and provides the University with the flexibility, but not the requirement, to be reimbursed for current project costs from future bond proceeds, she said.
The second resolution allows the University to investigate arrangements for structuring and issuing bonds. To consider financing, it may be necessary for University administration to select and employ an underwriting firm and bond counsel to analyze bond structures, Mangels said. The University may also employ the services of an architectural/engineering firm to further analyze the scope and estimated cost of priority projects, she said. No bonds will be used and a contract for the sale of bonds will not be entered into without further approval from the Board, Mangels stressed.
She said neither of the resolutions obligate the University to issue bonds in the future or require a specific amount of bonds to be issued. Further analysis of the scope, estimated cost and options for phasing construction of the priority projects will occur this summer, she said. Final recommendations for priority capital projects and methods for financing them will be presented to the Board at a later date for their consideration and approval, Mangels said.
She said the University began to explore a possible bond issue after the Board of Regents retreat in March in which the Board identified action items for the University to pursue to meet budget challenges over the next five years. One of the action items was to review and prioritize major campus capital maintenance and repair needs and investigate possible funding sources to meet these needs.
Mangels said the Board implemented a general fee to fund campus maintenance and repair costs beginning in fiscal 2007. At that time, the Board implemented a $1 per year general fee for six years, for an ongoing maintenance and repair general fee of $6 per credit hour after it is fully implemented in fiscal 2012. Because of the governor’s agreement with higher education institutions in fiscal 2010 and fiscal 2011 to not increase fees charged to all students, however, this fee is currently only at $3 per credit hour, she said.
The Board directed that these funds first be used to renovate science facilities in Magill Hall. Currently, this fee generates about $600,000 per year which is being used to renovate a few classrooms each summer. Based on current funding levels of the general fee, it will take approximately 7-10 years to complete the renovations to Magill Hall, Mangels said.
She said the state also has provided maintenance and repair dollars totaling $1.7 million as part of the University’s annual operating appropriation, which is matched with approximately $350,000 local dollars. These funds, Mangels says, allow for completion of small deferred maintenance projects usually totaling $100,000 or less. The University used a portion of these funds in 2003 to issue bonds for campus-wide energy projects. By using a portion – approximately $700,000 annually -- of these dollars to repay debt service, it allowed the University to do major capital improvements such as chilled water loop modifications and campus-wide lighting upgrades – that could only be piecemealed over time using the annual appropriations, she said.
Mangels says Southeast has consistently reported to the state through the capital budget request process that renovation of the science facilities, upgrades to the infrastructure of Academic Hall and major deferred maintenance and repair projects are the University’s top priorities.
The Regents reiterated these needs again today. At today’s meeting, the Regents approved a biennium capital budget request for fiscal 2012 and fiscal 2013 to be submitted to the Department of Higher Education. Like last year’s request, renovation and expansion of the science complex is the highest priority. Because of Southeast’s commitment to the development of applied sciences in Missouri and teaching through real world experiences, renovation and expansion of the science complex continues to be the University’s first priority for capital development. The University is requesting $37 million for this project, which would cover the full scope of the initiative, including the construction of a new building at the science complex.
Mangels says much of the University’s existing laboratory space was built and equipped in the early 1960s. The University Campus Master Plan, she said, identifies the need for additional specialized lab space due to changes in technology and advances in lab design. This need is compounded by the requirements of the University’s environmental science program, she said.
The University’s next priority is renovation of Academic Hall, which was built in 1905. This project, Mangels says, would involve extensive interior renovation, upgrade of mechanical, plumbing and electrical systems, and upgrading all classrooms with information technology. More than 200 single glazed windows would be replaced, and the slate roof would be repaired. Exterior stone walls would be cleaned and waterproofed, and entrance doors would be replaced. Mangels says Southeast is requesting $29.3 million for this project, which, again, would cover the full scope of the project, including renovation of the building’s historic architecture.