Minnesota State Colleges and Universities

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Minnesota State Colleges and Universities

• Revenue Fund
• Overview

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What is the Revenue Fund?

• Means of Financing Revenue Producing Facilities
• Similar to State GO Bond Financing Process
• Master Planning
• Pre-Design
• Design Construction Standards
• Office of Chancellor Oversight

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Operations

• Includes residence halls, dining services,
  student union facilities, parking, wellness, and
  athletics facilities
• Programs are administered through the Vice
  President of Student Affairs, parking usually
  under Vice President of Finance
• Includes those revenues generated for the
  operation of the program/facilities and payment
  of debt. But those revenues are fenced, once
  you are in the Fund, you stay in.

4
Legislative Background

• Established by the legislature in 1955 as an
  independent enterprise fund.
• Predates all systems, Fund was created more than
  10 years before the establishment of the state
  university system.
• Has authority to sell revenue bonds academic and
  administrative buildings must use General
  Obligation bonds of the State of Minnesota.
• In 2008 colleges were included in the Fund.

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Authority

• Minnesota Statues 136F.90-136F.98
• Master Resolution/Indenture is the contract
  between the seller and buyer of bonds. It must
  be reaffirmed by the Board of Trustees before
  each bond sale along with a sale resolution.
  Master Indenture adopted by Board of Trustees on
  January 18, 2007 governs the 2007, 2008, and
  future sales.

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Capacity Authority

• Financial Advisor determines Revenue Fund debt
  capacity
• Based on previous years financials and history
  of revenue generation
• Bonding authority is received from the
  Legislature and is based on debt capacity
• Current authority is 200 million, MnSCU will
  request 300 million in 2009 session.

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Bonded Projects

• Unlike GO bonding, there are costs related to a
  bond sale in addition to the project costs that
  are assessed to a campus.
• These issuance costs include establishment of
  the Debt Service Reserve, registration fees, and
  professional fees associated with the issuance.
  The debt to the schools therefore is higher than
  the project cost.

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Cost of Issuance

• Calculate at 11 of Project Cost
• Includes LAST Debt Service Payment to create the
  D/S Reserve
• Includes Professional Fees (Bond Counsel,
  Financial Advisor), Underwriter costs, and POS/OS
  Printing
• May include Capitalized Interest
• Total costs are pro-rated to each project.

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Debt Service Payments

• If there is no capitalized interest, 1st debt
  service payment is due upon receipt of proceeds.
• This means that both your 1st and LAST debt
  service payments are due upon receipt of proceeds
  --- immediately!

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Funding

• Fees -- Approval and Consultation
• Board of Trustees must approve fees
• Students must be consulted prior to submission of
  fees for approval and provide written
  acknowledgement of consultation.

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Structure

• Revenue Fund is one fiscal entity from the
  perspective of the outside world.
• Debt is project/campus specific, the result of
  restructuring in 1998/1999 and 2001.

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Oversight and Reporting

• Office of the Chancellor is responsible for
  oversight and reporting to the Board of Trustees
  and other entities including the Legislature, Mn
  Mgmt Budget, bond holders, national bond rating
  agencies, and the IRS.

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Pros Cons of Revenue Fund

• Pro
• If it is a good project, and you can afford it,
  you get it.
• No scoring, no prioritizing, no vetoes
• Con
• You pay the whole debt, not just 1/6.
• The are fenced what goes into the Fund, stays
  in.

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Questions? Answers

• Contact
• Sieglinde Bier 651.297.7468
• sieglinde.bier_at_so.mnscu.edu
• Heather Anderson 651.296.3792
• heather.anderson_at_so.mnscu.edu