Minnesota State Colleges and Universities

Minnesota State Colleges and Universities Revenue Fund Overview

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

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.

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.

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.

Capacity & Authority • Financial Advisor determines Revenue Fund debt capacity • Based on previous year’s 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.

Bonded Projects UnlikeGO 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.

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.

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!

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.

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.

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.

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.

Questions? & Answers Contact Sieglinde Bier 651.297.7468 sieglinde.bier@so.mnscu.edu Heather Anderson 651.296.3792 heather.anderson@so.mnscu.edu

Minnesota State Colleges and Universities