Systemwide Capital Planning A Financial Perspective

Elvyra San Juan,Assistant Vice Chancellor, Capital Planning, Design & Construction

Robert Eaton,Director, Financing and Treasury

Agenda• Campus Master Plan • Five-Year Capital Outlay Plan• State Facilities• Funding for State Facilities• State Appropriations• Authorizing Campus• Space and Facilities Database• Non-State Facilities• Funding for Non-State Facilities• Combined Funding & Facilities• Equipment Financing• Public/Private Developments

Campus Master Plan• Show existing and anticipated facilities necessary

to accommodate a specified enrollment at an estimated target date• Are generally revised every 10 years• 2 - 3 year process• Requires an Environmental Impact Report (EIR)• Requires Trustees approval

State University Administrative Manual• http://www.calstate.edu/CPDC/SUAM/• Policies and Procedures for Planning, Design, Construction, Plant

• Campus responsibilities for design/construction• Building Official and Deputy Building Official• Forms

Five-Year Capital Outlay Plan• Annually campuses submit a proposed schedule

for its Campus Master Plan implementation for a five-year period• Includes both State and Non-State projects• Amendments/Revisions are allowed with Trustee

approval

State Facilities/Projects• Infrastructure Projects• Library Buildings• Academic Buildings• Administration Buildings

Funding for State Facilities• General Obligation Bond – voter approved• Lease Revenue Bonds – legislatively approved• Annual funding provided by State Bonds ≈ $345

Million• “Free Money” for the CSU – CSU doesn’t pay the

debt service• Have specific encumbrance and reversion dates• Utilized for Capital Renewal, Minor, and Major

projects

Funding for State Facilities • Capital Renewal Projects

• Upgrade/replace building systems (HVAC, lighting, etc.)• $50 million available systemwide• $2 million limit per campus

• Minor Projects• Upgrade/renovate academic spaces• $25 million available systemwide• $400K limit per project

• Major Projects: • Approx. $270 million for new construction systemwide• Generally based on enrollment projections and space

entitlements

Funding for State Appropriations• Budget Act governs• CSU – Agency 6610• Major Capital Outlay

• Line Item Appropriations• Phased Funding

• 6610-302-xxxx• Streamlined Funding

• 6610-302-xxxx• xxxx refers to bond funding

Funding – Phased – P 06/07 W 07/08 C 09/10

• Budget Act – Section 1.8 for money life• Preliminary Plans – 1 year• Working Drawings– 1 year• Construction – 1 year to secure a proceed to bid, and 2

additional years to encumber (3 total)• 2 years to spend encumbered funds or you lose them

(revert)• PWB – Public Works bond approves preliminary plans,

scope charges augmentations• DOF authorizes funding by phone

Funding – Streamlined - PWC• PWC– 2 years to encumber, 2 years to spend• No DOF/PWB approvals • No scope charges augments

Budget Act Provisional Language• Provides governing language that is different

than Section 1.8• Reporting• Project Savings• Deadlines for money

Authorizing Campus• CPDC issues request for Allocation Order (RAO)• Resource Mgmt (F.Services) to generate A. Order• Project Number• CFIS

Capital Project Reporting• FIRMS• Account Codes• Use for reporting to Board, and Sacramento

agencies

Space & Facilities Database• Campus Annually Reports• Insurance• New Space $/SF

CSU - Debt Outstanding• $3.61 Billion as of January 2, 2009

• SRB - $2.67 Billion• Commercial Paper - $205 Million• Auxiliary Organization Bonds - $185 Million• State Public Works Board - $492 Million

• State appropriates money each year to CSU for the debt service

• Other - $64 Million

Non-State Facilities/Projects• Parking Structures• Health Centers• Student Unions• Student Housing• Cont. Education

• Foundation Bldgs.• Recreation Centers• Bookstores• Public/Private

Developments

Funding For Non-State Facilities• Generally funded through Systemwide Revenue Bonds (SRB)• Other Funding Sources:

• Auxiliary Organization Revenue Bonds• Donations/Gifts• Energy Incentive/Rebates• Banks (Auxiliary Organizations Only)• Interest Earnings from Student Fees

Systemwide Revenue Bonds• Pledge of the CSU Revenue Programs

Housing ParkingStudent Unions Health CentersCont. Education Auxiliary

Organizations

Systemwide Revenue BondsProgram flexibility

• SRB funds can be loaned to Auxiliary Organizations• Loan agreement between CSU and the Auxiliary• Off-campus Auxiliary projects can be financed and the

Auxiliary can retain ownership of the land• CSU can issue Variable Rate debt• Tax-Exempt or Taxable

Systemwide Revenue BondsExecutive Order 994 defines the Debt Service Coverage Ratios

• Campus – Overall coverage ratio of Net Operating Revenues required - 1.35x Debt Service

• Program – Campus – 1.1x Debt Service (Housing, Parking) – Existing program can subsidize new projects

• Standalone Project – Campus – 1.1x Debt Service • Auxiliary – Overall coverage ratio of 1.25x Debt Service

Systemwide Revenue BondsCSU Debt Ratings

• Aa3 from Moody’s• A+ from Standard & Poor’s• CSU’s ratings better than the State of California (A1/A)

Systemwide Revenue BondsThe Trustees receive regular reports on the CSU’s Debt Capacity • Debt capacity is a measure of how much debt an institution can

support at a given credit rating level • November 2007 BOT report – based on the ratio of Debt Service

to Total Resources, the CSU has additional Debt Capacity thru 2012 of $4.5 Billion

Commercial Paper• Variable rate, short-term borrowing, done through the CSU Institute• Variety of purposes:

• “Bridge” financing for SRB projects• “Permanent” financing for short-term capital projects approved

by the Trustees • Funding for the CP/Equipment Program

• Tax-Exempt or Taxable

Combined Funding & Facilities• It is possible to combine multiple funding sources for a project

• Except State funds for a non-State facility• Funding a State facility with revenue bonds is not encouraged• It is possible to combine a State and Non-State facility into one

project• Accounting must have a clear understanding of the use of space

and construction costs

Equipment Financing• Financing is provided through a lease, with a non-appropriation

clause:• Lease provided by a third-party vendor

• Current approved vendors: DLL Public Finance, Key Government Finance, Koch Financial, Providence Capital

• Lease provided through the CP/Equipment Program• Generally at tax-exempt rates• Equipment can be financed for 1-8 years• $100,000 to $5 million per transaction• Rate is reset annually by Financing & Treasury – currently 3.6%• Payments are quarterly• Campus acquires equipment and then is reimbursed

Public/Private Developments• Allows for private entities to utilize campus land for continued support

of the campus mission• Typical Structure

• Campus land is leased to an Auxiliary Organization• Auxiliary Organization sub-leases land to a private entity• Private entity develops land and provides a lease payment

• Projects must be reviewed by the Land Development Review Committee

• Governed by Executive Order 747

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