Capital Outlay Process: Financing

1. Capital Outlay Process: Financing MCCBOA Spring 2007 Workshop Presented by Debbie Roberts, Executive Director, State Building AuthorityState of Michigan

2. SBA Organizational Chart

3. SBA Contact Information State Building Authority Lewis Cass Building 320 S. Walnut Street P.O. Box 30026 Lansing, MI 48909 Phone: 517 373-3806 Fax: 517 335-1638 Website: www.michigan.gov/sba

4. What We Do • The State Building Authority (SBA) was organized under P.A. 183 of 1964, as amended. The purpose of the Authority is to acquire, construct, furnish, equip, and renovate buildings and equipment for the use of the State, including public universities and community colleges. It is governed by a 5-member Board of Trustees appointed by the Governor, with advice and consent of the Senate. • The Authority is authorized to issue and sell bonds and notes for acquisition and construction of facilities and State equipment in an aggregate principal amount outstanding not to exceed $2.7 billion. Not included in this limitation are bonds allocated for debt service reserves, bond issue expenses, bond discounts, bond insurance premiums and certain refunding bonds. • All bonds and commercial paper notes are limited obligations of the Authority and are not general obligations of the State or Authority. The debt service on the bonds are payable from lease revenue paid by the State pursuant to the provisions of the leases. • In addition to capital financing, SBA houses Risk Management providing state agencies with commercial property, general liability, aviation, builder's risk, as well as other needed insurance and administers the state's Vehicle Self Insurance Fund.

5. SBA Financing Flowchart Project Authorization

6. Project Authorization • SBA begins the financing process for approved projects after the Design & Construction Division authorizes the university or community college to proceed to construction • SBA will ask the DMB surveyor to provide a survey and legal description of the project • SBA will seek a rental range for the project as determined by an independent appraiser SBA will compile a concurrent resolution and Construction and Completion Assurance Agreement • SBA will submit to the Joint Capital Outlay Subcommittee

7. SBA Financing Flowchart cont. Short-term Financing

8. Short-term Financing • SBA prepares and submits State Administrative Board Resolution • SBA Board meets and approves the Construction and Completion Assurance agreement, conveyance of property and lease • University/CC (U/CC) Board of Trustees approves same • Once all approvals are received, SBA obtains signatures of the Governor, Secretary of State, U/CC and SBA Executive Director to execute documents • At the next commercial paper roll, the project is eligible to be included, at this time SBA can reimburse the U/CC for expenditure if their match has been met

9. SBA Financing Flowchart cont. Long-term Financing

10. Long-term Financing • Once a project is complete and a Certificate of Tenantability has been issued the project is eligible for long-term financing • A true annual rental is determined by an independent appraiser • Approvals from the State Administrative Board and SBA are sought approving the lease and other documents necessary to issue bonds • Lease is executed by the Governor, Secretary of State, U/CC and SBA • Warranty deed is executed transferring title to SBA • State of Michigan pays ‘rental’ amount to SBA • Debt service is paid with rent received from state • Bonds are redeemed or restructured by SBA • Once lease is cancelled or reaches maturity ‘rental’ ceases • Property is reconveyed to state or U/CC

11. Other Financing Options • College issued bonds • Certificates of Participation (CoPs) • Sales/Leaseback