Systemwide Capital Planning A Financial Perspective

1. Systemwide Capital PlanningA Financial Perspective Elvyra San Juan, Assistant Vice Chancellor, Capital Planning, Design & Construction Robert Eaton, Director, Financing and Treasury

2. 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

3. 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

4. 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

5. 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

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

7. 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

8. 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

9. 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

10. 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

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

12. Budget Act Provisional Language • Provides governing language that is different than Section 1.8 • Reporting • Project Savings • Deadlines for money

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

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

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

16. 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

17. Parking Structures Health Centers Student Unions Student Housing Cont. Education Foundation Bldgs. Recreation Centers Bookstores Public/Private Developments Non-State Facilities/Projects

18. 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

19. Systemwide Revenue Bonds • Pledge of the CSU Revenue Programs

20. Systemwide Revenue Bonds Program 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

21. Systemwide Revenue Bonds Executive 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

22. Systemwide Revenue Bonds CSU Debt Ratings • Aa3 from Moody’s • A+ from Standard & Poor’s • CSU’s ratings better than the State of California (A1/A)

23. Systemwide Revenue Bonds The 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

24. 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

25. 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

26. 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

27. 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

28. www.calstate.edu