Board of Visitors Approves Bond Issue of Up to $300 Million

April 3, 2009 — This week's Board of Visitors meeting provided fresh evidence that even in a recession that has damaged its endowment, slowed its fund-raising campaign and caused its prospective graduates to scramble for jobs, the University of Virginia remains an economic engine.

The board, meeting Thursday and Friday, approved the issuance of up to $300 million in bonds to help finance 20 construction projects through the 2010-11 fiscal year.

Though the bonds will have a 30-year term, each of the projects has been reviewed to ensure that revenue streams will repay the debt in 20 years, said Leonard W. Sandridge, executive vice president and chief operating officer.

U.Va. is one of two public institutions of higher education nationwide – the other being the University of Texas-Austin – to hold the highest possible credit rating from all three major credit rating agencies.

The University remains well within its own debt capacity guidelines, which are more stringent than the state requires, Sandridge reported. With the new bond issuance, the University will have nearly $1 billion in debt on its books.

The University uses debt only for capital projects and never for operating budgets, and "almost none" of the debt depends upon revenue from the endowment, he said.

"I am not concerned about our debt capacity at this time," Sandridge said.

However, he warned that if the economy does not rebound, the University cannot sustain its construction program at its current pace without risking its credit rating.

Board members appeared reassured by Sandridge's words. "It gives me comfort to know where we stand on this," said John O. "Dubby" Wynne, the vice rector, adding that the University has long practiced fiscal conservatism.

Of the 20 projects the bonds will fund, 11 are linked to the Health System – including the hospital expansion, Emily Couric Cancer Center, Claude Moore Medical Education Building and the Snyder Translational Research Building.

Non-Health System projects to be funded include the new information technology engineering and Arts & Sciences research buildings and renovations to Newcomb and Garrett halls and the Rugby Road administrative building.

The recession has certainly taken a toll on the University's balance sheets, however.

The $3 billion capital campaign has slipped behind schedule in recent months, having reached 62.5 percent of its goal ($1.873 billion as of Feb. 28) in 64.6 percent of the elapsed time, reported Charles B. Fitzgerald, senior associate vice president of development.

Philanthropic cash flow for the 2008-09 fiscal year was $173 million through Feb. 28, which is 15.5 percent behind the numbers at the same time last year and 20.9 percent behind the previous year, which is the top cash-flow year on record.

The unofficial March numbers look slightly improved, Fitzgerald said. Preliminary estimates show the University took in $20.1 million last month, which would push the overall campaign past the $1.9 billion mark.

Development officers remain in constant contact with donors and prospects, said Allison Traub, assistant vice president for development. Visits to donors are up 27 percent this year, she reported, with faculty members increasingly coming along when their schedules allow.

Now is not the time to slow the campaign, despite the prevailing economic headwinds, said University President John T. Casteen III. "It's very clear that if one stops the effort, the funds stop."

University endowments continued to feel the pain of the recession, with the value of the pooled endowments slipping from a high of $5.1 billion as of June 30 to $3.76 billion as of Feb. 28, reported Christopher Brightman, chief executive officer of the U.Va. Investment Management Co., or UVIMCO.

However, preliminary numbers suggest that the decline may have leveled off in March, he reported. Early indicators show about a 3 percent gain, "plus or minus 1 or 2 percent," he said.

There was some good news. The last-minute infusion of federal stimulus funds into the state budget approved by the General Assembly in February reduced the budget cut the legislature had planned for the University by $10.7 million, from $23.1 million to $12.4 million, Casteen reported.

In Other Board Matters

• The Board held off a decision on tuition for the next academic year, until after the General Assembly reconvenes Wednesday for its one-day veto session. However, increases will likely be lower than previously anticipated, Sandridge said. The board will hold a special meeting April 14 to address tuition.

• The Board approved Rice Hall as the name of the School of Engineering and Applied Science's new information technology engineering building, in honor of its lead donors, Paul Rice, a 1975 graduate of the Engineering School, and his wife, Gina. The groundbreaking will be April 17.

• Speaking of names, Alexander "Sandy" Gilliam, secretary to the Board, read into the minutes that the proper name of the University's art museum is the University of Virginia Art Museum. The museum is housed in the Bayly Building, and for decades had been referred to as the "Bayly Art Museum." However, Gilliam's research confirmed the more recent practice of referring to it as the U.Va. Art Museum, though there was no official board record to that effect. Now there is.

• David J. Prior, chancellor of U.Va.'s College at Wise, presented Gilliam with the Samuel Crockett Award in recognition to his service to the college.

• The search committee charged with nominating a new dean of the School of Architecture is due to report back by the end of the month, said Dr. Arthur Garson Jr., executive vice president and provost.

• Complying with a state reporting requirement, the Board reaffirmed enrollment projections that will see total on-Grounds enrollment grow by 765 students by 2015, to a total of 21,804. The growth will include 560 additional undergraduate students and 254 graduate students, but three fewer first-professional students and 46 fewer on-Grounds Continuing and Professional Studies students.

— By Dan Heuchert