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MEMORANDUM

TO:

FROM:

DATE:

SUBJECT:

At the September 2011 meeting, the Board of Regents received an update of theMartin Stadium project, to include the premium seating/press box facility and thefootball operations center.

Since then, the majority of the bids have been opened for the first stage of theproject, which includes the premium seating and the press box enhancements tothe south side. The proposal and bids for the second stage to include the footballoperations center are scheduled for summer 2012.

At the November meeting, we will ask the Regents for authority to proceed with thefirst stage south side premium seating/press box facility. ln addition, we will seekauthorization to finance'the first stage of the project.

The enclosed materials include the official notice for next week's special meeting onOctober 25, the latest schematics, a Memorandum of Understanding (MOU) thatsummarizes the two-stage approach to the project, and a summary of the proposedfinancing structure.

Enclosures

PULLMAN . SPOKANE . TRI-CtTtES . VANCOUVERPO Box 641048, Pullman, WA99164-1048509-335-6666. Fax: 509-335-01 37

Office of the President

Board of Regents

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October 20,2011

Martin Stadium Project

BOARD OF REGENTS NOTICE OF SPECIAL MEETING

The Board of Regents of Washington State University will hold a special meeting on Tuesday, October 25, beginning at 2:30 p.m. via phone and video conference. The purpose of the meeting is to provide an update on Martin Stadium football facilities improvements and financing. The meeting will be held in the Lighty 401 on the WSU Pullman campus. This notice is being sent by the direction of the Chair of the Board of Regents pursuant to the requirements of the Open Meeting Act of 1971 (Chapter 250, Laws of 1971, First Extraordinary Session), as amended. Questions about this special meeting may be directed to Christine R. Hoyt, Executive Assistant to the Board of Regents, 509-335-6615. cc: Attorney General’s Office News Bureau

OctOber 25, 2011

Washington state university Martin stadiuM iMproveMents

111vicinity Map

222site plan

333partial Master plan

444site plan

OctOber 25, 2011

Washington state university - Martin stadiuM iMproveMents pressbox/preMiuM seating

666elevations - east and West

777elevations - east and West

888club level 7

999suite level 8

101010press - level 9

111111building section

121212club perspective 2

131313club perspective 2

141414neW press/preMiuM seating building south 1

OctOber 25, 2011

Washington state university - Martin stadiuM iMproveMents football operations

161616West ops building elevations

171717West ops building elevations

181818West ops building level 1

191919West ops building level 2

202020West ops building level 3

212121West ops building level 4

222222West ops building level 5

232323West ops building roof

242424neW press/preMiuM seating building south 2

October 25, 2011, Special Regents’ Meeting Page 1 of 1

Memorandum of Understanding Martin Stadium Project

The current Martin Stadium project will be separated into two distinct projects. The first project, called the Southside project, will consist of a Premium Seating/Press Box Facility. The second project called the West End-Zone project will consist of a Football Operations Center. Southside Project (Premium Seating/Press Box Facility) At the November 18, 2011 Board of Regents (BOR) meeting, the administration will seek approval of the schematic design document for the Southside project, approval of a project budget of $80.0 million for the Southside project, and a delegation of authority to the President or his designee to enter into any and all contracts necessary to complete the Southside project. Construction of the Southside project will begin November 21, 2011. The Press Box portion is scheduled for completion no later than August 2012, in time for the first home game of the 2012 football season. The remainder of the facility is scheduled for completion in time for Apple Cup 2012. Any cost savings from the Southside project will be reserved for the West End-Zone project. Depending on the total cost of the project, the anticipated cash-flows during construction and the current interest rate environment, the use of a bank line of credit to cover costs during construction may result in additional savings to the project. If so, this option will be considered by the administration and the BOR and will impact when the University issues long-term fixed rate debt and the size of the debt issuance. West End-Zone Project (Football Operations Center) Approval to move forward with the design costs for both projects and to cover the costs from the above cited $80.0 million was approved by the BOR at its January 28, 2011 meeting. As construction progresses with the Southside Project, the design work and cost estimating for the West End-Zone project will continue. Once the design work and cost estimate for the West End-Zone project are complete, savings from the Southside project are known, suite sales from the Southside project are confirmed and donations for the West End-Zone project have been analyzed, a budget meeting will be held to assess the financial feasibility of moving forward with the West End-Zone project. As part of the budget meeting, participants will review updated proformas that include the revenue streams cited above as well as the PAC-12 media revenues and any expected PAC-12 network revenues. The updated proformas will also include any revisions to operating and debt service expenses. If after reviewing these data, the administration determines sufficient fund sources are available to cover the estimated costs of the West End-Zone project, and with approval of the BOR, construction of the West End-Zone project will begin at the end of the 2012 football season. _________________________________ _________________ Elson S. Floyd Ph.D., President Date

_________________________________ _________________ Bill Moos, Director of Athletics Date

October 25, 2011, Special Regents’ Meeting Page 1 of 3

Washington State University Overview of Financing Plan

Athletic System Facilities Background Based on the project proposal for Martin Stadium, up to $80 million will be expended on premium seating improvements through August 2012. Design and cost estimates for the separate operations building project will be available summer 2012, and subject to Board of Regents approval, construction would begin fall 2012. The source of repayment for the premium seating improvements is based on the new revenue from the PAC-12 Conference, which is expected to begin June 30, 2013. Because of this, we anticipate capitalizing interest payments on related financing through April 1, 2013. The source of repayment for the athletic operations building project is expected to be based on the new revenue from the premium seating, PAC-12 Television revenue, and potential contributions, more of which should be known simultaneous with completion of design of the operations building. Based on current market conditions, we estimate the average interest rate for a Bond with a 25-year term at 4% to 4.25%. Investment return on bond proceeds are estimated at 0.15%, based on recent performance of the State’s LGIP and short term Treasury rates. Financing Plan We propose the use of interim financing, through proceeds of a bank line of credit, to pay initial costs of the premium seating improvements. In order to minimize the overall interest cost, the financing would be in the form of a bank line of credit, with funds drawn as needed for construction. It is estimated that the interest rate for such a line of credit, based on the General Revenue pledge of the University would average approximately 1.0%. We propose to issue Bonds for permanent financing only after the Board of Regents has an opportunity to consider the plans and budget for the operations building project and additional information is known relative to the identified source of repayment (i.e., premium seating, PAC-12 Television revenue, and potential contributions).

o By the summer of 2012 we will need to know: 1) the final cost of the south side and what balance of the $80 million remains to fund the west side, 2) what will be the maximum allowable construction costs of the west side Football Operations building, 3) what contributions have been collected to facilitate the completion of the west side project, 4) what additional revenues have been collected from premium seating and press boxes, and 5) whether additional PAC-12 Television revenue have materialized.

o If the operations building project is approved by the Board of Regents, we would expect to issue long term bonds for both projects at one time, taking into account available funds from contributions and other sources, and expected expenditure timing and market conditions.

o If the operations building project is not approved by the Board of Regents, we would issue long term Bonds for the premium seating improvements in 2012, with timing to be determined by market conditions.

October 25, 2011, Special Regents’ Meeting Page 2 of 3

Proposed Requests – Board of Regents Action Accordingly, we propose to bring to the Board of Regents in November 2011, a Resolution to delegate authority to the President or his designee to proceed with the premium seating and procure financing in an amount up to $80 million. We would subsequently bring to the Board of Regents a separate Resolution to approve the issuance of General Revenue Bonds in an amount and for purposes determined based on Board of Regents direction, after consideration of new information expected to be available in April-June 2012. Depending on direction from the Board after receipt of more complete project and revenue information, this bond resolution would be sized for one or both of the proposed project components.

October 25, 2011, Special Regents’ Meeting Page 3 of 3

Attachment Washington State University

Overview of Interim Financing Plan Athletic System Facilities

Supporting Information Assuming that the interest rate for interim financing will be based on a rate of 1% instead of 4-4.25%, it is estimated that the University would:

o Save a net present value of $1.85 million if bonds are issued in October 2012. Furthermore, the University would benefit from one bond issuance for the total amount of the two project components (the premium seating improvements and the operations building project). These benefits result from: 1) broader distribution for a larger issue with larger maturity sizes, and 2) reduced issuance costs for one issue versus two issues.

o While the first benefit is harder to quantify, it is broadly believed that a larger bond issue offers greater secondary market liquidity for investors, and therefore certain larger investors will only consider investing in bonds over a specified size. That specified size will differ for different investors, but generally, as sizes increase the overall number of potential investors expands.

o The savings in costs of issuance are estimated at approximately $100,000, by issuing one series of bonds rather than two series of bonds.

While use of interim financing introduces interest rate risk, the markets broadly anticipate that interest rates will remain low for an extended period. This is supported by the Federal Reserve’s announcement in September that it would liquidate shorter-term Treasuries and purchase longer-term Treasuries, in order to further support a low interest rate environment. The initial transactions of the Fed did lead to 0.20% declines in long-term municipal bond interest rates.

o The municipal bond market continues to display volatility driven largely by changes in supply and demand that occur from week to week. This has caused rates to fluctuate, generally in a narrow range of 0.10 to 0.15%.

o We believe that the interest rate risk is mitigated somewhat by increased flexibility in timing.