Summary of $475 million Bond Issue and Capital

Financing Options

Summary of $475 million Bond Issue and Capital

Financing Options

PracticedBy the State System of Higher

Education in Oklahoma

PracticedBy the State System of Higher

Education in Oklahoma

Types of Financing Currently Practiced Types of Financing Currently Practiced

Bonds – G.O., RevenueBonds – G.O., Revenue

Master Lease – EquipmentMaster Lease – Equipment

Master Lease – construction – Master Lease – construction – new optionnew option

General Obligation Bonding Authority: General Obligation Bonding Authority: research universities and research universities and coordinating boardcoordinating board

Bonds – G.O., RevenueBonds – G.O., Revenue

Master Lease – EquipmentMaster Lease – Equipment

Master Lease – construction – Master Lease – construction – new optionnew option

General Obligation Bonding Authority: General Obligation Bonding Authority: research universities and research universities and coordinating boardcoordinating board

Issuance of Bond Debt Issuance of Bond Debt

General Obligation of the State of OklahomaGeneral Obligation of the State of OklahomaGeneral Obligation of the State of OklahomaGeneral Obligation of the State of Oklahoma

Does require a vote of the PeopleDoes require a vote of the People

Puts the full faith and credit of the State Puts the full faith and credit of the State behind the bondbehind the bond

Creates debt as authorized by the State Creates debt as authorized by the State ConstitutionConstitution

Last used in 1992 to finance higher Last used in 1992 to finance higher education projects.education projects.

Does require a vote of the PeopleDoes require a vote of the People

Puts the full faith and credit of the State Puts the full faith and credit of the State behind the bondbehind the bond

Creates debt as authorized by the State Creates debt as authorized by the State ConstitutionConstitution

Last used in 1992 to finance higher Last used in 1992 to finance higher education projects.education projects.

Issuance of Bond Debt Issuance of Bond Debt

Revenue Bond StructureRevenue Bond StructureRevenue Bond StructureRevenue Bond Structure

Does not require a vote of the PeopleDoes not require a vote of the People

Deemed as limited and special Deemed as limited and special obligations of the authorized issuerobligations of the authorized issuer

Must be “self-liquidating” or “profit-Must be “self-liquidating” or “profit-producing”producing”

Specific projects are approved by the Specific projects are approved by the legislature prior to the issuance of legislature prior to the issuance of debtdebt

Does not require a vote of the PeopleDoes not require a vote of the People

Deemed as limited and special Deemed as limited and special obligations of the authorized issuerobligations of the authorized issuer

Must be “self-liquidating” or “profit-Must be “self-liquidating” or “profit-producing”producing”

Specific projects are approved by the Specific projects are approved by the legislature prior to the issuance of legislature prior to the issuance of debtdebt

Issuance of Bond Debt Issuance of Bond Debt

Revenue Bond StructureRevenue Bond StructureRevenue Bond StructureRevenue Bond Structure

The revenue stream can be The revenue stream can be appropriated to pay lease for the appropriated to pay lease for the improvement or constructionimprovement or construction

Utilizes a lease-back use agreement Utilizes a lease-back use agreement until ownership transferred to the until ownership transferred to the institution when the debt is retiredinstitution when the debt is retired

Used in 1999 and 2005/2006 for higher Used in 1999 and 2005/2006 for higher education projectseducation projects

The revenue stream can be The revenue stream can be appropriated to pay lease for the appropriated to pay lease for the improvement or constructionimprovement or construction

Utilizes a lease-back use agreement Utilizes a lease-back use agreement until ownership transferred to the until ownership transferred to the institution when the debt is retiredinstitution when the debt is retired

Used in 1999 and 2005/2006 for higher Used in 1999 and 2005/2006 for higher education projectseducation projects

Master Lease Equipment Program Master Lease Equipment Program

Purpose:Purpose:to finance major personal property acquisitions to finance major personal property acquisitions through a cost effective method.through a cost effective method.

Purpose:Purpose:to finance major personal property acquisitions to finance major personal property acquisitions through a cost effective method.through a cost effective method.

Issued by Oklahoma Development Issued by Oklahoma Development Finance Authority Finance Authority

$50,000 up to $10 million. $50,000 up to $10 million.

Lease terms vary by useful life of Lease terms vary by useful life of equipment purchased; may not equipment purchased; may not exceed 20 years. exceed 20 years.

Governing board approval Governing board approval

Issued by Oklahoma Development Issued by Oklahoma Development Finance Authority Finance Authority

$50,000 up to $10 million. $50,000 up to $10 million.

Lease terms vary by useful life of Lease terms vary by useful life of equipment purchased; may not equipment purchased; may not exceed 20 years. exceed 20 years.

Governing board approval Governing board approval

Master Lease Equipment Program Master Lease Equipment Program

Purpose:Purpose:to finance major personal property acquisitions to finance major personal property acquisitions through a cost effective method.through a cost effective method.

Purpose:Purpose:to finance major personal property acquisitions to finance major personal property acquisitions through a cost effective method.through a cost effective method.

State Regents participate in 3 issues State Regents participate in 3 issues annually; average is $10 millionannually; average is $10 million

The institution is invoiced monthly for The institution is invoiced monthly for its portion of the debt serviceits portion of the debt service

May use operating funds budget to May use operating funds budget to retire the debt.retire the debt.

State Regents participate in 3 issues State Regents participate in 3 issues annually; average is $10 millionannually; average is $10 million

The institution is invoiced monthly for The institution is invoiced monthly for its portion of the debt serviceits portion of the debt service

May use operating funds budget to May use operating funds budget to retire the debt.retire the debt.

In 2005, the legislature expanded In 2005, the legislature expanded equipment master lease program equipment master lease program to include real property.to include real property.

$50,000 up to $25,000,000$50,000 up to $25,000,000

No more than 30 years No more than 30 years

Anticipate two issuances per Anticipate two issuances per calendar yearcalendar year

In 2005, the legislature expanded In 2005, the legislature expanded equipment master lease program equipment master lease program to include real property.to include real property.

$50,000 up to $25,000,000$50,000 up to $25,000,000

No more than 30 years No more than 30 years

Anticipate two issuances per Anticipate two issuances per calendar yearcalendar year

Master Lease Construction Program Master Lease Construction Program

Participating institutions Participating institutions responsible for payment of their responsible for payment of their portion of the debt service portion of the debt service requirement.requirement.

The institutional governing The institutional governing boards must approve any boards must approve any construction or major renovation construction or major renovation project prior to participation in a project prior to participation in a bond issuance.bond issuance.

Participating institutions Participating institutions responsible for payment of their responsible for payment of their portion of the debt service portion of the debt service requirement.requirement.

The institutional governing The institutional governing boards must approve any boards must approve any construction or major renovation construction or major renovation project prior to participation in a project prior to participation in a bond issuance.bond issuance.

Master Lease Construction Program Master Lease Construction Program

Based on full revenue capacity of each research university, excluding General Revenue

OU, OSU and OSRHE are “authorized” issuers of debt. Projects submitted for legislative approval by April 1 of each year, giving the Legislature a 45-day period in which to disapprove any project.

Based on full revenue capacity of each research university, excluding General Revenue

OU, OSU and OSRHE are “authorized” issuers of debt. Projects submitted for legislative approval by April 1 of each year, giving the Legislature a 45-day period in which to disapprove any project.

General Obligation Bonding Authority General Obligation Bonding Authority

Total revenues, excluding revenues appropriated by the Legislature from tax receipts, are designated as lawfully available sources to be pledged for debt service obligations.

Total revenues, excluding revenues appropriated by the Legislature from tax receipts, are designated as lawfully available sources to be pledged for debt service obligations.

General Obligation Bonding Authority General Obligation Bonding Authority

Total identified capital deferred maintenance Total identified capital deferred maintenance needs: $1,300,000,000needs: $1,300,000,000

Increases in student enrollment: 28,000 Increases in student enrollment: 28,000 students over last five yearsstudents over last five years

Total enrollment in public college and Total enrollment in public college and universities: 232,000universities: 232,000

13 years since 13 years since significantsignificant investment in investment in higher education facilities (1992 – 2005)higher education facilities (1992 – 2005)

Total identified capital deferred maintenance Total identified capital deferred maintenance needs: $1,300,000,000needs: $1,300,000,000

Increases in student enrollment: 28,000 Increases in student enrollment: 28,000 students over last five yearsstudents over last five years

Total enrollment in public college and Total enrollment in public college and universities: 232,000universities: 232,000

13 years since 13 years since significantsignificant investment in investment in higher education facilities (1992 – 2005)higher education facilities (1992 – 2005)

2005/2006 $475 million Capital Bond Issue 2005/2006 $475 million Capital Bond Issue

Need:Need:Need:Need:

ADA compliance and fire code compliance ADA compliance and fire code compliance issues loomingissues looming

Need for more modern facilities and Need for more modern facilities and infrastructureinfrastructure

Average age of public college and Average age of public college and universities infrastructure was 1971, or 34 universities infrastructure was 1971, or 34 years.years.

ADA compliance and fire code compliance ADA compliance and fire code compliance issues loomingissues looming

Need for more modern facilities and Need for more modern facilities and infrastructureinfrastructure

Average age of public college and Average age of public college and universities infrastructure was 1971, or 34 universities infrastructure was 1971, or 34 years.years.

2005/2006 $475 million Capital Bond Issue 2005/2006 $475 million Capital Bond Issue

Need:Need:Need:Need:

141 projects in 36 locations statewide141 projects in 36 locations statewide

Estimated economic impact of $730 Estimated economic impact of $730 millionmillion

Primarily teaching and research Primarily teaching and research classrooms and laboratories (80%)classrooms and laboratories (80%)

Emphasis on science, math, Emphasis on science, math, technology, and health-related technology, and health-related programsprograms

Many renovations with increased Many renovations with increased efficiencies and energy savingsefficiencies and energy savings

141 projects in 36 locations statewide141 projects in 36 locations statewide

Estimated economic impact of $730 Estimated economic impact of $730 millionmillion

Primarily teaching and research Primarily teaching and research classrooms and laboratories (80%)classrooms and laboratories (80%)

Emphasis on science, math, Emphasis on science, math, technology, and health-related technology, and health-related programsprograms

Many renovations with increased Many renovations with increased efficiencies and energy savingsefficiencies and energy savings

Summary of Projects Summary of Projects

New ConstructionNew Construction63.0%63.0%Major RenovationMajor Renovation27.5%27.5%InfrastructureInfrastructure6.3%6.3%EquipmentEquipment2.8%2.8%Land/Bldg. PurchaseLand/Bldg. Purchase0.4%0.4%

New ConstructionNew Construction63.0%63.0%Major RenovationMajor Renovation27.5%27.5%InfrastructureInfrastructure6.3%6.3%EquipmentEquipment2.8%2.8%Land/Bldg. PurchaseLand/Bldg. Purchase0.4%0.4%

Types of Projects Types of Projects

Previous legislative intent – 14%Previous legislative intent – 14%

Minimum floor to ensure that all Minimum floor to ensure that all institutions could fund at least one institutions could fund at least one priority - $1.5 million – 8%priority - $1.5 million – 8%

Enrollment – total and growth – 30%Enrollment – total and growth – 30%

Previous legislative intent – 14%Previous legislative intent – 14%

Minimum floor to ensure that all Minimum floor to ensure that all institutions could fund at least one institutions could fund at least one priority - $1.5 million – 8%priority - $1.5 million – 8%

Enrollment – total and growth – 30%Enrollment – total and growth – 30%

Method of Allocation of Funds Method of Allocation of Funds

The State Regents staff and Presidents The State Regents staff and Presidents Council developed a data-driven allocation Council developed a data-driven allocation formula based upon the following formula based upon the following components:components:

The State Regents staff and Presidents The State Regents staff and Presidents Council developed a data-driven allocation Council developed a data-driven allocation formula based upon the following formula based upon the following components:components:

Building square footage and age -17%Building square footage and age -17%

Research, non-college entities and Research, non-college entities and special circumstances not addressed special circumstances not addressed in previous components – 31%in previous components – 31%

Building square footage and age -17%Building square footage and age -17%

Research, non-college entities and Research, non-college entities and special circumstances not addressed special circumstances not addressed in previous components – 31%in previous components – 31%

Method of Allocation of Funds Method of Allocation of Funds

The State Regents staff and Presidents The State Regents staff and Presidents Council developed a data-driven allocation Council developed a data-driven allocation formula based upon the following formula based upon the following components:components:

The State Regents staff and Presidents The State Regents staff and Presidents Council developed a data-driven allocation Council developed a data-driven allocation formula based upon the following formula based upon the following components:components:

2 research universities 2 research universities 46.9%46.9%11 regional universities 11 regional universities 28%28%12 community colleges 12 community colleges 22.8%22.8%Non-college entities Non-college entities 2.4%2.4%

2 research universities 2 research universities 46.9%46.9%11 regional universities 11 regional universities 28%28%12 community colleges 12 community colleges 22.8%22.8%Non-college entities Non-college entities 2.4%2.4%

Share of Bond FundsShare of Bond Funds

Meetings with Legislative Committees

Ad hoc meetings with individual legislators in “problem” districts

Rotary and other service clubsEditorial boards

Materials – t shirt – video - print

Meetings with Legislative Committees

Ad hoc meetings with individual legislators in “problem” districts

Rotary and other service clubsEditorial boards

Materials – t shirt – video - print

MarketingMarketing

OKLAHOMA STATE SYSTEM OF HIGHER EDUCATION

OKLAHOMA STATE SYSTEM OF HIGHER EDUCATION