new capital financing authority and debt policy revisions
Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills NEW CAPITAL FINANCING AUTHORITY AND DEBT POLICY REVISIONS East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose CSU Business Conference April 7-8, 2015 Presented by Kelly Cox, Associate Director, Accounting Nancy Freelander-Paice, Director of Capital Programs Elvyra F. San Juan, Assistant Vice Chancellor San Luis Obispo San Marcos Sonoma Stanislaus 1 AGENDA Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt CSU Capital and Deferred Maintenance Needs New Capital Financing Authority Policy Implementation Future Financing Discussion – Questions Best Practices Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 2 HISTORICAL CAPITAL OUTLAY FUNDING Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 3 HISTORY Together Towards Tomorrow Deferred Maintenance Funding Chancellor’s Office Trustees requested $293 million State provided $9.3 million Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Long-term inadequate support Since 2000 Last state appropriation – 2007: $2.5 million Deferred Maintenance Backlog Building estimate : $1.8 billion Infrastructure estimate: $700 million Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 4 NEW CAPITAL FINANCING AUTHORITY Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands SB 860 Trailer Bill Language (TBL) Changed Education Code Section 89770+ General Fund Support Appropriation Other Revenues – Tuition Fees Pay as You Go Pay debt service Pledge to Secure Bond Obligation Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Use of Operating Revenues for Capital Projects Capital costs limited to 12% of General Fund Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 5 BENEFITS OF NEW AUTHORITIES Together Towards Tomorrow Allows pledge and use of operating funds for capital program Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Allows use of Systemwide Revenue Bond (SRB) program Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Permits refinancing of State Public Works Board debt Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Streamlines project approval 6 MITIGATING RISK $360 Together Towards Tomorrow $340 Chancellor’s Office Bakersfield Channel Islands Funding for Annual Debt Service to increase to $317 Million (add of $20 Million) for Current and Future GO and PWB $320 Chico Dominguez Hills East Bay $300 Fullerton Humboldt Long Beach Los Angeles Millions Fresno $280 Maritime Academy Monterey Bay Northridge $260 Pomona Sacramento San Bernardino San Diego $297 Million 14-15 Operating Budget Augment for Debt Service Payments Actual GO and PWB Debt Service Payments $240 San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 7 IMPLEMENTING THE NEW AUTHORITY Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Develop financial analysis to assess all projected revenues and expenditures Update debt policy Encourage Alternative/Additional Funding for Academic Projects Improve Investment Earning Revenues Monterey Bay Northridge Pomona Sacramento Increase Use of Facility Reserves for Capital Needs San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Modify Accounting Procedures 8 FINANCIAL ANALYSIS & DEBT POLICY Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills New Board Policy for Financing (November 2014) East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Applies to CSU Operations and Auxiliaries $10 million operating budget for annual debt payments Estimate $150 million in projects Bond sale—late June/early July Cash flow, site certification, private use Use of local funds for design phase Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 9 FINANCIAL ANALYSIS & DEBT POLICY Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Implementation of board policy Dominguez Hills East Bay Fresno Fullerton Humboldt Use data from financial statements Correlation to credit rating levels Campus calculations and ratios under review Campus pro forma incorporating all entities Approach to system debt capacity Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 10 CATEGORIES Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay AND CRITERIA 2016 – 2017 Capital Improvement Program Optimize use of all university revenues Identify other funding sources for projects Other funding contributions may improve priority position Consider overall strategic needs of system Board approved March 2015 Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 11 INVESTMENT POLICY PROPOSAL Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills Improve investment earnings Able to invest in a broader range of investments Board approved for legislative program East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 12 RESERVE POLICY PROPOSAL Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Broaden existing policy to improve use for facility needs. Incrementally build Facility Reserves Pay debt service Pay as you go funding Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 13 RESERVE ASSESSMENT Together Towards Tomorrow Campuses have Reserve Assessment Tool Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Sightlines Facilities Renewal and Reinvestment Model Calculates Current Replacement Value (CRV) Other Institutions University of Missouri System – 1% annually of CRV University of Massachusetts System – 3% of CRV on newly constructed buildings Others ? Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 14 RESERVE ASSESSMENT Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Sightlines Draft Report 11 26 2014 15 RESERVE ASSESSMENT Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Sightlines Draft Report 11 26 2014 16 MAINTENANCE DEFINITIONS Together Towards Tomorrow On-going, scheduled maintenance/repair Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Deferred maintenance Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Francisco San Luis Obispo San Marcos Sonoma Stanislaus Result of not completing routine maintenance Can shorten lifecycle of building systems, equipment and infrastructure Cost of deferred maintenance increases over time Capital renewal San Diego San Jose Regular, ongoing, scheduled tasks Typically occurs in cycles less than one year, but may be more Required to achieve full lifecycles of building systems, equipment and infrastructure Building systems, equipment and infrastructure that have reached end of useful life Becomes deferred if not replaced at end of useful life 17 DEFINITIONS Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Dominguez Hills East Bay Fresno Fullerton Long Beach Los Angeles Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Greater than $634,000 (can change annually) Capital improvement requires Board approval Maintenance/repair does not require Board approval Minor Capital Project Maritime Academy Improve or better a space New buildings, additions or major renovations Major Capital Project Chico Humboldt Capital Improvement Less than or equal to $634,000 Can be capital improvement Does not require Board approval Maintenance/Repair Project No dollar limit using operating funds Does not require Board approval 18 MODIFY ACCOUNTING PROCEDURES Together Towards Tomorrow Tracking Expenditures with New Authority Purpose of Proposed Changes Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Track/report capital improvements from major repairs Track cost of ongoing/ scheduled maintenance Improve reporting across multiple fund sources and multiple years Implement SRB financing for academic projects Propose New CSU funds Use of CFS Project Attribute Field 19 ACCOUNTING Together Towards Tomorrow Proposed Funds for Recording Expenditures Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills Fresno Fullerton Humboldt Long Beach Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 0948 CSU Fund 485 Funding from Operating Revenues Deferred Maintenance and Capital Renewal 0948 CSU Fund 486 (new) Funding from tuition fees and interest earnings 0576 CSU Fund 230 (new) Funding from SRB Bond proceeds East Bay Los Angeles On-going/Scheduled Maintenance Capital Improvement 0948 CSU Fund 487 (new) Funding from tuition fees and interest earnings Replaces CSU Fund 491 0576 CSU fund 231 (new) Funding from SRB Bond proceeds 20 ACCOUNTING Together Towards Tomorrow Proposed Fund Process Changes Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona CFS Project Chartfield Defined by Campus Required on all transactions Carries transactions to Systemwide Data Warehouse CFS Project Attribute Multiple project attributes can be assigned and used One defined by Chancellor’s Office (CPDC) Campus manually adds to PS Project Chartfield (once) All transactions will carry this value Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 21 ACCOUNTING Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Multi-funded Projects – Considerations Sample Allocation of Cost CSU Fund Primary Fund 0948-486 Expenditure Transfer 101 – Cash /Investments 2,000 Expenditure Transfer 305022 – Fund Balance Clearing 1,000 Housing Housing Bond 0948-492 0948-531 0576-221 Parking (1,000) Total Project (1,000) 0 (1,000) 0 Expenses: Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo 607009 – Capital Equipment 750 750 607021 – Capital Design other 250 250 607033- Capital Construction Expense Expenditure Transfer via 607033-Capital Construction Expense 3,000 3,000 (3,000) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 0 4,000 San Marcos Sonoma Stanislaus 22 POSSIBLE FUTURE CAPITAL FINANCING Together Towards Tomorrow 2015-2016 Governor’s Proposal Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego $119 million General Fund base increase About $14 million remaining after enrollment/ mandatory costs/compensation Estimate $6 million for debt service Assume about $90 million for projects $25 million for deferred maintenance CSU to provide information to support an additional $25 million for deferred maintenance 2016-2017 Governor’s Plan $124 million General Fund base increase San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 23 DEBT SERVICE TO OPERATIONS RATIO Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Percentage of operations dedicated to debt service Lower is better 4% roughly correlates to “AA” 6% roughly correlates to “A” CSU actual calculations… FYE 2013—5.7% FYE 2014—5.3% Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 24 EXPENDABLE FINANCIAL RESOURCES Together Towards Tomorrow Chancellor’s Office Bakersfield Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge DEBT RATIO Amount of expendable financial resources— generally, net assets—relative to debt Channel Islands TO Higher is better 1.20x roughly correlates to “AA” 0.80x roughly correlates to “A” CSU actual calculations… FYE 2013—0.66x FYE 2014—0.71x Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 25 DEBT SERVICE COVERAGE Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Amount of operating cashflow available to cover debt service Higher is better 3.00x roughly correlates to “AA” 2.40x roughly correlates to “A” CSU actual calculations… FYE 2013—1.96x FYE 2014—2.41x Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 26 SYSTEMWIDE DEBT CAPACITY Together Towards Tomorrow Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay “Debt Service to Operations” used to calculate debt capacity Highest correlation to ratings Ratio used in prior CSU debt capacity studies Calculations based upon 6% threshold 2014—CSU debt capacity is $5.7 billion Excess capacity of $774 million Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus 27 THANK YOU FOR JOINING US! Together Towards Tomorrow Kelly Cox Chancellor’s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Humboldt Long Beach Los Angeles Maritime Academy Northridge Pomona Sacramento Nancy Freelander-Paice Director of Capital Programs Capital Planning, Design and Construction [email protected] (562) 951-4087 Fullerton Monterey Bay Elvyra (Vi) San Juan San Bernardino San Diego San Francisco Associate Director, Accounting Financial Services [email protected] (562) 951-4611 Assistant Vice Chancellor Capital Planning, Design and Construction [email protected] (562) 951-4090 San Jose San Luis Obispo San Marcos Sonoma Stanislaus 28 WWW.CALSTATE.EDU
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