Legislative Update No. 2
April 1, 1996
REBUILDING, RENEWING AND ENHANCING
THE UNIVERSITY OF CONNECTICUT
and the Connecticut General Assembly
II. ACTIVITIES COMPLETED OR UNDERWAY:
This is the second in a series of semi-annual reports to the Governor and the General Assembly pursuant to the provisions of Public Act 95-230, An Act to Enhance the Infrastructure of the University of Connecticut, the law that is now known as UCONN 2000.
The first report, dated October 1, 1995, placed this historic undertaking in the context of the University’s Strategic Plan and provided a summary of the provisions of the law. Because the reporting deadline followed so closely on the heels of the enactment of UCONN 2000, many of the activities on which the University is required to report were in the earliest stages of development. This and future reports will contain an increasing level of detail as projects are implemented and completed.
While most of the activities mentioned in this report are projects specified in the UCONN 2000 legislation, some are supported by other funding sources. All significant projects underway are presented in this report, however, for two reasons. First, it is essential that all major capital activities are developed, implemented and reported in a comprehensive manner. Second, UCONN 2000 did more than provide a funding structure for the rebuilding of the University. The law also conferred upon UConn the flexibility and management authority necessary to enable the University to move forward with this tremendous effort in a focused and expeditious manner. Every aspect of the University’s physical renewal has benefited from the management oversight provisions of UCONN 2000.
ACTIVITIES COMPLETED OR UNDERWAY
PLANNING, DESIGN AND MANAGEMENT
- Twenty-two design contracts have been assigned to the University after transfer from the State Department of Public Works. Along with the contracts, the funds for these projects were transferred to UConn.
- The review for prioritization of all projects proposed under UCONN 2000 has been completed and a list has been developed of those projects that will be funded by the state debt service commitment. The list of projects has been approved by the Board of Trustees and the Governor and submitted to the Bond Commission. (Attachment I)
- The list of Fiscal Year 1995-96 projects funded under UCONN 2000 has been developed and approved by the Board of Trustees. (Attachment II)
- On March 15, 1996, the Board of Trustees adopted a policy concerning the negotiation of construction bids. (Attachment III)
- The staff for managing the UCONN 2000 program and projects are in place and the University has assumed project management responsibilities for all projects transferred from the Department of Public Works.
- The flexibility and management authority given to the University by UCONN 2000 has made a significant difference in terms of UConn’s ability to move projects forward in a planned, deliberate and timely fashion. The Chemistry Building – one of the biggest projects of the early phase – is six months ahead of the original schedule, a state of affairs that is largely attributable to the new management flexibility of UCONN 2000.
- Architectural and engineering firms have been selected to perform services for the University. Their contracts have been signed and design work is underway. The categories of work include:
- Civil Engineering
- Structural Engineering (Threshold Code Review)
- Mechanical Engineering
- Electrical Engineering
- Advertising for, and interviewing of, legal counsel has taken place. Firms have been selected and are under contract for specific tasks. Most immediate tasks are the development and/or review of contracts, bid documents and prequalification documents.
- A review of the feasibility of the University’s purchasing directly the insurance for the UCONN 2000 projects (wraparound and project coverage) is underway . This approach is expected to offer savings in insurance coverage costs. Over $225 million of Phase I construction projects have been identified for potential inclusion in wraparound coverage.
- A firm has been hired to update the University’s 1987 Facilities Master Plan. Its activities will include development of an overall strategy for campus design, including matters related to maintenance, energy use and environmental concerns, architectural standards for buildings, a parking and transportation plan, landscaping and signage schemes, as well as assistance in preparation of implementation strategies for projects. This plan will include all University facilities except for the Health Center.
- Prequalification criteria and information for contractors have been developed and reviewed by legal counsel. UCONN 2000 permits the prequalification of contractors, enabling the University to ensure that contractors who bid on a project meet baseline criteria concerning such matters as finances, experience, prior project quality and use of subcontractors. The process has been completed to prequalify contractors for the Gampel Seating Expansion and demolition activities in Stamford. Other projects will be advertised later this Spring.
- University representatives are meeting with representatives of various public and private higher education institutions to discuss opportunities for coordination.
- The University has issued a request for qualifications as it begins the process of selecting a consultant to conduct the study of the feasibility of relocating the West Hartford campus to a location in downtown Hartford.
The Babbidge Library repairs are continuing. All plastic has been removed and the footings and foundation for the new structure poured. The structural steel has been fabricated and will be put into place in the next few weeks.
Bids have been received for the Field House renovation. Construction on the project will begin May 1, 1996, with completion scheduled eighteen months later.
- The South Campus residence hall project has moved into the design development phase. The residence halls will be equipped to bring state of the art technology directly to dorm rooms and should serve to enhance the University’s ability to attract talented students. The project is scheduled to be bid in October, with occupancy planned for the Fall of 1998.
- Demolition and asbestos removal activities for the Stamford Downtown Relocation project are out to bid. This phase of work will permit the University to assess renovation needs more precisely before the larger project is bid in May 1996.
- Classroom renovation projects are continuing with Arjona 119 and Torrey Life Sciences 301 currently undergoing construction. The School of Business Lecture Hall and classrooms in Design and Resource Management, Ratcliffe Hicks, Monteith and Whetten Graduate Center are scheduled for construction this summer.
- Exterior physical enhancements are continuing with facade repairs, window replacement, roof repairs/replacement for Beach, Wood and Manchester Halls. Window replacement at the Northwest Quad Dorms will be completed in May 1996. Bids have been received on the reconstruction of Gilbert Road. Construction on the road will be completed during Summer 1996.
- The Gampel Seating Expansion project is out to bid. The project will provide for 1600 additional seats. Construction activities are scheduled to take place from May to September, 1996 (structural work and utilities relocation) and from May to September, 1997 (seat installation).
- Bids have been received for the Mansfield Apartments (graduate student housing) renovations. Construction is scheduled to begin in April 1996 with completion in April 1998.
- UCONN 2000 also provides significant funding for equipment. Much of the equipment to be acquired is systems-related and research-oriented. There are, however, exceptions to this general rule. For example, UCONN 2000 has allowed the University to address a longstanding need to upgrade the student shuttle bus system. Four new buses accessible to persons with disabilities have been ordered at a cost of approximately $200,000 each. The improved shuttle bus system also will enable closing parts of center campus to vehicular traffic. This will improve campus appearance, reduce grounds maintenance costs, facilitate pedestrian activities and increase student, faculty and staff safety.
PRIVATE FINANCIAL SUPPORT
- The goal for private financial support for Fiscal Year 1995-96 is $12 million in receipts (pledges are no longer counted toward the goal). From July 1, 1995 through February 29, 1996 actual gift receipts for the University totaled $8.8 million. This amount represents a 56% increase over the same period in Fiscal Year 1994-95 and outstrips the pace needed to achieve the goal for the year.
- An analysis of the private giving results for the eight months ended February 29, 1996, as compared with the same period in 1995, reveals several noteworthy trends. Although all areas of the University benefited from increased charitable contributions, the academic program showed the most dramatic increases. Specifically, gifts to Storrs and the regional campuses were up 93%, gifts to the Health Center were up 70%, and gifts to the athletic program were up 26%.
- Many UConn supporters contributed for the first time, renewed lapsed giving, or increased their annual giving levels, which helped the Annual Fund raise $855,000 through phonathon and direct mail efforts, an 81% increase. As of February 29, 1996 unrestricted contributions totaled $754,000, an increase of 97% over the same period last year and 94% of the $800,000 unrestricted goal set for Fiscal Year 1995-96. Donors to the Annual Fund form a broadening base of major donors for the years ahead.
- In July, the Board of Trustees approved guidelines governing the eligibility of private donations for the $20 million state matching funds made available under UCONN 2000. Generally, state matching funds are applied on a dollar-for-dollar basis to all private gifts and pledges of $25,000 to $2,000,000 which either create new endowments or add to existing endowments and are received in calendar years 1996, 1997 and 1998. (The state matching grant will be paid in Fiscal Years 1998, 1999 and 2000). By targeting investment to endowments, the matching program encourages new and existing donors to support the University’s long-term needs and assist the University in funding its highest institutional priorities.
- Alumni and other friends have shown great interest and enthusiasm for the endow ment matching program made available under UCONN 2000. As of February 29, 1996 (two months into the program), 50 documented, match-eligible pledges from private sources had been recorded. In total, these pledges amounted to $5.3 million and, once received and matched by the state, will permanently increase UConn’s endowment by $10.6 million. Actual cash receipts from donors against these pledges totaled $1.63 million through February 1996.
- Recently announced gifts serve as good examples of the exciting opportunities being afforded with private support:
- On March 12, 1996, Connecticut Mutual announced a gift to the University of Connecticut School of Law to establish an endowed chair in insurance law to be named in honor of the 150-year-old insurance company, which has recently merged with Massachusetts Mutual Life Insurance Company. The grant, made through the Connecticut Mutual Life Foundation, when combined with prior gifts and matching state funds provided by UCONN 2000, will result in a total gift of $1 million. The funds will help establish an Insurance Law Center – one of the most comprehensive academic centers in the nation for insurance law.
- The University will be able to launch a new summer program, the UConn Mentor Connection, because of a gift from the W. R. Berkley Corporation. The contribution will provide start-up funds and endowments for scholarships (eligible for the UCONN 2000 match) for a program that will bring some of the most talented high school students from across the nation to the Storrs campus, where faculty from nearly 20 departments will provide apprenticed-based involvement in faculty research. Selection criteria are designed to identify and involve talented students from diverse cultural, racial and socioeconomic backgrounds. The program design, which features teens actively engaged with faculty and graduate students, stems from research conducted by the University’s National Research Center for the Gifted and Talented, which has already received more than $8.2 million in external funding from federal sources.
- A permanent endowment for the University of Connecticut’s Honors Scholars Program – recognized as unsurpassed in the Northeast and among the best honors programs in the nation – will be created by a gift from Richard Treibick. This gift, when matched with UCONN 2000 funds, will allow the University to strengthen the program and offer scholarships to outstanding applicants, thereby helping UConn attract the most qualified students in a very competitive environment.
- It is fully expected that the Fiscal Year 1995-96 minimum goal of $12 million – nearly a 50% increase in cash receipts over the Fiscal Year 1994-95 results Ñ will be achieved, and that the UCONN 2000 matching opportunity of $20 million over three years will be fully subscribed. Together with the emphasis on fundraising for the current year, a comprehensive program for future private giving is being aggressively planned and pursued. Progress is continuing on several fronts: to renew and build relationships, to identify potential volunteers and financial supporters, to steward former donors, and to create the overall infrastructure necessary to increasing contributions again significantly in Fiscal Year 1996-97 and to initiating a successful multi-year campaign of $200 – $300 million for UConn in Fiscal Year 1997-98.
UCONN 2000 authorizes the University to issue bonds to finance its capital infrastructure program. A significant amount of activity over the last six months has revolved around this aspect of the law. The law provides that:
- The state pays the debt service on $962 million of UConn bonds.
- The State Treasurer manages the sale process and invests bond proceeds.
- The maximum annual issuance amount is limited to 120% of the estimated project expenditures during the following 12 months.
The law also requires that the University of Connecticut Board of Trustees adopt a Master Indenture to be submitted to the State Bond Commission prior to the initial issuance of securities. The Master Indenture, in essence, is a contract between the University and the banking and trust company providing services for bondholders. It authorizes the issuance of bonds and describes how the debt will be serviced. The Board of Trustees approved the Master Indenture in November 1995, and the Bond Commission approved it as to form in December 1995. Representatives of the University, the State Treasurer’s Office and UCONN 2000 financial advisers went to New York to make rating agency presentations regarding UCONN 2000 bonds to Moody’s, Standard & Poor’s, and Fitch Investors.
Also in November, the Board of Trustees approved the revised list of UCONN 2000 projects which will be financed by the state debt service commitment over the ten-year period as well as the First Supplemental Indenture which serves as the Board of Trustees’ bond resolution for the 1996 Series A Bonds. This resolution was sent to the Governor who, by virtue of his decision not to exercise his right to disapprove it within 30 days of its submission, permitted the resolution to move forward. Projects in the first year of UCONN 2000 include construction of the new Chemistry Building, various deferred maintenance projects, equipment replacement and upgrades, the Stamford Downtown relocation, a study of the feasibility of relocating the West Hartford campus to Hartford, and the Mansfield Apartment renovations (graduate student housing).
In February 1996, the team working on UCONN 2000 completed the Official Statement, a document which is provided for the purpose of presenting information about the bond financing (as well as information about the University in general) in connection with the offering and sale of the General Obligation Bonds 1996 Series A.
All of these activities culminated with the bond sale on February 6, 1996, when the University of Connecticut entered the market with an $83.9 million General Obligation Bond issue secured by the state debt service commitment. The first UCONN 2000 bond issue was successful in many respects:
- Orders totaled $327.1 million, or four times the amount of bonds offered.
- Sale was at an overall interest rate of about 4.94 % Ñ an extremely favorable interest rate. This compares to a rate of about 5.25% for the last issuance of state general obligation bonds in October 1995. Rarely in the recent past has an A1/AA- rated issuer raised twenty-year money at a cost below 5%.
- Long-term bonds sold at an interest rate about ten basis points less, and short-term bonds about five basis points less, than the state’s general obligation bonds trading in the secondary market on February 6, 1996.
- Yields on the bond issue are below those of most other similar bond issues priced during the same period.
- Individual investors purchased nearly 50% of the bonds while sufficient institutional interest was attracted to facilitate secondary market liquidity. Alumni of the University of Connecticut purchased almost 4% of the bonds.
The favorable pricing is attributable to the high retail participation in this issue which enabled the state and the University to offer more aggressive pricing to the institutional market than would have been possible without retail interest. The bonds attracted strong investor demand because of the extensive retail marketing effort and the use of insurance on bonds maturing in 2002 and after, as well as the unique nature of the UCONN 2000 financing program. While UConn bonds offer security features very similar to those on the state’s general obligation bonds, they also offer investors a defined, specific use of the proceeds. Retail investors liked knowing that proceeds would benefit UConn. Institutional investors liked the portfolio diversity which UConn bonds provide while limiting investment risk to that of the state’s general obligation bonds.
This financing was unique and represented many “firsts,” all of which combined to make the bonds appealing to investors:
- It was the first time the University entered the market in its own name.
- It was the first time the University and the state entered into a partnership specifically to provide infrastructure funding.
- It was the first time such a security structure has been used in connection with any public university program anywhere in the country.
- It was the first financing in a ten-year program in which the University expects to issue $962 million in bonds secured by the state debt service commitment.
The bond sale team included the Senior Managing Underwriter for the UConn 2000 initiative, Advest, Inc.; Co-Senior Managing Underwriters, A.G. Edwards & Sons, Inc., Lehman Brothers, and Morgan Stanley & Co.; and the following underwriters: Bear, Stearns & Co., Inc., First Albany Corporation, Fleet Securities, Inc., Greenwich Partners, Inc., Grigsby Brandford & Co., Inc., Merrill Lynch & Co., Paine Webber Incorporated, Prager, McCarthy & Sealy, Prudential Securities Incorporated, Pryor, McClendon, Counts & Co., Inc., Roosevelt & Cross, Inc., Herbert J. Sims & Co., Inc., and Smith Barney, Inc.