Legislative Update No. 8
REBUILDING, RENEWING AND ENHANCING
THE UNIVERSITY OF CONNECTICUT
Table of Contents
I. UCONN 2000: THE UPDATE
II. ACTIVITIES COMPLETED OR UNDERWAY:
This is the eighth in a series of semi-annual reports to the Governor and the General Assembly pursuant to the provisions of Sections 10a-109 through 10a-109y of the Connecticut General Statutes, originally An Act to Enhance the Infrastructure of the University of Connecticut, and now known as UCONN 2000. These reports have been issued each October and April since the passage of UCONN 2000 on June 7, 1995. However, since the law also required a four year progress report to be filed on January 15, 1999, much of the information for the time period normally covered in the semi-annual report has already been submitted. Although this report does contain fully up-to-date project status charts, for prose project updates the reader is directed to UCONN 2000: Four Year Progress Report, Chapter III. The standard reporting structure utilized in reports one through seven will resume with the report due in October, 1999.
THE LEGISLATIVE FINDING
Section 10a-109y of the Connecticut General Statutes provides as follows:
On January 15, 1999, the university shall submit to the Governor and to the joint standing committees of the General Assembly having cognizance of matters relating to education and finance, revenue and bonding, a four-year UConn 2000 performance review report detailing for each project undertaken to date under the program the progress made and the actual expenditures compared to original costs. In addition, the report shall include a summary of programs, services and facilities which the university coordinates with other public and independent institutions of higher education. Not later than sixty calendar days after receipt of said report, such joint committees shall consider the report and determine whether there has been insufficient progress in implementation of UConn 2000 or whether there has been significant cost increases over original estimates as a result of actions taken by the university. If so, the committees may make recommendations for appropriate action to the university and to the General Assembly.
The report was submitted to the Governor and members of the General Assembly on January 15, 1999. On March 10, 1999, the chairmen and ranking members of the Education Committee and of the Finance, Revenue and Bonding Committee wrote to President Austin thanking him for the report and finding that the University is managing the UCONN 2000 capital projects, discharging its responsibilities, and achieving and implementing the UCONN 2000 goals, in full accord with the intent of Public Act 95-230. (The full text of the letter can be found on the preceding pages). With this finding, the University will move forward to Phase II of UCONN 2000. On June 14, 1999, the University Board of Trustees is scheduled to consider the project list for Fiscal Year 2000, the fifth year of UCONN 2000.
UCONN 2000: CHAMPIONSHIP BONDS
The basketball court wasn’t the only place where Connecticut scored a first in March, 1999. It was also the first time in state history, according to the State Treasurers Office, that a State of Connecticut secured bond issue was sold completely to retail investors.
The State Treasurers Office opened a two-day retail order for $80 million in 1999 Series A UConn 2000 bonds March 26, in advance of a planned sale in the institutional market. By the time the retail order period closed March 29, the bonds were totally sold out, eliminating the need to go to the institutional market. It is the first time that a State of Connecticut secured bond issue has been sold entirely to retail investors. Selling predominantly to retail customers is a clear indication of market enthusiasm. It also benefits the state by lowering he rate of interest and reducing the amount of debt service the state must pay.
This unprecedented level of retail purchases demonstrates investor confidence both in the bonds as an investment and in the University as an institution. UConn really had the numbers in the tournament and in the market, said State Treasurer Denise L. Nappier. We worked very closely with officials at the University and with our financial team, Nappier said. As with the Huskies, ours was a real collaborative effort that paid off with record-setting returns.
UCONN 2000: ACTIVITIES COMPLETED OR UNDERWAY
For design and construction updates, please go to the Current Project Status chart.
Phase I Debt Service Commitment Bond Issues Completed
During April 1999 the University completed the last of the $382,000,000 of Phase I project financings with the fourth issue of University General Obligation Bonds secured by the States Debt Service Commitment. The four bond issues, sometimes referred to as Debt Service Commitment Bonds, were issued pursuant to the General Obligation Master Indenture of Trust, dated as of November 1, 1995, between the University of Connecticut, as Issuer, and Fleet National Bank of Connecticut (now State Street Bank & Trust, as successor), as Trustee.
On February 21, 1996, the University, in conjunction with the Office of the State Treasurer, issued $83,929,714.85 of The University of Connecticut General Obligation Bonds 1996 Series A, the first series of bonds secured by the State’s Debt Service Commitment. On April 24, 1997, The University of Connecticut General Obligation Bonds 1997 Series A, the second series of bonds secured by the States Debt Service Commitment, were issued in the amount of $124,392,431.65. The third series, The University of Connecticut General Obligation Bonds 1998 Series A, was issued in the amount of $99,520,000.00 on June 24, 1998.
On April 8, 1999, The University of Connecticut General Obligation Bonds 1999 Series A, the fourth series of bonds secured by the State’s Debt Service Commitment, were issued in the amount of $79,735,000.00. Of this amount, $79,032,918.52 was for UCONN 2000 projects, and the balance , together with accrued interest, funded the cost of issuance through the Office of the Treasurer. With this bond issue the University completed the $382,000,000 of Phase I financings.
Projects funded at the time of issuance of the Debt Service Commitment 1999-A Bond Issue include the Agricultural Biotechnology Facility; the Benton State Art Museum Addition; the Deferred Maintenance & Renovation Lump Sum-Phase I; the Equipment, Library Collections & Telecommunications-Phase I; the Gant Plaza Deck; the Heating Plant Upgrade; the Litchfield Agricultural Center-Phase I; the North Superblock Site & Utilities; the Pedestrian Walkways (a.k.a. Fairfield Road Pedestrian Mall); the School of Business; the School of Pharmacy; the Stamford Downtown Relocation-Phase I; the Technology Quadrant-Phase IA; the Underground Steam & Water Upgrade-Phase I; and the Wilbur Cross Building Renovation.
As of April 1999, the UCONN 2000 Debt Service Commitment bonds were rated AA by Standard & Poors; A-1 by Moodys Investors Service; and AA- by Fitch Investors Service. Additionally, certain maturities of the bonds were insured with AAA rated municipal bond insurance at issuance. The University and the Office of the State Treasurer managed the Debt Service Commitment Bond sale process.
Trustee-Held Construction Fund
Pursuant to the Indenture of Trust, the construction fund proceeds from the Debt Service Commitment Bonds were deposited to State Street Bank & Trust, as Trustee. Prior to June, 1998, these funds had been deposited with the State. The University directed the Trustee to invest the proceeds so deposited in the State Treasurer’s Short Term Investment Fund which is AAA rated and offers daily liquidity and historically attractive risk-adjusted yields.
The Indenture of Trust authorizes and directs the University to order each disbursement from the Construction Account held by the Trustee upon a certification filed with the Treasurer and the Trustee, signed by an Authorized Officer of the University. Once the filings are made the University directly disburses the payments.
University Special Obligation Revenue Bonds Secured by Pledged Revenues
UCONN 2000, as codified in Connecticut General Statutes ection 10a-109 through 10a-109y, also authorizes the University to issue Special Obligation Revenue bonds. Unlike the Debt Service Commitment Bonds, which are paid for out of the State’s General Fund, the Special Obligation Bonds are paid for out of certain, pledged revenues of the University as defined in the particular bond series indenture.
Additionally, a Special Capital Reserve Fund may be established for University Special Obligation bond issues only if the Board of Trustees of the University determines that the Special Obligation bond issue is self-sufficient as defined in the act. The self-sufficiency finding by the University must be submitted to and confirmed as not unreasonable or arbitrary by the Treasurer of the State, prior to issuance of the bonds. Once approved, the Special Capital Reserve Fund is funded at issuance by the University to meet the minimum capital reserve requirement. However, subject to notification by the University on or before December first annually, if this amount falls below the required minimum capital reserve, there is deemed to be appropriated from the state General Fund the sums necessary to restore each such Special Capital Reserve Fund to the required minimum capital reserve.
On November 8, 1996, the Board of Trustees approved the Special Obligation Master Indenture and Supplemental Indenture drafts authorizing the issuance of up to $30,000,000 of Special Obligation bonds for construction of the South Campus Residence and Dining Hall. The Board of Trustees subsequently found project self-sufficiency for the creation of a Special Capital Reserve Fund.
On February 4, 1998, the University issued $33,560,000.00 of the University of Connecticut Student Fee Revenue Bonds 1998 Series A. The bonds have a final maturity of November 15, 2027. The University managed the issuance and sale of the UCONN 2000 Student Fee Revenue Bonds 1998 Series A, and realized a favorable true interest cost over the twenty-nine year term. The main source of repayment of the bonds is the Infrastructure Maintenance Fee that is paid by students. The fee was instituted in 1997 as a means to fund South Campus debt service and as a revenue source to help support future operation and maintenance costs for facilities built or expanded by virtue of UCONN 2000. This long-term planning is essential to protect the investment.
The majority of the Student Fee Revenue Bonds 1998 Series A proceeds is being used to finance a portion of the cost of the South Campus project, including dormitories and a consolidated dining hall facility. Additionally, part of the proceeds was used to fund a Special Capital Reserve Fund (SCRF). The University has invested the bond proceeds in suitable Investment Obligations pursuant to the Indenture of Trust
The State SCRF enhancement allowed the bonds to obtain a AA- rating from Standard & Poors with a positive outlook, a AA- rating from Fitch Investors Service, and a A-1 rating from Moodys Investors Service. The bonds were subsequently covered by municipal bond insurance and upgraded to a AAA rating category at Fitch and Standard Poors and Aaa at Moodys Investors Service. During October 1998, Standard & Poors upgraded the SCRF bond ratings to AA with a stable outlook.
Future Bond Issues
Phase II projects totaling $580,000,000 remain to be financed with future series of Debt Service Commitment Bonds. Pursuant to the law, the initial Phase II allocation of $130,000,000 will be available as of July 1, 1999, and is subject to approval by the University Board of Trustees and the Governor.
Based on projected spending the University currently anticipates offering a new Debt Service Commitment Bond issue during the Fall of 1999 or early Spring of 2000. Generally, the University plans on issuing a series of Debt Service Commitment bonds at least every twelve months.
Additionally, at some future point, the University could issue Special Obligation Revenue bonds for certain projects with the capacity for financial self-sufficiency. In this regard, two such projects that may warrant further consideration are a second parking garage and a Greek housing project to replace sorely outdated facilities for the fraternities and sororities on campus.
The UCONN 2000 endowment matching gift program has been a resounding success, resulting in unprecedented levels of giving from alumni and other friends of the University.
- To date, the $20 million in 1:1 match of state funds to private gifts as provided by the original UCONN 2000 legislation is in-hand. During the first year of the program, $9.1 million in match-eligible gifts was received. During calendar year 1997, an additional $6.5 million was received and, $4.4 million was received in calendar year 1998.
- The $6.8 million in state funds to match the private gifts received in 1997 was transferred by the state to the University in December 1998 and January 1999 and invested promptly.
- In February 1999, the Board of Trustees submitted to the State a request for $7.5 million in matching funds to be paid against the endowment gifts received in 1998, 1997 and 1996, which had not been previously submitted.
- In recognition of the programs success, the General Assembly enacted a continuation and restructuring of the match on a 1:2 basis (one state dollar to every two private dollars). From Fiscal Year 2000 to Fiscal Year 2007, the state grant will total up to $52.5 million, depending on the level of match-eligible donations actually received. Through December 31, 1998, $5.8 million in pledges have been received as part of the 1:2 matching gift program.
- Total endowment assets for the University at December 31, 1998 were $144 million, including the Foundations total endowment assets of $139 million. Foundation endowment assets grew 13% from the $123 million in Foundation assets as of June 30, 1998.
- On February, 25, 1999, the University had the pleasure of announcing a $23 million gift from alumnus Raymond Neag 56. $21 million of the gift is slated for the School of Education and $2 million is for the Health Center. This contribution is the largest gift ever given to a School of Education in the nation, the largest to a public university in New England and the largest in UConn history. The total value of the gift, with additional funding from the states endowment matching grant program, is approximately $27.4 million. The UConn Board of Trustees has voted to rename the School of Education the Neag School of Education, making this the first named school at the University.
- With another gift from Ray Neag in the amount of $225,000 to benefit the Lynn Wood Neag Distinguished Visiting Professor of British Literature, the British Literature program in the College of Liberal Arts and Sciences has been greatly enhanced. This generous donation will provide financial support for a Distinguished Visiting Professor of British Literature in the English Department.
- A $250,000 gift from Raymond and Beverly Sackler to create the Sackler Master Artists Institute will help bring nationally and internationally renowned artists, playwrights and musicians to the University to create new works, while also working with students and faculty. As a result of another of the Sacklers gifts, one of the most prominent Latina playwrights in the United States, Migdalia Cruz, was named the first Sackler Artist in the School of Fine Arts, and has been commissioned to write a play dealing with the effects of war on children.
- UConns Stamford campus received $375,000 from SBC Warburg Dillon Read, Inc., $150,000 from Robert N. Rich, and $100,000 from Xerox, to benefit the Connecticut Information Technology Institute (CITI). CITIs goal is to enhance Connecticuts labor force by establishing undergraduate and graduate information technology degree programs, as well as offering customized courses in subjects specific to the corporate market.
- Gary Gladstein contributed $500,000 to establish The Marsha Lilien Gladstein Visiting Professor in Human Rights in the Universitys College of Liberal Arts and Sciences. The professorship will allow UConn to appoint annually one internationally renowned scholar to lecture, teach, and ollaborate with faculty. The Gladstein Visiting Professor will provide the College flexibility to offer courses not taught by the Colleges faculty, provide seminars on groundbreaking areas of study, and complement existing faculty expertise.
- A $500,000 gift from Southern New England Telephone (SNET) for the School of Engineering will establish a named professorship in information and communications echnologies. The new program is designed to encourage more high school students to pursue careers in Engineering. With this support, the University will recruit a top faculty member to conduct state-of-the-art research in information technology and train undergraduate and graduate research assistants. This professor will also direct the SNET Program for Future Focus, a new initiative intended to recruit young scholars to information technology and to the School of Engineering.
- A $1 million pledge from Philip and Christine Lodewick will establish a visitors program at the University that will become a gateway to the UConn Storrs Campus. At a new center, those who visit the main campus will be greeted and provided with information about University activities, events and programs. The visitors center will serve as the first point of contact for the hundreds of thousands of people who come to the main campus each year.
- Thanks to a $300,000 commitment from Northeast Utilities (NU), the School of Engineering will launch a new campaign to enhance environmental education and encourage Connecticut students to pursue careers in environmental engineering. With NUs support, the University will recruit an internationally recognized faculty member to conduct advanced research and development in the area of environmental engineering, and will focus on undergraduate and graduate-level education and training.
- The University of Connecticut Athletic Development Fund received a $100,000 gift from former UConn baseball All-American player Charles Nagy and his wife Jacquelyn to establish the Charles and Jacquelyn Nagy Endowed Baseball Scholarship.
- UConns School of Social Work received the largest gift in its history from Judith and Henry Zachs. The generous $250,000 donation will be used to renovate the first floor of the School of Social Work building to create a community room for lectures, meetings, receptions and other activities.
- Geno Auriemma and Jim Calhoun, UConn’s two basketball coaches, are each making gifts that together total a quarter million dollars to benefit the University. Women’s basketball coach Geno Auriemma will contribute $125,000 to Homer Babbidge Library, while men’s basketball coach Jim Calhoun will donate $125,000 to the cardiology program at the Health Center.