PUBLICATIONS Inside Illinois Vol. 25, No. 14, Feb. 2, 2006

Trustees discuss financing of capital projects

By Sabryna Cornish, UIC News

The UI is examining its financial status to see how much money it can borrow during the next few years for several high-priority capital projects, according to information presented at the UI Board of Trustees meeting Jan. 19 in Chicago.

Capital projects slated for the Urbana campus include a $103 million renovation project at Memorial Stadium, $75 million in renovations for the residence and dining halls in Champaign, $45 million for the Business Instructional Facility, $25 million for a parking structure in the heart of campus and $5 million for a conference center at St. Mary’s Road and First Street.

Upcoming capital projects at UIC include the $44 million Stukel Towers project, a 740-bed residence hall expected to open in fall 2007; $16 million for The Forum, a conference center to be constructed on UIC’s south campus; and an undetermined amount for renovating the UIC Medical Center.

Moody’s Investment Services determines universities’ credit ratings as well as the bond ratings, which reflect how much debt the institution currently has, the university’s growth potential and its annual revenues.

“This provides an overall debt picture for the university,” said President B. Joseph White.

In order to determine the university’s credit rating, several factors are considered, including the university’s relationship with the state, the availability of financial resources such as endowments and projected student enrollment.

The bond ratings vary depending on the type of bonds that are needed, but for the most part, the UI has a rating ranging from “good” to “excellent.” Very few universities have the highest rating, said Diane Viacava, vice president and senior credit officer of Moody’s Investment Services.

Illinois has had to overcome some challenges in the past few years, including a decrease in state funding, more competition for coveted research dollars and significant future capital needs, Viacava said.

“The state of Illinois has been one of the least generous of the states that we have seen in the past few years,” Viacava said. “You have a strong linkage with the state, but the state (economy) needs to improve before the University of Illinois can.”

Despite these challenges, Viacava said the university is in a good position to fund some of its projects through bonds.

“You have a growing pool of students in Illinois,” she said. “It’s just a matter of capturing them.”

The university’s research component also is important when looking at the big financial picture, Viacava said.

“Very clearly, the UI is a research powerhouse,” Viacava said. “I believe this is understated.”

Douglas Beckmann, senior associate vice president of business and finance, said the vast amount of projects that the university is looking to finance would generate revenue, so they would not be considered risky investments, but the university should be cautious when it is considering taking out bonds to finance projects.

“The state of Illinois capital funding is currently constrained and there are many projects being considered,” Beckmann said. By taking out bonds to finance these projects, “the university would have a relatively large mortgage, but it is supported by a very good-paying job.”

Many of the suggested projects are short term and about 80 percent of them will produce revenue, making it easier to pay off the bonds. Revenue from the sales of suites to be installed during the renovation of Memorial Stadium and from ticket sales probably will be used to pay back any bonds issued for the Memorial Stadium renovation project.

The board of trustees has limited bonding authority and can only issue bonds for projects that will generate revenue; the state Legislature must approve issuing bonds for other projects.

At the meeting, the board also confirmed several key administrative appointments at Urbana.

• Linda Katehi was named provost and vice chancellor for academic affairs. Katehi, a professor of electrical and computer engineering, is the John A. Edwardson Dean of Engineering at Purdue University.
  
• Sarah Mangelsdorf was named dean of the College of Liberal Arts and Sciences, of which she has been acting dean for the past two years.
  
  “She is uniquely qualified to serve as dean,” Urbana Chancellor Richard Herman said. “She is a gifted administrator.”
  
  Herman said the appointment is widely supported by people in the college. “We’ve been through some difficult times and she led the college through it,” Herman said.
  
• Robert Graves, professor and head of the department of theater, was named interim dean of the College of Fine and Applied Arts. Herman said students consistently rate Graves excellent as an instructor and “he has a distinguished record of service.”
  

The board authorized the architectural firm HNTB, which has offices in Chicago and numerous other U.S. cities, to continue planning the first phase of a multiphase renovation project at Memorial Stadium for a $422,375 fee. White said the financial details of the project have been reviewed and “we are convinced the financing for this project is sound.”

Herman said Athletic Director Ron Guenther has been successful in selling suites in the renovated stadium.

Funding was approved to hire the architectural firm VOA Associates of Chicago for $597,465 to redesign the Intramural-Physical Education Building, the second phase of a two-phase renovation project for Campus Recreation at Urbana.

In other business, the trustees re-elected Chairman Lawrence Eppley to a fourth term as chair. Eppley, who said he is committed to working harder than ever, is a lawyer in the corporate practice of Bell, Boyd and Lloyd LCC, Chicago.

Trustee Kenneth Schmidt, who nominated Eppley, said it takes “skill, patience, intelligence and perhaps a little luck” to head the board.

The reappointments of other university officers also were confirmed: secretary Michele Thompson, comptroller Stephen Rugg and Thomas Bearrows, university counsel. Three trustees also were named to the executive committee: Eppley as chair, Niranjan Shah and Robert Vickrey.

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