Agenda Item No. _________
Washburn University Board of Regents
SUBJECT: Authority to Refund the callable portion of $16,205,000, 1999 Series Revenue Bonds issued November 1, 1999
BACKGROUND: The 1999 Series bonds bear interest at rates ranging from 5.25% to 6.5% with the final installment due in 2029. These bonds are payable from revenue generated by the Living Learning Center, Union operations, and funds available in the Debt Retirement and Construction Fund (3 mill fund), as needed.
During the spring of 2001, discussions began with John McArthur of Fahnestock and Co. and Don Jensen, Bond Counsel at Cosgrove, Webb & Oman, to determine the feasibility of refinancing the 1999 Series Revenue Bonds since interest rates had begun to decline since their issuance on November 1, 1999. At that time, Mr. McArthur was projecting a gross level savings of $885,526 or $30,000 each year with a present value savings of $450,631 which was 3.57% of the Refunding Bonds.
Unfortunately, the events of September 11, 2001 created negative market conditions for refunding these bonds, but Mr. McArthur believes market conditions will be again be favorable within the next few months to refund these bonds.
DESCRIPTION: The refunding bond issue for the 1999 Series Revenue Bonds will continue to be paid from a combination of revenues from the housing and union operations and funds available in the Debt Retirement and Construction Fund (3 mill fund), as needed.
Volatility in the market calls for precise timing on the sale of the bonds. A negotiated sale of the bonds allows for the timing of the sale to coincide with favorable market conditions. In order to time the sale of the bonds, the Board should vest authority in a committee that can, in concert with John McArthur and Don Jensen, judge the market and act swiftly and effectively. That committee should include the Board Chair, Vice Chair, President and Treasurer. That committee should have the authority of the Board to select the most opportune date on which to sell the bonds. The committee will return a recommendation to the Board at a regular or special meeting for passage of the resolution authorizing and directing the issuance and sale of the refunding revenue bonds.
Included as part of this action is the approval of the Board to:
1. Authorize publication of the intent of the Board to issue revenue bonds; and
2. Create the committee authorized to negotiate the sale of the bonds.
FINANCIAL IMPLICATIONS: Savings to Washburn University in interest payments.
RECOMMENDATION: President Farley recommends the Board of Regents approve the action listed above.
Date Jerry B. Farley, President