SUBJECT: Call of Washburn University Bonds
$1,385,000 of the 1992 Refunding and Improvement Bond is currently outstanding. Annual bond payments currently are approximately $500,000 per year, with final maturity of 9-1-02. Interest rates on the outstanding bonds are between 5.45% and 5.9%, whereas the University is receiving less than 4.5% interest rates on investment of DR&C Fund balances.
Because the University is receiving less than 4.5% on its investment of DRC funds versus the interest cost of up to 5.9% on the present bonded indebtedness, calling the bonds is economically advantageous and enhances the University's position on issuance of the LLC bonds later this year.
In Fall of 1999, the University is planning on issuing G.O. and revenue bonds to pay for the Living Learning Center and renovation of the Memorial Union. As part of this package, the Administration determined that calling this bond issue on September 1, 1999 would facilitate the issuance of LLC bonds in Fall of 1999.
This early payout will save an additional $164,065 in interest.
In 1992 this refunding debt was issued for the new KTWU building, to pay off the West Hall lease, and to partially refund the 1990 Law School G.O. bond. In 1995, when interest rates went even lower, the University partially refunded this bond issue to save approximately $34,000 over the life of the bonds.
1. Reduces $500,000 in debt service costs each year FY01 - FY03 and saves $164,065 in interest.
2. Projected 6-30-99 Debt Retirement and Construction balances are estimated to be $1.9 million. This reduces the Debt Retirement & Construction Fund balance by approximately $1.4 million.
3. Allows the University to allocate approximately the same amount of funds for capital maintenance and major equipment in FY 2001 and FY 2002 as in FY 2000.
President Farley recommends approval by the Board of Regents of the Resolution enclosed (prepared by the bond counsel for the University) calling the 1992 G.O. bonds.
(date) Jerry B. Farley, President