Repository: UIHistories Project: Board of Trustees Minutes - 1986 [PAGE 533]

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522

BOARD OF TRUSTEES

[April 10

University of Illinois Auxiliary Facilities Revenue Refunding and Improvement Bonds, Series 1986

(2) In September 1984, the board authorized the issuance of $55.3 million of revenue bonds (University of Illinois Auxiliary Facilities System Revenue Bonds, Series 1984), the proceeds of which provided for the advance refunding of all then existing debt of the system (Series M and N ) . Other resources of the system provided for the prepayment of Series A-L Bonds held by the Department of Education. The payments to Series 1984 bondholders were scheduled to begin in Fiscal Year 1991 and continue through Fiscal Year 2009. In June 1985, the board authorized another major issue of revenue bonds, $56.8 million, called University of Illinois Auxiliary Facilities System Revenue Bonds, Series 1985. The proceeds of these bonds are being used to fund a number of projects both for new facilities {e.g., the Chicago Residence Hall and Commons Facility) and major repair and remodeling (e.g., the Busey-Evans Residence Halls). T h e large majority of the payments on the Series 1985 Bonds will be made in Fiscal Years 1986-1990. Interest rates on tax-exempt municipal bonds have dropped substantially, three to four percent depending upon maturity, since the Series 1984 Bonds were issued. The Series 1984 Bonds maturing on or after October 1, 1995, may be redeemed on or after October 1, 1994, at the option of the board. The substantial high-tolow change in interest rates makes it financially attractive to place funds in an escrow account now in an amount that will be sufficient, with interest earnings in the interim, to call a large portion or all of the legally callable bonds in 1994. In addition, it may be desirable to call certain of the bonds in the Series 1985 issue. The amount of the present-value savings, which can be converted into funds available to the University for additional projects as part of a new bond sale, is highly sensitive to interest rates at the date of sale; however, it is estimated to be several millions of dollars at current rates. In order for the University to obtain funds to deposit in the escrow account it will be necessary to issue another series of Auxiliary Facilities System Revenue Bonds — Series 1986. Payments on these bonds would be timed to replace those that they advance refund. Thus, the transaction would not place any additional burden of annual debt payments on the system. Because of pending changes in Federal tax laws, it is very likely that the opportunity for the University to capture the benefits made possible by this advance refunding will expire in the near future, possibly September 1, 1986. Uncertainties in the municipal bond market make it desirable to proceed towards a sale with all deliberate dispatch. The president, with the concurrence of the appropriate administrative officers, recommends the following: 1. Approval of the employment of the law firm of Chapman and Cutler to act as bond counsel in connection with the University of Illinois Auxiliary Facilities System Revenue Refunding and Improvement Bonds, Series 1986 (the "Bonds"). Funds will be available for this service from the bond proceeds; 2. Approval of the employment of the firms of John Nuveen & Co. Incorporated and Stifel, Nicolaus & Company Incorporated to act as representatives of the underwriters of the bonds; 3. Authorization for the comptroller, with the assistance of bond counsel and the representatives of the underwriters, to prepare and distribute a Preliminary Official Statement with respect to the bonds, and to secure bond ratings in connection with such bonds; 4. Authorize such sale to occur on or after May 8, 1986, the date on which the board shall consider a bond resolution to authorize the issuance of such bonds;