Repository: UIHistories Project: Board of Trustees Minutes - 1978 [PAGE 424]

EXTRACTED TEXT FROM PAGE:

1977]

UNIVERSITY OF ILLINOIS

413

Competitive Bidding versus Negotiated Sale of Revenue Bonds: Financing of Parking Structure No. 2, Chicago Circle Campus (35) O n March 23, 1977, the trustees approved the construction of Parking Structure No. 2 at the Chicago Circle campus, to be financed from the sale of revenue bonds.' At a meeting of the Finance Committee on September 20, 1977, the committee considered in some detail, although without taking formal action, the general question of the desirability, as a matter of public policy, of competitive bidding as opposed to the negotiated sale of such bonds — with particular reference to the parking structure for Chicago Circle. At that meeting and at the board meeting on September 21, Vice President Brady reviewed the presumed advantages of a negotiated sale, at least in the present instance: the assumption of cost savings by private placement; the certainty as to the timing and its favorable effect on the negotiations; and the capability of matching the amortization schedule precisely to the interest rate (when known in advance) — constituting a further saving, inasmuch as the bonds can be paid off more quickly. H e also indicated that in the current market it is more difficult to obtain competitive bids than in previous years. He stated that legal questions had been carefully investigated, and no legal obstacles had been advanced against selling such bonds through negotiation. In the course of extended discussion, certain reservations were expressed about the wisdom of negotiated bond sales. Among them was the possibility that negotiation could have the effect of "grandfathering out" earlier bidders under the bidding procedure. Doubts were expressed about adding an additional "mortgage," i.e., pledging of student fees, to another capital project. It was pointed out that the tax-free bond market is subject to rapid shifts, and, thus, cost comparisons are neither easily made nor particularly valid. There was also concern as to whether, as a public institution, the University should depart from its traditional practice of competitive bidding. Some trustees expressed doubt that t h e savings, if demonstrable, clearly outweighed the obligation of the University to support public bidding. Finally, Mr. Lenz made the following motion: that it is the sense of t h e Board of Trustees that bonds to finance Parking Structure No. 2 at Chicago Circle be sold by public bid. T h e student advisory vote was: Aye, M r . Overstreet; no, Miss ConIon, Miss Winter. T h e motion lost by a vote of six to three by the following roll call: Aye, M r . Forsyth, M r . Howard, M r . Lenz; no, Mr. H a h n , M r . Livingston, M r . Neal, Mrs. Rader, Mrs. Shepherd, M r . Velasquez; absent, Governor Thompson. Mr. Neal then m a d e the following motion: that the president, or his designee, be directed to negotiate a sale of bonds for Parking Structure No. 2 at Chicago Circle. H e stated t h a t the motion was directed to this specific project and not to a general endorsement or policy with regard to negotiated sales of revenue bonds. T h e motion was approved by voice vote. M r . Neal requested, and by consensus the board agreed, that t h e administration be directed to bring to a n appropriate committee a statement of the necessary procedures to be followed for future actions of this type.

1 Recommendations and supporting materials prepared for the September agenda — to provide for the acceptance of a purchase offer for the bonds and for the awarding of contracts for the structure — were withdrawn because of the need to correct technical errors.