NMSU Regents approve issuance of $85 million in system revenue bonds

October 22, 2009 by Mark Cramer NMSU NewsCenter

The New Mexico State University Board of Regents gave preliminary approval for the issuance of about $85 million in system revenue bonds at its meeting Oct. 22.

Jennifer Taylor, senior vice president of business, finance and human resources at the university, requested the bonds to finance six building and improvement projects.

The sale of bonds is the means by which institutions such as NMSU borrow money for projects. This action will allow the university to self-fund capital construction and renovation projects, including improvement to the health center, the second phase of the Chamisa student housing complex, and a new campus bookstore, arts complex and central utility plant. The bonds also were sought to cover the cost of a new irrigation system for the NMSU Golf Course.

“These are all cash-flow projects that will provide revenue for repayment,” Taylor told the board. “We’ve examined the projects and believe they are sound. The current construction market also has seen a decline in cost, meaning our dollars go further, making this a good time to invest in these projects.”

Taylor said the university’s Master Plan for development of the Las Cruces campus is the driving force behind the projects mentioned, identified by NMSU as priority initiatives to meet current campus population needs and position the university for continued growth.

“Even in the current economic climate, we have a responsibility to continue to grow to meet the needs of our current and future students,” Taylor said.

Kevin Powers, a financial adviser with RBC Capital Markets, joined Taylor at the meeting to provide an overview of current market conditions.

“In the municipal bond market right now, there is a real opportunity for the university to get funding at historically low interest rates,” he said. “The university is well-positioned financially, with existing debt relatively small in comparison to other universities of similar size.”

Taylor said NMSU’s current debt capacity is at about $100 million, and stands to be resolved within 17 years, well below the 30-year norm for debt resolution in higher education.

Board members unanimously approved the resolution declaring their intent to issue the improvement revenue bonds, as well as system refunding bonds. This approval was only the first step in a lengthy process to gain full formal approval. Taylor said she would appear before them again in November and a third time in January for final approval to sell the bonds. She indicated, however, that the requested amount for the bonds would remain consistent, if not decrease.

Revenue bonds are special types of municipal bonds distinguished by their guarantee of repayment solely from revenues generated by a specified revenue-generating entity associated with the purpose of the bonds. Only the revenues specified in the legal contract between the bond holder and the bond issuer are required to be used for repayment of the principal and interest of the bonds.

The board also heard a report from Shaun Cooper, associate vice president of information technology at NMSU, and Norma Grijalva, director of ICT telecomm and networking services, on the success of the university’s online distance learning programs.

NMSU entered the field of online distance education in 1997, offering three courses via the Internet. Today, the university offers more than 3,000, and some undergraduate and graduate programs are offered completely online. To keep up with demand, Cooper and Grijalva guided NMSU toward implementation of the Blackboard CE 8 online course management system.

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