AGENDA ITEM #16:

Revenue Bonds.

SUBJECT: Review of Statement of Essential Facts.

RECOMMENDATION:

It is recommended that the State Regents approve the issuance of general revenue refunding bonds, Series 2006A by the University of Oklahoma in the approximate amount of $114,000,000.

BACKGROUND:

The Oklahoma State Regents for Higher Education are required to approve affirmatively the issuance of revenue bonds issued by either the University of Oklahoma or Oklahoma State University pursuant to Title 70, O.S. 2005 Supp, Section 3980.4. For each proposed issue, the issuing governing board shall prepare a Statement of Essential Facts for the use of and information of prospective bond purchasers. The State Regents’ responsibility is to examine the Statement of Essential Facts and if they determine that, based upon such facts and projections, the projected revenue will satisfy the financial obligation to be incurred, they shall certify such to the Governor, the Speaker of the Oklahoma House of Representatives and the President Pro Tempore of the Oklahoma State Senate.

The universities may pledge to the repayment of obligations any lawfully available source of revenue other than revenues appropriated by the Legislature from tax receipts, but inclusive of revenues derived from the Oklahoma Education Lottery Act accruing to the credit of the university.

POLICY ISSUES: State Regents’ policy does not address this type of financing.

ANALYSIS:

The University has three objectives in their proposed refinancing plan. The first objective is to realize debt savings through the issuance of advance refunding bonds. The second objective is to release prior liens on five previous bond issuances and consolidate these sources into a general revenue pledge, as recently permitted through legislation passed in 2005, and the third objective is to benefit from the release of $1.1 million in existing debt service reserve obligations through the refunding of the Athletic Facilities Revenue Bonds.

The proceeds received from the sale of the General Revenue Bond Refunding Series 2006A bonds will be used (a) to advance refund five previously issued series as described below, (b) to make required deposits into the Escrow Funds, and (c) for payment of costs of issuance.

The proposed plan includes the refunding of the five outstanding revenue bonds. A brief description of the bonds to be refunded and the current outstanding principal balance of such bonds are provided below:

Multiple Facilities Series 1998 Bonds $18,805,000

Original Par Value: $21,950,000

Original proceeds were used to repair student housing facilities, make improvements to the Oklahoma Memorial Stadium, Murray Case Sells Swim Complex, the Energy Center, Nielsen Hall (Physics) and the Law Center.

Public Facilities Program ODFA 2000 Bonds $ 8,865,000

Original Par Value: $10,000,000

Original proceeds were used to renovate Ellison Hall (Arts & Sciences,) construct and equip a multi-purpose laboratory and expand the Fred Jones Art Center.

Student Usage Facilities Series 2000 Bonds $ 8,415,000

Original Par Value: $ 9,500,000

Original proceeds were used to expand the Huston Huffman Physical Fitness Center and partially renovate the Oklahoma Memorial Stadium.

Athletic Facilities Series 2001 Bonds $13,920,000

Original Par Value: $15,500,000

Original proceeds were used to partially finance renovation and additions to the multiple athletic facilities including Lloyd Noble Center, the tennis center, softball locker rooms, indoor practice facility, the Academic Center in the football complex, and the football locker rooms.

Athletic Facilities Series 2002A Bonds $62,885,000

Original Par Value: $63,750,000

Original proceeds were used to fund the expansion and improvements to the football stadium.

It is anticipated that the bonds will be issued as serial bonds payable on July 1 for each of the years 2007 through 2031 with interest payments commencing on January 1, 2007, and semiannually each year thereafter. The bonds are general, limited, and special obligations of the Board of Regents for the University of Oklahoma. The University has pledged, as security for the bonds, all lawfully available revenues with the exception of tax receipt appropriations, as required by statute. The available resources will include the following dedicated revenue sources as originally pledged to the issuances being refunded: (1) Athletic System Revenues, (2) Student Activity Fees, (3) Section 13/New College Revenue, (4) Cultural and Recreation Services Fees, and (5) Student Facility Fees. It is expected that the University will not be required to establish a Debt Service Reserve Fund on this issuance.

The pledged revenues as anticipated by the University’s Board will provide sufficient revenue to pay principal of and interest on the Bonds. The refunding component of this series of bonds calls for an escrow fund to be established which will redeem a portion of refunded bonds at par, over a period of five years from 2006 through 2011. The economic savings associated with the refunding is estimated to be $3.4 million in net present value terms and will also be beneficial to the University’s ability to gain favorable ratings from the rating agencies using the general revenue pledge. This transaction was approved by the Board of Regents for the University of Oklahoma at their March 2005 meeting and the Council of Bond Oversight at their July 27, 2006, meeting.

The Statement of Essential Facts as reflected in the Preliminary Official Statement for the 2006A Refunding Series has been reviewed and found to be substantially accurate. Projected revenue, as described in the Statement, will assure that revenues will be adequate to cover debt service requirements.

A concurrent resolution authorizing issuance of the bonds has been approved by the legislature. A copy of the Preliminary Official Statement is available for review.

Meeting of the

OKLAHOMA STATE REGENTS FOR HIGHER EDUCATION

September 14, 2006