Financing Educational Infrastructure
in Virginia
Evie Whitley, Director of Debt Management, Commonwealth of Virginia Deidre Jett, Program Manager, Virginia Public School Authority
Financing Educational Infrastructure in Virginia
• Commonwealth Bond Programs
• Virginia College Building Authority (VCBA) • Virginia Public School Authority (VPSA) • Questions
Commonwealth Bond Programs
• State Treasurer’s Office administers financing programs for
state and local infrastructure projects.
• State agencies and institutions of higher education • Localities in the Commonwealth (K-12)
• Private institutions of higher education
• Programs vary in terms of their level of state credit support. • General obligation bonds - full faith and credit
• State appropriation-backed obligations
• Credit enhancements – Moral obligation or state-aid intercept • No enhancement
Commonwealth Bond Programs
• General Obligation Bonds
• Issued by Treasury Board
• AAA/Aaa/AAA
• Two types:
• Voter-Approved
• Capital projects authorized by General Assembly and approved by voters at referendum
• Double-barrel Revenue Bonds
• Revenue-producing capital projects
• Requires two-thirds vote of the General Assembly
Commonwealth Bond Programs
• Virginia College Building Authority • 21st Century & Equipment Program
• Capital projects for public higher education institutions • Projects authorized by General Assembly
• Tax-supported debt
• Amortization: Capital projects – 20 years/ Equipment – 7 years • Repaid primarily by general fund appropriation
• Rated AA+/Aa1/AA+
• Equipment: $1.2 billion financed; $239 million outstanding • 21st Century: $ 2.8 billion outstanding
Higher Education Facilities 46.9%
Higher Education Teaching & Research Equipment
6.5% Public & Mental Health
Facilities 3.3% Other State Bldgs
8.9% Local & Regional Jail
Reimbursements 3.2% Port Development 1.2% Correctional Facilities 6.9% Transportation Facilities 18.6% Local Projects 0.4%
Parks, Conservation & Recreation
4.6% Economic Development 0.3%
Uses of Tax-Supported Debt Issued
FY 2005 - FY 2014
Commonwealth Bond Programs
• Virginia College Building Authority • Pooled Bond Program
• VCBA purchases notes of public institutions of higher education • Note proceeds used by institution for capital projects
• Notes secured by institution general revenue pledge • Not considered tax-supported debt
• Projects must be approved by the General Assembly • State Aid Intercept mechanism
• Note payments due 15 days prior to VCBA bond payments • Rated AA+/Aa1/AA
VCBA - Private College Program
• Conduit financing for private, nonprofit
institutions of higher education within the Commonwealth • Bonds payable solely from loan repayments made by the
borrowing institution
• No additional security pledged by the Commonwealth or the VCBA
• Bonds carry rating of underlying institution or credit provider
• As of June 30, 2014, $660 million was outstanding for ten private colleges in Virginia
Equipment and Energy Leasing Programs
• Master Equipment Leasing and Energy Financing Programs offer another option for state agencies and institutions.
• Ensures state agencies obtain consistent and competitive credit terms.
• Eligible Agencies – all administrative units of State government • Minimum financing amount - $10,000
• Financing terms offered:
• Equipment: 3, 5, 7 and 10 years • Energy: 12 & 15 years
• Payments may be made monthly, semiannually or annually as established at time of financing
Equipment and Energy Leasing Programs
• Energy Program provides financing for energy efficiency projects to reduce energy operating costs.
• Agencies must evaluate the merits and cost effectiveness of proposed project.
• May included projects done under a performance contract.
• Under a performance project, agency may have recourse with the energy vendor if savings do not materialize or are insufficient for lease payments.
• Typical energy projects include improvements or retrofits to: • Electrical, lighting and auxiliary systems
• Heating ventilating and air conditioning systems • Building improvements
• Minimum lease amount $100,000
Commonwealth Bond Programs
• Considerations for Higher Education Community
• Look at the type of project and determine which program may be most appropriate, and offers the lowest borrowing cost.
• Limited debt capacity will continue to constrain future authorization of tax-supported debt.
• Look at the long-term planned use of the financed facilities.
• Certain private use arrangements may require taxable, rather than tax-exempt bonds.
• Research contracts, privatization agreements, sale of a facility for which bonds are outstanding.
• Easy to issue taxable bonds up front; more problematic to remedy a tax-exempt issue for non-qualifying private use.
K-12 Capital Financing Options
• Pay- as- you- go
• Short-Term / Long Term • Bank Financing • Bond Financing – Lease Revenue – General Obligation • Referendum • VPSA •
VPSA Programs
• Pooled Financing • Notes
• Stand Alone
114 School District Participate in VPSA’s Bond Programs
Accomack County Albemarle County Alleghany County Amelia County Amherst County Appomattox County Arlington County Augusta County Bedford County Botetourt County Bristol City Brunswick County Buchanan County Buckingham County Buena Vista City Campbell County Caroline County Carroll County Charlotte County Chesapeake City Chesterfield County Clarke County Covington City Craig County Culpeper County Cumberland County Danville City Dickenson County Dinwiddie County Essex County Falls Church City Fauquier County Floyd County Fluvanna County Franklin City Franklin County Frederick County Fredericksburg City Giles County Gloucester County Goochland County Grayson County Greene County Greensville County Halifax County Hanover County Harrisonburg City Henrico County Henry County Highland County Hopewell City Isle of Wright County James City County King George County King William County Lee County Lexington City Loudoun County Louisa County Lunenburg County Lynchburg City Manassas Park City Martinsville City Mathews County Mecklenburg County Middlesex County Montgomery County Nelson County New Kent County Newport News City Northampton County Norton City Nottoway County Orange County Page County Patrick County Petersburg City Pittsylvania County Poquoson City Portsmouth City Powhatan County Prince Edward County Prince George County Prince William County Pulaski County Radford City Rappahannock County Richmond City Richmond County Roanoke City Roanoke County Rockbridge County Rockingham County Russell County Shenandoah County Smyth County Southampton County Spotsylvania County Stafford County Staunton City Suffolk County Surry County Sussex County Tazewell County Virginia Beach City Warren County Washington County Waynesboro City West Point Town Westmoreland County Williamsburg-James City County Wise County Wythe County York County
VPSA - Pooled Bond Program
• Flagship program • Established in 1962
• Virginia’s “Bond Bank” for K-12 school capital improvements • Forty-nine issues under the 1997 resolution
VPSA’s Rating
• Bond ratings
– Fitch: AA+
– Moody’s: Aa1
– S&P: AA+
• State Aid Intercept Provision
• Sum sufficient appropriation from the Literary Fund
• Sum sufficient appropriation from the Commonwealth’s general fund • Based on credit strength the Commonwealth
Pooled Bond Program - Key Features
• Finances all types of real and personal property for public schools, including land, buildings and equipment
• Market access – particularly helpful to localities that are not frequently in the bond market
• Credit enhancement through state-aid intercept provision and sum sufficient provisions
• Streamline application process with no application fee
• Decreased administrative burden on local officials for ratings, issuance, arbitrage rebate compliance and continuing disclosure
Pooled Bond Program - Process
• VPSA issues bonds
• Proceeds used to purchase local general obligation school bond • No local voter referendum required when local bonds sold to VPSA • Bonds issued twice a year
- June (applications due in March)
- December (applications due in September)
• Flexibility in debt service schedules
- Level principal - Level debt service
Benefits of Participating in VPSA’s Pool
• VPSA achieves very competitive pricing
• Attractive financing rates for local governments - No application fee
- No upfront VPSA cost of issuance fees
- 5 basis points (0.05%) added to interest rate on VPSA’s bonds • VPSA monitors arbitrage compliance
- Benefit from being in the pool
Recent Changes in Refunding Savings
• Saving Spread over the life of the issue • Lower annual debt service
• Communicate prior to bond sale
School Technology Notes
• Administered through the Department of Education (DOE) • Finances
• Computer-based instructional and testing system • High-speed internet connectivity for public schools
• Authorization by the General Assembly
• Distribution by formula • Matching grant program
• $70 M in FY 2015 and $72 M in FY 2016
School Security Notes
• Administered through the Department of Education (DOE) • Established in 2013 Appropriation Act
• $6 million annual authorization
• Annual competitive grants up to $100,000 per school division • Debt service paid from Literary Fund appropriations
School Tax Credit Bonds – QSCBs & QZABs
• Strict three year spending requirements • Tax Credit versus Direct Pay
• Qualified School Construction Bonds (QSCBs)
• No additional federal authorization
• Qualified Zone Academy Bonds (QZABs)
• Administered with the Department of Education (DOE) • DOE determines eligibility
• As low as 0% Interest • 10% Private Contribution
VPSA “Stand Alone” Program
• Intended for highly rated issuers (“AAA” )
• Rating equal to the general obligation rating of the locality
• VPSA serves as conduit for local issuer
• VPSA purchases local general obligation school bond • State Aid Intercept applies
• No sum sufficient enhancement
• Locality is responsible for the following:
• Cost of Issuance (VPSA and Locality) • VPSA internal expense fee
Changing Municipal Landscape
• Post Issuance Compliance (SEC)
• Read your documents • Have written polices
• VPSA will notify you if you are a Materially Obligated Person
• Record Keeping (IRS)
• Keep all bond related documents for the life of the bonds (plus three years) • This includes Invoices
• GFOA/VGFOA
• Good resource for Best Practices • Training
