MINUTES OF A SPECIAL MEETING OF THE BOARD OF VISITORS
OF VIRGINIA COMMONWEALTH UNIVERSITY
June 17, 1982
A Special Meeting of the Board of Visitors of Virginia Common-
wealth University was held on Thursday, June 17, 1982, at 9:00 a.m.
in the University Meeting Center.
Present were Messrs. Balfour, Craigie, Grey, Ludeman, Smith and
Wyatt; Drs. Coleman, Gayle, Johnson and Nemuth; and Mesdames Bemiss,
Thalhimer and Whittemore. Absent were Mrs. Fewell, Dr. Butt and
Mr. Cotten. Also present were Drs. Ackell, Hall and Woods; Messrs.
Bruegman, Guerdon, Lash, Ross, Schrock and Ware; and Mrs. Price.
Invited guests included Mr. John McConnell from the Attorney General's
Office, Mr. Joe Smith from Ernst and Whinney, Mr. George Calvert,
State Treasurer's Office, Mr. Cam Hoggan and Mr. Walter Craigie from
Wheat, First Securities, Mr. William Boinest, from Craigie, Incorpo-
rated, and Mr. Peter Michel, Bond Counsel, representing Brown, Wood,
Ivey, Mitchell and Petty.
Dr. Ackell reported that the purpose of the meeting is to seek
approval from the Board to issue $37.4 million in bonds to complete
Phase II of the MCV Hospital project. This project includes con-
struction of three additional floors to the existing Supply and
Distribution Building; renovation and construction of an addition to
North Hospital, and repayment of the loan from the State of Virginia
which was used to purchase and renovate the former Richmond Eye
Hospital.
Mr. Walter Craigie reported on the present market and economic
conditions and recommended that the University proceed with the sale
-2-
of the bonds. He stated that the University will probably receive an
A-1 rating from Moody's and a AA rating from Standard and Poors,
as we did on the last issue of bonds.
Mr. Joe Smith of Ernst and Whinney reviewed the feasibility study
and indicated that the project was financially feasible at this time.
In answer to a question, he stated that any major change in assump-
tions (i.e., change in Medicare funding, cash flow, revenues) would
give cause for his firm to review the present feasibility study.
Mr. Peter Michel, Bond Counsel, reviewed the Bond Resolution
and highlighted those sections of significant interest. Following
a discussion, on motion made and seconded, the interest amount shown
in Section 7, page 11 was changed from 14% per annum to 13.5% per
annum. Mr. Craigie abstained from the vote.
On motion made and seconded, the attached Supplemental Resolution
was approved as amended (Mr. Craigie was absent from the room when the
vote was taken).
On motion made, seconded, and approved the Board went into
Executive Session to discuss certain personnel matters involving
the performance of identifiable employees or faculty of VCU and to
discuss legal matters with its attorney as authorized by Sections 2.1 -
344 a(1) and a(6) of the Virginia Freedom of Information Act.
Following the Executive Session, on motion made and seconded,
the recommendations for Promotion and Tenure for 1981-82 were approved
as submitted.
The meeting was adjourned at 10:45 a.m.
Approved
A SUPPLEMENTAL RESOLUTION AUTHORIZING THE CON-
STRUCTION AND EQUIPPING OF A THREE-STORY ADDI-
TION TO THE EXISTING SUPPLY AND DISTRIBUTION
CENTER AND AN ADDITION TO AND THE RENOVATION
OF THE EXISTING FACILITY KNOWN AS NORTH-HOS-
PITAL, BOTH OPERATED AS PART OF MEDICAL COLLEGE OF
VIRGINIA HOSPITALS AND THE REIMBURSEMENT OF THE
STATE TREASURY FOR ADVANCES MADE TO THE UNIVERSITY
IN CONNECTION WITH ITS ACQUISITION OF THE FORMER
LAND AND BUILDING OF RICHMOND EYE HOSPITAL, AND
THE ISSUANCE UNDER THE PROVISIONS OF TITLE 23,
CHAPTER 3, CODE OF VIRGINIA OF 1950, AS AMENDED,
OF $37,400,000 VIRGINIA COMMONWEALTH UNIVERSITY
MEDICAL COLLEGE OF VIRGINIA HOSPITAL REVENUE
BONDS, SERIES B TO PROVIDE FUNDS FOR PAYING THE
COST OF SUCH PROGRAM; AUTHORIZING THE EXECUTIVE
COMMITTEE OF THE BOARD OF VISITORS TO DETERMINE
THE MATURITIES AND REDEMPTION PROVISIONS OF THE
SERIES B BONDS, TO APPROVE THE AWARD OF SAID BONDS
BY THE TREASURY BOARD AND TO APPROVE THE OFFICIAL
STATEMENT WITH RESPECT TO THE SERIES B BONDS; AND
APPROVING THE PRELIMINARY OFFICIAL STATEMENT.
WHEREAS, Virginia Commonwealth University (the "Uni-
versity") has been created as a public body constituting a
governmental instrumentality of the Commonwealth of Virginia;
and
WHEREAS, The Board of Visitors of the University (the
"Board") under the authority of the Constitution and laws of
the Commonwealth of Virginia, particularly Title 23, Chapter
3, Code of Virginia of 1950, as amended (the "Act"), adopted
on September 30, 1977 a resolution (the "Resolution") au-
thorizing the issuance of revenue bonds of the University
in an aggregate principal amount not exceeding Ninety-nine
Million Eight Hundred Thousand Dollars ($99,800,000) for the
purpose of paying, together with any other available funds,
the cost of the Project (as defined in the Resolution), and
providing for the issuance from time to time of additional
revenue bonds of the University for the purpose of paying
all or a part of the cost of constructing improvements or
refunding outstanding bonds theretofore issued under the
Resolution; and
WHEREAS, pursuant to Section 2.08 of the Resolution,
the issuance of additional bonds in an aggregate principal
amount not exceeding Two Million Dollars ($2,000,000) in
order to reimburse the State Treasury for advances made to
the University in connection with its acquisition of the
former land and building of Richmond Eye Hospital without
complying with the earnings tests contained in clauses (I)
and (II) of said Section 2.08 is permitted; and
WHEREAS, the University acquired the land and building
formerly owned by Richmond Eye Hospital with funds advanced
by the State Treasury, and the Board has determined that it
will reimburse the State Treasury for advances made in
connection with such acquisition in accordance with Section
2.08 of the Resolution; and
WHEREAS, the University initially issued under and
secured by the Resolution revenue bonds of the University
in the aggregate principal amount of Sixty-four Million Four
Hundred Thousand Dollars ($64,400,000), designated "Medical
College of Virginia Hospital Revenue Bonds, Series A" (the
"Series A Bonds"), for the purpose of paying, together with
any other available funds, the cost of the First Phase
Project (as defined in the Resolution); and
WHEREAS, the Board has determined that it will,-for
the purpose of paying, together with any other available
funds, certain costs of the Second Phase Project (as here-
inafter defined) and reimbursing the State Treasury for
advances made to the University in connection with its
acquisition of the former land and building of Richmond Eye
Hospital (collectively referred to herein as the "Program"),
provide for the issuance of additional bonds, pursuant to
the provisions of Sections 2.06(B), 2.08 and 10.01 of the
Resolution; now, therefore,
BE IT RESOLVED by the Board of Visitors of Virginia
Commonwealth University:
SECTION 1. Meaning of Words and Terms. Except as
hereinafter provided, capitalized words and terms used
in this Supplemental Resolution which are defined in the
Resolution shall have the same meanings in this Supplemental
Resolution as such words and terms are given in the Resolu-
tion.
2.
SECTION 2. Authorization of Program and Series B Bonds.
The undertaking of the Program is hereby authorized, and
for the purpose of providing funds, together with any other
available funds, for paying the cost thereof there shall be
issued under and pursuant to the authority of the Constitu-
tion and laws of the Commonwealth of Virginia, particularly
the Act, revenue bonds of the University in -the aggregate
principal amount of Thirty-seven Million Four Hundred Thou-
sand Dollars ($37,400,000), of which $35,400,000 principal
amount has heretofore been authorized under Section 2.06(B)
of the Resolution and $2,000,000 principal amount is hereby
authorized pursuant to Section 2.08 of the Resolution. The
bonds shall be designated "Medical College of Virginia
Hospital Revenue Bonds, Series B" (the "Series B Bonds"),
shall be dated August 1, 1982, shall be in substantially the
form set forth in Exhibit A hereto, and shall be stated to
mature, subject to the right of prior redemption, on July 1
in such years (not exceeding 30 years from their date) and
amounts as shall be determined by resolution of the Executive
Committee of the Board. Interest on the Series B Bonds
shall be payable on January 1, 1983 and semiannually
thereafter on January 1 and July 1 of each year.
SECTION 3. Conditions Precedent to Issuance of Series
B Bonds. Pursuant to the provisions of the second, third
and fourth paragraphs of Section 2.06(B) and Section 2.08 of
the Resolution, each of the Series B Bonds shall be executed
substantially in the form and manner set forth in Exhibit A
hereto and shall be deposited with the State Treasurer, but
prior to or simultaneously with the delivery of the Series B
Bonds by the State Treasurer to or upon the order of the
purchasers thereof, there shall be filed with the State
Treasurer the following:
(a) a copy, certified by the Secretary of the
Board, of this Supplemental Resolution;
(b) a copy, certified by the Secretary of the
Board, of the resolution or resolutions of the
Executive Committee of the Board referred to in
Sections 2 and 4 of this Supplemental Resolution;
(c) an executed copy of the Governor's consent
to the undertaking of the Program and the issuance
of the Series B Bonds pursuant to this Supplemental
Resolution;
(d) a copy, certified by the State Treasurer, of
the resolution of the Treasury Board awarding the
Series B Bonds to the purchasers thereof and specifying
the interest rate or rates thereon;
3.
(e) a copy, certified by the Secretary of the
Board, of the resolution adopted by the Executive
Committee of the Board approving the sale of the Series
B Bonds by the Treasury Board to the purchasers thereof
and directing the delivery of the Series B Bonds to or
upon the order of such purchasers upon payment of the
purchase price therein set forth;
(f) a statement, signed by the Architect and
approved by the Provost, giving the Architect's
estimate of the cost of the Program, including an
amount for contingencies, but excluding financing
charges, reserves and interest during construction, and
an estimate of the date the Program will be completed
and certifying that, according to the Architect's
estimate of the total amount required to pay the cost
of the Program, the proceeds of the Series B Bonds will
be sufficient, together with other funds to be made
available therefor, for paying such cost;
(g) an opinion of the Attorney General to the
effect that (i) this Supplemental Resolution has been
duly adopted pursuant to the Act and the issuance of
the Series B Bonds has been duly and validly authorized
and all conditions precedent to the delivery of the
Series B Bonds have been fulfilled, (ii) no provision
of this Supplemental Resolution or of the Series B
Bonds results in or constitutes a default under any
agreement, indenture or other instrument of which the
Attorney General has knowledge and to which the Uni-
versity is a party or by which the University may be
bound, and (iii) all permits, approvals, franchises,
privileges and legal clearance under Federal, Common-
wealth or local laws and from Federal, Commonwealth or
local entities or officers necessary for the Program,
and then obtainable, have been obtained, and that the
University has full and lawful authority to operate and
maintain the Hospital Facilities as provided in the
Resolution;
(h) a statement, signed by the Accountant, setting
forth:
(i) the Income Available for Debt Service for
each of the two (2) fiscal years next preceeding
the fiscal year in which the Series B Bonds are
delivered, as shown by the audited financial
statements filed under the provisions of Section
7.14 of the Resolution,
4.
(ii) the amount of the Maximum Total Annual
Debt Service for any fiscal year following the
fiscal year in which the Series B Bonds are to be
delivered, excluding from such computation the
annual debt service on the Series B Bonds, and
(iii) the amount of the Maximum Total Annual
Debt Service for any fiscal year following the
fiscal year in which the Series B Bonds are
delivered, including in such computation the
annual debt service on the Series B Bonds; and
(i) a statement, signed by the Management Con-
sultant, stating, for each of the two (2) fiscal years
immediately following the fiscal year in which the
Program is placed in use and operation (as estimated by
the Architect in his statement mentioned in clause (f)
above), the estimate of the Management Consultant of
the Income Available for Debt Service.
When (1) the documents mentioned in clauses (a) to
(i), inclusive, of this Section 3 shall have been filed with
the State Treasurer and (2) the Series B Bonds shall have
been executed as required by the Resolution, the University
shall deliver the Series B Bonds to the State Treasurer and
the State Treasurer shall deliver the Series B Bonds at one
time to or upon the order of the purchasers thereof but only
upon payment to the State Treasurer of the purchase price of
the Series B Bonds so delivered.
Simultaneously with the delivery of the Series B Bonds
and the deposit of said proceeds with the State Treasurer,
the proceeds (excluding accrued interest) of said bonds
shall be applied by the State Treasurer, as follows:
(1) the State Treasurer shall deposit to the
credit of the Bond Service Account an amount which,
together with the accrued interest, if any, shall be
equal to 94.65% of the interest accruing on the Series B
Bonds from their date to August 1, 1984 and 72.56% of
the interest accruing on the Series B Bonds from
August 1, 1984 to August 1, 1985;
(2) the State Treasurer shall deposit to the
credit of the Debt Service Reserve Account an amount
equal to the amount of the increase in the Maximum
Annual Debt Service on Outstanding Bonds resulting from
the issuance of the Series B Bonds; and
5.
(3) the balance of said proceeds shall be de-
posited to the credit of the Construction Fund.
Any amount received as accrued interest shall be
deposited to the credit of the Bond Service-Account.
SECTION 4. Redemption of Series B Bonds. Pursuant to
the provisions of the fifth paragraph of Section 3.01 of the
Resolution, the Series B Bonds shall be subject to optional
and mandatory redemption, including redemption at the option
of the holders thereof, at such times and prices as shall
hereafter be determined by the Executive Committee of
the Board.
SECTION 5. Amendments to Section 1.01 of the Resolution
Which Will Become Effective upon the Passage of the Supple-
mental Resolution. Upon the passage of this Supplemental
Resolution, Section 1.01 of the Resolution shall be amended,
without any further action, by revising the definitions
of the terms "Attorney General", "Provost" and "Second
Phase Project", as follows:
"Attorney General" shall mean the Attorney
General, from time to time, of the Commonwealth,
any Deputy Attorney General or Assistant Attorney
General designated by the Attorney General, or any
other attorney or firm of attorneys who shall have
been designated by the Attorney General as counsel
to the University.
"Provost", wherever used in this Resolution,
shall mean the Vice President for Finance of the
University or his designee in writing filed with
the State Treasurer.
"Second Phase Project" shall mean the con-
struction and equipping of a three-story addition
to the supply and distribution center constituting
a part of the First Phase Project and an addition
to and the renovation of that part of the Existing
Facilities known as North Hospital.
SECTION 6. Amendments to Sections 1.01, 5.04(d) and
5.08 of the Resolution Which Will Become Effective in the
Future. At such time as the Series A Bonds are no longer
outstanding bonds or at such earlier time as the consent
thereto of the holders of not less than a majority in
aggregate principal amount of the bonds then outstanding
shall have been obtained pursuant to Section 10.02 of the
Resolution, the Resolution shall be amended, without any
further action, as follows:
6.
(a) Section 1.01 shall be amended by deleting the
definitions of the terms "Monthly Depreciation", "Monthly
Principal Requirement" and "Required Depreciation Reserve"
and by adding the following definitions:
"Required Depreciation Reserve" shall mean
the Required Depreciation Reserve as defined in
Section 5.08 of the Resolution.
"Schedule of Depreciation and Principal Re-
quirements" means that schedule so defined in Sec-
tion 5.08 of the Resolution.
(b) Section 5.04(d) shall be amended to read as
follows:
"(d) to the credit of the Depreciation
Reserve Fund, commencing on the January 25 or July
25 next succeeding the retirement of all Series A
Bonds that are outstanding bonds or the date on
which the requisite consents to the amendments to
this paragraph (d) and Section 5.08 of this
Resolution are received, one-half (1/2) of the
Required Depreciation Reserve for the then
current fiscal year and beginning in the month
following the month in which money is transferred
from the Depreciation Reserve Fund to the Univer-
sity or to the Bond Service Account, the Redemp-
tion Account or the Debt Service Reserve Account
pursuant to paragraphs (2) or (3) of Section
5.08 of this Resolution, into the Depreciation
Reserve Fund one-twelfth (1/12) of the amount or
amounts so transferred until the amount deposited
equals the sum of the Required Depreciation
Reserve for such fiscal year and the amount or
amounts so transferred."
(c) Section 5.08 shall be amended to read as follows:
"Section 5.08. Computation of Required Depreciation
Reserve and Application of Money in the Depreciation
Reserve Fund. (a) The Required Depreciation Reserve for
each fiscal year will be determined from the Schedule of
Depreciation and Principal Requirements prepared by the
Accountant within 30 days after the receipt of the audited
financial statements for the preceding fiscal year.
"Each Schedule of Depreciation and Principal Require-
ments shall contain the following:
7.
(1) The depreciation on the Hospital Facilities,
assuming no further capital expenditures from the time
of calculation, for each fiscal year commencing with
the fiscal year next succeeding that in which the
schedule is prepared, as calculated by the Accountant
in accordance with generally accepted accounting prin-
ciples for hospitals and based upon the most recent
audited financial statements of the University together
with the depreciation on depreciable assets acquired
during the period from the last audited financial state-
ments to the date of calculation (as certified by the
Provost).
(2) The Principal Requirements on outstanding
bonds for each fiscal year described in clause (1)
above less, with respect to the fiscal year next pre-
ceding the final maturity of all series of outstanding
bonds at the time of calculation, the portion of Maxi-
mum Annual Debt Service on outstanding bonds attri-
butable to principal in such fiscal year, assuming
no further issuance of bonds and no further reduction
in the Amortization Requirements for any outstanding
bonds from the date of calculation (the "Net Principal
Requirements").
(3) A comparison of depreciation, as shown in (1)
above, and the Net Principal Requirements, as shown in
(2) above, showing the fiscal years in which the Net
Principal Requirements exceed depreciation ("Deprecia-
tion Shortfall Years") and for each Depreciation Short-
fall Year the amount by which the Net Principal Require-
ments exceed depreciation ("Depreciation Shortfall").
(4) The amount on deposit in the Depreciation
Reserve Fund on the date of calculation, valued at
amortized cost or market, whichever is less, together
with accrued interest thereon.
(5) The sum of the present values on the first
day of the first Depreciation Shortfall Year as shown
in (3) above, of Depreciation Shortfall for each
Depreciation Shortfall Year commencing with the next
succeeding fiscal year, assuming a 5-1/2% annual dis-
count rate.
8.
(6) The future value on the first day of the
first Depreciation Shortfall Year shown in (3) above,
assuming a 5-1/2% annual rate of return, of the amount
on deposit in the Depreciation Reserve Fund as set
forth in (4) above.
(7) The amount by which the sum set forth in (5)
above exceeds the amount set forth in (6) above (the
"Compound Value").
(8) The Required Depreciation Reserve for each
fiscal year, computed by reference to the following
formula:
Required Depreciation
Reserve = Compound Value - (1+i t ) - 1
i
where i is equal to the annual rate of return, which should
be assumed at 5-1/2%, and t is equal to the number of Excess
Depreciation Years remaining from the date of calculation to
the first day of the first Depreciation Shortfall Year.
"In making these calculations the Accountant shall (a)
assume that deposits to the Depreciation Reserve Fund are
made timely, (b) not give effect to any increase in depre-
ciation or in the Net Principal Requirements resulting from
the issuance of bonds to build or complete Improvements
until the fiscal year immediately succeeding the completion
of such Improvements, except that the aforementioned cal-
culations shall give effect to an increase in Net Princi-
pal Requirements if principal payments commence prior to the
first fiscal year following completion of such Improvements,
and (c) not reduce the last occurring Net Principal Require-
ments by any amounts received as a result of the taking of,
or damage to or destruction of the Hospital Facilities until
the fiscal year after such moneys are transferred to the
Redemption Account or the properties for which such amounts
are utilized are completed.
"If the University obtains the opinion of a Management
Consultant, copies of which are delivered to the State Trea-
surer and, for informational purposes only, the Principal
Underwriters, to the effect that all cost-based payors will
no longer reimburse the University for depreciation but will
reimburse the University for principal payments on long term
debt, the University shall be excused from making deposits
to the Depreciation Reserve Fund.
9.
"(b) Money held for the credit of the Depreciation
Reserve Fund shall be applied as follows:
(1) During a Depreciation Shortfall Year the
State Treasurer shall transfer from the Depreciation
Reserve Fund to the Sinking Fund an amount equal to the
Depreciation Shortfall for such Depreciation Shortfall
Year.
(2) If at any time money held for the credit of
the Bond Service Account, the Redemption Account and
the Debt Service Reserve Account should be insufficient
to pay the principal and interest on all bonds when due
and payable, the State Treasurer shall transfer from
the Depreciation Reserve Fund to the Bond Service Ac-
count, the Redemption Account or the Debt Service
Reserve Account, as the case may be, an amount suffi-
cient to make up any deficiency.
(3) The State Treasurer may transfer from the
Depreciation Reserve Fund to the University money to
provide working capital for the current operation,
maintenance and repair of the Hospital Facilities in an
aggregate principal amount not to exceed in any fiscal
year the greater of (a) the amount of the University's
then current accounts receivable net of reserves-and
(b) the amount of the University's operating expenses
for the most recent one-month period for which records
are available; provided, however, that no such transfer
may again occur unless there shall be an intervening
period of not less than 30 consecutive days during
which no prior transfer had not been fully repaid.
(4) For so long as the University is not in de-
fault under the provisions of the Resolution the State
Treasurer shall use all or a portion of the amount on
deposit in the Depreciation Reserve Fund to pay, at the
request of the University, the cost of the acquisition
or construction by the University of Improvements,
and the cost of unusual or extraordinary maintenance or
repairs, renewals and replacements of and to the Hospi-
tal Facilities, upon receipt from the University of a
bill for the same, together with a certificate request-
ing and authorizing the State Treasurer to make such
payment and certifying that (i) the University will
take all action necessary to include such property in
the Hospital Facilities, and (ii) such cost has not
previously been paid from the Depreciation Reserve Fund
