MINUTES OF A MEETING OF THE
BOARD OF VISITORS OF
VIRGINIA COMMONWEALTH UNIVERSITY
October 11, 2005
A meeting of the Board of Visitors of Virginia Commonwealth University
was held on Tuesday, October 11, 2005, at 12 noon in the University Meeting Center
located at 101 North Harrison Street.
Present were Drs. Bersoff (Rector), Doswell, Romano and Shapiro; Messrs.
Axselle, Jackson, Sherman, Siegel and Thompson; and Mesdames Lambert and Rhodes.
Absent were Dr. Broaddus; and Messrs. Baldacci, Robertson, Rosenthal and Snead. Also
present were Drs. Trani, Gottfredson, Macrina, Retchin and Sarrett; Messrs. Jez,
Messplay, Ross, Timmreck, Wyeth; and Mesdames Atkinson, Balmer, Chinnici, Lepley,
and Messmer. Mr. Dean Pope and Ms. Suzanne Yount were also present.
Dr. Bersoff called the meeting to order and welcomed members of the press.
The Financing Consideration for the School of Business and School of
Engineering Debt was presented for information. The presentation by Ms. Yount,
University Financial Advisor, SunTrust Capital Markets, Inc., discussed available
financing options including the use of fixed or variable rate debt, possible forms of credit
enhancement and the use of interest rate swaps so that the variable rate debt will be
effectively converted to fixed rate debt. The Board conducted an in-depth discussion on
the options including the risks and advantages for the different financing options.
The Bond Counsel Memorandum was presented for information by Dean Pope,
University Bond Counsel, Hunton & Williams. The memorandum discussed interest rate
swaps and other derivative products for non-profit organizations.
The Debt and Risk Management Guidelines were presented. The Guidelines were
presented to the Finance, Investment and Property Committee on August 24, 2005. A
summary of the Guidelines are:
^ The Debt and Risk Management Guidelines are internal guidelines for the
issuance and management of the University's Debt including the use of interest
rate risk management techniques.
^ All debt financing will be approved by the Board of Visitors, the Treasury Board
and in the case of debt supported in whole or part by the University Foundation,
by the appropriate Foundation Board.
^ Compliance to the guidelines will be maintained with the University's current
debt limit parameters and credit ratings.
^ Debt will have final maturities of not more than 30 years with interest funded
from bond proceeds as appropriate and call features that provide maximum
flexibility relative to the cost of the features.
^ Methods of sale, whether negotiated or competitively bid, will result in the lowest
borrowing cost.
^ Variable rate debt will be maintained within a target guideline of not more than
[30%] of total debt to minimize volatility in the university's debt service
payments.
^ Interest rate risk management strategies will be evaluated with prudent guidelines
to achieve more flexibility in meeting the University's overall objectives.
The Summary Plan of Finance for the School of Business and School of
Engineering was presented and discussed.
The following Resolution Authorizing the Issuance of Bonds and Related
Transactions was presented:
RESOLUTION
Authorizing the Issuance of Bonds and Related Transactions
Virginia Commonwealth University Board of Visitors
2005 School of Business Project and 2005 School of Engineering Project
Whereas, Chapter 6.1, Title 23 of the Code of Virginia of 1950, as amended (the
"Code"), creates Virginia Commonwealth University (the "University"), which is
governed by a Board of Visitors (the "Board"), which is vested with the supervision,
management and control of the University; and
2
Whereas, Chapter 3, Title 23 of the Code (the "Act"), empowers the University,
with the consent and approval of the General Assembly of the Commonwealth of
Virginia and the Governor of the Commonwealth, to build, construct, reconstruct, erect,
extend, better, equip and improve any building, facility, addition, extension or
improvement of a capital nature required by or convenient for the purposes of the
University and to borrow money and make, issue and sell bonds of the University for any
of such purposes, such bonds to be issued and sold through the Treasury Board of the
Commonwealth; and
Whereas, the Act further authorizes the University to pledge the payment of the
principal of and the interest on such bonds any moneys available for the use of the
University, including, but not limited to, and subject to guidelines promulgated by the
Secretary of Finance of the Commonwealth of Virginia, moneys appropriated to the
University from the general fund of the Commonwealth of Virginia or from nongeneral
funds, without regard to the source of such moneys, and which are not required by law or
by previous binding contract to be devoted to some other purpose; and
Whereas, the University and the Virginia Commonwealth University School of
Business Foundation (the "School of Business Foundation") have developed plans to
build and finance a replacement facility for the University's School of Business (the
"School of Business Project"); and
Whereas, the University and the Virginia Commonwealth University School of
Engineering Foundation (the "School of Engineering Foundation") have developed plans
to build and finance an addition to the University's Engineering School (the "School of
Engineering Project"); and
Whereas, on August 25, 2005, the Board approved the School of Business
Project and the School of Engineering Project (together, the "Projects") and authorized
the Senior Vice President for Finance and Administration (the "SVPFA") to approve the
terms of an amended and Restated Project Development and Financing Agreement with
the School of Engineering Foundation and a Project Development and Financing
Agreement with the School of Business Foundation (together, the "Project Agreements")
and other agreements with respect to the Projects, and further authorized the officers and
employees of the University, as further authorized by the SVPFA, to take all such actions
as may be necessary or desirable in connection with the development, acquisition,
construction, equipping and financing of the Projects; and
Whereas, on August 24, 2005, there was presented to the Finance, Investment
and Property Committee of the Board the University's Debt and Risk Management
Guidelines, including its provisions regarding interest rate swaps and other derivative
products; and these guidelines are hereby presented for approval to the Board of Visitors
at this meeting; and
Whereas, a special committee (the "Special Committee") consisting of members
of the Boards of Directors of the School of Business Foundation and the School of
Engineering Foundation has worked with senior staff of the University and its financial
3
and legal advisors and has recommended to the University that it authorize a plan of
finance described below; and
Whereas, there has been presented to this meeting a plan of finance for the
Projects, which includes the issuance of two series of general revenue pledge bonds of
the University (the "Bonds"), expected to take the form of variable rate demand bonds
secured by credit enhancement, with the University entering into one or more forward
interest rate swap agreements (the "Swap Agreements") under which the University
would be obligated to pay a fixed rate to the counterparty and receive a variable rate
intended to cover interest on the Bonds; and
Whereas, the School of Business Foundation will undertake to (1) assist in the
development and construction of the School of Business Project, (2) pay all costs
incurred in connection with the construction and financing of the School of Business
Project not paid out of the proceeds of the series of Bonds issued for the School of
Business Project (the "Business School Bonds") and other available funds, and (3)
reimburse the University for all debt service and related costs with respect to the principal
amount of the Business School Bonds, including remarketing and credit enhancement
fees and payments incurred in connection with the Swap Agreement applicable to the
Business School Bonds; and
Whereas, the School of Engineering Foundation will undertake to (1) assist in the
development and construction of the School of Engineering Project, (2) pay all costs
incurred in connection with the construction and financing of the School of Engineering
Project not paid out of the proceeds of the series of Bonds issued for the School of
Engineering Project (the "Engineering School Bonds"), and (3) reimburse the University
for all debt service and related costs with respect to the Engineering School Bonds,
including remarketing and credit enhancement fees and payments incurred in connection
with the Swap Agreement applicable to the Engineering School Bonds; and
Whereas, the University will undertake to construct the Projects on land currently
owned by the University and, upon completion of the Projects, to convey the School of
Business Project to the School of Business Foundation and the School of Engineering
Project to the School of Engineering Foundation; and
Whereas, the School of Business Foundation will then lease the School of
Business Project back to the University for use as the University's School of Business
and the School of Engineering Foundation will then lease the School of Engineering
Project back to the University for use as part of the University's School of Engineering
under lease agreements (the "Lease Agreements"); and
Whereas, the ability of the University to maximize the desirability of the Bonds
to investors and to reduce the risks of rising interest costs will be enhanced if the
University is able to issue the Bonds in the form of variable rate demand bonds and enter
into the Swap Agreements; and
Whereas, the University's flexibility in accomplishing such purposes will be
substantially enhanced by the delegation to the SVPFA of the authority to set the terms of
4
the Bonds, the Swap Agreements and related documents and to provide for related
covenants and undertakings within certain enumerated parameters;
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF VISITORS
OF VIRGINIA COMMONWEALTH UNIVERSITY:
1. The SVPFA is hereby authorized to execute and deliver a bond resolution
(the "Bond Resolution") providing for the issuance of the Bonds, in an aggregate
principal amount not to exceed $85,000,000, provided that the Bonds shall mature no
later than November 1, 2030. The Bonds shall have such terms, including interest rates
and redemption provisions, as may be approved by the SVPFA, provided that no fixed
interest rate may exceed 5%. The officers of the University may execute and deliver such
credit enhancement agreements, including bond insurance agreements, letter of credit
agreements and standby bond purchase agreements with respect to all or part of the
Bonds, subject to such terms as may be approved by the SVPFA. The officers of the
University may execute and deliver one or more Swap Agreements with respect to the
Bonds subject to such terms as may be approved by the SVPFA, provided that the
notional amount of all the Swap Agreements shall not exceed the expected principal
amount of the Bonds and the variable rate paid to the University shall be based on either
the London Interbank Offering Rate ("LIBOR") or the variable rate index known as the
Bond Market Association Index ("BMA"). The Bond Resolution shall be in substantially
the form of resolutions of the University authorizing the issuance of previous general
revenue pledge bonds, reflecting the financing terms approved in this resolution, and
shall pledge the University's Pledged Revenues, as defined in such previous resolutions,
to the payment of the Bonds, subject to parity pledges for other debt as provided in such
previous resolutions.
2. The Board authorizes the SVPFA to select one or more underwriters for
the purchase and sale of the Bonds (the "Underwriters") and to execute or authorize the
execution of a bond purchase agreement or agreements with respect to the Bonds,
provided that no bond discount shall exceed 1/2% of the principal amount of the Bonds.
The SVPFA may authorize the Underwriters to distribute the Preliminary Official
Statement in form deemed "near final" as of its date, within the meaning of Rule 15c2-12
of the Securities and Exchange Commission ("Rule 15c2-12"), to prospective purchasers
of the Bonds, with such completions, omissions, insertions and changes as may be
approved by the SVPFA.
3. The SVPFA is authorized and directed to approve such completions,
omissions, insertions and other changes to the Preliminary Official Statement necessary
to reflect the final terms of the Bonds and their sale, to complete it as an official
statement in final form (the "Official Statement") and to execute and deliver the Official
Statement to the Underwriters. The Underwriters are authorized to distribute the Official
Statement to each potential investor requesting a copy of the Official Statement and to
each person to whom the Underwriters initially sell the Bonds and the remarketing agent
is authorized to use the Official Statement in any remarketing of the Bonds. Execution of
the Official Statement by the SVPFA shall constitute conclusive evidence of his approval
of any such completions, omissions, insertions and changes and that the Official
Statement has been deemed final by the University as of its date within the meaning of
Rule 15c2-12.
5
4. The SVPFA and the other officers of the University are authorized to
execute a continuing disclosure agreement as necessary permitting compliance with Rule
15c2-12.
5. The Board authorizes the SVPFA to execute the Project Agreements. The
Agreements shall be in substantially the form submitted to this meeting, which are hereby
approved, with such completions, omissions, insertions, deletions and changes as may be
approved by the SVPFA, such execution to constitute conclusive evidence of the
SVPFA's approval of any such completions, omissions, insertions, deletions and changes.
6. The Board authorizes the appropriate other officers of the University to
convey the Projects to the Foundations upon completion of the Projects and to execute
the Lease Agreements, all subject to terms and conditions approved by the SVPFA.
7. The Board authorizes the SVPFA and the other officers of the University
to negotiate, approve, execute, deliver, file and record, as appropriate, all such further
documents, instruments and certificates as they may consider necessary, convenient or
desirable in connection with the undertaking of the Projects, the Lease Agreements, the
issuance of the Bonds, and the execution and delivery of the Swap Agreements, provided
such actions are consistent with this resolution.
8. Any authorization herein to execute a document shall include
authorization to record such document where appropriate and to deliver it to the other
parties thereto.
9. All other acts of the officers of the University that are in conformity with
the purposes and intent of this resolution and in furtherance of the undertaking of the
Projects are hereby ratified, approved, and confirmed.
10. The President of the University may take any action, including the
approval of terms and conditions of documents, that the SVPFA is authorized to take by
this resolution.
This resolution shall take effect immediately upon its adoption.
On motion made and seconded, the Board approved the Debt and Risk
Management Guidelines, the Summary Plan of Finance for the School of Business and
School of Engineering and the Resolution: Authorizing the Issuance of Bonds and
Related Transactions.
An overview of VCU's six-year academic, enrollment, and financial plans was
presented. The Restructured Higher Education Financial and Administrative Operations
Act, passed by the 2005 General Assembly, requires each public institution of higher
6
education in Virginia to submit six-year plans to the Governor, the respective Chairmen
of the House Appropriations and Senate Finance Committees, and to the State Council of
Higher Education for Virginia (SCHEV). The six-year plans were prepared in
accordance with guidance from the SCHEV.
VCU's academic plan addresses the nine state goals for higher education, which
are:
1. Provide access to higher education
2. Provide affordable higher education
3. Offer a broad range of mission-relevant academic programs
4. Initiate continuous, rigorous assessment of academic programs
5. Improve student retention
6. Develop articulation agreements
7. Stimulate economic development
8. Engage in research
9. Develop K-12 partnerships
VCU's enrollment plan reflects an increase in headcount enrollment to about
34,000 students by 2012. On-campus degree-seeking undergraduate enrollments will
increase to over 21,000 and graduate enrollment projections are consistent with VCU's
goal of doubling the number of graduate students by 2020.
VCU's financial plans included two financial planning scenarios:
1. No increase in general fund support; and,
2. Incremental general fund support based upon a general fund share for
costs for all in-state students as set forth in the current biennial
budget.
The six-year financial plans included Educational and General Programs,
Sponsored Programs, Auxiliary Enterprises, and Student Financial Assistance. Also,
anticipated tuition and fee charges and strategies for providing sufficient financial aid to
mitigate tuition and fee increases were included in the six-year plans.
The six-year academic, enrollment and financial plans were submitted on
7
October 3, 2005, pending final approval by the Board of Visitors. On motion made and
seconded, the Six-Year Plans were approved by the Board of Visitors.
On motion made and seconded, the Board convened into closed session to consult
with legal counsel and receive briefings by staff members regarding legal matters and
actual or probable litigation where such consultation or briefing in open session would
adversely affect the negotiating or litigating posture of VCU, as may be necessary; and to
discuss prospective candidates for employment, as authorized by Section 2.2-3711 A(l)
and A(7) of the Virginia Freedom of Information Act.
Following closed session, on motion made and seconded, the following resolution
was approved by roll call vote:
Virginia Commonwealth University hereby certifies that, to the best of each member's
knowledge, (i) only public business matters lawfully exempted from open meeting
requirements by Virginia law were discussed in the closed session meeting to which this
certification resolution applies, and (ii) only such public business matters as were
identified in the motion convening the closed session meeting were heard, discussed or
considered by the Board of Visitors of Virginia Commonwealth University.
Roll Call Vote Ayes Nays
Dr. Edward H. Bersoff, Rector X
Mr. Ralph L. "Bill" Axselle, Jr. X
Mr. David G. Baldacci Absent
Dr. J. Alfred Broaddus, Jr. Absent
Dr. John C. Doswell II left before voting
Mr. Brian K. Jackson left before voting
Ms. Lillian L. Lambert X
Mrs. Anne J. G. "Panny" Rhodes X
Mr. Richard T. Robertson Absent
Dr. Michele A. Romano X
Mr. Thomas G. Rosenthal Absent
Dr. Carol S. Shapiro X
Mr. John Sherman, Jr. X
Mr. Stuart C. Siegel X
Mr. Thomas G. Snead, Jr. Absent
Mr. Philip Thompson, Sr. X
8
Vote:
Ayes: 9
Nays: 0
ABSENT DURING MEETING: 5
ABSENT DURING VOTING: 7
On motion made and seconded, the Board approved authorizing the President to
extend offers of employment to individuals who have been recommended for
consideration by the Vice President for Finance and Administration Search Committee
for positions of Vice President for Finance and Vice President for Administration.
The meeting was adjourned at 3 p.m.
9
