Talking Stick - July/August 2011 - 31

The first three items listed are beyond the scope of this article, but the last three call for comment here. Typically, expenditures for design, construction, furniture, and the like start at project inception, and funds to meet those costs must be borrowed at that time. Consequently, interest expense is being incurred long before the project is completed and begins to generate revenue on its own. In many cases, funds for this expense are included in the amount borrowed and referred to as capitalized interest. A battery of experts – among them attorneys, underwriters, bankers, and trustees – conduct the process of issuing and marketing revenue bonds. Issuance expenses include the fees paid to these professionals and to bond rating agencies; costs of bond insurance or other credit enhancement; and expenses for printing, mailing, and advertising. These expenses may be paid out of an institution’s current income or they, too, may be paid from borrowed funds, i.e., capitalized. In some instances, bond covenants require that certain reserves be maintained. One may be a debt service reserve. Its purpose is to assure that debt service obligations can be met for a reasonable period of time, usually one year, in the event that financial difficulties arise and time is needed to resolve them. A repair and replacement reserve also may be required. Its purpose is to assure bondholders that the project to which it is related can be kept in good rentable condition throughout the period of indebtedness. Funding for this reserve is not likely to be capitalized, but covenants may direct that a specified amount be transferred to it annually for all or a portion of the amortization period.

each debt service installment and the cumulative interest paid over the life of the debt. At a given time, conditions in the credit markets will determine base line interest rates. In addition, circumstances unique to a particular bond issue or loan will further influence the rate that must be paid to obtain needed funds. One important distinction of most debt assumed by colleges and universities is that it is tax-exempt. The exemption means

that lenders are not taxed on the interest income paid to them. Consequently, lenders accept lower interest rates for taxexempt debt, and borrowers realize the attendant savings in interest costs. Another consideration is whether the interest rate is fixed for the full period of amortization or may change as economic conditions and demand for funds in the credit markets change. Variable rates are lower than fixed ones but bring with them uncertainty about

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Interest Rates
The interest rate that must be paid to obtain borrowed funds is a leading cost factor that affects the amount of
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JULY + AUGUST 2011

31



Talking Stick - July/August 2011

Table of Contents for the Digital Edition of Talking Stick - July/August 2011

Talking Stick - July/August 2011
Contents
Online Now
Vision
Just In
Your ACUHO-I
Transition
Res Life
Facilities
Turn the Page
Calendar
Balancing Act
Making Gender-Neutral Housing Work
Conversations
First Takes
Reporting Out
Welcome
Snapshot
Talking Stick - July/August 2011 - intro
Talking Stick - July/August 2011 - BB1
Talking Stick - July/August 2011 - BB2
Talking Stick - July/August 2011 - Talking Stick - July/August 2011
Talking Stick - July/August 2011 - Cover2
Talking Stick - July/August 2011 - 1
Talking Stick - July/August 2011 - 2
Talking Stick - July/August 2011 - Contents
Talking Stick - July/August 2011 - Online Now
Talking Stick - July/August 2011 - 5
Talking Stick - July/August 2011 - Vision
Talking Stick - July/August 2011 - 7
Talking Stick - July/August 2011 - Just In
Talking Stick - July/August 2011 - 9
Talking Stick - July/August 2011 - 10
Talking Stick - July/August 2011 - 11
Talking Stick - July/August 2011 - 12
Talking Stick - July/August 2011 - Your ACUHO-I
Talking Stick - July/August 2011 - 14
Talking Stick - July/August 2011 - Transition
Talking Stick - July/August 2011 - 16
Talking Stick - July/August 2011 - Res Life
Talking Stick - July/August 2011 - 18
Talking Stick - July/August 2011 - 19
Talking Stick - July/August 2011 - Facilities
Talking Stick - July/August 2011 - 21
Talking Stick - July/August 2011 - 22
Talking Stick - July/August 2011 - 23
Talking Stick - July/August 2011 - Turn the Page
Talking Stick - July/August 2011 - 25
Talking Stick - July/August 2011 - 26
Talking Stick - July/August 2011 - Calendar
Talking Stick - July/August 2011 - Balancing Act
Talking Stick - July/August 2011 - 29
Talking Stick - July/August 2011 - 30
Talking Stick - July/August 2011 - 31
Talking Stick - July/August 2011 - 32
Talking Stick - July/August 2011 - 33
Talking Stick - July/August 2011 - 34
Talking Stick - July/August 2011 - 35
Talking Stick - July/August 2011 - Making Gender-Neutral Housing Work
Talking Stick - July/August 2011 - 37
Talking Stick - July/August 2011 - 38
Talking Stick - July/August 2011 - 39
Talking Stick - July/August 2011 - 40
Talking Stick - July/August 2011 - 41
Talking Stick - July/August 2011 - 42
Talking Stick - July/August 2011 - 43
Talking Stick - July/August 2011 - Conversations
Talking Stick - July/August 2011 - 45
Talking Stick - July/August 2011 - 46
Talking Stick - July/August 2011 - First Takes
Talking Stick - July/August 2011 - Reporting Out
Talking Stick - July/August 2011 - 49
Talking Stick - July/August 2011 - 50
Talking Stick - July/August 2011 - 51
Talking Stick - July/August 2011 - 52
Talking Stick - July/August 2011 - 53
Talking Stick - July/August 2011 - Welcome
Talking Stick - July/August 2011 - 55
Talking Stick - July/August 2011 - Snapshot
Talking Stick - July/August 2011 - Cover3
Talking Stick - July/August 2011 - Cover4
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