Talking Stick - July/August 2011 - 32

future interest costs. A third factor, especially for fixed rates, may be the amortization term. Though not always, lower interest rates will usually apply to debt repaid over a shorter period of years than over a longer span.

facilities through relationships generally characterized as public-private partnerships. Typically, these involve a longterm lease of campus property to an affiliated foundation or other private, non-profit corporation that is supportive of the institution. Such corporations are termed 501(c)(3) organizations, referring to the section of the Internal Revenue Code by which they have been granted tax-exempt status. The 501(c)(3) corporation then secures financing and undertakes development of a residence facility on the leased site. In this arrangement, the borrower – and legal owner of the facility – is not the institution, but the 501(c)(3) corporation. Lenders generally consider these organizations to have less in the way of resources, support, and student housing experience than established colleges and universities commonly have. Consequently, all else being equal, the private entity’s borrowing costs are likely to be higher than would be paid by the public partner it supports. However, all else is not always equal. Heretofore, many privatized financings have been able to acquire

bond insurance or a bank letter of credit that enhanced the debt issue’s credit rating and strengthened lenders’ confidence in being repaid. Such credit enhancement has substantial cost but may attract lower interest rates which make overall results cost effective. The solvency crises experienced by banks and other financial institutions in recent years have diminished the availability and strength of credit enhancement instruments. Some recovery is now being seen, but, as before, the cost and benefit of using these instruments must be weighed in light of circumstances unique to each debt issue. One primary determinant of a debt issue’s creditworthiness is the pledged revenue stream that provides funds for repayment. In the case of general obligation bonds, bondholders can, if need be, call upon the entirety of the borrower’s revenues for repayment. There are limited obligation bonds that pledge a specified sub-set of institutional revenues, such as those of all campus auxiliary enterprises or the collective campus housing system. There are also bonds that have

Creditworthiness
Judgments of the creditworthiness of a bond issue or loan also have an important influence on financing costs. These judgments take into account many considerations, prominent among them the borrower’s provenance and permanence, depth and breadth of the pledged revenue stream, and bond rating agency evaluations. It might seem self-evident that the college or university on whose campus a proposed housing facility is to be located would be the borrower. In most cases, permanence as an institution and success as a provider of student housing could similarly be assumed. However, those assumptions do not hold in all cases. Over the past quarter of a century, a sizeable number of public institutions have determined that time, money, or both could be saved by acquiring campus housing

Friendly Advice
Obviously, many factors are involved in the process of issuing and using debt to finance campus housing facilities. Here are some tips to help you be an informed and successful participant in that process. 1 Demands for more, better, or different campus housing can spur overly optimistic projections of the revenues, expenses, and occupancy that will result if those demands are satisfied. Be informed about what is needed, be imaginative about how to gain it, but also be realistic in estimating the resources that will be available to meet the commitments that come with assuming new debt. 2 Be mindful that debt financing brings with it an obligation of the borrower to the lender that extends over many years. The reputation of the institution in general and its access to borrowed capital for all other purposes depend upon that obligation being consistently and fully met.

32

TALKING STICK



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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