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Subject: CSU Policy for Financing Activities Approved by the
Board of Trustees on March 12, 2002
Reference: RFIN 03-02-02
WHEREAS, The Board of
Trustees of The California State University (“the Board” or
“the Trustees”) finds it appropriate and necessary to use
various debt financing programs afforded to it through the
methods statutorily established by the legislature, and to use
to its advantage those programs available to it through debt
financing by recognized auxiliary organizations of the
California State University; and
WHEREAS, The Board wishes to
establish and maintain policies that provide a framework for the
approval of financing transactions for the various programs that
enable appropriate oversight and approval by the Trustees; and
WHEREAS, Within a policy
framework the Board desires to establish appropriate delegations
that enable the efficient and timely execution of financing
transactions for the CSU and its recognized auxiliary
organizations in good standing; and
WHEREAS, The Board recognizes
that there is a need from time to time to take advantage of
rapidly changing market conditions by implementing refinancings
that will lower the cost of debt financing for the CSU and its
auxiliary organizations and that such refinancings could be
better implemented by reducing the time required to authorize
such refinancings; and
WHEREAS, The Board finds it appropriate to establish the lowest cost
debt financing programs for the CSU, and to use the limited debt
capacity of the CSU in the most prudent manner; and
WHEREAS, There are certain
aspects of the tax law related to the reimbursement of up-front
expenses from tax-exempt financing proceeds that would be more
appropriately satisfied through a delegation to the Chancellor
without affecting the Trustees’ ultimate approval process for
such financings; now, therefore be it
RESOLVED, by the Board of
Trustees of The California State University as follows:
Section 1. General Financing Policies
1.1
The State University Revenue Bond Act of 1947 (Bond Act)
provides the Board of Trustees with the ability to acquire,
construct, or refinance projects funded with debt instruments
repaid from various revenue sources.
1.2
The long-term debt programs of the Board of Trustees
established pursuant to the Bond Act shall be managed by the
Chancellor to credit rating standards in the “A” category.
1.3
The intrinsic rating of any debt issued by the Trustees
shall be at investment grade or better.
1.4
The Trustees debt programs should include the prudent use
of variable rate debt and commercial paper to assist with
lowering the overall cost of debt.
1.5
The Trustees programs shall be designed to improve
efficiency of access to the capital markets by consolidating
revenue bond programs where possible.
1.6
The Chancellor shall develop a program to control, set
priorities and plan the issuance of all long-term debt
consistent with the five-year non-state capital outlay program.
1.7
The Chancellor shall annually report to the Trustees on
the activity related to the issuance of long-term debt.
Section 2. Financing
Program Structure of the CSU’s Debt Program
2.1
To use the limited debt capacity of CSU in the most cost
effective and prudent manner, all on-campus student, faculty and
staff rental housing, parking, student union, health center, and
continuing education capital projects will be financed by the
Trustees using a broad systemwide multi-source revenue pledge
under the authority of the Bond Act in conjunction with the
respective authority of the Trustees to collect and pledge
revenues.
Other revenue-based on-campus and off-campus
projects will also be financed through this program and the Bond
Act unless there are compelling reasons why a project could not
or should not be financed through this program (See Section 3
below).
2.2
The Chancellor shall establish minimum debt service
coverage and other requirements for Bond Act financing
transactions and/or for the related campus programs, which shall
be used for implementation of the Trustees’ debt programs.
The Chancellor shall also define and describe the
respective campus program categories.
2.3
The Chancellor, the Executive Vice Chancellor and Chief
Financial Officer, the Assistant Vice Chancellor Financial
Services, the Senior Director of Financing and Treasury, and
each of them (collectively, “Authorized Representatives of the
Trustees”), are hereby authorized and directed, for and in the
name and on behalf of the trustees, to take any and all actions
necessary to refinance any existing bonds issued pursuant to the
Bond Act of 1947 if the refinancing transaction will result in
net present value savings, as determined by an Authorized
Representative of the Trustees and which determination shall be
final and conclusive. Authorized Representatives of the Trustees
are authorized to execute, acknowledge and deliver, and to
prepare and review, as each of them deems appropriate, all bond
resolutions, bond indentures, official statements and all other
documents, certificates, agreements and information necessary to
accomplish such refinancing transactions.
Section 3. Other
Financing Programs
3.1
The Board recognizes that there may be projects, or
components of projects, that a campus wishes to construct that
are not advantaged by, or financing is not possible, or is
inappropriate for the Bond Act financing program.
A campus president may propose that such a project be
financed as an auxiliary organization or third party entity
financing if there is reason to believe that it is more
advantageous for the transaction to be financed in this manner
than through the Bond Act financing program.
3.1.1
Such financings and projects must be presented to the
Chancellor for approval early in the project’s conceptual
stage in order to proceed. The approval shall be obtained prior
to any commitments to other entities.
3.1.2
These projects must have an intrinsic investment grade
credit rating, and shall be presented to the Trustees to obtain
approval before the financing transaction is undertaken by the
auxiliary organization or other third party entity.
3.1.3
If a project is approved by the Trustees, the Chancellor,
the Executive Vice Chancellor and Chief Financial Officer, the
Assistant Vice Chancellor Financial Services, the Senior
Director of Financing and Treasury, and each of them
(collectively, “Authorized Representatives of the Trustees”)
are hereby authorized and directed, for and in the name and on
behalf of the Trustees, to execute, acknowledge and deliver, and
to prepare and review, as each of them deems appropriate, any
and all documents and agreements with such insertions and
changes therein as such Authorized Representatives of the
Trustees, with the advice of the General Counsel, may require or
approve, such approval to be conclusively evidenced by the
execution and delivery thereof, in order to assist with
the planning, design, acquisition, construction,
improvement, financing, and refinancing of the projects.
3.2
The Chancellor may require campus presidents to establish
campus procedures applicable to campus auxiliary organizations
for the issuance of debt instruments to finance or to refinance
personal property with lease purchase, line-of-credit, or other
tax-exempt financing methods.
The procedures issued by the Chancellor need not contain
a requirement for approval of the Trustees or the Chancellor but
may include authority for campus presidents to take all actions
to assist the auxiliary organization on behalf of the Trustees
to complete and qualify such financing transactions as
tax-exempt.
Section 4. State Public
Works Board Lease Revenue Financing Program
4.1
The authorizations set forth in this section shall be in
full force and effect with respect to any State Public Works
Board project which has been duly authorized by the Legislature
in a budget act or other legislation and duly signed by the
Governor and which is then in full force and effect.
4.2
The Chancellor, the Executive Vice Chancellor and Chief
Financial Officer, the Assistant Vice Chancellor Financial
Services, the Senior Director of Financing and Treasury, and
each of them (collectively, “Authorized Representatives of the
Trustees”) are hereby authorized and directed, for and in the
name and on behalf of the Trustees, to execute, acknowledge and
deliver, and to prepare and review, as each of them deems
appropriate, any and all construction agreements, equipment
agreements, equipment leases, site leases, facility leases and
other documents and agreements with such insertions and
changes therein as such Authorized Representatives of the
Trustees, with the advice of the General Counsel, may require or
approve, such approval to be conclusively evidenced by the
execution and delivery thereof, in order to provide for the
planning, design, acquisition, construction, improvement,
financing, and refinancing of the projects.
Section 5. Credit of the
State of California
5.1.
The delegations conferred by this resolution are limited
and do not authorize the Chancellor or other Authorized
Representatives of the Trustees to establish any indebtedness of
the State of California, the Board of Trustees, any CSU campus,
or any officers or employees of any of them.
Lending, pledging or otherwise using the credit
established by a stream of payments to be paid from funds
appropriated from the State of California for the purpose of
facilitating a financing transaction associated with a capital
project is permitted only if specifically authorized by a bond
act or otherwise authorized by the legislature.
Section 6.
Tax Law Requirement for Reimbursement of Project Costs
6.1
For those projects which may be financed under the
authority of the Trustees, the Chancellor, the Executive Vice
Chancellor and Chief Financial Officer, the Assistant Vice
Chancellor Financial Services, the Senior Director of Financing
and Treasury, and each of them (collectively, “Authorized
Representatives of the Trustees”), are hereby authorized to
make declarations on behalf of the Trustees solely for the
purposes of establishing compliance with the requirements of
Section 1.150-2 of the U.S. Treasury Regulations; provided,
however that any such declaration:
6.1.1
Will not bind the Trustees to make any expenditure, incur
any indebtedness, or proceed with the project or financing; and
6.1.2
Will establish the intent of the Trustees at the time of
the declaration to use proceeds of future indebtedness, if
subsequently authorized by the Trustees, to reimburse the
Trustees for expenditures as permitted by the U.S. Treasury
Regulations.
Section 7.
Effective Date and Implementation
7.1
Within the scope of this financing policy, the Chancellor
is authorized to further define, clarify and otherwise make and
issue additional interpretations and directives as needed to
implement the provisions of this policy.
7.2
This resolution supercedes RFIN 11-98-18 and shall take
effect immediately. However,
the Chancellor shall have the authority to authorize on a
individual basis, auxiliary organization projects that are in
the planning stage as of the adoption of this policy to proceed
under the previous policy in order to prevent situations that
would result in additional project costs or additional
time-to-completion.
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