R590, Issuance of Bonds for Colleges and Universities

R590-1. Purpose: To provide policy and procedural guidelines for the issuance of revenue bonds for colleges and universities within the Utah System of Higher Education (USHE).

R590-2. References

2.1. Utah Code 53B-21 (Revenue Bonds)

2.2. Utah Code 11-17 (Utah Industrial Facilities and Development Act)

2.3. Utah Code 11-27 (Utah Refunding Bond Act Code)

2.4. Policy and Procedures R220, Delegation of Responsibility to the Presidents and Institutional Boards of Trustees

2.5. Policy and Procedures R710, Capital Facilities

2.6. Policy and Procedures R587, Contract or Lease-purchase Financing

R590-3. Legislative Approval Required for Bond Issuance:  The Board of Regents shall not issue revenue bonds without prior legislative approval except as provided by sections 3.1 and 3.2 below.

3.1. The Board may refund previously issued bonds without legislative authorization if the bonds are issued to reduce debt service costs or for an objective that benefits the institution.

3.2. The Board may issue Utah Industrial Facilities and Development bonds, on behalf of the University of Utah and Utah State University without prior legislative approval if the amount does not exceed $10,000,000 in any one fiscal year, except refunding bonds for savings and with a maturity within the same time frame as the original bonds.

R590-4.  Responsibilities of the Office of the Commissioner:

4.1. Availability of Office of the Commissioner: At the institution’s request, the Office of the Commissioner shall assist in developing institutional revenue bonding proposals.

4.2.  Review Bond Documentation: Prior to the Board considering any authorizing resolution, the Office of the Commissioner shall review the applicable bond documentation, up-to-date financial data for the institution and the revenues pledged to secure the bonds; the expected bond structure, including the structuring of any reserves; the parameters for maximum principal amounts, interest rates, terms of maturity and discounts from par; the anticipated timing for the issuance of the bonds and other materials requested by the Office of the Commissioner relating to the financial feasibility of the proposed bond issue.

4.3.  Seek Attorney’s General Opinion: The Office of the Commissioner shall request from the Attorney General’s office a legal review of the bond issue and related contracts.

4.4. Engagement of Bond and Disclosure Counsel: The Office of the Commissioner shall request the Attorney General to procure bond counsel and disclosure counsel services.

4.5. Submit an Annual Report of Outstanding Bond Indebtedness. The Office of the Commissioner shall prepare and submit to the Board an annual report of institutional and system bonded indebtedness relative to nationally recognized standards for financial strength.

R590-5. Responsibilities of USHE Institutions:

5.1. Procurement of Financial Services: USHE institutions shall independently engage municipal advisors, trustees, underwriters, and dissemination agents relative to revenue bonds issuance.

5.2. Providing Bond Documentation: Prior to the Board reviewing a bond proposal, USHE institutions shall provide the Office of the Commissioner current data and information attesting to the financial feasibility of the proposed bond issue.

5.3. Continuing Disclosure Reporting Policies: USHE institutions shall establish policies and procedures that assure compliance with continuing disclosure requirements of the Securities and Exchange Commission (SEC) Rule 15c2-12.

5.3.1. Third-party Dissemination Agents: USHE institutions shall engage independent dissemination agents to verify information required under an institution’s Continuing Disclosure Agreement, notify an institution on a timely basis of any missing information, collect and organize such specified data and information, generate the continuing disclosure reports and submit the report to EMMA on or before the required deadline.

5.4.  Continuing Disclosure Training: USHE institutions shall ensure that officers and employees responsible for preparing the information required for continuing disclosure filings are properly trained.

5.5  Maintaining Tax Exempt Status: USHE institutions shall ensure that adequate policies, procedures, controls, and employee training are in place to preserve the tax-exempt status of Board issued revenue bonds.

R590-6. Requirements for Institutions to Issue Revenue Bonds: Consistent with Utah Code 53B-21:

6.1. Board Approval: Institutions shall obtain Board approval for each construction project or facility acquisition for which bonding will be requested.  In seeking Board approval institutions shall:

6.1.1 Document the institution’s need for project and its compatibility with and inclusion in the institution’s current facilities master plan.

6.1.2. Provide financial analyses documenting the feasibility and sufficiency of revenue streams necessary to support the institution’s currently outstanding indebtedness, the proposed revenue bonds, and demonstrating the institution’s compliance with its additional bonds test including adherence with times coverage and rate covenants, if any.

6.1.3. Request Board approval to pursue legislative authorization.

6.2.  Legislative Approval: After receiving preliminary Board approval, institutions shall obtain legislative authorization through an authorizing bill or resolution.

6.3.  Appointment of Bond Counsel: After receiving legislative authorization, institutions shall request the Office of the Commissioner to engage bond counsel through the Attorney General.

6.4.  Subsequent Board Approval through Resolution: After the appointment of bond counsel, institutions shall petition the Board for an approving resolution authorizing the issuance and sale of revenue bonds. The approving resolution shall:

6.4.1 Be prepared by bond counsel and include the provisions necessary to complete the transaction and issue the bonds.

6.4.2 Include the parameters for principal amounts, maturity date, discounts and interest rates.

6.4.3 Be submitted to the Office of the Commissioner for review prior to the Board’s meeting.  When practicable, institutions shall submit the proposed approving resolution 15 days prior to the meeting but no later than 7 days.

6.5   Issuing the Bonds: After the Board has authorized the institution to issue the bonds, the institution shall coordinate and issue the bonds with the assistance of an Independent registered municipal advisor and underwriter or team of underwriters employed to market and sell the proposed bonds.  The Board chair, Board vice-chair or Finance and Facilities Committee chair shall formally participate in the sale of the bonds and affirmatively authorize, either in person or via conference call, the final terms and conditions for the sale of bonds consistent with the approving resolutions.

6.6.  Reporting Results to the Board: The Office of the Commissioner shall report the results of the final bond pricing to the Board during its next scheduled meeting, including a comparison between the Board’s previously approved parameters and the actual results of the bond pricing.

R590-7. Requirements for Institutions to Issue Refunding Revenue Bonds: Consistent with Utah Code 53B-21 and §11-27,  legislative authorization is not required for bonds that refund prior issued revenue bonds. Institutions shall:

7.1. Appointment of Bond Counsel: Institutions shall request the Office of the Commissioner to obtain bond counsel through the Attorney General.

7.2. Board Approval through Resolution: After the appointment of bond counsel, institutions shall submit a proposed approving resolution for Board approval, authorizing the issuance and sale of revenue bonds refunding a prior issuance. The approving resolution shall:

7.2.1     Be prepared by bond counsel and include the provisions necessary to complete the transaction and issue the bonds.

7.2.2     Include the parameters for principal maturity date, discounts and interest rates.

7.2.3    Be submitted to the Office of the Commissioner for review prior to the Board’s meeting.  When practicable, institutions shall submit the proposed approving resolution 15 days prior to the meeting but no later than 7 days.

7.2.4    May request authority to issue bonds at an unspecified future date contingent on favorable interest rates if the approving resolution limits the maximum amount of principal that may be refunded, establishes an expiration date on the authorization not to exceed 18 months from the date of approval, and sets a minimum net present value savings that will be achieved.

7.3  Issuing the Bonds: After the Board has authorized the institution to issue the bonds, the institution shall coordinate and issue the bonds with the assistance of an independent registered municipal advisor and underwriter or team of underwriters hired to market and sell the proposed bonds.  The Board Chair, Board vice-chair, or Finance and Facilities Committee chair shall formally participate in the sale of the bonds and affirmatively authorize, either in person or via conference call, the final terms and conditions for the sale of bonds consistent with the approving resolutions.

7.4.  Reporting Results to the Board: The Office of the Commissioner shall report the results of the final bond pricing to the Board during its next scheduled meeting, including a comparison between the Board’s previously approved parameters and the actual results of the bond pricing.

R590-8. Requirements for Institutions Issuing Industrial Facilities and Development Revenue Bonds: Institutions issuing bonds pursuant to Utah Code 11-17, Utah Industrial Facilities and Development Act, shall follow the procedures established R590-6 except that the University of Utah and Utah State University does not need legislative approval for issuances under $10 million per calendar year or refunding transactions.

Adopted June 28, 1991, amended January 16, 2004, March 28, 2014,May 15, 2015 and July 15, 2016.