UNIVERSITY OF VIRGINIA CONSENT AGENDA
A. INTENT TO ISSUE BONDS - Declares University's intent to issue
bonds to reimburse expenditures for planning costs, issuance costs,
reserve funds, and other financing expenses associated with the
Orange Medical Facility and the Clinch Valley College Student
Residence Hall.
If it is determined that issuing tax-exempt bonds is the best
way to finance any of these projects, federal regulations require
the University to declare its formal intent to issue bonds to
reimburse expenditures associated with the projects. This resolution
does not authorize the issuance of bonds for any of the projects.
The Orange Medical Facility is a 24,000-square-foot, regional,
state-of-the-art dialysis and ambulatory care facility which
will also house ancillary services radiology and clinical laboratory
services. The facility will support the University of Virginia
Health Sciences Center's mission of providing accessible primary
care services throughout Central Virginia.
The Clinch Valley College Student Residence Hall will provide
housing for approximately 120 students, in response to increased
demand for housing and the closure of Crockett Hall. The new
housing facility will be constructed in the vicinity of the
student housing building completed in August 1992, easily accessible
to both existing housing and academic and support facilities.
The facility will house students in double rooms. The exact
site location and floor plan arrangements will be determined
during the programming and schematics design phases.
ACTION REQUIRED: Approval by the Finance Committee and the Board
of Visitors
WHEREAS, the United States Department of the Treasury has promulgated
final regulations in Section l.l50-2 of the Treasury Regulations
(the "Regulations") governing when the allocation of bond proceeds
to reimburse expenditures previously made by a borrower shall
be treated as an expenditure of the bond proceeds; and
WHEREAS, the Regulations require a declaration of official intent
by a borrower to provide evidence that the borrower intended
to reimburse such expenditures with proceeds of its bonds; and
WHEREAS, the Board of Visitors of the University of Virginia
(the "University") desires to make such a declaration of official
intent as required by the Regulations;
RESOLVED that, pursuant to the Regulations, the University hereby
declares its intent to reimburse expenditures in accordance
with the following:
-
The University reasonably expects to reimburse expenditures
incurred for the construction and/or purchase of the Orange
Medical Facility and the construction of the Clinch Valley
College Student Residence Hall with proceeds from the issuance
of tax-exempt bonds (the "bonds") to be issued by the University
through the Treasury board;
- This
resolution is a declaration of official intent under Section
l.l50-2 of the Regulations;
- The
maximum principal amount of bonds expected to be issued for
the purpose of reimbursing expenditures relating to the construction
and/or purchase of the Orange Medical Facility is $4.5 million
and the construction of the Clinch Valley College Student
Residence Hall is $4.5 million.
B.
CLINCH VALLEY COLLEGE INTEREST SUBSIDY - Delegates authority
to the Executive Vice President and Chief Financial Officer to
determine the exact amount of the interest subsidy the University
will provide to Clinch Valley College to allow the College to
keep its housing rates at or below the market rate.
Based upon a recommendation from the Special Committee on Clinch
Valley College, the Finance Committee discussed at its January
and May meetings options for providing financial support for
student housing at Clinch Valley College. The Finance Committee
concluded that the University should provide an interest subsidy
to the Clinch Valley College housing operation, in order to
hold rate increases for students living in residence halls to
the level of the projected Consumer Price Index (2.8- percent).
We continue to work with the state Departments of Planning and
Budget and Treasury to determine the exact amount of the subsidy,
which varies according to assumptions about occupancy, operating
expenditures, debt service schedules and reserve commitments.
At this time, we estimate the amount of the subsidy to be approximately
$670,000 over a six-year period beginning in Fiscal Year 2001.
ACTION REQUIRED: Approval by the Finance Committee and the Board
of Visitors
RESOLVED that the Board of Visitors approves the University’s
providing to the Clinch Valley College housing operation a one-time
subsidy not to exceed $700,000 to be paid over a period of approximately
six years beginning in Fiscal Year 2001 from gifts or endowment
income held by the Board of Visitors;
RESOLVED FURTHER that the Board of Visitors delegates authority
to the Executive Vice President and Chief Financial Officer
to establish the exact amount of the subsidy when adequate information
is available.
II.
A. ENDOWMENT INCOME DISTRIBUTION
BACKGROUND: The investment guidelines for the Pooled Endowment
Fund call for spending to increase on a per-share basis by four
percent annually. If, however, income per share as of the previous
June 30 is less than 3.5 percent for the Class A shares and
5.5 percent for the Class B shares, then the Finance Committee
will review the situation and consider increasing the per-share
spending rate.
DISCUSSION: Completion of the plan to increase faculty salaries
dependent upon increases of endowment income at a level above
the standard four percent increase called for in the investment
guidelines. The standard increase is near or below the 3.5 percent
and 5.5 percent threshold described above. We therefore recommend
increasing the pay out on each of the funds to a dollar value
equal to 4.25 percent of June 30, 1998, market value for the
Class A shares and 5.75 percent for the Class B shares. The
distribution at these levels will equal $64.95 per share for
the Class A shares and $87.87 per share for the Class B shares.
ACTION REQUIRED: Approval by the Finance Committee and the Board
of Visitors
AUTHORIZATION
TO INCREASE THE FISCAL YEAR 1998-99 ENDOWMENT INCOME DISTRIBUTION
RESOLVED that the Executive Vice President and Chief Financial
Officer be authorized to increase the Fiscal Year 1998-99 income
distribution of Class A shares 20.4 percent from $53.94 per
share to $64.95 per share, which equals 4.25 percent of the
June 30, 1998, market value of the Pooled Endowment Fund;
RESOLVED FURTHER that the Executive Vice President and Chief
Financial Officer be authorized to increase the Fiscal Year
1998-99 income distribution for Class B shares 18.8 percent
from $73.99 per share to $87.87 per share, which equals 5.75-
percent of the June 30, 1998, market value of the Pooled Endowment
Fund.
II.
B. Acquisition of Zion Crossroads Dialysis
Center Facility
BACKGROUND: In 1997 the Health Services Foundation (HSF) completed
construction of a Dialysis Center facility at Zion Crossroads
in Louisa County. The Medical Center intended originally to
lease the facility from the Foundation but since has determined
that acquisition of the property is the most cost-effective
method of operating the Dialysis Center.
The Vice President for Management and Budget reported to the
Finance Committee at its January 1998 meeting that the Medical
Center had submitted an amendment to the General Assembly for
the acquisition of the Center. The 1998 General Assembly approved
the Medical Center’s request for authority to utilize $1.1 million
of hospital operating revenues to acquire the facility.
DISCUSSION: The Dialysis Center is a 5,000-gross-square- foot,
single-story structure housing twelve dialysis treatment stations
and all support facilities necessary to provide a complete and
functioning facility. On-site parking for 31 vehicles is included.
The facility can accommodate approximately 6,000 patient visits
annually.
The facility sits on a 1.5-acre parcel leased by the HSF from
the Virginia Oil Company for a twenty-year period, with four
five-year renewals at the tenant’s option. Acquisition of the
Dialysis Center requires the Medical Center’s acquiring the
ground lease from the HSF. Increases in the ground lease rental
rate can occur only every five years and are limited to 15 percent
of the current rate or the percentage increase in Louisa County’s
real estate tax assessment for the property over the same five-year
period, whichever is less.
A purchase price of $1,152,165 for the Dialysis Center facility
and ground lease is predicated on a closing date of October
30, 1998.
ACTION REQUIRED: Approval of the Finance Committee and the Board
of Visitors
APPROVAL
OF ACQUISITION OF ZION CROSSROADS DIALYSIS CENTER FACILITY
WHEREAS,
the Dialysis Center constructed in 1997 at Zion Crossroads by
the Health Services Foundation ("HSF") fulfills the need for
dialysis services among Louisa and Fluvanna County residents;
and
WHEREAS, the Medical Center has determined that acquisition
of the Center from the Health Services Foundation would be the
most cost-effective method of operating the Center; and
WHEREAS, the 1998 General Assembly authorized the Medical Center
to utilize up to $1.2 million of hospital operating revenues
to acquire the Dialysis Center at Zion Crossroads in Louisa
County; and
WHEREAS, acquisition of the facility must be accompanied by
acquisition of the ground lease that the HSF holds with the
Virginia Oil Company;
RESOLVED that the Finance Committee approve acquisition of the
Dialysis Center facility and ground lease in the amount of $1,152,165;
and
RESOLVED FURTHER that the Executive Vice President and Chief
Financial Officer is authorized to execute any and all contracts
and documents pertaining to the acquisition of the aforementioned
property and ground lease.
II.
C. General Revenue Pledge Bond Issuance
- Series 1998
BACKGROUND: The University plans to issue bonds in late October
and early November to finance the following projects: the Scott
Stadium Renovation ($60 million), the Medical Office Building
at Fontaine Research Park ($8 million), the East Precinct Parking
Garage ($2.6 million), and the Student Residence Hall ($6 million).
The University also plans to refinance the Series E Hospital
bonds issued in 1989 ($59 million). These projects, when combined
with capitalized interest during construction and issuance costs,
will require a bond issue not to exceed $145 million.
The University has a five-year contract with Goldman Sachs to
underwrite financings. Goldman Sachs will serve as the lead
underwriter on this bond issue.
DISCUSSION: The Board of Visitors will be asked to approve issuance
of the bonds subject to certain constraints, including maximum
amount to be borrowed, maximum interest rate, maximum maturity,
call protection and maximum underwriting costs. In addition,
the Board will authorize the Executive Committee to approve
all terms and conditions of the bond issue subject to these
constraints.
The new money projects of the East Precinct Parking Garage,
the Student Residence Hall, and the Medical Office Building
will be issued as fixed rate debt with equal payments each year
for twenty years. The Scott Stadium project will consist of
approximately one-half variable rate bonds (with interest rates
reset daily) and one-half fixed rate with a final maturity in
thirty years. The hospital refunding will also be one-half variable
and one-half fixed rate with a final maturity of 2013, matching
that of the refunded bonds. The variable rates are being used
for the larger projects because of the attractive spread to
fixed rates, both current and historic. All series will have
a maximum of ten years of call protection and a maximum discount
payable to the underwriters of $7 per $1000 bond.
The Scott Stadium project will expand the existing Scott
Stadium to over 60,000 seats by enclosing the South end. The
project also includes site development and construction of a
new parking structure with 466 spaces to support overall University
and stadium expansion parking needs. Bryant Hall will be demolished
and replaced within the new stadium structure. The revenue available
for debt service will come from a combination of gifts and grants,
auxiliary revenue, student fees and Athletic Department operating
funds, including receipts from ticket and concession sales,
suite leases, advertising income and bowl game proceeds. No
general funds will be used. The $60 million bond issuance amount
will increase by the costs of issuance and capitalized interest.
The Medical Office Building in Fontaine Research Park includes
the acquisition or lease of a 44,000-gross-square-foot building
housing all musculoskeletal services and support for a new 50-bed,
adjacent rehabilitation hospital. This consolidation will enhance
the overall cost of operations, providing a more efficient patient
treatment program. In April 1997, the Board of Visitors declared
its intent to issue bonds for this project in the amount of
$8.5 million. The bond issuance will be in the amount of $8
million; the revenue available for debt service will come from
hospital revenue.
The East Precinct Parking Garage project involves three
major components: 1) acquisition of several parcels of real
estate, 2) upgrade of the circulation infrastructure and a major
storm water retention system and 3) construction of a parking
garage to accommodate 982 vehicles. The current appropriation
of $17.0 million will be funded from mixed sources. Revenue
bonds in the amount of $4.5 million already have been issued.
An additional $2.6 million in bonds will be issued to expand
the original scope of the garage from 600 to 982 vehicles. Approval
to transfer bond authorization from two other projects is pending
Department of Planning and Budget approval. The final project
budget will total $19.6 million.
The Student Resident Hall project provides new housing for
first- year students in the Alderman Road housing area. The
facility will provide beds for 134 students and six resident
advisors. The total cost of the project is $7 million of which
$6 million will come from debt issuance. Auxiliary Enterprise
funds will be the source of the remaining $1 million. Revenue
available for debt service will come from student housing fees.
Funding of Hospital bonds involves refunding approximately $56
million of the Hospital Revenue Refunding Bonds issued in 1989.
ACTION REQUIRED: Approval by the Finance Committee and the Board
of Visitors
AUTHORIZATION
OF ISSUANCE OF UP TO $145,000,000 OF GENERAL REVENUE PLEDGE
BONDS
WHEREAS, Chapter 9, Title 23 of the Code of Virginia of 1950,
as amended (the "Virginia Code"), establishes a public corporation
under the name and style of The Rector and Visitors of the University
of Virginia (the "University") which is governed by a Board
of Visitors (the "Board");
WHEREAS, Chapter 3, Title 23 of the Virginia Code (the "Act")
classifies the University as an educational institution, declares
it to be a public body and constitutes it a governmental instrumentality
for the dissemination of education;
WHEREAS, the Act empowers the University, with the consent and
approval of the General Assembly of the Commonwealth of Virginia
(the "Commonwealth") 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 such purposes, including the
refinancing of any such facilities, such bonds to be issued
and sold through the Treasury Board of the Commonwealth (the
"Treasury Board");
WHEREAS, the Act further authorizes the University to pledge
to the payment of the principal of and the interest on such
bonds any monies 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 (the "Secretary
of Finance"), monies appropriated to the University from the
general funds of the Commonwealth or from non-general funds,
without regard to the source of such monies, and which are not
required by law or by previous binding contract to be devoted
to some other purpose;
WHEREAS, the Board has determined to finance or refinance several
projects (the "Projects"), as more particularly described on
Exhibit A, through the issuance of bonds in an aggregate principal
amount not to exceed $145,000,000 (the "Bonds");
WHEREAS, the Board anticipates that the Bonds will be secured
by a general revenue pledge of the University; and,
WHEREAS, the Board desires to authorize its Executive Committee
(the "Executive Committee") to approve the final forms and details
of the Bonds, as set forth below;
RESOLVED that the Executive Committee is hereby authorized to
implement the plan of finance described in the Recitals and
on Exhibit A by adopting a resolution or resolutions authorizing
the issuance of one or more series of Bonds for the purpose
of financing or refinancing any or all of the Projects and providing
for the terms thereof as required by Section 23-19 of the Virginia
Code;
RESOLVED FURTHER that the Executive Committee is hereby authorized
to approve the final terms of each series of Bonds including,
without limitation, their original principal amounts, the specific
Projects to be financed or refinanced, maturity dates and amounts,
redemption provisions and prices, and interest rates (which
may be either fixed or variable); provided, however, that (i)
the maximum aggregate principal amount of all Bonds shall not
exceed $145,000,000, (ii) the maximum true interest cost of
any series bearing interest at a fixed rate shall not exceed
six percent per annum, (iii) the maximum initial true interest
cost of any series bearing interest at a variable rate shall
not exceed five percent per annum, (iv) the final maturity of
all Bonds shall not extend beyond June 1, 2029, (v) call protection
on the Bonds shall not exceed ten (10) years, and no optional
redemption premium shall exceed two percent, and (vi) the terms
of the Bonds are otherwise consistent with the parameters for
each of the Projects as described on Exhibit A;
RESOLVED FURTHER that the Executive Committee is hereby authorized
to approve the discount payable to Goldman, Sachs & Co. (the
"Underwriter") on account of the sale of the Bonds and to approve
the terms of a contract for the sale of the Bonds to the Underwriter;
provided, however, that the discount payable to the Underwriter
shall not exceed 0.7 percent of the original aggregate principal
amount of the Bonds;
RESOLVED FURTHER that the Executive Committee and all officers
of the University are hereby authorized and directed to take
all such further actions and to execute all such instruments,
agreements, documents and certificates as they shall deem necessary
or desirable to carry out the terms of the financing plans presented
to this meeting;
RESOLVED FURTHER, pursuant to the Section 147(f) of the Internal
Revenue Code of 1986, as amended, and applicable regulations
thereunder, the University hereby designates Alice W. Handy,
Treasurer of the University, as the public hearing officer to
hold any public hearings required in order to ensure the tax-exempt
status of interest on the Bonds; and,
RESOLVED FURTHER that all acts of all officers of the University
which are in conformity with the purposes and intent of this
Resolution and in carrying out the financing plans presented
to this meeting are hereby ratified, approved and affirmed.
EXHIBIT A:
BOND ISSUANCE PARAMETERS FOR UP TO $145,000,000
GENERAL REVENUE PLEDGE BONDS
In addition to the general parameters described in the Resolution,
the following specific parameters shall apply to the Projects
described below:
| Scott
Stadium Expansion |
| Maximum
Principal Amount: |
$67,000,000 |
| Latest
Final Maturity Date: |
June
1, 2029 |
| East
Precinct Parking Garage |
| Maximum
Principal Amount: |
$
3,000,000 |
| Latest
Final Maturity Date: |
June
1, 2019 |
| Student
Residence Hall |
| Maximum
Principal Amount: |
$
6,500,000 |
| Latest
Final Maturity Date: |
June
1, 2019 |
| Medical
Office Building |
| Maximum
Principal Amount: |
$
8,000,000 |
| Latest
Final Maturity Date: |
June
1, 2019 |
| Hospital
Refunding Bonds |
| Maximum
Principal Amount: |
$
60,500,000 |
| Latest
Final Maturity Date: |
June
1, 2013 |
III.
A. Endowment Report
ACTION REQUIRED: None
Market Value and Performance as of August 31, 1998
BACKGROUND: The Rector and Visitors of the University, particularly
the University of Virginia Investment Management Company (UVIMCO),
oversees the major component of the endowment that benefits
the University. A large portion of the University's endowment
is managed by external managers, with UVIMCO staff managing
selected components. The UVIMCO board meets quarterly to review
performance and to make asset allocation decisions. The Finance
Committee hears reports on market value, asset allocation and
endowment performance at each regular meeting of the Board.
DISCUSSION: As of August 31, 1998, the endowment under the control
of the Rector and Visitors totaled $1.002 billion, compared
with $1.087 million as of June 30, 1998. During the months of
July and August, both the domestic and foreign stock markets
experienced a major correction, with the S&P losing 15.6 percent
and the broader Wilshire 5000 losing 17.8 percent. Hardest hit,
however, were the emerging markets; the Emerging Markets Free
Index was down 29 percent in August alone. Since August 31,
the domestic equity markets have staged a modest rally and are
up seven percent during the first two weeks of September. Market
volatility remains high, and daily swings of one to two percent
are quite common.
The pooled endowment fund performance fared somewhat better
than that of the public markets. Our equity managers carried
both bond and cash positions as well as a short position in
the S&P 500. We also have a significant commitment of about
31 percent with satellite and real estate managers (some of
those positions are revalued only quarterly or, in the case
of real estate, annually). For the calendar year-to-date, however,
we are under-performing our target benchmark, based on the target
allocations to various asset classes (–1.3 percent versus a
constructed benchmark of five percent) because of specific biases
in the portfolio. Our equity portfolio is over-weighted in value
stocks and has a smaller average capitalization than the S&P.
Our growth manager’s stocks did not perform on par with the
growth universe, in part because of the smaller capitalization
biases. Our heavier weighting in emerging markets also has hurt
performance.
On the positive side, the real estate portfolio continues to
outperform its benchmark (13.2 percent versus a benchmark of
ten percent calendar year-to-date) and our in-house bond portfolio
matched our benchmark. Our absolute return strategies proved
to be correlated highly with the equity market in the severe
decline in August.
We were aware that a major correction could affect us significantly,
but we nevertheless are disappointed. We anticipate continued
choppiness in the market. The UVIMCO Board will review policy
and asset allocations at its meeting in early November.
III.
B. Report on Actions of the Investment Management
Company (September 14, 1998)
ACTION REQUIRED: None
BACKGROUND: The University of Virginia Investment Management
Company (UVIMCO) meets quarterly and reports all of its activities
at the following meeting of the Finance Committee.
DISCUSSION: The first meeting of the Board of UVIMCO was held
in New York City on September 14, 1998. Because this was an
organizational meeting, the staff and the Board spent much time
reviewing the history of the endowment and the current asset
allocation and managers. Over the next several meetings, the
Board plans to discuss asset allocation, benchmarks and the
individual managers in each asset class.
The Board also authorized the Executive Vice President and Chief
Financial Officer to commit up to $50 million of the endowment
to Oaktree Capital Management for investment in a high-yield
bond portfolio. The endowment currently has investments of up
to $30 million in two Oaktree distressed debt and real estate
partnerships. The new Oaktree commitment will be part of the
bond fund.
III.
C. Vice President's Remarks
ACTION REQUIRED: None
1999 Legislative and Budget Amendments
BACKGROUND: Beginning in the spring and summer, the vice presidential
areas developed a list of possible legislative and budget amendments
for consideration by the Governor and 1999 General Assembly.
With the concurrence of the Secretary of Education, the University
submitted to the Governor two legislative amendments and operating
and capital amendments totaling $10,056,740 in general funds
and $110,037,503 in nongeneral funds for the University's three
divisions. If the Board concludes that it does not want to submit
one or more of the following amendments, the University will
withdraw them.
DISCUSSION: The two legislative proposals would make changes
to the benefits we offer to our employees. The first amendment
would authorize the University of Virginia Medical Center to
enroll all employees hired on or after July 1, 1999, in a retirement
plan sponsored by the Medical Center and would authorize the
Board of Visitors to approve changes to the contribution level
of the new plan. The legislation also would allow the Medical
Center to provide life, disability and accidental death and
dismemberment benefits to all eligible employees. These changes
would align the Medical Center’s employee benefit offerings
more closely with those of the health care industry.
The second legislative amendment would permit higher education
institutions to extend eligibility in optional retirement plans
to employees who are currently limited to participation in the
Virginia Retirement System retirement benefit. This change would
enhance the ability of higher education institutions to recruit
and retain classified employees. The University currently offers
an alternative benefit plan to 70 percent of its work force.
Descriptions
of the University's budget amendments follow:
AGENCY 207 - Academic Division
Operating:
- Uncollectible
Tuition Revenue ($2,115,540) - During budget preparation for
the 1998-2000 biennium, the Department of Planning and Budget
(DPB) estimated tuition revenues by multiplying the expected
enrollment by the tuition rates. This methodology fails to account
for programs that reduce gross tuition revenues, such as unfunded
scholarships. By overestimating the amount of revenue the University
can generate from tuition, DPB underestimated by $2.1 million
the general fund appropriation required from the state to meet
the budget priorities in the 1998- 2000 Appropriations Act.
- Routine
and Preventive Maintenance ($2,400,000) – In order to address
the increasing deferred maintenance backlog of educational and
general facilities and to protect the Commonwealth's investment
in facilities from further deterioration, a significant incremental
investment is needed to increase the major and routine maintenance
budgets of the University.
- Health
Care Plan Funding ($357,600 in year one, $357,600 in year two)
- In 1998-2000, the Department of Planning and Budget (DPB)
increased the funding for health insurance in agencies using
the state's health insurance plans. DPB has agreed that the
funding increase should not be restricted to the state's insurance
plan and that the University also should receive the increased
funding for its QualChoice health plan premiums.
- Technical
Amendment: Correct Reduction for Southwest Virginia Residency
Program ($10,000) - This proposal will restore funding that
was eliminated mistakenly from the base budget during 1998 budget
development. During the 1996-98 biennium, the University received
one-time funding for 1996-97 of $150,000 related to the implementation
of the Southwest Virginia Generalist Residency Program to be
administered by the Virginia Statewide Center for the Advancement
of Generalist Medicine. The 1997 General Assembly reduced the
one-time appropriation to $10,000 for the 1996-97 Fiscal Year.
The one-time appropriation appropriately was not included in
the 1997-98 budget, which serves as the base budget for the
1998-2000 biennial budget. However, the line item for the program
mistakenly remained in the Governor’s introduced budget for
1998-2000. The conference committee reduced the University’s
appropriation by $10,000 when it corrected the line item, but
the amount actually had not been included in the base budget.
Capital:
- East
Precinct Chiller Plant ($3,316,000 in General Funds, $(626,000)
in Nongeneral Funds) - This project will construct a new Chiller
Plant and thermal storage system to provide additional chilled
water capacity for buildings in the east precinct of the Health
Sciences Center. This request amends an existing project.
- Campbell
Hall Chiller Plant ($1,500,000 in General Funds) - This project
is included in the University’s Six-Year Plan for the 2000-
2002 Biennium. It is no longer dependable or economical to maintain
and repair the Campbell Hall chiller, and its replacement must
be accelerated. We are presenting this project to the state
for the first time.
- Biomedical
Engineering & Medical Sciences Building ($8,000,000 in Nongeneral
Funds) - This building will support research for the School
of Medicine and the School of Engineering and Applied Science.
The University requests an authorization increase from $33,424,000
to $41,424,000 to conform with original cost estimates. This
request increases an existing authorization.
- Central
Grounds Electrical Upgrade ($900,000 in Nongeneral Funds) -
This project will provide additional and more reliable power
for the Central Grounds areas and will accommodate the increase
in student population and the construction of new facilities.
A recently completed engineering study indicates that the project
budget should be increased from $800,000 to $1,700,000.
- Renovation
of Academic and Research Facilities ($6,000,000 in Nongeneral
Funds) - This blanket authorization is for small capital outlay
projects that are needed to support the University’s academic
and research programs. A recent projection indicates that the
University will need $6 million more than the current $8 million
authorization.
- Lambeth
Area Housing Renovations ($5,000,000 in Nongeneral Funds) -
The Lambeth Student Housing area accommodates students in an
apartment setting. It was completed in the mid-1970s and is
in need of external and internal renovations. A recent study
indicated we should undertake this project as soon as possible.
We are bringing this as a new project to the state at this time.
- Renovations
of School of Medicine Offices ($2,173,000 in Nongeneral Funds)
- This new project will support renovations for three departments
in the School of Medicine.
AGENCY 209 - Medical Center
Operating:
- Nongeneral
Fund Appropriation Increase ($41,232,384 in Nongeneral Funds
in year one, $34,738,119 in Nongeneral Funds in year two) -
This amendment corrects the appropriation in each year of the
1998- 2000 biennium to conform to actual operating levels.
Capital:
- Orange
Medical Office Building ($4,500,000 in Nongeneral Funds) - The
Medical Center received a $4,500,000 authorization, funded by
hospital revenues, from the 1998 General Assembly to construct
or acquire a medical office building in Orange, Virginia, to
provide primary care services. This request will change the
fund source from hospital revenues to bonds.
- Kluge
Children's Rehabilitation Center Renovations (planning) ($4,000,000
in Nongeneral Funds) - This project will combine all pediatric
clinics at the University’s Kluge Children’s Rehabilitation
Center. This is a request for a planning authorization. A construction
authorization request will be submitted to the 2000 General
Assembly.
- Ambulatory
Care Clinics ($4,120,000 in Nongeneral Funds) - This new project
will support the renovation of clinic space for the Departments
of Neurosurgery, Surgery and Family Medicine.
AGENCY 246 - Clinch Valley College
Operating:
- Faculty
Salary Technical Adjustment ($178,350 in General Funds in year
one; $179,800 in General Funds in year two) – The 1998 Appropriations
Act includes a 12.5 percent salary increase in each year of
the biennium to bring the College's faculty salaries to the
60th percentile of its peer group. Based on the funding formula
developed by the Department of Planning and Budget which does
not account for the high rate (93 percent) of Virginia residents
served by the College, the College is experiencing a deficit
in the funding available for faculty salaries. This proposal
will correct the funding shortfall for faculty salary increases.
- Math
Faculty ($106,200 in General Funds in year two) – There is a
critical regional, statewide and College need for significant
improvement in math education. To support state and regional
economic development, greater math and computer skills are required
to support growing technology-based industries. Good mathematical
skills are a critical determinant of student retention. Currently,
the student-faculty ratio of mathematics classes offered at
the College is 30 to 1. This proposal includes the costs of
hiring two new positions in the Mathematics Department.
- Revision
of Base Other than Personnel Services (OTPS) ($80,438 in General
Funds in year one; $82,582 in General Funds in year two) – Enrollment
growth has eroded the College’s basic OTPS support. This erosion
has been exaggerated by the faculty salary miscalculation, forcing
the College to divert growth funds to meet faculty salary increases.
The OTPS base budget is further complicated by the College’s
remote geographic location, which necessitates higher expenses
for travel and other services within the Commonwealth. To maintain
a level in line with inflation, this proposal increases the
current OTPS budget by three percent,
UVA HEALTH CARE PLAN
BACKGROUND: The Board has asked that the Executive Vice President
and Chief Financial Officer report regularly on the status of
the University's self-insured health care plan. DISCUSSION: The
University, with the help of fringe benefit consultants, regularly
monitors its health insurance claims and premiums, the adequacy
of its reserves and the outlook for future health care costs.
We anticipate that health care costs will rise in the year ahead
by as much as nine- percent. At present we are experiencing higher
utilization and claims than we projected a year ago. Employees
generally are very pleased with their health care plan. We continue
to build our reserve for claims incurred but not yet reported
or paid.
The University will revise its insurance plan premium structure
effective January 1999. Rates will be set to cover our projected
claims costs, to hold employee premiums equal to or less than
the state-sponsored employee benefits plan and to continue to
build a prudent reserve. At the October meeting, we will provide
information to the Board that compares our premiums and administrative
fees with the state plan and national averages. We will present
detailed information about the proposed monthly premiums for the
1999 calendar year and changes that are intended to manage medical
costs. In addition, we will provide information about employee
satisfaction with the plan and the status of our reserve balances.
The report will show that the University's health insurance plan
a) provides very good coverage, b) is more expensive for the employer
than the state plan, c) is less expensive for the employee than
the state plan, and d) is making good progress to build required
reserves.
Pricing
Policy for 1999-2000 Tuition and Required Fees
BACKGROUND: The Board normally approves tuition and required fees
at its March/April meeting. Members of the Board have emphasized
that it is important to review pricing policy and outlook prior
to the meeting at which action is taken.
The Governor's budget and General Assembly actions set the criteria
and framework for the establishment of tuition and fees. Board
policy and Board response to institutional requirements determine
the specific tuition structure within the state-proscribed framework.
DISCUSSION: The discussion at the Board meeting will address undergraduate,
graduate and professional school charges and the outlook for 1999-2000
and will emphasize the self-sufficiency model for the professional
schools. Our recent pricing policy has been designed to enable
the professional schools to generate the funds necessary to support
their operations, therefore allowing us to target institutional
funds for other schools that do not have the same market opportunities.
We also will discuss preliminary information on special programs
being considered by the McIntire School and will review the related
tuition and fee structure.
We will seek Board reaction to various strategies, alternatives
and projections. The outcome of the discussions will determine
the direction taken in the development of the tuition and fee
structure for 1999-2000. No action will be taken at this meeting.
D. MISCELLANEOUS FINANCIAL REPORTS
I. ACADEMIC DIVISION's 1. ACCOUNTS AND LOANS
RECEIVABLE (AS OF JUNE 30, 1998)
Summary
of Accounts Receivable:
The Academic Division's accounts receivable as of June 30, 1998,
were $8,878,000, compared with $12,457,000 as of March 31, 1998.
The major source of receivables as of June 30, 1998, is sponsored
programs of $6,966,000.
The past due receivables over 120 days old are $788,000 as of
June 30, 1998, or 9.22 percent of total receivables, below the
Commonwealth's management standard of ten percent.
Summary of Loans Receivable:
The default rate for the Perkins Student Loan Program increased
by .16 percent to 6.40 percent. This is based on the cohort
default rate calculation and is well below the 15 percent threshold
set by federal regulations. The Health Professions Loan Program
default rate decreased by .13 percent to .08- percent. The Nursing
Undergraduate Student Loan Program default rate increased by
.14 percent to 1.29 percent, while the Graduate Nursing Loan
Program remained at zero. All medical loan programs are well
below the five percent federal threshold. The University Loan
Program default rate decreased by .22- percent to 2.69 percent.
2. CAPITAL
CAMPAIGN GIFT REPORT
Cash and Pledges as of 8/31/98 -- In Millions All Units
3. DISINVESTMENT
OF UNRESTRICTED QUASI-ENDOWMENT TO FUND CAPITAL CAMPAIGN EXPENSES
(June 1, 1994 - August 31, 1998)
(Per June 4, 1993, Board of Visitors resolution granting the
Executive Vice President and Chief Financial Officer approval
to disinvest the principal of the unrestricted quasi-endowment
to fund pre-Capital Campaign expenses)
4. EXPENDITURE
OF FUNDS FROM THE PRATT ESTATE
(As of June 30, 1998)
5. INTERNAL
LOANS TO UNIVERSITY DEPARTMENTS AND ACTIVITIES
(As of August 31, 1998)
(Per January 1990 Board of Visitors resolution changing Current
Funds Guidelines to include investments in internal loans and
the June 1994 Board of Visitors resolution authorizing internal
loans to be made in the discretionary collateral account lending
program [security lending program], both subject to approval
by the Executive Vice President and Chief Financial Officer)
6. MEDICAL
CENTER'S REPORT ON WRITE-OFF OF BAD DEBTS AND INDIGENT CARE
(Per February 6, 1993, Board of Visitors resolution granting
the Executive Vice President and Chief Financial Officer authorization
to approve the write-off of bad debts and free service for the
Medical Center)
INDIGENT CARE:
Indigent care charges totaling $26.1 million for the period
April 1, 1998, through August 31, 1998, have been written off.
For the two months of the current Fiscal Year, $9.7 million
has been written off. Recoveries during this period amounted
to $1.4 million, or 15 percent of the amount written off, and
occurred primarily through Medicaid payments.
The cost of indigent care in Fiscal Year 1997-98 amounted to
$43.8 million. The cost of indigent care for Fiscal Year 1998-99
is estimated to be $52.9 million, of which $35.1 million, or
66 percent, will be funded through the Medicaid special disproportionate
share payments.
BAD DEBT:
Bad debt charges totaling $10.8 million (including $937,000
because of noncompliance with insurance information requirements)
for the period April 1, 1998, through August 31, 1998, have
been written off. Total write-offs for the first two months
of Fiscal Year 1997-98 amounted to $4.5 million. During this
same period, $1.2 million was recovered through suits, collection
agencies and Virginia refund set-off.
7. QUARTERLY BUDGET REPORT
As of June 30, 1998
This report compares, on a quarterly basis, the approved budget
with actual revenues and expenditures for the Academic Division.
Enclosed is the quarterly report for the fourth quarter of 1997-98.
For the fourth quarter of the 1997-98 Fiscal Year, 105.7- percent
of budgeted revenue had been collected,
while actual expenditures were at
101.4 percent of budget.
A definition of terms is included to explain the sources of
revenues and the purposes of expenditures.
DEFINITION
OF TERMS
Educational
and General - those activities which embrace the three programs
directly related to the higher education mission: (1) instruction,
(2) research, and (3) public service. These activities also
encompass the support programs: academic support, institutional
support, and maintenance and operation of physical plant; and
sponsored programs associated with instruction, research, and
public service.
Student
Financial Assistance - those activities which promote student
accessibility to the University through scholarships and fellowships.
Student loans, student wages, and aid from third parties is
not included.
Auxiliary
Enterprises - those activities which are supported entirely
though fees charged to users; such as housing, athletics, dining
services, the telephone system, and the bookstore.
Sponsored
Programs and Indirect Cost Recoveries - primarily research
projects, but also includes activities restricted to institutional
and service programs.
Instruction
- expenditures for the primary mission of the University which
includes teaching faculty, support staff, instructional equipment,
and related routine operating costs.
Research
- includes expenditures for activities such as support for research
faculty, but does not include sponsored research. Activities
include the Center for Public Service, the State Climatologist,
and the Center for Liberal Arts.
Public
Service - includes activities such as the Miller Center
of Public Affairs, the Virginia Foundation for the Humanities
and Public Policy, and that portion of the medical school's
clinical physicians salaries and fringe benefits related to
patient care.
Academic
Support - the program which encompasses the libraries, the
activities of the deans of the schools, and other related expenditures.
Student
Services - activities whose primary purpose is to contribute
to the students' emotional and physical well-being and to their
intellectual, cultural, and social development outside the classroom.
Institutional
Support - primarily includes the financial, administrative,
logistical, and development activities of the University.
Operation
and Maintenance of Plant - includes expenditures for activities
related to the operation and maintenance of the physical plant,
net of amounts charged to auxiliary enterprises and the Medical
Center.
8. SALARY AND COMPENSATION FOR FULL-TIME
FACULTY AT AAU AND SCHEV PEER GROUP INSTITUTIONS
These reports provide average compensation and salary figures
for institutions included in the American Association of Universities,
and average salary figures for the University's peer institutions,
as established by the State Council of Higher Education in Virginia.
These figures include instructional faculty paid on a full-time
basis; all medical faculty have been excluded. Salary figures
for faculty with eleven- or twelve-month duties have been converted
to nine- month figures. The source for these figures is "The
Annual Report on the Economic Status of the Profession, 1997-98,"
as printed in the March-April 1998 issue of Academe, the bulletin
of the American Association of University Professors.
SOURCE: Institutional Assessment and Studies
DATE: September 18, 1998
UNIVERSITY OF VIRGINIA FACULTY SALARY AVERAGES
Salary at AAU Institutions:
AAU salary data includes all sources of funds.
Only U.S. institutions included in the rankings of the 60 institutions.
Two Canadian institutions, the University of Toronto and McGill
University, have been excluded.
The U.Va. averages in all six years displayed represent the
salary averages as of December 1 of those years and reflect
the merit increases of those dates. The 1996-97 average does
not include the increases from endowment funds that were made
in early 1997. That retroactive increase from the endowment
is represented in the 1997-98 figures with the December 1997
installment from the endowment and a five percent increase from
the state.
The percent increase shown for U.Va. between 1996-97 and 1997-98
was 7.11 percent. This represented the third highest increase
in the AAU for that year and resulted in a jump of five positions
in the rankings (from 32nd to 27th).
In 1989-90, before the first round of the Wilder budget cuts,
the University ranked 18th (68th percentile) in the AAU. Since
then our ranking has varied, never rising above 18th, and now
stands at 27th (56th percentile) in 1997-98. During that eight
year period, our average salary increased from $54,100 in 1989-90
to $70,800 in 1997-98 (an increase of 31 percent).
Compensation at AAU Institutions:
As in the case of the average salary, average compensation was
reported as of December 1 of those years.
In 1989-90, U.Va. ranked 20th (65th percentile) in compensation.
Since then our ranking has varied, never rising above 20th,
dropping as low as 32nd in 1992-93, and now stands at 30th (51st
percentile) in 1997-98. During that eight-year period, our average
compensation increased from $66,800 in 1989-90 to $86,500 in
1997-98 (an increase of 29 percent).
State Salary at SCHEV Peer Institutions:
In spring 1997, SCHEV approved a new sample of peer institutions
for the University. Again, the U.Va. state salary represents
the salary average as of December 1 each year. The state salary
average excludes all endowment funds.
In 1989-90, U.Va. ranked 10th in our state peer group of 25.
Since then, our ranking has varied, rising as high as 9th in
1990-91 and dropping as low as 15th in 1991-92, and again in
1995-96. In the newly constituted group, the University’s 1997-98
salary ranks 15th, at the 32nd percentile.
SOURCE: Institutional Assessment and Studies
DATE: September 18, 1998
SCHEV APPROVED 1998-2000 INSTITUTIONAL
PEER GROUP
SALARY FOR FULL-TIME FACULTY AT AAU INSTITUTIONS 1989 - 1998
9. SUMMARY OF SPONSORED PROGRAMS RESTRICTED GRANTS & CONTRACTS
June 1, 1997 - June 30, 1998
For the year ended June 30, 1998, the University received sponsored
program awards totaling $164 million, representing a two percent
increase from June 30, 1997. The Department of Health and Human
Services continued as the University's major source of awards,
accounting for 46 percent of the total. The Medical School received
approximately 54 percent of Fiscal Year awards, followed by
Arts & Sciences at 22 percent and Engineering at 16 percent.
Awards received included $33 million for indirect costs, a three
percent increase from 1997.
