NOTE 5: LONG-TERM OBLIGATIONS

a. Long-term debt: The composition of long-term debt at June 30, 2015, is summarized as follows:

LONG-TERM DEBT (in thousands)
INTEREST RATES FINAL MATURITY BEGINNING BALANCE
JULY 1, 2014
ADDITIONS REDUCTIONS ENDING BALANCE
JUNE 30, 2015
CURRENT PORTION
BONDS AND NOTES PAYABLE              
Revenue bonds:              
University of Virginia Series 2003A (9d) 0.05% to 0.27% 2034 $78,639 $- $78,639 $- $-
University of Virginia Series 2005 (9d) 4.0% to 5.0% 2037 36,005 - 36,005 - -
University of Virginia Series 2008 (9d) 5.00% 2040 231,365 - - 231,365 -
University of Virginia Series 2009 (9d) 4.48%* 2040 250,000 - - 250,000 -
University of Virginia Series 2010 (9d) 3.62%** 2041 190,000 - - 190,000 -
University of Virginia Series 2011 (9d) 4.0% to 5.0% 2033 71,625 - 2,435 69,190 2,550
University of Virginia Series 2013A (9d) 2.0% to 5.0% 2043 168,300 - 535 167,765 3,015
University of Virginia Series 2013B (9d) 5.00% 2037 61,595 - - 61,595 -
University of Virginia Series 2015A-1 (9d) 4.00% 2045 - 86,995 - 86,995 -
University of Virginia Series 2015A-2 (9d) 3.57% to 5.0% 2045 - 97,735 - 97,735 -
University of Virginia Series 2015B (9d) 2.0% to 5.0% 2022 - 106,910 - 106,910 -
Commonwealth of Virginia bonds (9c) 3.8% to 9.3% 2021 5,848 - 1,500 4,348 1,798
Notes payable to VCBA 2004B (9d) 3.0% to 5.0% 2020 23,280 - 23,280 - -
Notes payable to VCBA 2007B (9d) 4.0% to 4.25% 2020 10,620 - 30 10,590 30
Notes payable to VCBA 2010B (9d) 2.0% to 5.0% 2021 3,435 - - 3,435 -
Other various 2029 2,981 - 220 2,761 170
TOTAL BONDS AND NOTES PAYABLE     $1,133,693 $291,640 $142,644 $1,282,689 $7,563
Less: Current portion of debt     (13,303) - (5,740) (7,563)  
Bond premium     57,823 37,560 5,197 90,186  
NET LONG-TERM DEBT     $1,178,213 $329,200 $142,101 $1,365,312  
*The University of Virginia Series 2009 (9d) revenue bonds are Build America Bonds, issued at 6.2%. The University receives an interest credit from the United States Treasury for a portion of the interest it pays on the bonds. On issuance of the bonds, the University received an interest credit of 35%. This amount has been reduced as noted in the footnote below. With the current credit, the effective interest rate on the bonds is reduced to 4.48%.
**The University of Virginia Series 2010 (9d) revenue bonds are Build America Bonds, issued at 5.0%. The University receives an interest credit from the United States Treasury for a portion of the interest it pays on the bonds. On issuance of the bonds, the University received an interest credit of 35%. This amount has been reduced as noted in the footnote below. With the current credit, the effective interest rate on the bonds is reduced to 3.62%.


On November 10, 2014, the University of Virginia issued $18.2 million of taxable commercial paper to refund $18.2 million of VCBA Series 2004B bonds.

On April 8, 2015, the University of Virginia issued Series 2015A-1 bonds of $87.0 million and Series 2015A-2 bonds of $97.7 million to refund $199.7 million of tax-exempt commercial paper. The Series 2015A-1 bonds were issued with a premium of $4.4 million and the Series 2015A-2 bonds were issued with a premium of $11.6 million.

On April 8, 2015, the University of Virginia issued Series 2015B bonds of $106.9 million to refund $78.6 million of Series 2003A bonds, $31.0 million of Series 2005 bonds, and $18.2 million of taxable commercial paper. The refunding reduced the aggregate debt service by $23.9 million representing a net present value savings of $17.3 million. The bonds were issued with a premium of $21.6 million and an accounting gain, representing the difference between the par value of the refunding debt and the defeasance amount of the refunded debt, of $581,775.

The University of Virginia has three revolving credit agreements from three different banks in the aggregate amount of $200 million to provide liquidity for its variable rate debt obligations. There were no advances outstanding under any credit agreements as of June 30, 2015.

Maturities and interest on notes and bonds payable for the next five years and in subsequent five-year periods are as follows:

MATURITIES (in thousands)
PRINCIPAL INTERESET BUILD AMERICA BONDS
INTEREST REBATE
NET INTEREST EXPENSE
2016* $7,563 $63,817 $(8,111) $55,706
2017 6,558 64,665 (8,111) 56,554
2018 10,333 64,360 (8,111) 56,249
2019 9,581 63,965 (8,111) 55,854
2020 9,655 63,520 (8,111) 55,409
2021-25 141,043 293,994 (40,556) 253,438
2026-30 26,757 279,562 (40,556) 239,006
2031-35 53,685 273,021 (40,556) 232,465
2036-40 555,430 231,026 (38,042) 192,984
2041-45 462,084 57,541 (1,541) 56,000
TOTAL $1,282,689 $1,455,471 $(201,806) $1,253,665
*FY2015 represents a 7.3% reduction in the credit interest payment for September 1, 2014 and 7.3% reduction in the credit interest payment for March 1, 2015. The 7.3% sequestration reduction rate will be all future years unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change.

Prior Year Refundings. As of June 30, 2015, prior years’ in-substance defeased bonds and notes had no outstanding balances.

b. Long-term liabilities: The composition of long-term liabilities at June 30, 2015, is summarized as follows:

LONG-TERM LIABILITIES (in thousands)
BEGINNING BALANCE
JULY 1, 2014
ADDITIONS REDUCTIONS ENDING BALANCE
JUNE 30, 2015
Investments held for related entities $17,521 $2,093 $1,909 $17,705
Accrual for compensated absences 67,750 97,400 90,839 74,311
Perkins loan program 12,563 - - 12,563
Investment in Culpeper Regional Hospital 23,397 144,247 117,690 49,954
Other postemployment benefits 40,681 6,524 - 47,205
Service concession arrangement - 13,459 - 13,459
Other 42,516 10,157 13,184 39,489
Total 204,428 273,880 223,622 254,686
Less: Current portion of long-term liabilities (92,061) - (735) (91,326)
NET LONG-TERM LIABILITIES $112,367 $273,880 $222,887 $163,360