Board of Curators approves $332 million in bonds

Friday, July 17, 2009 | 12:01 a.m. CDT

COLUMBIA — Construction of a new orthopedic center, renovations to the university power plant and construction of a new residence hall are among the projects that will be supported by the $332 million in bonds issued by the university, MU officials announced Thursday at the University of Missouri System Board of Curators meeting.

“The university’s backlog of facility needs continues to grow at an alarming rate,” stated Nikki Krawitz, UM System vice president of finance and administration, in a news release.  

The bonds are set to help fund projects on all four campuses in the system, with roughly $220 million going to projects in Columbia.

The Missouri Orthopedic Institute, currently under construction on Monk Drive, will provide operating rooms, short-stay inpatient beds, a pharmacy and orthopedic clinics. It is slated for completion by December 2009 at a total cost of $52.5 million.

The university also has plans to build a new patient care tower that will provide additional short and long-term inpatient beds with room for future expansion.  

The bonds are to support the construction of a new 526-bed mid-campus residence hall and renovation of Defoe, Graham, Hudson and Gillette residence halls.

In an attempt to be more energy efficient, the university power plant will receive heat and power upgrades and new cooling towers.  

A large portion of the bonds, over $256 million, are Build America Bonds. These are taxable bonds that come with a 35 percent subsidy in federal stimulus funds on the interest paid by the university.  

“Through the federal stimulus package, the university is able to use debt financing for revenue-generating facilities such as student housing and a new patient care tower,” stated UM System President Gary Forsee in a news release. “This affords the university the opportunity to reduce the debt service and represents a win-win for the university and those it serves.”

Krawitz said the use of Build America Bonds will save the university 28 percent of the total debt service over the 30-year life of the bond, amounting to millions of dollars in savings.

Despite the savings, the new bond issue will increase the UM System debt from $836 million to $1.2 billion. The university pays off about $65 million in debt each year, but with approval of the bonds, that number is to increase to $85 million.  

The university will be able to handle the additional debt load because the projects being funded are revenue-producing, Krawitz said. She said the Build America Bonds, which will reduce the university's interest rate from nearly 6 percent to roughly 3.8 percent, put the university in a good position to finance its long-term debt.

"These are historically low interest rates," Krawitz said. "It's very rare for long term interest rates to be below 5 percent, much less below 4 percent."

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