A Handbook on Debt Management for Colleges and Universities
Between 1983 and 1986, colleges and universities issued about $20 billion of debt for facilities and student financing, and it is predicted that billions of dollars of new debt will be needed for building renovation. Debt capacity, management, and accounting are now major issues, and the purpose of this book is to provide a handy reference manual for treasury and controllership personnel. Information includes a history of college debt; the need for new debt; common concerns with debt (funded depreciation and debt capacity); choosing a source of funds (debt policy, controlling the financing process, and blended pool of funds); credit support; the effect of the Tax Reform Act; accounting issues over the life cycle of debt; and federal recovery. Ten appendices offer the following examples of debt accounting (bank financing and tax-exempt financing); questions and interpretations regarding debt accounting; an annotated subject bibliography; criteria by various credit rating agencies; hospital and university credit ratings; features of tax-exempt financing alternatives; significant features of the Tax Reform Act of 1986; and three examples (choosing a source of funds, capitalization of interest, and gain on "low to high" refunding). Tables are included. (SM)
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Choosing a Source of Funds
Accounting Issues over the Life Cycle of Debt
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$10 million advance refund allocate alternative minimum tax Amortization amount arbitrage average basis points blended pool bond issuance costs bond issues Bonds payable budget capital structure capitalization of interest capitalization rate Capitalized interest Cash Mandatory transfer colleges and universities costs of issuance Current Unrestricted Fund debt capacity Debt Financing debt issue debt service reserve Deposit with trustee depreciation dormitory endowment example exempt EXHIBIT extinguishment facilities federal Financing Alternatives Financing Higher Education fund balance governmental use bonds higher is better in-substance defeasance Increase in fund interest capitalization interest cost interest earned interest expense interest rate interest rate swaps investment investors issuers letter of credit long-term lower is better Lufkin & Jenrette Mandatory transfer Cash maturities NACUBO NYNEX old debt percent premium principal payment private activity bonds qualifying assets service reserve fund SFAS Source of Funds Standard & Poor's swap Tax Reform Act tax-exempt financing variable-rate debt yield curve Yield Spreads