U.Va. poised to issue $300 million in bonds to finance campus construction projects

CHARLOTTESVILLE -- The University of Virginia is poised to take on an estimated $250 million in debt to finance a long list of construction projects.

The finance committee of the university's board of visitors voted unanimously Thursday to issue up to $300 million worth of bonds in April to help pay for the projects. Final approval of the measure is expected today.

If approved, the latest round of bonds would increase U.Va.'s outstanding debt to just shy of $1 billion.

Yet despite that costly sounding figure, U.Va. Executive Vice President and Chief Operating Officer Leonard W. Sandridge said it is not actually all that much, relatively speaking.

"That's a relatively small amount of debt for a higher education institution," Sandridge said. "Harvard University just issued $1.5 billion of new debt."

Sandridge added that the university has plenty of debt capacity and would not be jeopardizing its Triple-A bond rating, which allows the university to borrow with the best possible conditions and terms. Only two public universities have a Triple-A rating from all three major credit-rating agencies -- U.Va. and the University of Texas at Austin.

Money generated by the sale of the new bonds would pay for a portion of 20 capital projects on the Charlottesville campus and at U.Va.'s College in Wise.

Among the Charlottesville projects are a $14 million renovation of Garrett Hall, an $80.2 million expansion of the hospital and construction of a $76.3 million information technology engineering building and an $88.9 million College of Arts & Sciences research building.

Yoke San. L. Reynolds, vice president and chief financial officer, said the ongoing economic slump has resulted in attractive rates for borrowing.

"In terms of cost of capital and the cost of borrowing, the economy has not really had a significant impact," she said.

The economy has been less kind to U.Va.'s endowment, which fell from $5.1 billion to $3.76 billion over the past eight months, a 26 percent drop.

Christopher J. Brightman, executive director of the U.Va. Investment Management Co., said the university's portfolio started to improve in March as the market began to rebound.

Fundraising has also struggled amidst the recession, reported President John T. Casteen III. As of Feb. 28, the university had raised $173 million during the current fiscal year. That figure marks a roughly $32 million, or 15.5 percent, decrease from a year earlier.

"It is extremely difficult in this economic environment to know what will happen with fundraising," Casteen said.

One bit of good news, he said, is that the federal economic stimulus package will send $10.7 million to U.Va., helping to offset some $23.1 million in budget cuts during 2009-10.

The net reduction, he said, will come to around $12.4 million out of U.Va.'s general fund.

Brian McNeill is a staff writer for The Daily Progress in Charlottesville