Let the building begin.
The Southeast Missouri State University Board of Regents on Wednesday approved a $59.25 million bond issue to pay for campuswide renovation and maintenance.
Despite a bond market that saw historically low interest rates spike Tuesday, the university is slated to lock into an average 4.33 percent interest rate over the life of the 30-year loan. That's an increase over rates in October, when the board approved the scope of the project, boosting the debt. But it remains a "very cost-effective" borrowing package, especially compared to other institutions in this week's volatile bond market, according to an investment specialist. For instance, in long-term debt at the end of the maturity cycle, Southeast's interest rate was more than 1 percentage point below that of Northern Illinois University, which entered the bond sale Tuesday, unlike Southeast, whose bonds were priced Wednesday morning.
"You have appeal among individual investors. There are a lot of investors all over the place that would like to own your bonds," Julie Portman of St. Louis-based Edward Jones told regents, noting Southeast's strong fiscal position. Earlier at the board meeting Wednesday, the board approved the university's annual audits for fiscal year 2010, which effectively gave the institution a clean bill of financial health.
December typically is a chaotic time in the bond business as entities scurry to wrap up borrowing plans for upcoming building projects. But this year has been especially hectic due to the public sector rush to take advantage of federal Build America Bonds, an incentive program set to expire at the end of the year. The U.S. Treasury subsidizes 35 percent of the interest expense on the bonds, which will save Southeast Missouri State millions of dollars.
States and local governments are set to sell $4.3 billion of the taxable securities this week, the fourth-highest since borrowers began offering the debt in April 2009, according to Bloomberg.
Southeast students will pick up nearly two-thirds of the tab for the upgrades, expected to cost the university about $3.5 million per year for the next 30 years. Student general fees are set to rise $5 per credit hour on top of a $6 maintenance fee, to be in full force next year. The board of regents gave its support to a Student Government Association recommendation to phase in the $5 fee increase over the next three years.
"We thought it was the best option," said Katie Herring, student government president. "This will give the university the funding it needs and give our students the time to adjust" to the fees.
Herring told board members that student government reluctantly approved the recommendation, adding that students expressed concern about the state of the buildings. Academic Hall, marked for nearly $23 million in renovations, has been described by Southeast president Ken Dobbins as a "crisis waiting to happen."
"Students want to make sure that the buildings are maintained so this doesn't happen again," Herring said. Dobbins and the regents agreed, noting diminished state funding in recent years hasn't helped matters.
"These are state buildings, so we look to the state for assistance," Dobbins said, pointing to the approximately $1 million the legislature annually appropriates for maintenance and repair at Southeast, about one-tenth of what higher education experts say is needed.
Board member Jim Limbaugh commended student government on working through a tough issue, in an exchange that provided a moment of levity during the sober proceedings.
"It is never easy to tax yourself unless you create a compelling reason why," he said. "It's not very sexy to replace plumbing until the plumbing breaks down."
"Are you talking about buildings?" joked board member Reginald Dickson, drawing laughter from many in the University Center Ballroom.
Construction on the building projects, which includes a nearly $18 million improvement and expansion of Magill Hall, is slated to begin next summer. Bidding gets underway in spring.
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