policy comprehensive debt modified Mon Oct 03 2022 16:16:32 GMT-0400 (Eastern Daylight Time)
University of Louisville
January 1, 2008
This policy applies to the University Community (administrators, faculty, staff, and students).
REASON FOR POLICY
The purpose of this policy is to provide general guidance on the strategic use of debt as a funding source. The amount and type of debt incurred impacts the financial health of the University and its credit rating. In a tight fiscal environment, its use should be limited to only those projects that fulfill the mission and strategic objectives of the University. To fulfill its mission to become a preeminent metropolitan research university, the University of Louisville will need to make ongoing capital investments in facilities. These will enhance the educational experience of students and foster the pursuit of knowledge from research and scholarly activity.
Under this policy there are six primary objectives:
- Maintain a debt credit rating sufficiently high to provide the financial flexibility to access capital markets at low borrowing costs. The attainment or maintenance of a specific rating of itself is not an objective of this policy.
- Define quantitative tests that will be used to evaluate the University’s overall financial operations and debt capacity.
- Assist in a process for prioritizing capital projects for debt financing with assurance the debt financed project has a viable plan of repayment.
- Consider decisions regarding term and structure of debt issuances.
- Establish guidelines for the issuance of variable rate debt and derivative products to limit risk and achieve the lowest cost of capital.
- Identify criteria used to identify refunding opportunities.
This policy provides a discipline and framework that will be used by leadership management to evaluate the appropriate use of debt in capital financing plans.
Consolidated Debt – Bonds and notes payable, both current and non-current from the University of Louisville Consolidated Statement of Net Assets, increased by the amount of the proposed bond issuance and decreased by the amount of any refunding.
Consolidated Operating Expenses – Total operating expenses from the University of Louisville Consolidated Statement of Revenues, Expenses and Changes in Net Assets.
Consolidated Unrestricted Net Assets – Unrestricted net assets from the University of Louisville Consolidated Statement of Net Assets.
Endowment – Total University Endowment as reported by the UofL Foundation Inc. financial statements.
Proforma Debt – Consolidated debt as defined herein plus bonds payable from the University of Louisville Foundation Consolidated Statement of Net Assets, increased by the amount of the proposed bond issuance and decreased by the amount of any refunding.
Proforma Expendable Resources – Net assets of the University of Louisville Consolidated and the University of Louisville Foundation Consolidated less invested in capital assets, net assets, nonexpendable net assets, and permanently restricted net assets.
Proforma Operating Expense – Consolidated operating expense as defined herein plus total expense of the University of Louisville Foundation consolidated financial statements.
Proforma Peak Debt Service – The maximum aggregate annual debt service for the University of Louisville and the University of Louisville Foundation and their corporate affiliates.
Proforma Unrestricted Net Assets – Consolidated unrestricted net assets as defined herein plus unrestricted net assets of the University of Louisville Foundation consolidated financial statements.
The Vice President for Finance is directly responsible for capital debt management. The Board of Trustees formally approves actions to issue debt from recommendation of the University Leadership Team, with the advice of the Vice President for Finance.
Vice President for Finance and Chief Financial Officer
RESPONSIBLE UNIVERSITY DEPARTMENT/DIVISION
Service Complex, Louisville, KY 40292
Revision Date(s): October 2016
Reviewed Date(s): October 2016
The University Policy and Procedure Library is updated regularly. In order to ensure a printed copy of this document is current, please access it online at http://louisville.edu/policies.