Ohio Administrative Code
Title 3356 - Youngstown State University
Chapter 3356-3 - Guidelines for Expenditure of Funds
Section 3356-3-14 - Debt management
Universal Citation: OH Admin Code 3356-3-14
Current through all regulations passed and filed through September 16, 2024
(A) Policy statement. The assumption of debt is governed by sections 3345.12, 3345.07, 3345.64, and 3345.66 of the Revised Code and is subject to board approval.
(B) Purpose. The amount of debt issued by the university impacts the financial health of the university and its credit rating. The purpose of this policy is to establish parameters for the issuance of debt, including refinancing of existing debt, to ensure an appropriate mix of funding sources for the university's capital and strategic plans, while considering the long-term financial sustainability of the university. Debt is a valuable source of capital project financing and its use should be limited to projects that support the mission and strategic objectives of the university.
(C) Definitions.
(1) "Debt financing" includes long-term,
short-term, fixed-rate, and variable-rate debt, and any instruments that have
the effect of committing the university to future payments for current capital
or operating needs.
(2) "Debt"
includes bonds, capital leases, on- and off-balance sheet financing, as well as
any legal derivative instruments.
(3)
For the purposes
of this policy, "debt" does not include installment payment plans that are part
of a multi-year vendor agreement.
(D) Parameters.
(1)
When evaluating the issuance of debt, the university
will take the following actions:
(a)
Identify and prioritize capital projects considered eligible for debt financing
and ensure that debt-financed projects have a feasible plan of
repayment.
(b) Define the
quantitative tests that will be used to evaluate the university's overall
financial health and present and future debt capacity.
(c) Define project specific quantitative
tests, as appropriate, which will be used to determine the financial
feasibility of an individual project.
(d) Manage the university's debt to maintain
an acceptable credit rating. The university, consistent with the capital
objectives, will limit its overall debt to a level that will maintain an
acceptable credit rating with bond rating agencies.
(e)
Limit risk
to the
university's total debt portfolio. The university
will manage debt on a portfolio basis to diversify exposure and will use an
appropriate mix of fixed and variable rate debt to achieve the lowest cost of
capital while limiting exposure to market interest rate shifts.
(f)
Monitor the interest rate environment to limit its
exposure to risks associated with variable rates.
(2)
Debt funding is not
recommended under the following circumstances:
(a) To finance purchases of assets whose
lives are shorter than five years;
(b) To finance recurring maintenance
expenditures; and
(c) When market
conditions are unstable or present difficulties in achieving acceptable
interest rates.
(3)
Short-term bond anticipation notes (with final maturities of five years or
less) may be issued to finance projects or portions of projects and are
appropriate under the following conditions:
(a) As a source of permanent financing for
projects with useful lives of less than five years;
(b) As a temporary funding source prior to
and in anticipation of other funding sources, such as long-term bonds, state
capital appropriations, and philanthropic funding; or
(c) When the immediate need for financing is
five million dollars or less.
(4) The following parameters are established
for long-term debt:
(a) To minimize overall
interest rate risk, the amount of variable rate financing shall not exceed
twenty-five per cent of the university's outstanding debt, on and off balance
sheet.
(b) Projects financed with
long-term debt should have an expected useful life that is equal to or greater
than the debt structure.
(c) The
addition of long-term debt may not be advisable if the university's Senate Bill
6 composite ratio, as measured by the Ohio
department of higher education,
is below 2.5, or if the addition of debt results in a projected composite ratio
of below 2.5.
(d) It is the
objective of the university to maintain no less than a single "A" category
underlying rating for all debt at the time of issue.
(e) Refinancing may be considered when net
present value savings percentage is equal to or greater than three per cent.
Refinancings that do not produce the minimum three per cent net present value
savings will be considered when there are substantial benefits to the
university, including eliminating restrictive bond covenants.
(5) The university's current debt
structure and debt service schedule will be reported annually as part of the
audited financial statements.
(6)
Proposals for future debt financing plans will be presented to the board of
trustees in a timely manner.
(7)
Exceptions to this policy require written justification from the vice president
for finance and business operations and the approval of the board of
trustees.
Disclaimer: These regulations may not be the most recent version. Ohio may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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