New capital funding model saves university money, time

Susan Fritz, Ph.D., interim president of the University of Nebraska

A new approach to the way the University of Nebraska finances capital projects is yielding significant savings in dollars and time, creating a more efficient and flexible process that reflects the university’s commitment to maximizing its resources on behalf of students and the state.

The university this month issued $563 million in bonds — its largest bond sale ever — the proceeds of which will largely be used to take advantage of historically low interest rates and refinance existing debt. The refinancing will save the university almost $14 million.

In addition, the university has freed up $36 million in debt service reserve funds that are no longer needed thanks to an updated model for financing capital projects. The new model allows the university to issue larger bond sales with less frequency, versus issuing bonds on a project-by-project basis — an approach more in line with leading universities across the country that will allow NU greater flexibility in addressing capital needs as they arise.

In all, the university’s decisions to refinance its debt and shift its capital financing model will yield $50 million that can be deployed to address deferred maintenance and other facility needs across the campuses.

That represents valuable capital as the university considers opportunities to grow on behalf of students and the state while also managing urgent deferred maintenance needs, according to Interim President Susan Fritz, Ph.D.

“One of our highest goals at the University of Nebraska is to be good stewards of our resources and stretch every dollar as far as we possibly can,” Dr. Fritz said. “Our 51,000 students, their families and the people of Nebraska expect no less. I’m very pleased that we have been able to think differently about how to address our facilities’ needs.

“Our buildings — where our students learn and where our faculty conduct life-changing research — are some of our most valuable assets. I believe our new approach for maintaining and growing our physical presence positions us well for the long term, and I thank our CFO Chris Kabourek for his leadership.”

Immediate projects to be supported with the newly realized capital include a newly upgraded home for the Munroe-Meyer Institute at UNMC, which serves patients with developmental and intellectual disabilities, renovation of UNL’s East Campus Union, and the new athletics facility at the University of Nebraska-Lincoln that will support 600 student-athletes across 24 Husker sports.

Additional projects would be funded as new needs arise, through an approval process involving campus chancellors, the president and Board of Regents.

The university’s prudent fiscal management was reaffirmed by a recent Aa1 bond rating from Moody’s and AA rating from S&P Global Ratings, both at the higher end of the rating spectrum. The university’s fundraising success, careful management of state funding challenges, its position as the state’s only public university and UNL’s membership in the prestigious Big Ten Academic Alliance all contributed to NU’s strong credit ratings.

The Board of Regents will hear an update on the University of Nebraska’s successful bond sale and capital funding model at its Oct. 25 meeting.