Northern Michigan University plans to sell a mix of tax-exempt and taxable new money and refunding bonds that will fund a renovation of the its university center, an upgrade that comes as the school is working to stem enrollment losses.
The university will issue a total of $72 million of general revenue bonds in a negotiated sale Thursday.
Northern Michigan, in Marquette on the Upper Peninsula, is one of 15 publicly assisted universities in Michigan. The university reported total general revenues collected in 2017 were $123 million. Operating revenues for the fiscal year 2017 $99 .4 million.
The university experienced a decline in general enrollment for five consecutive years although enrollment for fall 2017 stabilized with an increase in freshmen matriculation to 1,501 from 1,355 in 2016.
Roughly $8 million of the $22 million taxable bond piece will redeem bonds the university issued in 2008. The rest will finance the university center. Proceeds from the $50 million tax-exempt piece of the deal will refund 2008 bonds.
Bank of America Merrill Lynch and Citi are the lead managers. Blue Rose Capital Advisors LLC is the municipal advisor and Miller Canfield Paddock & Stone Plc is bond counsel.
S&P Global Ratings affirmed the university’s long term rating at A with a stable outlook. Moody’s Investor Service rates the bonds A1 with a stable outlook. The university has $81 million of outstanding bonds.
The bonds are secured by an irrevocable pledge of general revenues . State operating and capital appropriations and restricted income are specifically excluded from the security pledge. Revenues associated with certain on-campus student housing facilities constructed and managed by third parties are also excluded from general revenues.
The borrowing will finance the demolition costs and reconstruction and equipping of the south and east wings of the Don H. Bottum university center. The update to the center will provide an opportunity to serve the campus community as well as conference patrons and community of the Upper Peninsula residents.
“Renovation of the current university center on campus will create a new and modern venue for the university region and upper peninsula that attracts students and the community,” the university stated in an offering document.
The project is expected to cost $22 million with construction to begin this spring and completed next August. The bonds will finance about $14 million and the rest of the project will be be paid from reserves.