DALLAS - The Colorado State University System will improve housing at its main campus in Fort Collins with proceeds from a $141 million bond deal expected to price Tuesday.
The system revenue bonds will price through negotiation with RBC Capital Markets and Morgan Stanley as co-managers.
RBC managing director Jon Moellenberg, who earned his undergraduate degree at CSU, is the lead banker on the deal with fellow RBC managing director J.J. Ament, a Colorado native and former candidate for the state Treasurer's post.
Rich Schweigert, another CSU grad, will direct the deal as chief financial officer for the CSU System, which is headquartered in Denver. Schweigert, who was named CFO in 2006, began his professional career as a senior budget analyst in the Governor's office.
Stephanie Chichester, founder of North Slope Capital Advisors in Denver, serves as financial advisor, with Kutak Rock partner Frederic H. Marienthal III as bond counsel. Marienthal has been with the firm for more than 30 years and has acted as bond or disclosure counsel for 10 of Colorado's boards of higher education.
Chichester said Monday that she was optimistic about the market's pre-holiday appetite for deals like CSU's.
"I'm actually in the market today with another Montana state university deal, and we have a huge book of orders," Chichester said. "It's the last full week for investors to get their hands on bonds for 2013."
"We're hoping for similar results," Schweigert said. "Typically we see 150% to 300% oversubscription. This week looks like it's a little light on offerings, so we're hoping that works in our favor."
With serial maturities through 2033, the Colorado State bonds carry underlying ratings of Aa3 from Moody's Investors Service and A-plus from Standard & Poor's with stable outlooks. Backing from the state's Higher Education Revenue Bond Intercept Program raises the rating to Aa2 from Moody's and AA-minus from S&P.
The intercept program was created by 2008 legislation to add the state's guarantee to debt issued for colleges and universities. The state treasurer is required to make up debt service deficiencies for a college or university from any immediately available funds. Debt service payments do not require legislative approval.
"Based on the program's mechanics and available funds, bondholders would be paid on time and in full for the life of the bonds," wrote Moody's analyst Mary Kay Cooney.
About $115 million of bond proceeds will go toward a new 1,000-bed living-learning community for undergraduate and graduate students, with the remaining funds for remodeling or tenant finishes at three academic buildings and the student center.
CSU has added hundreds of beds on campus over recent years. Laurel Village, scheduled to open next fall, also will add 600 new beds, including the Natural Sciences residential learning community.
"Adding additional beds has helped the university with increasing enrollment and also created designated spaces for returning students to assist with retention," said Tonie Miyamoto, director of communications and sustainability for housing & dining services.
Laurel Village will include new classroom space, collaborative work areas and opportunities for faculty engagement. Extensive landscaping will create outdoor study and gathering areas for all of the residence halls.
The Durrell Center, a student programming and dining center that was closed for renovation during the 2012-2013 academic year, reopened to students this fall featuring new study spaces, an outdoor deck, completely revamped dining center, and new landscaping for outdoor programming and gatherings, perks that make on-campus residences more attractive than ever.
With its flagship campus in Fort Collins, about 60 miles north of Denver, the CSU System includes a branch in Pueblo in southern Colorado and an online Global Campus with 7,000 students. Combined enrollment at the three campuses grew 2.3% this fall to 32,576 compared to fall 2012.
In January, CSU will begin classes in the south metro region of Denver under a program that will offer a systems engineering master's degree. In fall 2014, the CSU System will coordinate with its three campuses and other academic partners to include undergraduate degree offerings in business and nursing, with the prospect of adding more programs quickly based on community demand.
The university said it will keep start-up costs low by leveraging resources and faculty from the three existing campuses. The CSU System is also coordinating with local community colleges to reduce or eliminate overlap and provide a pathway to upper division classes once pre-requisites are met.
Initially, on-site instruction will be delivered in local corporate training centers or in classroom space provided by education partners, but the CSU System is considering a new facility in the region in the next three to five years, officials said.
"The CSU System's three campuses already have high-quality programs that can be adapted and quickly delivered in Denver's South Metro region," Ajay Menon, dean of the CSU College of Business.
Earlier this year, the CSUS Board of Governors approved slight increases in budgets for its three campuses and administrative headquarters after years of limited funding from the state.
The Fort Collins campus saw funding increase 5% to $957 million, while the Pueblo campus grew about 1% to $45.3 million. The Global Campus budget of $52.6 million represented an increase of nearly 28%.
Resident undergraduate tuition at CSU in Fort Collins will be $7,494 in fiscal year 2014, a $619 increase over the previous year, officials said. That is below proposed in-state tuition rates at peer institutions such as Michigan State, University of California at Davis, Purdue, Washington State, Virginia Tech and the University of Illinois. Resident undergraduate tuition at the University of Colorado at Boulder will be $8,760.
Resident undergraduate tuition at CSU-Pueblo remains unchanged at $4,894 for next year, and the per-credit-hour undergraduate tuition rate at CSU-Global Campus will continue to be $449.
Since 2007, CSUS has gone to the bond market 15 times, generating outstanding debt of about $770 million, according to Moody's.
After several years of deep cuts in state funding, this year's CSU System budget is the first since 2009 that includes additional money from the Colorado General Assembly, which increased spending on higher education by about $30 million for the 2014 fiscal year. That translates to about $6.1 million in additional state revenue for the CSU System.
"This year's budget is good news for students and our employees, because - after several very difficult years - we're going to be able to make investments in academic programs, financial aid, student support initiatives, campus safety and more," Tony Frank, president of CSU in Fort Collins said in a statement. "We're even going to be able to give our faculty and staff a raise, which we weren't able to provide for several years during the economic downturn."
In 2009-10, the state put $706 million into the public higher education system. With an increase of $30 million this year, the total state budget for all of higher education will be about $543 million, a net decrease of $163 million since 2009.
"Future support in state funding remains a key credit concern with a history of volatile state funding and policy cuts," Moody's analyst Cooney noted in her ratings report.
CSU is also planning a $226 million on-campus football stadium that would replace the off-campus Hughes Stadium. In an update report for October, CSU president Tony Frank said the cost of the stadium had been reduced by about $20 million and would accommodate about 40,000 fans.
"Given the change in estimated cost of the athletic portion of the stadium facility, following my initial goal of bonding 50% of the facility against stadium-generated revenues would result in total revenue bonds about $13M below the amount supported by the low-case revenue scenario of the feasibility study, if we are successful in raising $113M of philanthropic support," Frank wrote, adding that he expected to reach about a third of the giving target by the end of the year.