Florida universities' COVID-19 disclosure shows good governance, Moody's says

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Disclosing the negative impact of the coronavirus pandemic earned a top Florida university praise from a rating agency.

Florida State University has experienced a 21% drop in dormitory residency this fall due to a reduced number of students in rooms and setting aside two dorms with 746 beds for COVID-19 isolation spaces, FSU said in a disclosure Sept. 16.

The university said it has taken actions to offset revenue declines, including a reduction in housing staff, cutting operating expenses, and delaying capital projects, according to the disclosure posted on the Municipal Securities Rulemaking Board’s EMMA filing system.

FSU President John Thrasher closes the virtual summer commencement ceremony on July 31. He'll retire at the end of the 2020-2021 school year.

"Despite the reduction in occupancy, FSU does not anticipate any difficulty in making its fiscal year 2020-21 annual debt service payment of approximately $15.3 million," the disclosure said, noting the housing system also has $68.2 million of unrestricted cash on hand, plus carryforward funds to use, if needed.

The university's voluntary disclosure regarding its dormitory revenue bonds is an example of timely and transparent information and a sign of effective governance, Moody's Investors Service analyst Dennis Gephardt said Wednesday.

"The disclosure also shows that despite the drop in revenue, the university's housing system has strong reserves that will allow it to avoid credit stress, a credit positive," he said.

FSU had $172.4 million of outstanding housing bonds as of June 30, 2019, and $262.3 million of outstanding long-term debt for student parking, dining and wellness facilities.

The bonds are rated AA-plus by Fitch Ratings and S&P Global Ratings, and Aa2 by Moody's.

Kyle Clark, vice president for finance and administration, said in a statement to The Bond Buyer Friday, the university made the decision to issue the disclosure after consulting with the Florida Division of Bond Finance.

“Although the information was not deemed necessary, we thought it only prudent to update the investment community on our fall reopening plan,” he said.

FSU and the Division of Bond Finance “have a long-standing tradition of being fully transparent and providing detailed information for interested individuals,” said Clark. “We are most appreciative of investors supporting Florida State University and our strategic plan and vision for the future.”

While the use of dorms is down, FSU's disclosure said total fall enrollment is 43,880, up 1,004 over the fall of 2019. Most classes, 73%, are online this fall, while 27% are in person, the disclosure said.

In 2019, 93% of classes were in person, and only 7% were offered online.

FSU's housing system benefits from strong credit fundamentals, Gephardt said. While occupancy declined this fall, the housing system has a record of strong debt service coverage along with substantial reserves. Debt service coverage was 1.7 times in fiscal 2019.

"This fall, management reduced the density of its housing stock in an effort to foster social distancing, converting 105 triple-occupancy rooms to double occupancy and reserving two residential halls for coronavirus 'isolation spaces,'” he said. "Total capacity is down by 860 beds this fall."

In response to violations of health and safety protocols put in place to stem spread of the virus this fall, FSU President John Thrasher issued a notice to students warning that violations on and off campus are subject to "serious disciplinary action."

"Students who endanger the community with actions such as hosting or attending a large party or gathering will be subject to suspension," Thrasher said in a Sept. 18 notice. Students who test positive and break isolation protocols will be suspended for a minimum of one semester, he added.

Founded in 1851 with its main campus in Tallahassee, the state's capital, FSU is a sea-grant research university with 16 separate colleges and institutes offering 297 degree programs for undergraduates and upper level students.

The university didn't immediately respond to a request for comment about Moody's report.

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Municipal disclosure Higher education bonds Revenue bonds Coronavirus State of Florida Florida
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