September 11, 2006
MEMORANDUM
TO:
The Finance Committee:
W. Heywood Fralin, Chair
A. Macdonald Caputo
Alan A. Diamonstein
Georgia Willis Fauber
G. Slaughter Fitz-Hugh, Jr.
Warren M. Thompson
John O. Wynne
Thomas F. Farrell, II, Ex Officio
and
The Remaining Members of the Board:
Daniel R. Abramson
Lewis F. Payne
Susan Y. Dorsey
Don R. Pippin
Glynn D. Key
Gordon F. Rainey, Jr.
Vincent J. Mastracco, Jr.
E. Darracott Vaughan, Jr., M.D.
Anne Elizabeth Mullen
FROM:
Alexander G. Gilliam, Jr.
SUBJECT:
Minutes of the Finance Committee Meeting on
September 11, 2006
The Finance Committee of the Board of Visitors of the
University of Virginia met, in Open Session, at 1:55 p.m.,
Monday, September 11, 2006, in the Byrd Seminar Room at the
Harrison Institute; W. Heywood Fralin, Vice Rector and Chair,
presided. A. Macdonald Caputo, Alan A. Diamonstein, G. Slaughter
Fitz-Hugh, Jr., Warren M. Thompson, John O. Wynne, and Thomas F.
Farrell, II, Rector, were present.
Present as well were Daniel R. Abramson, Ms. Susan Y.
Dorsey, Ms. Glynn D. Key, Vincent J. Mastracco, Jr., Lewis F.
Payne, and Ms. Anne Elizabeth Mullen.
Also present were John T. Casteen, III, Leonard W.
Sandridge, Alexander G. Gilliam, Jr., Paul J. Forch, R. Edward
Howell, Ms. Patricia M. Lampkin, James L. Hilton, Ms. Yoke San L.
Finance Committee
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September 11, 2006
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2.
Reynolds, Ms. Colette Sheehy, William B. Harvey, David J. Prior,
Christopher Brightman, and Ms. Jeanne Flippo Bailes.
The Chair asked Mr. Sandridge, Executive Vice President and
Chief Operating Officer, to present the Agenda.
ACTION ITEMS
Mr. Sandridge told the Committee that there were six
proposed resolutions on the Agenda.
CHANCELLOR’S RESIDENCE ADDITION AT THE COLLEGE AT WISE
The first of these was the proposed addition to the
Chancellor’s Residence at The University of Virginia’s College at
Wise. Normally, Mr. Sandridge explained, capital outlay projects
are approved by the Board every two years as part of the Six Year
Major Capital Project program, or annually as part of the Budget
Amendments proposed to the Governor or the General Assembly.
Sometimes, however, projects fall outside these two cycles. The
addition to the Chancellor’s Residence is one of these.
The project has been under consideration for some time and
originally was to have cost less than $1million and thus would
not have been classified as a major capital project. The revised
plans, however, call for a budget of $1.28million, funded
entirely from gifts; moreover, the donor wishes to see the
project move forward as rapidly as possible. It is for these
reasons that the project is being brought to the Committee for
consideration.
The proposed addition will enlarge the house and provide
the space necessary for various College events. The Buildings
and Grounds Committee approved the project at its meeting on July
27th.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
APPROVAL OF ADDITION TO THE CHANCELLOR’S RESIDENCE AT THE
UNIVERSITY OF VIRGINIA’S COLLEGE AT WISE
RESOLVED, the Board of Visitors approves the construction
of an addition to the Chancellor’s Residence of approximately
1600 square feet at The University of Virginia’s College at Wise.
The addition is budgeted at $1.28 million, to be funded entirely
by private gifts.
- - - - - - - - - -
Finance Committee
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September 11, 2006
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3.
CAPITAL LEASE FOR THE LONG-TERM ACUTE CARE HOSPITAL
The Medical Center wishes to establish a long term acute
care hospital with 40 beds. This is a specialty care hospital
designed for extended stay patients with chronic conditions, and
it would receive patients from the Medical Center or from other
hospitals. It would make available beds in the University
Hospital for patients requiring shorter hospital stays.
The University has been approached about the possibility of
leasing on a long-term basis, with an eventual purchase, a 3.5
acre parcel of land at 2985 Ivy Road. The property is adjacent
to several University properties, including the Northridge Office
Building which is leased by the Medical Center from the Health
Services Foundation. It is intended that this land be used for
necessary parking if, as is currently considered, the Medical
Center builds a long term acute care hospital at Northridge.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
APPROVAL OF CAPITAL LEASE FOR THE MEDICAL CENTER LONG-TERM ACUTE
CARE HOSPITAL PARKING
WHEREAS, the Medical Center has determined that it is costeffective to add 40 long-term acute care beds to a facility offsite from the University Hospital; and
WHEREAS, the Kirtley Family Holdings desires to lease 3.5
acres and improvements to the University of Virginia on a longterm basis with an eventual purchase;
RESOLVED, the Board of Visitors approves a 40-year capital
lease for the property located at 2985 Ivy Road, with an initial
annual cost of $240,000, to be increased at three percent
annually, and a purchase price of $6 million at the end of the
term contingent on successful conclusion of a due diligence
period; and
RESOLVED FURTHER that the Executive Vice President and
Chief Operating Officer is authorized to execute any and all
contracts and documents pertaining to the capital lease of the
aforementioned property.
- - - - - - - - - -
Finance Committee
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September 11, 2006
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4.
INTENT TO ISSUE TAX-EXEMPT DEBT
Under federal tax regulations, the Board of Visitors must
pass an intent-to-issue resolution prior to issuing tax-exempt
debt, in order to reimburse itself for expenditures associated
with specific, enumerated projects. Mr. Sandridge introduced Ms.
Reynolds, Vice President and Chief Financial Officer, who
presented her annual resolution for the Committee’s
consideration. She mentioned six possible projects, two each in
the Academic Division, the Medical Center and The University of
Virginia’s College at Wise. She and Mr. Sandridge emphasized
that the resolution by no means calls for approval of the
projects, but merely requests possible authorization of the debt
that would be issued if the projects were to come to past.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
APPROVAL OF INTENT TO ISSUE TAX EXEMPT DEBT
WHEREAS, the University intends to undertake the following
capital projects utilizing tax-exempt debt as a funding source:
ACADEMIC DIVISION
Main Heat Plant Environmental Upgrade (supplement)
Rouss Hall Renovation (supplement)
MEDICAL CENTER
Children’s Medical Center (supplement)
Hospital Expansion Project (supplement)
COLLEGE AT WISE
Student Residence III
New Dining Facility
WHEREAS, the United States Department of the Treasury has
promulgated final regulations in Section l.l50-2 of the Treasury
Regulations governing when the allocation of bond proceeds to
reimburse expenditures previously made by a borrower shall be
treated as an expenditure of the bond proceeds; and
WHEREAS, the Regulations require a declaration of official
intent by a borrower to provide evidence that the borrower
intended to reimburse such expenditures with proceeds of its
debt; and
WHEREAS, the Board of Visitors of the University of
Virginia desires to make such a declaration of official intent as
required by the Regulations; and
Finance Committee
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September 11, 2006
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5.
WHEREAS, the University may be required to provide shortterm financing to each project prior to issuing long-term debt in
order to implement an efficient and timely construction schedule;
and
WHEREAS, the University has funding mechanisms to
accommodate short-term financing needs, defined as a period of
less than sixty months; and
WHEREAS, the authority for the University to enter into
financing arrangements exceeding sixty months in maturity for
each project listed is not included in this resolution; and
WHEREAS, if the University arranges short-term financing
for a particular project, and if the project is not ultimately
completed, or if the project utilizes funding sources other than
debt, then the appropriate school or unit remains responsible for
refunding the short-term obligation;
RESOLVED that, pursuant to the terms of the Treasury
Regulations, the University of Virginia declares its intent to
reimburse expenditures in accordance with the following:
1. The University reasonably expects to reimburse
expenditures from the issuance of tax-exempt debt to be issued by
the University incurred for each project;
2. This resolution is a declaration of official intent
under Section 1.150-2 of the Regulations;
3. The maximum principal amount of debt expected to be
issued for the purpose of reimbursing expenditures relating to
each project is as follows:
ACADEMIC DIVISION
Main Heat Plant Environmental Upgrade (supplement): $9,164,000
(cumulative authorization = $28.964 million)
Rouss Hall Renovation (supplement): $6,900,000
(cumulative authorization = $39.9 million)
MEDICAL CENTER
Children’s Medical Center (supplement): $4 million
(cumulative authorization = $15 million)
Hospital Expansion Project (supplement): $9.6 million
(cumulative authorization = $95.2 million)
Finance Committee
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September 11, 2006
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6.
COLLEGE AT WISE
Student Residence III: $8,000,000
New Dining Facility: $7,000,000
RESOLVED FURTHER, that each project is a separate
enterprise independent of other projects, and that the
authorization for funding relates to each individual project; and
RESOLVED FURTHER, funds may be borrowed for each project on
a short-term basis, but only if the following conditions are met:
1. The Board of Visitors approves the current resolution;
2. A comprehensive and detailed financial plan for the
school/unit project is submitted;
3. Short-term financing shall not exceed sixty months in
maturity; and
4. The school or unit remains responsible for any debt
obligation incurred regardless of the status of the capital
project or whether or not a debt issuance actually occurs.
- - - - - - - - - APPROVAL FOR THE DIVESTMENT FROM THE ATHLETICS GENERAL OPERATIONS
QUASI-ENDOWMENT TO FUND THE ACADEMIC CENTER AND THE CLUB/MEDIA
ROOM IN THE JOHN PAUL JONES MULTIPURPOSE ARENA
Mr. Sandridge explained to the Committee that in May, 2003,
the Athletics General Operations Quasi-Endowment was created with
money from the Harrison estate, designated for athletics. Some
$2.9million was invested with UVIMCO; it is now worth
$4.4million. It is proposed that $2,233,000 be divested from
this sum to pay for the Academic Center and the Club/Media Room
in the John Paul Jones Arena.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
APPROVAL TO DIVEST $2,233,000 FROM THE ATHLETICS GENERAL
OPERATIONS QUASI-ENDOWMENT TO FUND COSTS OF THE ACADEMIC CENTER
AND THE CLUB/MEDIA ROOM IN THE JOHN PAUL JONES MULTIPURPOSE ARENA
WHEREAS, the Athletics department requests the divestment of
$2,233,000 from the Athletics General Operations Quasi-Endowment
to fund the costs of the academic center and the club/media room
in the John Paul Jones Multipurpose Arena;
Finance Committee
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September 11, 2006
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7.
RESOLVED, that the Board authorizes the divestment of
$2,233,000 of the Athletics General Operations Quasi-Endowment to
fund the cost to fit-out the academic center and the club/media
room in the John Paul Jones Multipurpose Arena.
- - - - - - - - - - PROCUREMENT OF BLOOD PRODUCTS FOR THE MEDICAL CENTER
The Medical Center, in accordance with its established
procurement policies, is issuing a request for proposal for blood
products. Procurement is estimated to be completed late this
year or early in 2007. The term of the contract is expected to
be five years, and the total estimated value to be in excess of
$30million, with the value in any single year exceeding
$5million. This exceeds the signatory authority of the Executive
Vice President and Chief Operating Officer and thus must be
approved by the Board.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
APPROVAL OF SIGNATORY AUTHORITY FOR MEDICAL CENTER PROCUREMENT OF
BLOOD PRODUCTS
RESOLVED, the Executive Vice President and Chief Operating
Officer is authorized to execute a contract for the procurement
of blood products, based on the recommendation of the Vice
President and Chief Executive Officer of the Medical Center and
in accordance with Medical Center procurement policy.
- - - - - - - - - REVISIONS TO THE CHARTER AND BY-LAWS OF THE REGIONAL CRIMINAL
JUSTICE TRAINING ACADEMY
The University, by approval of the Executive Committee of
the Board, is a member of the Central Shenandoah Criminal Justice
Academy, a regional school where the University’s law enforcement
personnel – as well as those of other jurisdictions – receive
training.
The Academy’s Executive Committee in July approved changes
to the Charter and By-Laws of the school, changes which must be
ratified by the member organizations. The Board of Visitors must
approve these for the University.
On motion, the Committee approved the following resolution
and recommended it to the full Board for approval:
Finance Committee
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September 11, 2006
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8.
APPROVAL OF THE REVISIONS TO THE CHARTER AND BY-LAWS OF THE
REGIONAL CRIMINAL JUSTICE TRAINING ACADEMY
WHEREAS, the University is a member of the Central
Shenandoah Criminal Justice Training Academy, which provides
training and education in criminal justice to the University’s
law enforcement personnel; and
WHEREAS, the Central Shenandoah Criminal Justice Training
Academy’s Charter and By-Laws, adopted in 1998, became out of
date and required revision to comply with current law and
operating procedures; and
WHEREAS, each member organization must approve revisions to
the Charter and By-Laws of the Central Shenandoah Criminal
Justice Training Academy;
RESOLVED, pursuant to Va. Code §15.2-1747, the revised
Charter and By-Laws of the Central Shenandoah Criminal Justice
Training Academy, a copy of which is attached to this resolution
and incorporated herein by reference, is adopted; and
RESOLVED FURTHER that this resolution shall become
effective upon adoption; and
RESOLVED FURTHER by its adoption of this revised Charter
and By-Laws, the University evidences its commitment to the
training needs of its law enforcement personnel. Notwithstanding
the foregoing, it is understood that the University will assume
no expense or financial obligation of the Central Shenandoah
Criminal Justice Training Academy except as may be duly
authorized by University officials.
- - - - - - - - - VICE PRESIDENT’S REPORT
Mr. Sandridge told the Committee that there will be
amendments to the 2006-2008 Biennial Budget that the University
will want to propose in Richmond. Precise instructions on how to
submit these have not yet been received. When this information
is in hand, he will outline the proposed amendments to the
Committee by mail in time for consideration before the meeting of
the full Board on September 29th, at which time a vote will be
taken.
Mr. Sandridge outlined briefly for the Committee the
Finance Committee 2006-2007 Goals and Work Plan, agreed to at the
Board Retreat in July.
Finance Committee
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VICE PRESIDENT’S REPORT:
September 11, 2006
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9.
DEFINED CONTRIBUTION RETIREMENT PLAN
Mr. Sandridge explained that because of the revised status
of UVIMCO, the University must consider new ways to evaluate and
manage investments to support the Defined Contribution Retirement
Plan. He suggested that the Chair appoint a committee of two
Members to work with the Administration on these questions. The
Rector emphasized the importance of a sound Retirement Plan and
the Chair agreed to make the appointments.
REPORT ON THE ENDOWMENT
Mr. Sandridge introduced Mr. Christopher Brightman, Chief
Executive Officer of the University of Virginia Investment
Management Company (UVIMCO), and asked him to give his semiannual report on the Endowment. Mr. Brightman did so, using
figures current at the end of June, which was the end of the last
fiscal year. He noted that the Endowment stood at $2,594,000,000
at the beginning of that year, and at $3,457,000,000 on June 30th.
Contributions to the Endowment during the year came to
$571,000,000.
By way of summarizing Mr. Brightman’s report, copies of the
tables he used in his presentation are appended as an attachment.
(Attachment)
ANNUAL REPORT ON THE UVA HEALTH CARE PLAN
Mr. Sandridge asked Ms. Reynolds, Vice President and Chief
Financial Officer, to give her annual report on the UVa Health
Care Plan. In doing so, he remarked that the Committee reviews
the rates charged, but generally leaves their setting to the
Administration.
Ms. Reynolds gave her report. She said the proposed
changes to the Plan for 2007 include increasing the annual
maximum for covered dental services from $1,000 to $1,500,
expanding the period to receive physical therapy services, and to
increase – in some instances – the prescription co-payments.
VICE PRESIDENT’S REPORT:
FACULTY
SALARY AND COMPENSATION FOR FULL-TIME
Mr. Sandridge called the Committee’s attention to the
report on faculty compensation, provided in the materials
distributed to them before the meeting.
Finance Committee
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September 11, 2006
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10.
EXECUTIVE SESSION
After adopting the following motion, the Committee went
into Executive Session at 3:15 p.m.:
That the Finance Committee of the Board of Visitors go into
Closed Session to discuss the acquisition of specific real estate
for the University’s use and benefit; and to discuss investing
the managed endowment of the University in companies doing
business overseas where disclosure at this time may impair
present value or bargaining position, as permitted by Section
2.2-3711 (A)(3), (6), and (21) of the Code of Virginia.
- - - - - - - - - The Committee resumed in Open Session at 4:00 p.m. after
approving the following resolution certifying that its
discussions in Executive Session had been conducted in accord
with the exemptions permitted by the Virginia Freedom of
Information Act:
That we vote on and record our certification that, to the
best of each Board member’s knowledge, only public business
matters lawfully exempted from open meeting requirements and
which were identified in the motion(s) authorizing the closed
session, were heard, discussed or considered in closed session.
- - - - - - - - - On further motion, the Committee adjourned at 4:05 p.m.
AGG:lah
These minutes have been posted to the University of Virginia’s
Board of Visitors website.
http://www.virginia.edu/bov/financeminutes.html
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