November 13, 2014
MEMORANDUM
TO:
The Finance Committee:
Victoria D. Harker, Chair
John A. Griffin, Vice Chair
Frank B. Atkinson
L.D. Britt, M.D.
Kevin J. Fay
John G. Macfarlane III
John L. Nau III
George Keith Martin, Ex Officio
Daniel M. Meyers, Consulting Member
Raymond C. Scheppach, Faculty Consulting Member
and
The Remaining Members of the Board and Senior Advisor:
Frank M. Conner III
Allison Cryor DiNardo
Helen E. Dragas
Barbara J. Fried
Frank E. Genovese
William H. Goodwin Jr.
Bobbie G. Kilberg
Stephen P. Long, M.D.
Edward D. Miller, M.D.
Margaret N. Gould
Leonard W. Sandridge Jr.
FROM:
Susan G. Harris
SUBJECT:
Minutes of the Finance Committee Meeting on November 13,
2014
The Finance Committee of the Board of Visitors of the University
of Virginia met, in Open Session, at 1:18 p.m. on Thursday, November
13, 2014, in the Auditorium of the Albert & Shirley Small Special
Collections Library of the Harrison Institute; Victoria D. Harker,
Chair, presided.
Present were John A. Griffin, Frank B. Atkinson, L.D. Britt,
M.D., Kevin J. Fay, and John G. Macfarlane III.
Frank E. Genovese and Leonard W. Sandridge Jr. also attended.
Finance Committee
November 13, 2014
2.
Also present was Raymond C. Scheppach, the faculty consulting
member. Daniel M. Meyers, consulting member, participated by
telephone.
Present as well were Teresa A. Sullivan, Susan Carkeek, Susan G.
Harris, Donna Price Henry, Patrick D. Hogan, Patricia M. Lampkin,
David W. Martel, Marcus M. Martin, M.D., Debra D. Rinker, Nancy A.
Rivers, Roscoe C. Roberts, Pamela H. Sellers, and Colette Sheehy.
Presenters were Melody S. Bianchetto, Lawrence E. Kochard, and
James S. Matteo.
_ _ _ _ _ _ _ _ _ _
Action Item: Medical Center Acquisition and Renovation of 500 Ray C.
Hunt Drive
Mr. Hogan explained that in keeping with the recently approved
Health System strategic plan to establish the Fontaine Research Park
as a predominately clinical and research park, the Medical Center
proposes to purchase from the University of Virginia Physicians Group
and renovate 500 Ray C. Hunt Drive, a 59,000 square feet office
building, for medical clinics. The purchase price is estimated
between $12.0 million and $14.0 million, with the final purchase price
at fair market value based on two appraisals. The key cost is the
renovation cost which is estimated between $17.15 million and $21.0
million.
Mr. Hogan said the specific planned use for the 500 Ray C. Hunt
building is to provide modern clinic space for Urology, which is
presently located in the West Complex in a challenging location for
patient access. This new location should increase clinic visit volume
and patient satisfaction. It would also allow Cardiology to combine
several clinics located in Northridge and the Hospital into one
comprehensive clinical service, which would free up existing space in
the Hospital and Northridge for other clinical uses. The University
projects that the improved access to the clinics will directly
contribute to an increase in clinic visits for Cardiology and Urology
consistent with the Long Range Financial Plan. He said over the longterm, the plan is to purchase the space occupied by the UVA Health
South Rehabilitation Hospital which is immediately adjacent to the 500
Ray C. Hunt space to provide more space and improve access to the UVa
Health System ambulatory clinics.
Mr. Hogan said to facilitate the additional clinic space in 500
Ray C. Hunt Drive, the University Physician Group’s patient billing
functions will relocate to the UVA Research Park where they will join
most of the Medical Center’s patient billing staff. He said this move
allows the two separate revenue cycle functions to work closely
together as the Health System collaborates to improve patient service,
reduce cost, and improve collections. The goal is to reduce annual
operating cost by $8 million through this process redesign.
Finance Committee
November 13, 2014
3.
This action was also recommended by the Medical Center Operating
Board and the Buildings and Grounds Committee.
On motion, the following resolutions were approved by the
committee.
ACQUISITION OF 500 RAY C. HUNT DRIVE PROPERTY
WHEREAS, the Board of Visitors finds it to be in the best
interest of the University of Virginia for the Medical Center to
acquire the real property located at 500 Ray C. Hunt Drive from the
University of Virginia Physicians Group, at a fair market value
purchase price not to exceed $14.0 million;
RESOLVED, the Board of Visitors approves the acquisition of the
500 Ray C. Hunt Drive property at a fair market value purchase price
not to exceed $14.0 million; and
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized, on behalf of the University, to
approve and execute purchase agreements and related documents, to
incur reasonable and customary expenses, and to take such other
actions as deemed necessary and appropriate to consummate such
property acquisition; and
RESOLVED FURTHER, all prior acts performed by the Executive Vice
President and Chief Operating Officer, and other officers and agents
of the University, in connection with such property acquisition, are
in all respects approved, ratified, and confirmed.
REVISION TO THE MAJOR CAPITAL PROJECTS PROGRAM, 500 RAY C. HUNT DRIVE
RENOVATION
WHEREAS, the University proposes the addition of the 500 Ray C.
Hunt Drive Renovation to the Major Capital Projects Program;
RESOLVED, the Board of Visitors approves the addition of the 500
Ray C. Hunt Drive Renovation, estimated between $17.15 million and
$21.0 million, to the University’s Major Capital Projects Program.
_ _ _ _ _ _ _ _ _
Executive Vice President and Chief Operating Officer Reports:
Treasury Report
Mr. James Matteo provided a report on debt management, potential
financing needs, debt portfolio structuring considerations, and
enhancing Treasury’s policy framework. Mr. Matteo said it was an
opportune time to consider changes to the debt portfolio because of
historically low interest rates of which the University has taken
advantage by refunding three different series of bonds since 2010,
Finance Committee
November 13, 2014
4.
realizing present value savings of about $22M over the debt period.
He said they were considering issuing refunding bonds early in spring
2015 which will provide an opportunity to adjust the portfolio. Mr.
Matteo said the University hopes to obtain a number of objectives with
the help of the Finance Subcommittee: 1) reduce liquidity risk and
reliance on operating funds for liquidity; 2) diversify bank
counterparties; 3) better align short-term assets with short-term
liabilities; 4) lessen remarketing risk; and 5) reduce interest
expense wherever possible.
The different components of the potential bond financing are:
refinancing of commercial paper – estimated $200M outstanding at the
time of refunding; refunding of Series 2005 bonds - $36M callable on
June 1, 2015; refunding of VCBA Series 2004B bonds - $78M variable
rate bonds outstanding which is currently supported by operating
funds; and Series 2015 Bond Issue Size – up to $332M of refunded debt.
Ms. Harker stated that numerous calls have been made to Board
members to discuss these concepts, and she reiterated that the bulk of
these concepts are still mainstream and still pretty conservative.
She said there was nothing new or terribly aggressive in terms of the
approach.
Mr. Matteo showed two different financing options: 1) the
University can issue long-term variable rate debt to refinance
outstanding commercial paper. In FY 2018, the University would issue
$80M in fixed rate bonds to achieve a 20% unhedged long-term variable
rate debt; or 2) a more balanced approach would allow the University
to issue $120M in variable rate and $80M in fixed rate in FY 2015 to
refinance outstanding commercial paper. This approach would result in
a lower weighted average cost of capital (WACC) and also mitigate risks
associated with variable rate debt.
Mr. Matteo discussed next steps. At the February 2015 meeting,
they would seek a resolution for the bond issuance. They would also
seek Board approval to amend the University’s debt policy to address
remarketing procedures, diversification of bank exposure, staggered
expiration of credit facilities, staggered maturities of put-able
debt, and reintroduction of debt burden ratio which is required by the
Commonwealth.
UVIMCO Report
Mr. Lawrence Kochard provided a report on UVIMCO’s fiscal yearto-date results. As of September 30, the Long Term Pool stood at
$6.96 billion, down 0.3%. Over the 20-year period ending September
30, 2014, the Long Term Pool’s annualized return was 12.4%, exceeding
the policy benchmark return by almost 5%.
Finance Committee
November 13, 2014
5.
Interim Academic Division Financial Report
Ms. Melody Bianchetto provided an overview of the Academic
Division’s interim financial results for the three months ended
September 30, 2014. The financial statements, both unaudited and the
budget vs. actual can be found in the presentation located at:
http://www.virginia.edu/bov/meetings/14Nov/FINANCE%20COMMITTEE%20SLIDES.pdf
AccessUVa Metrics Annual Report
Mr. Hogan gave an overview of the AccessUVa program and reported
on several measures of the program’s vitality, including Pell grant
recipients, need-based financial aid recipients, student indebtedness,
and graduation rates. He said AccessUVa continues to be the premier
need-based aid program for a public institution in the United States,
supporting our efforts to increase socioeconomic diversity. Mr. Hogan
also said we want to focus our effort on bringing graduation rates of
Pell recipients to the level of undergraduate students without need
and moderating student indebtedness, mindful of the rising cost of
attendance. He said an important challenge going forward is meeting
the increasing need of middle-income families through an appropriate
balance of grants and loans.
_ _ _ _ _ _ _ _ _
The Chair adjourned the Finance Committee meeting at 2:38 p.m.
SGH:dr
These minutes have been posted to the University of Virginia’s Board of
Visitors website: http://www.virginia.edu/bov/financeminutes.html
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
November 13, 2014
UNIVERSITY OF VIRGINIA
Endowment/Long-Term Investments, Including Related Foundations
September 30, 2014
(in thousands)
The University of Virginia Medical School and related foundations
Rector and
Visitors Funds
Related
Foundation
Funds Invested
by UVIMCO
Alumni
Association
Funds Invested
by UVIMCO
Related
Foundation Funds
Invested by
Direction of
Foundation Board
$
$
$
$
-
$ 1,022,470
434,803
83,293
13,003
5,754
536,853
52,040
270,798
-
116,279
439,117
Darden School and related foundation
131,713
270,454
-
11,029
413,196
Batten School of Leadership and Public Policy
130,922
-
-
-
130,922
School of Engineering and related foundation
111,901
11,648
-
2,402
125,951
The McIntire School of Commerce and related foundation
55,127
-
53,372
623
109,122
University of Virginia's College at Wise and related foundation
57,469
13,619
2,789
-
73,877
Graduate School of Arts and Sciences
63,604
-
-
-
63,604
School of Nursing
52,308
-
2,833
-
55,141
Curry School of Education and related foundation
15,712
11,047
-
-
26,759
School of Architecture and related foundation
21,418
3,755
471
-
25,644
School of Continuing and Professional Studies
2,356
-
57
-
2,413
527,157
71,317
1,380
15,819 *
615,673
-
263,397
-
13,749
277,146
211,245
-
-
-
211,245
47,907
68,367
495
-
116,769
109,182
-
-
-
109,182
Alumni Association (Funds Held for Others)
-
-
59,302
38,546
97,848
Alumni Association
-
-
89,540
-
89,540
University of Virginia Foundation and related entities
-
85,442
-
-
85,442
Miller Center and related foundation
61,359
11,590
-
-
72,949
University Libraries
68,656
-
240
-
68,896
Alumni Board of Trustees
-
66,323
-
-
66,323
University Investment Management Company
-
5,256
-
-
5,256
University - Unrestricted but designated
371,359
-
-
-
371,359
University - Unrestricted Other
214,298
-
-
-
214,298
University - Unrestricted Quasi and True Endowment
195,499
-
-
-
195,499
University - Restricted
144,443
-
-
-
144,443
204,201
74,865
$ 5,841,802
The College of Arts and Sciences and related foundations
The University of Virginia Law School and related foundation
University of Virginia Medical Center and related foundations
955,951
Jefferson Scholars Foundation
Centrally Managed University Scholarships
Athletics and related foundation
Provost
University Charitable Remainder Trusts
$
74,865
4,111,294
$
1,349,239
2,294,038
University Operating Funds - Short Term Investments
1,292,042
$
10,783
234,265
$
944,799
University Operating Funds - Long Term Investments w/ UVIMCO
Source:
$
55,736
Total
Associate Vice President for Finance
Date: October 24, 2014
1
UNIVERSITY OF VIRGINIA
Operating Funds, Endowment and Long-Term Investments
as of September 30, 2014
2
UNIVERSITY OF VIRGINIA
Quasi-Endowment Actions
July 1, 2014 – September 30, 2014
The quasi-endowment actions listed below were approved by either (1) the Executive Vice President and Chief Operating
Officer, under the following Board of Visitors' resolutions or (2) the Assistant Vice President for Finance and University
Comptroller, under the delegation of authority from the Executive Vice President and Chief Operating Officer:
In October 1990 and June 1996 the Board of Visitors approved resolutions delegating to the Executive Vice President and Chief
Operating Officer the authority to approve quasi-endowment actions, including establishments and divestments of less than
$2,000,000, with regular reports on such actions.
In February 2006, the Board of Visitors approved a resolution permitting approval of quasi-endowment transactions, regardless
of dollar amount, in cases in which it is determined to be necessary as part of the assessment of the business plan for capital
projects. Additionally, to the extent that the central loan program has balances, they may be invested in the long term investment
pool managed by UVIMCO or in other investment vehicles as permitted by law.
Additions from Gifts
President's Fund for Excellence Unrestricted Quasi-Endowment
School of Medicine Quasi-Endowment
University Quasi-Endowment Fund 1
Total Additions from Gifts to Quasi-Endowments
Additions from Endowment Income (Capitalizations)
Antrim, Lottie C. Income Capitalization Quasi-Endowment
Athletics General Operations Quasi-Endowment
Chrysler, W. P. Fund for Engineering Library
Coulter, Wallace H. Endowment Match
Dermatology General Investment Fund
Gilbert, Harry Bramhall Merit Scholarship
Hecht, Sidney M. Fellowship in Chemistry
Hecht-Cruachem Chemistry Quasi-Endowment #3
HOPE Physician Incentive Quasi-Endowment
Hughes Endowment Income Capitalization Quasi-Endowment
Jordan, Harvey E. Lectureship
Low, Emmet F. and N. Alyce Chair Quasi-Endowment
McIntire, Howard Quasi-Endowment in Neurology
Miller, Mae W. Cancer Research Quasi-Endowment
Moyston, Vernah Scott Professorship in Ophthalmology Investment Quasi-Endowment
Plastic Surgery Quasi-Endowment Fund
Radiology Fund Special Diagnostic
Samuels, Bernard Ophthalmology Library Quasi-Endowment
School of Medicine Quasi-Endowment
Shea, Eleanor Quasi-Endowment Professorship in Music
Shea, Eleanor Quasi-Endowment Professorship in Art History
Southwest-Dishner Gift Quasi-Endowment Fund
Strategic Investment for Anesthesiology Research Chair Quasi-Endowment
Taylor, Henry N. Fund
Virginia Quarterly Review - Anonymous
Total Additions from Endowment Income to Quasi-Endowments
Amount
24,791
1,950,000
240,684
$ 2,215,475
$
$
$
10,208
93,239
1,806
651
34,871
2,931
9,816
1,620
71,852
2,125
1,598
1,371
25,215
6,768
4,873
20,624
4,914
2,784
98,374
5,024
4,833
18,326
22,293
362
626
447,104
Divestments
Total Divestments from Quasi-Endowments
$
-
Notes:
1
Includes current unrestricted gifts to the University which, under a standing Board of Visitors resolution, are required to be
added to the University's Unrestricted Endowment Fund.
Source:
Associate Vice President for Finance
Date: October 24, 2014
3