Minutes of the
NIU Board of Trustees
FINANCE, FACILITIES AND OPERATIONS
COMMITTEE MEETING
September 5, 1996

CALL TO ORDER AND ROLL CALL

The meeting was called to order by Chair Robert Boey at 12:55 p.m. in the Regency Room of Holmes Student Center at Northern Illinois University.  Recording Secretary Mimms conducted a roll call of Trustees.  Members present were Trustees Susan Grans, George Moser, David Raymond and Chair Boey.  Also present were Student Trustee-designate David Marquez, Committee Liaison Eddie Willliams, President John La Tourette and Board Parliamentarian Kenneth Davidson.  Having noted the presence of a quorum, the meeting proceeded.

VERIFICATION OF APROPRIATE NOTICE OF PUBLIC MEETING

Confirmation of Open Meetings Act notification compliance was given by Board Parliamentarian Ken Davidson.

MEETING AGENDA APPROVAL

Trustee Grans moved for approval of the agenda, seconded by Trustee Raymond.  The motion was approved.

REVIEW AND APPROVAL OF MINUTES OF JUNE 19, 1996

A motion was made by Trustee Moser and seconded by Trustee Raymond to approve the minutes of June 19. The motion was approved.

CHAIR'S COMMENTS

Chair Boey acknowledged the presence of President John La Tourette and Student Trustee-designate David Marquez, noting that the Board of Trustees looked forward to working with Mr. Marquez after his confirmation at the full Board of Trustees meeting on September 18.

Chair Boey, after welcoming fellow members of the Board of Trustees, faculty, students, staff and guests to a new semester and fiscal year at NIU, stated that he was excited over the challenges and opportunities NIU faced in the coming year to strengthen the university by improving programs, operations, facilities and services.  He stated that, the Finance, Facilities and Operations Committee of the Board of Trustees would play a key role in this endeavor and that he looked forward to working with everyone.

Chair Boey said that there were two major areas of consideration for the meeting.  One was to review and take action on both new and long-term budgets, including the Fiscal Year 1997 internal budget, the FY98 operating requests and the FY98 capital budget requests.  The second category included a number of projects and plans, developed in full consultation with representative committees, designed to improve the quality of life and services offered to NIU students.  Several Trustees obtained first-hand knowledge of the problems and needs by touring the existing facilities.  Chair Boey said that he and university staff had met with the underwriters to obtain a thorough understanding of financing mechanisms for these projects, and that bond council would provide the Committee with a brief overview of the financial structure and legal requirements of the proposed bond issue.

Because the projects total $48 million dollars in scope, Chair Boey asked Trustee Raymond to serve as point person on the residence hall project and Trustee Grans on the recycling center and child care projects along with Chair Boey.  Because of the financial impact of these projects on students, a student referendum was scheduled on this matter.

Agenda Item 6.a.(1) - FY97 Internal Budget

Dr. Eddie Williams referred the Committee to the Fiscal Year 1997 Internal Budget.  The university requested that the Committee recommend the internal budget to the full Board of Trustees for approval as required in Board Bylaws.  Trustees Raymond and Grans asked if a chart was available comparing the requested budget to actual expenses for the last fiscal year.  Dr. Williams said that he could make that information available to the Trustees at the full Board Meeting scheduled for September 18.

Chair Boey asked for a motion to approve an endorsement to forward the internal budget to the full Board for approval.  Trustee Grans made the motion, seconded by Trustee Raymond.  The motion was approved.

Agenda Item 6.a.(2) - FY98 Budget Guidelines

As part of the appropriation process, the university is required to submit its Fiscal Year 1998 budget in the Fall.  That process requires submission of the request through the Board of Higher Education which analyzes it along with those of the other state institutions.  The IBHE then forwards the higher education budget to the Governor and the legislature with its recommendations.  The recommended budget guidelines for Fiscal Year 1998 called for a 5% faculty and staff salary increase to improve salary competitiveness.  Also included were recommendations for a 4% general price increase, a 5% utility increase, and a 10% increase for library and technology materials due to cost escalations for these materials.  There were requests for participation in two state-mandated programs:  a request for $342,900 to meet Medicare program contributions and an additional $514,700 to meet estimated FY98 costs for payout of unused sick leave.  Also included, on the basis of recommendations from the Provost faculty processes, was a request for $3.4 million in program improvements.  These include improvements to programs in undergraduate education, technology, expanded capacity in health programs, and off-campus programs and distance education.

A new component in the NIU request for this fiscal year deals with an allocation for deferred maintenance on the campus.  Dr. Williams asked Dr. James Harder to give an overview of deferred maintenance plans.  Dr. Harder stated that during the past year, representatives from Northern Illinois University and other state-supported institutions met with Board of Higher Education staff members to discuss strategies that might be used to address deferred maintenance, one of the major funding issues on public university campuses, and to develop a basis for the IBHE's funding recommendations to the legislature.  Dr. Harder said that a guideline used for a number of years suggests that two-thirds of one percent of the replacement cost of facilities should be expended each year for maintenance.  The current replacement value of the state-supported facilities at NIU, he said, has been calculated to be $435 million, and that total does not include any revenue bond facilities such as the Holmes Student Center.  For NIU, this would mean that $2.9 million should be spent each year for maintenance.  Since this amount exceeds budget guidelines, the request will be spread over two or three years to achieve the level of funding needed.  The estimate for deferred maintenance for FY98 was in the range of  $1.5 million to $1.8 million.  Dr. Williams asked the Committee to endorse these guidelines for Fiscal Year 1998 and forward them to the full Board for consideration at the September 18 meeting.  Chair Boey asked that the same type of comparison being provided for FY97 be provided for the FY98 budget.

President La Tourette advised the Committee that these recommendations reflected not only the needs of Northern Illinois University, but those of all the public universities in the state of Illinois.  These FY98 priorities, he said, were discussed by the presidents and chancellors over several months.  The deferred maintenance problem, he said, is reaching crisis proportions, in part, because the bonding issue at the State level has precluded funds being allocated to the universities for new capital construction, as well as for replacement and renovation.  With an allocation such as that being requested, deterioration of facilities can be arrested and, in two or three years, the universities can address some of the backlog. At two-thirds of one percent of the replacement value, $2.9 million for Northern Illinois University would represent about 10% of the total need.  A second very important item, not only for the NIU campus, but for all of public higher education, is represented by the request for $1.5 million in technology which was an area of major concern identified by a large number of faculty and staff in meetings with Chair Siegel during the summer.

A third priority is the salary increase.  Some progress was made during 1996 in improving competitiveness and closing the gap between faculty and staff salaries and national averages.  Estimated to be about four or five percent, the gap was closed by approximately 25%.

For several years, the President said, the State has not provided general price increases, and universities are seeing an erosion of their s from inflation.  In some cases, for example printed materials for the library, cost increases have been above 20%.  A major investment in technology today means that three or four years later another major investment must be made for replacement in order to keep it up to date.

President La Tourette noted that these budget guidelines and requests reflect not only the analysis of the administration, but also the Chair's impressions in talks with a large number of faculty and staff over the summer.  And as pointed out previously, Northern's needs generally mirror the needs of all the public universities in the state of Illinois.  President La Tourette asked the Committee to endorse this request and forward it to the full Board so that the university can pursue a budget for FY98 that would allow NIU to maintain the quality of instruction, provide the technology needed to improve that quality through distance learning, and increase access for northern Illinois residents to attain a quality education from Northern Illinois University.

Trustee Grans asked if the budget tables presented were guidelines or set figures. Chair Boey explained that, rather than a guideline, the tables represented a proposed budget for NIU.

Dr. La Tourette explained that the proposed percentage guidelines would be translated into numbers and presented to the IBHE shortly after October 1 as Northern Illinois University's request for FY98.  The IBHE would analyze and discuss all university budgets and, in early December, a pattern will emerge on what they think should be presented to the Governor.  The requests will be consolidated in one single request for presentation at the January meeting of the Board of Higher Education to be approved and sent to the Governor.  The Governor will then incorporate his recommendations for higher education in his budget message to the legislature.

Trustees Raymond and Grans asked that a comparison which included 1996 actual expenses, the 1997 budget and how the proposed guidelines would translate into a budget for 1998 be provided at the September 18 Board of Trustees meeting.

Trustee Raymond stated that since joining the Board of Trustees, he had heard a strong theme of lack of support from the State over the years.  This three-year information sheet would be useful for everyone who watches the Board processes and might help the community and constituents understand some of the restrictions and limitations that the university has to operate under.  He said that President La Tourette had pointed out a few things that he would agree are high priorities – the deferred maintenance and the technology.  If the Board of Higher Education, the legislature and the Governor all cut back on high priorities such as deferred maintenance and technology, NIU's ability to address these issues would be restricted and we may need a lot of people to help get that message across to the State government.

Trustee Raymond asked what amount would be requested for deferred maintenance.  Dr. Williams stated that $2.9 million is the target figure which will be requested over two years so that other areas do not have to be reduced in order to address deferred maintenance.  It is not overreaching, Williams said, but I think it's more realistic given the other needs of the campus; other requests on the table must be weighed.  And, traditionally, the State has focused on a percent increase for higher education.  What we do not want to do is start diminishing other request in order to address the deferred maintenance.

Trustee Raymond asked if the uses for the undergraduate education request could be more fully described.

President La Tourette explained that the University 101 course, which has been run for several years on an experimental basis, would be integrated into the freshman experience.  Records show that retention and graduation rates for students who take this course are substantially higher than for those who do not.  Another goal  is to develop a more integrated system of advising and referral.  At most colleges and universities, the average student changes majors twice during his/her undergraduate academic experience.

Trustee Moser asked if the major percentage of the cost was for instructors.  President La Tourette replied that it was for both instructors and staff who would be needed for advising.  In answer to a question from Trustee Grans, Dr. La Tourette said that this would be a permanent addition to the budget.  Trustee Raymond asked how many more instructors or staff would have to be hired.  President La Tourette asked Dr. Kaplan to comment.

Dr. Kaplan indicated that undergraduate education and technology had been priorities of the IBHE as well as the university for a number of years and, typically, the IBHE provides some new program money for each of those areas.  A detailed budget request is not required; each institution receives some funding, depending on the size of its budget.  The budget request is, therefore, general rather than specific.

Chair Boey recognized the University Advisory Council representatives, Dr. Charles Larson and Mr. Jim Russell and asked if they had any comments.

Dr. Larson stated that he wanted to address the off-campus program and distance education request which is targeted for the western suburbs, Rockford and the Quad Cities to make sure that Lake and McHenry Counties and the opportunities there were not overlooked.  He mentioned that the Naval basic training that used to take place in Orlando and San Diego has been switched to Great Lakes, bringing with it a large student population for degree programs.  Because of the road system in northeastern Illinois, a lot of people in that area interested in public school administration find it takes too long to drive to even Hoffman Estates.  If programs were delivered closer to them, they would be well-attended.

Dr. La Tourette commented that the Board of Higher Education materials he had just received included an item on Higher Education Cooperation Act (HECA) grants.  One of these relates to the establishment of a multiuniversity center in Lake County to meet the kinds of concerns expressed by Dr. Larson.  Due to financial constraints, however, the legislature asked that the IBHE not implement that grant until the educational needs in Lake County had been discussed further.  Dr. Wagner, Executive Director of the Board of Higher Education, made it very clear in the IBHE Board meeting on October 1 that it was not likely much new program money would be made available, through his office, to finance programs in that area.  President La Tourette told Dr. Larson that his point was well taken and that the university would continue to develop its distance learning network to reach beyond Hoffman Estates and Rockford.

Student Trustee Marquez commented that from a student perspective, making the University 101 course a permanent option in undergraduate education was definitely needed on campus.  Marquez stated that he had changed his major three times before deciding on the current one.  A very important part of the decision process for students is advising, and the University 101 class has been productive.   He agreed with President La Tourette's statement that it provides a higher retention rate.

Chair Boey asked for a motion to endorse the FY98 Budget Guidelines and forward them to the full Board.  Trustee Raymond so moved; Trustee Grans seconded.  The motion was approved.

Agenda Item 6.a.(3) - FY98 Capital Budget

Introducing the Fiscal Year 1998 Capital Budget, Dr. Williams stated that NIU had not received any capital appropriations from the State over the last two fiscal years due to an impasse in the legislature.  The first part of the capital request lists major capital projects with an estimated budget of one million dollars and up and those which require several steps in the funding and phasing of the construction.  The second part of the capital request includes a list of projects normally having budgets less than one million dollars.  These are usually classified as repair and renovation projects. Again, these requests are submitted to the Board of Higher Education which submits a prioritized list to the Governor and the legislature.

In regard to storm water retention, Trustee Grans asked if NIU was working with both the City of DeKalb and the county as part of the national disaster summer program.  Chair Boey answered that the possibility had been discussed but no decisions made as yet.  Trustee Moser asked about expectations for the Altgeld Hall project.  Dr. Williams answered that NIU would be making a case for top priority projects on the State's list and that he expected the Altgeld project might be funded in two to four years.  He stated that it has moved down and is listed in the twenties by the State, noting that nothing has been funded by the State for the last two years and that this has created a backlog.

Chair Boey asked for a motion to endorse the FY98 Capital Budget and forward it for approval by the full Board.  Trustee Raymond made the motion, seconded by Trustee Moser.  The motion was approved.

 Agenda Item 6.b. - Income Fund Report

Dr. Williams stated that legislation dealing with the university income fund had been approved by the General Assembly and signed by the Governor.  He asked Ms. Kathy Swanson to give an update on this legislation.

Ms. Swanson gave a brief summary of the bill which will allow universities to retain their tuition revenues locally instead of sending them to Springfield where they would be held for reappropriation a year later.  Managing the income fund locally will allow the university greater flexibility in class scheduling and in offering courses based on enrollment.  In addition, it will increase the university's budgeting flexibility.  The Governor signed this legislation on August 2.

Ms. Swanson and Dr. Williams met with the Comptroller's Office in Springfield regarding the current balance in the fund account and how to deal with incoming revenues.  University Income Fund accounts have now been created and income fund revenues are being retained at the university.  Ms. Swanson reminded the Committee that even though these funds are retained at the university level, they are subject to State purchasing and finance regulations, subject to full audit by the Auditor General and to external audits.  The Income Fund revenue amount must be reported to the Board of Higher Education and the legislature annually.  Ms. Swanson thanked Legislative, Audit and External Relations Committee Chair Moser, Board Chair Myron Siegel and the rest of the Board for their leadership, commitment, letters and personal visits to the Governor's Office in behalf of this initiative.

Trustee Moser thanked President La Tourette, Kathy Swanson, and all those who worked with the Legislation, Audit and External Affairs Committee on the project.

Agenda Item 6.c.(1) - Transactions/Purchases

The current space utilized by the School of Art for sculpture is no longer available.  Alternative space of approximately 18,000 square feet was located and can be leased under a two-phase contract which covers five years at $2.75 per square foot for the first two years with an adjustment based on the Consumer Price Index for the last three years.  The contract offers a five-year renewal.  Included in this price are provisions for additional electrical service, ventilation service, partitions, and washrooms.  Because this is a five-year agreement, endorsement by the Committee is required for Board of Trustees approval.

Chair Boey asked for a motion to approve the lease for the School of Art.  Trustee Grans made the motion, seconded by Trustee Raymond.  The motion was approved.

Agenda Item 6.c.(2) - Microwave/Minirefrigerator Purchase

Dr. Williams informed the Committee that the combination microwave/minirefrigerator units approved by the Board of Trustees in the summer were purchased for $1,203,955 and installed in the residence halls.  Residence hall staff and students reported that the units were functioning well and very much appreciated.

Agenda Item 6.d.(1) - Residence Hall master Plan (Phase I)
Agenda Item 6.d.(2) - Recycling Center Feasibility Study
Agenda Item 6.d.(3) - Center for University Resources for Latinos and Latin American Studies

Dr. Williams referred the Committee to the information in the Board materials related to projects which had been discussed in detail at prior meetings, i.e. the Residence Hall Master Plan, the Recycling Center and the Center for University Resources for Latinos and Latin American Studies.

Agenda Item 6.d.(4) - Campus Child Care Feasibility Study

Two areas not previously discussed in detail were the Campus Child Care facility and the West Campus Master Plan. Consultants from the firm of Burnidge-Cassell Associates of Elgin – Ms. Agnes Kovacs and Mr. Mike Murphy – had been working with staff to assess university needs.  Mr. Mike Murphy stated that, currently, there are three programs located in Gable Hall which provide some form of child care.  First, the Shirley W. Nelson Center, the main child care center on campus, is an accredited and State-licensed facility which offers care for children two to six years old.  Sixty to sixty-five children are accommodated in 37 slots, indicating that a majority of the care is part-time.  Second, the School of Family, Consumer and Nutrition Sciences operates a Child Development Lab, a licensed facility offering care to children aged six weeks to six years within 30 enrollment slots.  The lab features a preschool program, some extended-hour care, and infant and toddler care.  It serves as an internship site for students majoring in Child Development.  Both of these programs operate within similar hours and a similar fee schedule for full-day care.  Both have high application rates with few new admissions and, consequently, long waiting lists.  The third facility, the Learning Research Lab in the college of Education, is strictly an academic research and practicum lab for Education majors.  Each semester, the lab offers two-hour sessions, four days a week, to approximately 30 children aged three to five years.

The consultants issued a random 1500-count survey to NIU graduate/undergraduate students, faculty and staff; conducted numerous interviews with involved groups and  community-based child care representatives; and reviewed background information from prior internal studies, State mandates and child care waiting lists.  All have indicated an overwhelming need for expanded child care services at Northern defined as:  infant and toddler care; extended hours of care; extended operating schedule, not based on a scholastic calendar; drop-in care and care for school-aged children; holiday and summer care.  Frequently requested programs that could be phased in include, the consultants suggested, half-day kindergarten, before-and-after school care and some evening-hour care, specifically during finals or just prior to finals.  It was noted that expanded child care should benefit the faculty, and especially staff, who cannot now be accommodated in the Nelson Center.

The consultants indicated that expanded care is perceived to be an NIU community issue.  Parent fees must be affordable; the quality of care must remain high; and the facility must be accessible and secure.  Some ancillary services could be incorporated into the child care program, including assistance from the School of Nursing, the Physical Education Department, Physical Therapy, the Speech and Hearing Clinic students to conduct screening clinics; and the Recreation Center.

Comparisons with other state universities or other higher education institutions showed that most have increasing child care enrollment needs and that many are modifying existing structures or planning new buildings.  Projections indicate that an expansion of between 145 and 200 slots for child care are needed to fit NIU's immediate requirements.  This would require a facility of approximately 19,000 square feet for an enrollment of 145, and 23,000 square feet for 200 children.  The facility would require classrooms, observation rooms, multipurpose play areas, washrooms, office and support space, and exterior playgrounds.  Many different sites on and off campus were considered, but no existing building of sufficient size was located.  Three sites have been identified for possible development.  Two of these sites fall within the area of the West Campus and will appear on the West Campus Plan proposal.

As evaluations progress, operating budgets, construction cost analyses and an appropriate schedule for the total project will be developed for Board review along with suggestions for implementation.

Dr. Williams said that plans with more definitive information and perhaps a specific project with operating costs, facility costs, etc. should be brought to the Committee in the late fall for consideration and approval.

Agenda Item 6.d.(5) - West Campus Master Plan

Dr. Williams stated that the West Campus Master Plan was part of an overall strategy for the development of the West Campus area.  In 1988, the university developed a campus master plan which focused primarily on the East and Central Campuses and provided a development strategy that could be used as opportunities arose for the university to improve roadways, infrastructure, landscaping, etc.  This strategy has worked very well and the university is now focusing on the West Campus.  Messrs. Gary Boyer and Dennis Swinford, consultants from Johnson, Johnson & Roy, were asked to give brief presentations on progress to date on the West Campus master plan.

Mr. Boyer gave a short slide presentation to orient the committee on the West Campus Master Plan.  The goal is to complete a plan for the 268 acres on the west side of Annie Glidden, including recommendations for property acquisitions.  In addition to Johnson, Johnson & Roy, the plan team is composed, of Bart Nashman Associates, a transportation/traffic planning group, and Solomon, Cordwell, Buenz, a firm which is also involved with the Residence Hall Master Plan.

The goals of the master plan were to identify sites for both near-term and potential long-term development and to specifically address the quality of life for residents of the West Campus.  Framework plan alternatives were developed from thorough analyses and interviews.  That information was used to create framework plan alternatives which were then presented to and discussed with the Campus Planning Committee.  Dennis Swinford gave an overview of several issues, problems and opportunities that arose during this process.  Areas he brought to the Committee's attention included multiple pedestrian/vehicular conflict points; the duplication of vehicular routes; poor roadway connection, pedestrian and vehicular, to the main campus from the West Campus; quality of life spaces on the West Campus not commensurate with those found in other parts of NIU; and the poor quality of intramural space and limited ability to use those fields throughout the day.

The framework plan consisted of five organizational concepts:  (1) Identification of sites for future buildings and intramural athletic space.  These included a new child care facility, the recycling center, intramural field space, and storm water management areas and improvements.  (2) Separation of vehicular and pedestrian circulation systems.  Two perimeter roads would be created, one on the north and one on the south, from which all parking areas and service to the buildings would be accessed.  (3) Creation of direct, safe and pleasing pedestrian connections.  An underpass would be created at Annie Glidden Road and Stadium Drive, which would start at the Central Campus Mall, go under Annie Glidden Road, continue north to the residence halls and on to the intramural field space.  This pedestrian spine would handle emergency vehicular traffic, move-in days, and service vehicles as well.  (4) Development of a meaningful open-space system.  A new central park would be developed in the middle of Stevenson, Grant, Douglas and Lincoln residence halls.  Students could use this space to hear concerts or lectures, participate as a community, or gather informally in smaller groups, to study, throw a frisbee or just relax.  (5) Improvement of the storm water management system.  It was recommended that the university acquire 40 acres on the northwest corner of the campus for the creation of a series of lagoons.  This would provide space for water coming from storm water management areas.  It would be possible to filter sediment, slow down and capture the water before it continues to the west campus.

The framework plan was designed to enhance the quality of life for the residents on the West Campus and to identify sites for near-term development while protecting the university's opportunity for long-term growth.

Dr. Williams emphasized the fact that the plan represents a framework, a draft.  It is a working document.  There would be an open forum for all faculty and staff of the university and, he anticipated hearing comments during the open forum that would reshape the final report to the Board.

Student Trustee Marquez asked if the current number of parking spaces would be affected by the creation of the central park in the new West Campus plan.  Mr. Swinford answered that every parking space had been replaced and there would be no net loss of parking spaces.

Agenda Item 7 - Bond Offering

Dr. Williams introduced the bond offering which would be used to finance the previously mentioned projects.  For the record, he stated that there is no arena in this financing request.  The university anticipated generating the necessary revenue to move forward with the specific design of each of the identified projects by taking advantage of current interest rates.

Dr. Williams asked Michael Boisvert, a representative of First Chicago Capital Markets, which will serve as the Underwriters, and Mr. David Williams, who is a partner at Chapman and Cutler and serves as bond counsel for the bond offering, if they would give the Board an overview of the financing package and the steps needed to move forward.

First to speak was Michael Boisvert, who gave a slide presentation.  He stated that the bond issue would total approximately $48 million and consisted of two parts.  One part was approximately $36 million for new projects which included the financing of the Stevenson Tower renovations, the recycling center, the child care facility, the Latino Center and the West Campus plan.  The second part was approximately $12 million to refinance existing bonds.  Some maturities from the NIU Series 1985 Bonds, originally issued at fairly high interest rates, were identified as refinanceable at a present value savings of approximately $425,000.

Mr. Boisvert stated that bond financing for Northern Illinois University was available at tax-exempt rates, making the cost of financing two to three percent below a taxable bank loan.  The university can finance facilities with bonds over 25, 30 or 40 years, based on the useful life of the actual facilities being financed.  A bank loan minimum tends to be seven to ten years.  By using bonds for this kind of project, the average annual cost to the university is reduced and this reduces the burden on students.

Final maturity for the new debt is planned for about 25 years with an interest rate of approximately 6.25% which is relatively low.  Most of this new debt will have provisions for prepayment.  If rates drop the university would have the ability to take advantage of refinancing to save money.

Presently, a portion of the 1985 Bonds have rates and maturities scheduled at 9.4% in 1997 to 10.05% in 2005.  That is a 4% to 5% difference from the current market rates.  Refunding the 1985 Bonds was not possible before now due to a prepayment penalty.

Ongoing costs of approximately $2.5 million in debt service paid every year were identified.  Up-front costs for the new bond issue covering attorneys, auditors, printers and underwriters are being kept at one percent or less.  A second up-front cost is bond insurance.  Mr. Boisvert stated that interest rates are now at relatively low historical rates which made this an optimal time to do a bond issue.

Dr. Williams summarized by reminding the Committee that the specific details of each project will be brought back to the Board for project approval once the total design and analysis are completed.  Payments for the $2.5 million debt service on the bond series would come from three sources:  user fees such as child care service fees; sales and service, consisting of net revenues from new facilities and operations such as the Recycling Center; and student fees at a graduated rate recommended to be $1.50 per credit hour next year, rising to a maximum of $4.50 per credit hour in 2002.  From that point on, the fees would be reduced on an annual basis.

Dr. Williams then asked Mr. David Williams to give a brief overview of the legal steps the university must take to implement the bond plan.

Mr. Williams stated that there were four documents that would have to be recommended by the Committee to the full Board for action to proceed with the bond financing.  The first was a supplemental revenue bond resolution. This resolution provides for the issuance of the bonds and the security for the payment of the bonds.

The second item is an escrow agreement.  This is an agreement entered into with a bank or trust company to which a portion of the proceeds of the bonds would be escrowed to provide for the payment and redemption of the previously issued bonds as they are redeemed prior to their maturity.

The third item was an authorization for First Chicago Capital markets and bond counsel, Chapman and Cutler, to prepare and distribute a Preliminary Official Statement and a final Official Statement to be approved by the Treasurer or the Chairman of the Board of Trustees with respect to the offering of the particular bonds.  This is a document that describes the security for the repayment of the bonds, provides information on the university and its auxiliary facilities system, and describes the tax exemption to the potential holders. One additional factor required by the Federal Securities Law is to provide financial audits and certain financial information to prospective holders and various national reporting information agencies.

Item number four was a bond purpose agreement with Chicago Capital Markets.

Item five is the approval of the refunding and the projects.  As specific projects are brought to the Board for approval, the Board will be able to revise the projects, as long as they fall within the Auxiliary Facilities definition of the statute.  A limitation states that refunding would occur only if there are savings in every year.

Limits in item number 6 state that the bonds shall be issued in aggregate principle amounts not to exceed $50 million, mature no later than 30 years from the dated date, and bear interest at rates permitted by law.  Interest on the entire issue is not to exceed 6.75%.

Item number 7 authorizes officers of the Board to proceed with the sale, issuance and delivery of the bonds.  Copies of the final resolution documents will be available for the September 18 Board meeting.

Part of the reason the university cannot start fresh is because those bonds sold by the predecessor Board of Regents are outstanding, and these bonds would have to be issued on a parity with those bonds because there is call protection.  Bonds are not called up for a period of approximately 10 years after their issuance.

Chair Boey asked for a motion approving the Committee Resolution which recommended that the Board of Trustees approve the 1996 Series Bond issue.  Trustee Grans made the motion, seconded by Trustee Raymond.  The motion was approved.

Dr. La Tourette expressed his appreciation to Dr. Williams and his staff for their work on this issue.  He also thanked the representatives of First of Chicago and Chapman and Cutler for their help in reducing the issuance fee to one percent instead of the two and three percent of earlier issues.  He emphasized the developing partnership with students through the leadership of Student Trustees David Marquez and Willie Fowler as well as Student Association President Ryan Eggert.

Because the Student Senate was not scheduled to meet to consider the student advisory referendum until September 15, Dr. La Tourette recommended to the Committee and the Board that the full Board take action to recommend that the Executive Committee  execute these documents on September 18 after this advisory referendum is completed.  He stated that timing the purchase while interest rates are low was important.  He reiterated the fact that bond convenants prevent the use of these funds for anything other than capital construction and university improvements.  These funds cannot be diverted to any other uses such as an arena, university operating expenses or academic programs.

Trustee Raymond asked what kind of communication is anticipated to educate everyone on the correct details of the plan.  Dr. Williams answered that several meetings had already taken place involving himself, the President and Provost, student leaders and staff in Student Services.  There had also been a media/press conference where  the overall strategy for projects, the West Campus Plan and funding issues were discussed.

Student Trustee Marquez indicated that various strategies had been developed to get information to the students and give presentations regarding the upcoming student referendum so that when they came out to vote, it would be an informed vote.

Dr. Williams stated that an open forum on the development of the West Campus would be held on September 12 in the Holmes Student Center for students, faculty and staff.  The forum was scheduled for two different times, noon and 7:00 p.m
 
Agenda Item 8 - Heavy Rainfall and Flood Damage

During the month of July, DeKalb experienced major rainfall which resulted in damage to university property through surface water and flooding.  Damages were estimated at approximately one million dollars.  Areas such as university insurance coverage and assistance through FEMA (Federal Emergency Management Agency) were looked into in order to acquire resources to cover the costs associated with clean up and for improvements.  Additionally, the university is looking at various projects in terms of mitigating this whole program.  There is very positive support from federal sources as well as from our insurance company.  Dr. Williams praised the physical plant staff and custodial staffs, who were on duty with immediate clean up, lessening the damage potential in their steadfast, positive efforts to minimize flood damage by working overtime, sandbagging and in other efforts to keep water from penetrating university buildings.  Letters were sent to the various staff thanking them for their efforts to save and protect the campus.  Updates on the damage report and progress on generating resources to cover it will be forthcoming at later meetings.

NEXT MEETING DATE

Chair Boey said that the next meeting date would be communicated to the Committee at a later date.

OTHER MATTERS

There were no Other Matters to come before the Committee.  Chair Boey reminded those present that requests had been made to limit presentations to 15 minutes and that in the future presenters will be held to that time.  Committee members will be allowed an open time frame for any necessary discussion.

Chair Boey then asked for a motion to adjourn.  Trustee Grans so moved, seconded by Trustee Moser.  The motion was approved.

The meeting was adjourned at 3:25 p.m.
 

Respectfully submitted,

Sharon M. Mimms
Recording Secretary