These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
238A Morrill Hall
Present:
Charles Speaks (chair), Prince Amattoe, Jean Bauer,
Stanley Bonnema, Charles Campbell, Tom Gilson, Gary Jahn, Abu Jalal, Thomas
Klein, Michael Korth, Kathleen O'Brien, Daniel O'Connor, Richard Pfutzenreuter,
Terry Roe, Sue Van Voorhis, Warren Warwick, Susan Carlson Weinberg
Absent:
Brittny McCarthy Barnes, Bruce Brorson, David Chapman,
Tim Church, Robert Cudeck, Cynthia Jara, Joseph Konstan, Marvin Marshak, Tim
Nantell, Thomas Stinson, Michael Volna
Guests:
Associate Vice President Donna Peterson
[In these minutes:
(1) new financial system; (2) implications of the election outcome; (3)
football stadium; (4) University debt]
1. New Financial System
Professor
Speaks convened the meeting at
The
correspondent cited an excerpt from the minutes recounting a discussion of a
new financial system for the University:
"Professor Campbell responded that the Committee has been told there
is a moderate risk with the current system--but that there has only been one
failure in the last two years. He said he agreed that the system must be
replaced sooner or later but that he wanted to hear more about how the current
system is not working before he would support any decision on a
replacement." The faculty member
then commented: "Could you pass on
to Prof. Speaks with a copy to Prof. Campbell that I feel that Prof Campbell's
point . . . is a very serious concern which was not answered by Mr. Volna in
the committee hearings. It needs to be addressed before funds are spent
on a CUFS replacement."
Professor
Speaks reported that he is on the task force evaluating options for and making
recommendations concerning a new financial system. The members of the task force had to sign a
confidentiality agreement, so he cannot say a great deal, but he told the
Committee that there has been no straying from the original plan. They are considering bids from vendors and
are considering the consortium option.
They are receiving financial information about both the vendor and
consortium options and the process is still on track.
Professor
Campbell and Ms. VanVoorhis both expressed interest in being provided with a
list of the task force members, as had been promised at the last meeting. Professor Speaks said the list would be
distributed to Committee members.
Professor
Campbell said he would also like assurances that there will be some kind of
"environmental impact statement" equivalent about the cost of and
impact on departments. He said he would
also like assurances that people will be given an opportunity to try the system
before it is installed, a broader group of people than the financial systems
people seemed inclined to rely upon.
Professor
Speaks noted that there are December meetings of the Committee; he said he
would not ask Mr. Volna to meet with this Committee again until he has
something to report--but that there will be information provided to the
Committee. He also pointed out that if
the legislature does not provide the funding for the new system it will not go
forward.
2. Implications
of the Election Outcomes
Professor Speaks welcomed Associate Vice President
Peterson to the meeting to discuss the implications of the elections for the
University. He said he would accept a
motion to close the meeting for this and the next item on the agenda. Messrs. Amattoe and O'Connor inquired why the
meeting should be closed; Professor Speaks explained that the Committee would
be unable to discuss sensitive political and legal issues if the discussion
were to be public. The Committee then
voted unanimously to close the meeting.
A MINNESOTA DAILY reporter present asked that the minutes
of the meeting record his protest at the closing of the meeting and said the
Committee was violating
The Committee then discussed the makeup of the Minnesota
House and Senate and the role various individuals and factors will play in
response to the University's biennial budget and capital requests.
3. Football
Stadium
The Committee next moved, while the meeting remained
closed, to a discussion of the present status of the negotiations between the
University and the Vikings as well as the political situation in which the
negotiations are taking place.
Professor Speaks noted that there will be an opportunity
for members of the University community to express their views. The Board of Regents has indicated it will
hold open hearings on the stadium issue for which people can sign up to make
statements. There will also be a survey
of individuals involved in governance (all Senate members, all members of all
committees and subcommittees, the Council of Academic and Professional
Administrators, and the Civil Service Committee); the survey, however, will
only be sent if there is a Memorandum of Understanding between the University
and the Vikings.
Professor Speaks thanked Ms. Peterson for joining the
meeting.
4. University
Debt
Mr. Pfutzenreuter next distributed a hand-out consisting
of a set of PowerPoint slides that had been used in a presentation to the Board
of Regents at its October meeting about the University's debt. He quickly ran through a number of
complicated slides noting market data and the like; he noted that interest
rates are at a historic low--the University has been issuing debt at a great
time. He also noted that the peak in
University debt service will be in 2004 and will decline thereafter (assuming
no large additional debt is incurred).
Mr. Pfutzenreuter reviewed the determinants of credit
rating and debt capacity. People want to
know what goes into them, he said; there is no one number for debt
capacity. The rating agencies use a
number of factors (such as student demand, financial statement analysis, state
support, and management analysis). The
University's rating is a strong Aa, which is the
second-highest rating possible. The
University could issue more debt, he said, but the question is where the money
would come from to pay the debt service.
It is debt payment that is a bigger problem than debt capacity.
Comparison data for peer schools were also included;
Mr. Pfutzenreuter noted that the Board of Regents has
authorized $787 million in debt; the University only has $712 million in
outstanding debt. Not all of the debt authorized
by the Board has been sold because it has not been needed.
Finally, Mr. Pfutzenreuter noted a table plotting the
reduction of the outstanding debt by year through fiscal year 2036. The debt level will no doubt NOT decline as
the table suggests because the University will issue new debt, but it does
portray the University's approach to debt:
pay it off fast and recycle it.
87% of the University's current debt will be retired by 2020 but there
will be a need for new or renovated buildings.
Of the existing debt, about 50% is in auxiliary services (housing,
parking, etc.) and 50% is centrally-supported (academic buildings, the steam
plant, etc.).
Is the University close to the point where its appetite
for capital projects, and its success in getting them, is creating a debt
service that is so great it is harming the institution's programs, Professor
Speaks asked? Once the University gets
beyond 2004 the problem will be reduced, Mr. Pfutzenreuter responded, and there
is not a lot of new construction planned at the central level. So unless there is a big jump in
construction, the debt cost levels out and then begins to decline. Many perceive that there is a huge debt level,
Professor Speaks said, but there will not be if there are no new buildings. Mr. Pfutzenreuter agreed.
About a year and a half ago the Committee told the
President that it was concerned about compensation for faculty and staff,
Professor Speaks recalled. The Committee
was told, again, that compensation was the number one priority--and it remains
the number one priority until reality hits the budget and the University must
pay its fixed obligations and ends up with few options for compensation.
Will there be an increase in debt, Professor Roe
asked? There is relatively light
construction planned in the six-year capital request, Mr. Pfutzenreuter said,
and the projected debt levels assume the construction in the six-year plan will
occur. He said he saw nothing that would
cause debt level to jump. The University
has built all the housing and parking (except for the stadium possibility) that
it needs for quite awhile. And the
six-year capital plan now includes unit fund-raising as part of the revenue
stream for new projects, which reduces the University's projected debt level.
Would the proposal for new UMP clinics affect the debt,
Mr. Klein asked? It could, Mr.
Pfutzenreuter said. That will depend on
who issues the debt. The capital plan
summary incorporates the items in the current plan. Items such as the clinics that are not in the
current capital plan are not reflected in the projected debt numbers.
The Committee then held a brief off-the-record discussion
about possible uses of the proposed stadium for activities other than
football. Mr. Pfutzenreuter noted that
the six-year capital plans contained nothing that would fit into the
non-football stadium space and it appears that it would be more expensive to
use that space for other purposes than it would be to construct a free-standing
facility. He noted that the proposed
site of the stadium leaves room for future academic buildings.
Professor Speaks adjourned the meeting at
--
Gary Engstrand