Financial Plan - Cornell University Division of Budget & Planning

Capital Plan• New York State support is projected to fund $530.8million (19 percent) of total project costs. Most ofthis amount is for contract college projects in theSUCF capital plan, but approximately 20 percentof the funding is state funding for certain universityprojects outside of the SUNY structure.• Funding from general purpose or unit resources andenterprise operations cover $489.5 million (18 percent)and $220.6 million (8 percent) of approvedcapital activity respectively.• Based on an analysis of project expenditures andfunding availability, the university expects tofinance $801.9 million of approved project costsusing long-term debt and another $401.3 millionof short-term bridge financing, which is oftenused to accommodate the timing of gift receipts.A funding plan for the estimated operating andmaintenance costs of each capital project is developedwhen construction is authorized. Projects includedin the approved capital plan are expected to increaseannual operating and maintenance costs for the Ithacacampus by $28.7 million per year. These projects areprojected to add about 1.5 million gross square feet ofnew space on the Ithaca campus and about half a milliongross square feet at Weill Cornell Medical Collegein New York City.Debt PlanThe proceeds from various university debt issuancesand borrowings provide for the financing needs of theuniversity’s capital projects. Debt allows the universityto undertake capital projects when cash funding is notavailable at the time capital expenditures are madeand to spread the cost of a project over multiple fiscalyears. It is also to the university’s financial benefit totake advantage of the low cost of tax-exempt debt.The need for short-term bridge financing and longtermdebt as indicated in the university’s 10-yearcapital plan is the basis for the University Treasurer’splanning for Cornell’s debt structure (defined as debtload, timing, and type of borrowing instrument,among other factors). In addition to an assessmentof the ability to repay borrowings by the relevantinternal university source of funding, there is regularmonitoring of the university’s external capacity toborrow (measured by the impact that additional debtwould have on financial ratios and the debt ratings byindependent rating agencies). The borrowing needsfrom the capital plan and projected repayment ofexisting and new debt are key inputs into the university’srecently created 10-year financial model.Debt and Debt RepaymentThe university’s external debt includes tax-exemptand taxable borrowings but excludes debt issued byNew York State for contract college projects, which ispaid directly by the state and is not recorded in theuniversity’s budgets or financial statements. Cornellis expected to have $988.4 million of external debt atthe beginning of 2008-09. (See line 21 on page 58.)During 2008-09, the university is scheduled to pay anestimated $61.4 million in principal and interest onthis outstanding debt.In 2007-08, the university issued $70 million of variable-ratedemand bonds to finance the central heatingplant and $130 million of variable-rate demand bondsto refund tax-exempt commercial paper. Cornellalso re-offered the 2004 bonds from an auction-ratemode to a variable-rate demand bond. In addition,in 2007-08, the university entered into forward-swapagreements to lock in interest rates for three anticipatedfuture borrowings of $575 million, bringingthe university’s total forward starting swaps to $1.175billion. Cornell entered into these agreements to takeadvantage of historically low interest rates. The newswap agreements will take effect in 2008-09 for $100million at a rate of 3.551 percent, in 2009-10 for $275million at a rate of 3.649 percent, and in 2013-14 for$200 million at a rate of 3.766 percent. The universityplans to use the tax-exempt commercial paper program(authorized at $200 million) during fiscal year2009 to finance capital projects in Ithaca and NewYork City. The taxable commercial paper program (alsoauthorized at $200 million) will be used for operatingworking capital, capital projects, and equipment purchasesfor the Ithaca and New York City campuses.Unit Debt and Debt RepaymentThe schedule on page 59 identifies outstanding debtand budgeted debt service by operating unit. A distinctionis made between debt service paid directly by anoperating unit and that budgeted and paid by centraluniversity resources for the benefit of operating units.47