Governor's proposal on bond refinancing assists university
A proposal by Virginia Gov. Ralph Northam grants Virginia Tech, along with other public universities in the commonwealth, the ability to redirect money that would have been designated for payment on bonds to other areas of the university’s budget.
The move by the governor, proposed last week, takes advantage of low interest rates by refinancing bonds issued by the Treasury Board of Virginia and the Virginia College Building Authority, which institutions of higher education use for capital projects.
Virginia Tech currently has approximately $315 million total in outstanding debt to repay such bonds, which are used to construct and improve academic and auxiliary buildings. The proposal would permit Virginia Tech to defer payments for two years on the principal to the end of a bond's term. By allowing this deferral, the university will have greater flexibility in navigating changes in revenue during the COVID-19 pandemic.
Funds not spent on principal payments in the next two years can be redirected to such auxiliary services as residence halls or dining centers, where revenue has decreased during the pandemic. For the current year, Virginia Tech would have about $20 million in funds that could be redirected under the proposal. A similar amount is projected for the next fiscal year.
While the refinancing proposal gives the university short-term flexibility to adjust and reallocate funds, Virginia Tech will still meet its full obligations on any bond it owes.
“This flexibility on deferring payments allows us to address needs in areas that have been severely affected by the pandemic,” said Dwayne Pinkney, senior vice president and chief business officer at Virginia Tech. “We appreciate the governor’s proposal and the General Assembly’s consideration of these measures.”