MSU Chemistry/Biochemistry Research Laboratory Facility
Authority for Project and Revenue Stream
� Montana State University is requesting authorization to proceed with the design and construction of a Chemistry/Biochemistry Research Facility.� The authorization to issue bonds for construction will come forward at a later meeting.
� In accordance with the provisions of MCA 18-2-102(c), the Board of Regents and the Governor can authorize construction of a facility that is funded entirely by federal and/or private sources.
� MSU proposes using recovered indirect costs from federal research grants to service the debt on an indenture for this facility.
� Recovered indirect costs are used for the enhancement of existing research programs, assistance to and encouragement of new research programs and the general support of research. MSU invests recovered indirect costs for the following: start-up packages for new faculty, graduate and undergraduate student support, technician support, equipment, support services, grants and contracts managers salaries, renovation, and with the addition of the Veterinary Molecular Biology facility payment of the lease. It is also appropriate to use recovered indirect costs to pay debt service on an indenture.
� Given the significant growth in G&C expenditures over the past several years if MSU is given approval to proceed with this project we would be able to start paying debt service once a bond is approved by the Board.
� The attached document, �Chemistry/Biochemistry Building Preliminary Revenue Analysis�, provides MSU�s grant and contract expenditures and F&A (recovered indirect costs) for the last ten years.� The attachment also lists the proportion of expended funds from federal, private and state sources. The majority of MSU�s F&A funds come from federal agencies and the percentage of federal funds is showing an increase, proving there would be adequate recovered F&A from federal funds to cover the debt service.
� While there are no guarantees that MSU will continue to increase its expenditures, the average annual increase from 1993 to 2003 has been approximately 13%.� This attachment also provides a projection for the next five years; however, it is not necessary to grow at this level in order to service the proposed debt. It is important to point out that the increase in recovered indirect costs over� the last two years is more than enough to service the proposed debt.
� Over the last three years MSU�s costs for renovation projects from recovered F&A have averaged more than 10% of the total recovered F&A.� In addition on average about 12% of the total recovered F&A has gone to start-up packages and these packages frequently include a component for renovation. We anticipate that the amount of F&A that will need to be dedicated to renovation will decrease significantly with the new building, especially in the early years.
� It should also be noted our LRBP request for the renovation of Gaines Hall includes a $6 million addition that is proposed to be funded from recovered F&A.� If MSU receives authority to construct the new Chemistry Building then our LRBP request for Gaines Hall renovation will be significantly reduced, and the reduction will include removing authority for the addition; therefore freeing up at least a $6 million commitment of recovered F&A funds.
� MSU has developed a preliminary cost projection to confirm the feasibility of this project.
o Our estimate of construction cost is based upon a figure of $350/GSF.
o Our estimate of debt service is based upon a 30-year bond, at a 5.00% rate.
o We project an annual debt service of about $1.4 million.
o Additional annual O&M costs are projected at about $350,000.
o A 150% coverage ratio for our debt service would require a pledge of slightly over $2 million.
o This $2 million is about 16% of the total F&A revenues in FY03 ($12.9 million).
� The University also prepared a tentative schedule for the development of a detailed financial plan, the selection of a bond underwriter, and the sale of revenue bonds.
� If this proposal is approved, the University will then appoint a Team to develop a detailed financial plan for the construction and operation of this facility.� The Associate Commissioner for Fiscal Affairs is part of the Team that will select a bond underwriter, and will also be invited to serve on the Financial Planning Team.
Building Location & Project Development
� A final location for the proposed Chemistry Building has not been decided.� We do have several sites in mind, and one of the sites was selected as the preferred site for a new Chemistry Building that was being proposed in the late 1990�s. That site was selected after a thorough review of potential sites for a building that was to be larger than the building proposed.
� If MSU is authorized to move forward, the site selection will be revisited and a final decision will be made according to the University�s regular (committee review) process.
� The proposed building as well as its source of funding has been discussed and reviewed by UPBAC. If the Regents authorize MSU to move forward with design, the project will be reviewed thoroughly on campus. The renovation of Gaines was selected as the number one LRBP priority in 2001 and 2003, because of the recognized need to provide much needed and updated facilities for the Chemistry department.� Building a new Chemistry Building will help us address what has been and still is an absolutely critical need for the MSU campus.