Minutes of a Regular Meeting, June 22-23, 2004 - Digital Collections

REGENTS’ POLICY MANUALSECTION 4—FINANCE AND MANAGEMENT4.2—DEBT POLICYThe issuance of debt shall be in accordance with the Board of Regents’ authority to issue said debt, asprovided by state law. All debt shall be secured in accordance with Oklahoma law and the administrativerules of the Council of Bond Oversight. Debt is defined to include all current short-term and long-termobligations, guarantees, and instruments that have the effect of committing the University to futurepayments. Generally, debt obligations encompassed by this policy will take the form of bonds, notes,loans, or capital leases (including use of the State of Oklahoma’s Master Lease-Purchase Program).4.2.1—PHILOSOPHYDebt, especially tax-exempt debt, provides a low-cost source of capital for the University to help fundneeds required to achieve its mission and strategic objectives.The University believes that appropriate financial leverage serves a useful role and should beconsidered a long-term component of the University’s balance sheet. Just as investments represent anintegral component of the University’s assets, debt is viewed to be a continuing component of theUniversity’s liabilities.Debt as a source of capital is not limitless. Even the wealthiest institutions are constrained by theamount of capital projects that can be supported without jeopardizing long-term strategic objectives.Therefore, not every desirable project can nor should be financed by the University. However, fulfillingthe University’s mission is paramount, which, in turn, will drive capital decisions that impact theUniversity’s credit.This policy provides a framework within which decisions will be made regarding the use of debt tofinance particular capital projects that help the University achieve its strategic objectives.4.2.2—COMPONENTS1) Provide funds to support the University’s capital needs while achieving the lowestoverall cost of capital.Part of the University’s success is attributable to prudent and timely capital investmentsmade to sustain and enhance its growth in research and in clinical, educational, andstudent service facilities. The University’s administration and Board of Regents mustcontinue to have the ability to make judgments as to the wisdom and timing of suchinvestments. It is prudent to achieve these ends at the lowest capital costs.2) Use selected financial ratios with specific targets to ensure that the Universitycontinues to operate within appropriate financial bounds while achieving itsmission and responding to changes in the market.Use of key financial ratios provides the University’s administration and Board of Regentswith feedback and assurances that the University is not exceeding its desired use of debt(credit) capacity. The University will prioritize projects in light of the limited availablefunding resources.THE UNIVERSITY OF OKLAHOMA 223