In order to clarify misconceptions, inaccuracies and important omissions made in reports concerning the University of Idaho Foundation’s (UIF) investment in the University Place Project (UPP), the UIF is providing this Fact Sheet. If additional information is needed, please contact the UIF Office by phone at (208) 885-9100, fax at (208) 885-4999 or email at carr@uidaho.edu.

Why and how did the UIF plan and finance the UPP?

• The University of Idaho (UI), as Idaho’s land grant university, has an obligation under federal law to provide outreach and extension programs throughout the state. As an example, the UI has extension staff and faculty located in 42 of Idaho’s 44 counties. The UI has been offering programs in Boise and the Treasure Valley since 1907.

• In addition to its land-grant obligations, expanding the academic choices throughout the state is a direct result of the State Board of Education (SBOE) specifically defining the missions of Idaho’s public universities. The mission statement directs all three Idaho public universities to offer courses within their defined mission wherever in Idaho the need exists, without duplication. Law and agriculture are just two examples of mission areas where UI is directed to serve the citizens of the state.

• In 1998, the Governor and Idaho Legislature enacted legislation that directs all state agencies to convert from leasing facilities to owning them wherever possible. In complying with this directive, both the UI and ISU began the process in 1998 of converting their long-term lease obligations to equity ownership in new Treasure Valley facilities. The UI has for a long period of time leased facilities throughout the Treasure Valley, including leasing a substantial portion of the MK Plaza in Boise. ISU has also leased various office and classroom facilities throughout Boise.

• As a result of these directives, former UI President Bob Hoover requested that UIF support the UI’s plan by facilitating the construction of such facilities in Boise, following the very successful model utilized by the UI and the UIF in the construction and operation of University Place in Idaho Falls.

• In 1999, the UIF Board of Directors responded to President Hoover’s request by agreeing to provide an initial investment of $1.9 million needed for the development of the UPP. Over the course of three years, that initial investment increased to a total authorization level of $28 million. The UIF Board of Directors was assured that when bonds were issued, all funds advanced would be reimbursed to the UIF.

• Given the rapid growth of the greater Boise area and the increasing demand for higher education services, the UIF and the UI, as well as ISU, pursued what by all accounts was an unprecedented project, unlike any other public project undertaken in the state. The size and scope of the project was large; an anticipated $136 million series of three buildings located in urban Boise.

• The first and primary building is the Idaho Water Center (IWC), bonded at $48 million. The IWC is under construction and scheduled for completion in August 2004. This precedent-setting facility brings together, in one building, the UI’s nationally acclaimed water resource program with the water research programs of the U.S. Forest Service and the Idaho Department of Water Resources. UI programs delivered in Boise, including agriculture, architecture, education, engineering, law, and natural resources, will now also be housed in the single UI Water Center Building.

• A second building is the ISU Health Professions Center. This building would allow ISU to offer in Boise those programs it has a statewide mission to provide, such as graduate nursing, pharmacy and other health profession disciplines. ISU is now pursuing its proposed Health Sciences Building. A feasibility study will determine the terms and conditions by which ISU can construct the Building through the Idaho State Building Authority (ISBA).

• The third building was to have been the Learning Center, a building for the UI to house various programs within the UI’s mission. UI Interim President Gary Michael concluded in July of this year that the UI did not have the financial ability to pay for this building.

• With legislative approval during the 2002 session, the UIF and the UI chose the ISBA as the entity to finance the project. The ISBA is an Idaho quasi-governmental entity whose sole purpose is to finance facilities by issuing low-interest, tax-exempt bonds. Issuing bonds provides private funds for the construction project. The public funds involved in the project are a portion of the annual lease payments and other operating costs outlined below. In any event, annual payments are required from UI, whether for occupancy and debt service for the UPP, or - simply as rent for the facilities UI occupies in Boise.

What is the true fiscal impact of the UPP on Idaho taxpayers?

• As a matter of law, the bondholders of the $48 million debt issued by ISBA assume the risk of repayment in the event of a default. This is not a taxpayer obligation.

• The operating impact to the university is related to the cost of leasing and operating the facilities. In fiscal 2004-2005, these costs are currently estimated to be $1.6 million. Additional lease expenses of $1 million will be incurred in fiscal 2005-2006. Additional one-time expenses for tenant improvements estimated at $2.9 million and additional operating expenses will be incurred as UI programs are phased into the IWC.

• The costs for the IWC can be met by a variety of sources, including as examples; lease income from other tenants in the building, state appropriations to cover the basic UI space costs, and grants related to research carried out in the facility.

• When the bond debt-service is fully paid at the end of the 40-year period, the UI will own its classrooms and research laboratories, which is a stated public policy objective.

What progress has the UIF made in recouping its investment in the UPP?

• $28 million was expended in developing the UPP, half of that on IWC. The UIF has developed a plan to carry the costs of this debt over the next several years, while at the same time undertaking an aggressive plan to repay the loan principal. Interest on all of the debt is current.

• The UIF is working with ISBA to maximize the return to the Foundation from the $48 million bonded amount. ISBA has identified approximately $4 million to $5 million that is potentially available due to lower than expected construction costs and contingencies. Of this amount, $1 million has already been reimbursed to UIF. This $1 million is part of a total $3 million that has been repaid against principal owed to the UI.

• The UIF continues to work with ISU and ISBA to determine the potential for completion of the Health Professions Center on the UIF-owned property. Moving ahead on this component of the project would return to UIF the funds invested in this start-up.

• The UIF has also taken initial actions and is currently working with auditors to determine how to handle potential write-down of some of this investment. This decision for FY 03 will be announced at or before the UIF Annual Meeting this month.

• The UIF continues to explore other options to recover an additional $10 million to $12 million in funds invested in UPP.

How has the UPP impacted the UIF’s ability to support the UI?

• The UIF continues to provide strong financial support to the UI and its students. This year, the UIF endowments will distribute more dollars for scholarships than ever in its history. The UIF continues to manage private scholarship and other gift funds with exceptional success.

• Over an 11 year period UIF has seen remarkable increases in its total assets, as well as in the amount of revenue earned annually, and distributions made to UI annually from the endowments.

• During the 14-year period ending June 30, 2003, the UIF has distributed over $117,181,652 million to the UI to fund a variety of programs, an all-time record.

• An operating budget impact to UI is reflected in that $1.9 million annually will not be transferred from the UIF to UI. This amount will be used by UIF to carry and pay down the project debt that was acquired to fulfill UI’s plans.

• In Idaho Falls, the UIF acquired and maintains University Place, which it makes available at little or no cost to ISU, SBOE and UI for education programs in the region.

• In the near future, the UIF will transfer the $15 million J.A. Albertson Building---funded entirely with private gifts--- to the UI.

• Since 1993, the UIF has nearly tripled its assets. Sound investment management has accumulated assets in excess of $190 million at the end of FY 03.

• Despite reports to the contrary, the UIF will meet all of its obligations to pay for UI scholarships. Nothing will be lost from any and all dedicated scholarship monies administered by the UIF on behalf of UI students.

• The UIF’s investment performance review as of June 30, 2003 states a total rate of return for the year at 4.58%, ranking the UIF among the top third of institutional investors in the nation. In this very difficult investment climate, the UIF continues to out-perform the national average.

• As a result of this project, UIF has undertaken a review of its relationship with the university and the operating procedures that support the relationship. Better operational guidelines are already being put in place.

Will the UPP realize its full potential?

• Not as originally envisioned. The IWC is under construction and the ISU Health Profession Center is now under serious consideration. Economic conditions, resulting in reduced funding, precluded the UI from moving forward with the third building as planned.

• When the UPP was conceived, the stock market was high, the economy was booming, and budget surpluses were more common than deficits. Those deteriorating economic conditions took their toll, but substantial benefits will still be realized.