March 1-3, 2006

ITEM 130-2011-R0306    Authorization to Secure Intercap Loan from State of Montana Board of Investments-Construction of BioSafety Animal Containment Facility; Montana State University-Bozeman

THAT: The Board of Regents of Higher Education authorizes Montana State University-Bozeman to secure an Intercap Loan from the State of Montana Board of Investments to finance the construction of a BioSafety Level 2 large animal containment facility. The amount of the loan is $2,297,400.

EXPLANATION: According to Board of Regents Policy 950.1, Municipal Finance Consolidation Act Participation, any financing through the State Board of Investments in excess of $500,000 must be approved by the Board of Regents. The Board of Regents authorized the construction of a new research facility (Item 128-2004-R0905) at its September 21, 2005, meeting. MSU is now seeking to secure approval of its final financing plan. A loan from the State of Montana Board of Investments under the Intercap Loan Program is sought to fund the majority of the construction, conditioned upon the Board of Investments increasing its current $1,000,000 maximum loan amount. Repayment of the loan will be financed with non-state funds. Neither state monies nor student tuition or fees will be used.

At the current Intercap Loan interest rate of 3.8%, annual debt service costs are expected to be approximately $276,000 per year, to be repaid over a 10-year period, yielding total payments of $2,760,000, including principal and interest. The Intercap Loan program charges a variable rate of interest. For each 1% increase in the interest rate, annual debt service would increase approximately $13,000.

There are three sources of loan repayment :

1.           Facility and administrative cost recoveries from Veterinary Molecular Biology department's National Institute of Health (NIH) grant #1U54AI065357 will be reserved to pay $500,000 of debt service.

2.           Yearly spendable income from the Johnson Ranch endowment (estimated at $190,000 per year) will repay $1,900,000 of debt service.

3.           Facility and administrative cost recoveries from NIH grant #5P20RR020185 will be reserved to pay $360,000 in debt service. (Total facility and administrative costs returned on this grant are expected to generate approximately $1,000,000 in funding.)