Tax Exempt Bonds as a Financing Tool Cornell University Patricia A. Johnson Treasurer April 18, 2008

2 Private research university which operates six endowed schools and four state supported schools in Ithaca, NY Medical College operated in New York, NY New York land grant institution 21,000 students Cornell University

3 $10.1 billion in assets $6.4 billion in investments $2.2 billion in liabilities $2.5 billion in revenue $2.5 billion in expenses $7.8 billion in net assets Financial Data (as of June 30, 2007)

4 MoodysAa1 Standard & PoorsAA+ Cornell Debt Rating

5 Why use tax exempt funding? Pros –Lowest cost of debt Cons –Expensive to Issue –Compliance is time consuming and on-going –Involves an issuer, attorneys, underwriter and rating agencies

6 Variable Rate Demand Bonds$254,82032% Tax-Exempt 7-Day Auctions$90,15011% Taxable Commercial Paper$86,97911% Tax-Exempt Fixed Rate Bonds/ Debt$258,21033% Tax-Exempt Commercial Paper$89,00511% Other$14,6042% $793,768100% Cornell Core Debt as of June 30, 2007 (in thousands ) Fixed/Variable MixBreakdown of Debt by Product

7 Estimated Budget Bridge Financing Long Term Financing Research $474,573 $214,620 $109,669 Program 220,573 63,701 12,400 Student Support 260,350 99,368 9,350 Renovations/Renewals 447,238 3,000 90,205 Infrastructure 294,775 5,000 93,285 Total Ithaca Campus $1,697,509 $385,689 $314,909 Weill Medical College 1,056,164 50, ,509 Total Approved Projects $2,753,673 $435,689 $507,418 Approved Projects (in thousands)

8 Issue Process Timeline: Three to Four Months Issue long term bonds every two years Assemble the team –Issuing Agency –Bond Counsel –Underwriter –Underwriters Counsel –Internal Staff

9 Issue Process (continued) Trustee approval of indebtedness and use of tax exempt funds Environmental studies Public hearings Reimbursements follow guidelines for approved costs

10 Approved Project Approval Request (PAR) –Is financing needed? Forward to Treasurers Office Treasurers Office determines source of debt –Bridge financing –Long-term financing Quarterly meetings with University Budget Office Internal Loan Process

11 Document all projects which received tax- exempt funding by reviewing closing documents and draw down schedules Contact (or assign) tax exempt coordinator for every project Include infrastructure projects such as utility projects not specific to a building, land improvements, etc. Due Diligence Process for Private Use

12 Questionnaire to be filled out by coordinator at issuance of loan Follow-up with on-site visits Questionnaire will be updated every two years Site visits will occur as necessary Due Diligence Process for Private Use (continued)

13 Auction Rates Wanted to diversify product offering, Closing for reoffering was April 10, 2008 Auction failed by not providing a market for the put Costs to Cornell 200 bp above LIBOR or maximum 6.26% Issued variable rate demand obligations with a liquidity facility

14 Questions?