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Capital projects are funded by
means of State Appropriations, State Bonds, Privatization
Funding and Lease Funding.
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State Appropriations |
State Appropriations can
be General Fund (GF) or Non-general Funds (NGF)
appropriations.. GF appropriations typically are
restricted to facilities supporting Educational and
General Programs. NGF appropriations are provided for
Sponsored Research, Auxiliary Enterprise or Hospital
facilities. GF appropriations are supported by State tax
dollars while NGF appropriations are derived from
institutional funds. |
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State Bonds |
Three types of bonds are
issued by the state to finance capital projects. They are
authorized in accordance with the requirements of Article
X, Sections 9(b), 9(c), and 9(d) of the Virginia
Constitution.
- 9(b) Bonds - Legislative
and voter approval are required for issuance of 9(b)
debt. These bonds are rated triple "A". 9(b) bonds
have been issued only twice since 1971 to finance
projects at public institutions of higher education, the
most recent being approved by voter referendum in 1992.
- 9(c) Bonds - Revenue
producing capital projects are funded through 9(c)
debt. These bonds are rated triple "A" and are secured
by the full faith and credit of the State. Net revenues
derived from the use of the capital projects are
expected to pay principal and interest on the 9(c)
bonds. Generally, 9(c) bonds are used to finance
Auxiliary Enterprise facilities, such as residence
halls, parking decks and student recreational
facilities. 9(c) debt must be approved by the General
Assembly.
- 9(d) Bonds - Unlike 9(b)
and 9(c) bonds, 9(d) bonds do not carry the full faith
and credit pledge of the State. 9(d) bonds may be
issued by the State or the University.
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Privatization Funding |
Privatization funding
refers to contractual arrangements between public and
private entities in which public facilities are owned,
operated or provided by the private entity. It is likely
that debt issued through Privatization Funding will be at
taxable rates of interest, up to 2.5% higher than
equivalent tax exempt rates of interest under conventional
public State funding. The advantages of Privatization
Funding include faster design and construction and less
demand on institutional debt capacity. |
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Lease Funding |
Lease funding is a method of
acquiring and financing capital projects through another
entity that will own and lease the project to the
institution. Virginia Commonwealth University makes use
of Lease Funding trough its real estate foundation. The
VCU Real
Estate Foundation
acquires and renovates property and then leases this
property to the the University. Lease rates are based on
the costs incurred by the Foundation for acquiring the
property and typically reflect the market rate appropriate
for the type and class of space being provided. All
leases with the Foundation must be approved by the State. |
Virginia Commonwealth
University's capital budget is dynamic. Projects financed
through State Appropriations and State Bonds must follow the
conventional biennial State budgeting cycle and are authorized
in the Appropriation Act. The majority of VCU's capital budget
is developed based on this process. Privatization Funding and
Lease Funding, however, offer financing alternatives outside the
biennial State capital budget process, and thus can be
undertaker anytime.
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