The Board of Trustees of Illinois State University authorized the issuance of a new series of auxiliary facilities system (AFS) revenue bonds for the purpose of debt refinancing and acquisition of the Cardinal Court housing complex. The authorization allows Illinois State to maintain a tax-exempt debt status on the newly issued bonds.
The Board of Trustees previously approved a plan to issue new AFS bonds at its quarterly meeting in October 2017. However, the major tax reform legislation proposed by both the U.S. House and Senate require that any advance refunding on tax-exempt debt prior to the permitted call date be issued at taxable rates and not tax-exempt rates. Refinancing the Cardinal Court debt in 2017 qualifies as an advance refunding because the permitted call date on the existing bonds with Collegiate Housing Foundation is not until April 2021. The current tax reform proposal permits advance refunding as tax-exempt debt provided the transaction closes prior to December 31, 2017.
Board members approved today the resolution to acquire Cardinal Court through the issuance of a new series of 2017 AFS bonds in an amount not to exceed $60 million, at an interest rate not to exceed 4 percent. This transaction will permit a future refunding of the bonds, beginning in early 2018, with tax-exempt AFS revenue bonds. The total cash flow savings are estimated to be at least $24 million over the life of the new 2018 series bonds.