University of Tennessee seeks broader bonding ability

The University of Tennessee wants the Tennessee State School Bond Authority to grant it the right to offer bonds supported by its general operating budget rather than revenue streams.

Residence halls and parking lots are the sort of projects the university currently finances through bonds, said David Miller, University of Tennessee chief financial officer and senior vice president. The school contacted state officials in an attempt to gain the ability to finance with bonds the building of academic facilities and other things that don't generate revenues Miller said.

The school would repay the debt by setting aside funds in its operating budget for debt service, he said.

The institution has a big backlog of academic facility needs, Miller said, and the new approach could address these.

If the Tennessee State School Bond Authority grants the university the right to sell a wider variety of bonds, the school will then need the state legislature and governor to approve a budget that would include debt service.

The time needed to achieve these steps means the university wouldn't be able to sell any of the new types of bonds until the second half of 2026, at the earliest, Miller said.

If things go forward, the university expects to set aside up to 3% of its budget to pay off debt. Three percent would allow the school system to sell a bit more than $1 billion in bonds, Miller said.

Any bonds would be issued by the Tennessee State School Bond Authority by competitive bid, Miller said.

The school's bonds issued through TSSBA are rated Aa1 by Moody's Ratings, AA-plus by S&P Global Ratings, and AA-plus by Fitch Ratings. Miller said he expected the new bonds would get the same ratings.

The University of Tennessee has five campuses and 62,000 full-time equivalent students.