University of Minnesota leaders and state lawmakers have proposed a new way to bolster the prominence of the Medical School.
Legislators passed a plan last week that would allow the University to refinance state-approved loans from 2006 to build TCF Bank Stadium. This would allow the institution to lower the interest rates on those bonds, potentially saving the school millions of dollars. Some of the saved money would be directed toward designing new medical facilities.
In total, the University could save $40 million to $42 million over the next 17 years, said Richard Pfutzenreuter, the University’s chief financial officer.
Of those savings, $10 million would go to developing new research and educational facilities for medical students and faculty members.
These projects were recommended by a Blue Ribbon Committee, formed by Gov. Mark Dayton last year, to improve the Medical School’s national ranking and research capabilities. Dayton also proposed $8 million go to the facilities’ design earlier this month.
School officials say the improved buildings will address future health professional workforce shortages and create state-of-the-art facilities to meet modern health care needs.
Since the savings wouldn’t cover the total cost of $100 million to construct these facilities, the University will likely approach the Legislature next year to request additional funding, Pfutzenreuter said.
“We’re going to use the proposal that [lawmakers are] advancing and supporting using some of that savings to accomplish a really important project for the University,” Pfutzenreuter said.
Sen. Terri Bonoff, DFL-Minnetonka, introduced the proposal to a slightly surprised group of lawmakers Tuesday, many of whom had never heard of the plan before.
Bonoff said University officials recently learned from the Minnesota Management and Budget office that the school could lower the interest rates by changing the language in law regarding the stadium’s financing.
Certain economic factors have made this change possible. Pfutzenreuter said interest rates have plummeted since the Great Recession. The bonds were originally issued at about 4.2 percent interest, but the University could now drop the rates down to about 2.7 percent, he said.
This restructuring is possible because the bonds are coming to the end of their “call period,” an approximately 10-year lock on interest rates to reassure investors. Pfutzenreuter said he could reissue the bonds in August or September if the legislation passes.
“The economics of both interest rates and the ability to call that debt and refinance it is what makes this possible today,” Pfutzenreuter said.
Legislators plan to vote in approval of the plan Monday, but a finalized version will have to be negotiated by the House and the Senate before the session ends May 18.