F–2 STANDING COMMITTEES Finance and Asset Management Committee

F–2/212-20 12/10/20

Budget, Finance, and Capital Report INFORMATION This item is for information only. BACKGROUND This is a standing monthly report. This month the Finance Report includes the Semi-Annual Debt Report and the Cash and Liquidity Report.

Attachments 1. Monthly Budget Report – December 2020 2. Semi-Annual Debt Report – December 2020 3. UW Finance Cash and Liquidity Report as of September 30, 2020 4. Active Capital Projects Summary as of November 19, 2020

OFFICE OF PLANNING & BUDGETING

MONTHLY BUDGET REPORT – DECEMBER 2020

Fiscal Year 2021 Budget Activity to Date (July through October)

CORE

ACADEMIC

OPERATING

BUDGET

FY21 vs FY20 YTD through October

Budget and Expenditures

FY21 vs FY20 YTD through October

Budget Utilization Rate

SELF

SUSTAINING

ENTERPRISE

ACTIVITY

FY21 vs FY20 YTD through October

October FY21 vs October FY20

BUDGET STATUS INDICATORS

Red = performance >5% worse vs Prior YTD; Gray = no better or worse than 5% vs Prior YTD; Green = performance >5% better vs Prior YTD

% Usage Relative

to Prior Year

Budget area scope

definition available

here

Budget area scope

definition available

here

Unit Grouping Definitions available here

ATTACHMENT 1F-2.1/212-20 12/10/20

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PLANNING & BUDGETING INITIATIVES & CHALLENGES

COVID-19 Revenue Loss and Expense Recovery Efforts

Our efforts continue to identify, retrieve documentation, and classify extraordinary expenditures incurred within the Academy (i.e.

business units outside of the UW Medicine clinical enterprise) and UW Medicine related to the pandemic.

Recently, two notable shifts occurred related to the local match of Federal Emergency Management Agency (FEMA) grant funds and

process changes unique to the West Coast:

1. Previously, the UW was allocated approximately $22 million from the State Disaster Relief Account (DRA) to fund the local cost

share requirement present within the FEMA Public Assistance grant. On November 19, the UW was notified that the

approximately $22 million in local cost share would be shifted to a portion of the state’s Coronavirus Relief Funds. This change

results in minimal impact to FEMA eligible costs incurred prior to December 30, 2020. However, absent additional state

funding, the change would result in a significant transfer of local cost share risk to the UW for FEMA eligible expenses that may

be incurred after December 30, 2020 due to the nature of current restrictions of the Coronavirus Relief Fund (CRF) within the

Coronavirus Aid, Relief, and Economic Security (CARES) Act.

2. We recently learned that the FEMA grant reconciliation and closeout process is being addressed differently at the state and

federal level for agencies along the West Coast. In short, this shift may introduce a degree of risk around our ability to

maximize reimbursement in the event certain expenditures are denied reimbursement by FEMA. We continue to work on

identifying options for risk mitigation, however the situation requires federal intervention.

In other COVID-19 recovery fund sources within the Academy, specifically the CARES Act Higher Education Emergency Relief Fund

(HEERF) allocations, the vast majority of the nearly $40 million in grant funds has been allocated for use. This includes nearly $20 million

in direct grant aid to students, $14.6 million to support Housing and Food Services, $1.7 million to support the Husky Coronavirus

Testing program, $1 million to support student mental health resource expansion and smaller amounts associated with academic and

learning technologies and UW Environmental Health and Safety.

Notably, without further federal legislation to enact new funding sources or expand existing CARES Act funding sources, the UW will be

entering a period in which external resources to defray portions of COVID-19 related costs and revenue losses will no longer be

available.

State Budget & Legislative Session Update

The COVID-19 pandemic has drastically changed the economic outlook in Washington state. The June Revenue Forecast, released by the

Economic and Revenue Forecast Council (ERFC), forecasted a precipitous economic decline as a result of the full shutdown in spring and

early summer. Fortunately, the November Revenue Forecast, released November 18, showed continued recovery from June estimates.

Unfortunately, the General Fund-State (GF-S) forecast remains $1.8 billion lower than the February 2020, pre-COVID, forecast for the

2019-21 biennium, $1.8 billion lower for the 2021-23 biennium, and $2.0 billion lower for the 2023-25 biennium. While this still reflects a

substantial deficit, it represents less than half of what was projected in the midst of the full shutdown in spring and early summer.

Governor Inslee will use revenue estimates from the November forecast when crafting his proposed 2021-23 biennial operating budget,

which will be released in December. The Governor’s budget release is the first step in the budget process for the upcoming 2021

legislative session, which begins on January 11 and is scheduled to last 105 days. An additional revenue forecast in February or March

will guide legislative leadership as they develop their budget proposals during the session.

F-2.1/212-20 12/10/20

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289$

187$

Total Debt Funding 475$

(1) 80/20 weighting between tax-exempt (assumes 5% coupons and a 10-year par call) and taxable 30-year interest rates to illustrate the University's portfolio (2) Due to commercial paper timing differences, project costs incurred in FY18 were refinanced with long-term debt in FY19

FY 2021-2025 ($ in millions)New Debt Needed for Board Approved Projects (A)

Remaining Debt Capacity (FY 2021-2025)

Long-Term Credit Rating: Aaa/AA+Internal Lending Rate: 4.25%

Weighted Average Cost of Debt: 3.62%

Recent Events As of Nov. 10th, the University's borrowing cost was 3.14%(1). This is 14 basis point increase from May 27th. The market is anticipating

that the Fed will retain a federal funds target of 0.00% to 0.25% through 2021.

In February 2021, the University is planning to sell bonds at the Board approved maximum of $97 million. The University will close on the 2020C forward refunding bonds in early February which will save the University $33 million in debt service over the next 15 years. Additionally, the University is planning on refunding $213 million in general revenue bonds for debt service savings.

The University plans to issue $25 million in tax-exempt commercial paper in mid-December. Proceeds from the 2021 bond sale will pay off the outstanding commercial paper.

The University has secured two lines of credit totaling $200 million to provide additional access to liquidity. Currently, no draws have been made on the lines of credit.

Since June 2020, the University has approved $22.8 million in FAST loans for HFS, School of Medicine, and UW Libraries.

Estimated Future Funding A revised debt capacity estimate was presented to the Board in

June 2020. This analysis indicated $475 million in available debt capacity through FY25.

Additional capacity from the Capital Assets Pool is recalculated quarterly as the value of the Invested Funds (IF) changes and principal owed to the CAP is repaid. As of 9/30/2020, the available capacity was $158 million.

Use of CAP reduces the University's institutional liquidity.

External Debt Portfolio (as of 09/30/2020)

ILP Debt, 77%

Non-ILP Debt, 23%

Variable, 4%

Fixed, 96%

Debt Activity Chart

The University has $2,357 million of external debt outstanding. This is $24.2 million lower than May's outstanding balance due to principal retired exceeding FAST loan issuance.

The weighted average cost of debt is 3.62%.

Between 2009 and 2015 outstanding debt grew by 13% annually. From 2015 through 2018, the annual growth rate slowed to 5%. Debt has not materially grown since 2017. Based on current debt capacity estimates, outstanding debt is projected to remain level through 2025.

$130 million of internal funding from the CAP is excluded from the external debt portfolio.

Semi-Annual Debt ReportDecember 2020

(A) Authorized projects include Destination One ($129M), Kincaid Hall ($31M), and NWH Childbirth Center ($25M), Finance Transformation ($180M) and Health Science Education Building ($30M), College of Engineering ($10M), UWM ($15M), SAF ($5.5M).

$68 $47

378

$188

$262

$122

$78

$142 $117

63(2)

$(42)(2)

$16 $5 $(0)

$(1) $(3) $(13)

$1,018

$2,389 $2,376

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$(50)

$-

$50

$100

$150

$200

$250

$300

$350

$400

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Out

stan

ding

Deb

t

Net

Cha

nge

Net Change Outstanding Debt

ATTACHMENT 2F-2.2/212-20 12/10/20

Page 1 of 2

Project Purpose Balance (1) Final MaturityLife Sciences Building Instruction and Research $110.1 2049Animal Research and Care Facilities Instruction and Research 86.0 2047Molecular Engineering Building Instruction and Research 68.7 2043Dempsey Hall Instruction and Research 34.9 2041Foege Building Instruction and Research 22.7 2031UW Bothell Phase 3 Instruction and Research 22.8 2043William H. Gates Law School Instruction and Research 8.3 2028AAALAC Instruction and Research 18.7 2035Ben Hall Instruction and Research 13.8 2037Denny Hall Instruction and Research 14.0 2046Kincaid Hall Instruction and Research 14.5 2046Health Science Education Building Instruction and Research 0.0 2042Other Instruction and Research Instruction and Research 21.0 various

Subtotal Instruction and Research $435.5South Lake Union (Ph I, II, 3.1, & 3.2) UW Medicine 315.1 2048UWMC Expansion UW Medicine 189.2 2046NW Hospital UW Medicine 58.3 2033UWMC Surgery Pavilion UW Medicine 24.8 2028NWH Childbirth Center UW Medicine 9.7 2041Destination One UW Medicine 54.5 2035Other UW Medicine UW Medicine 14.9 various

Subtotal UW Medicine $666.5HFS Expansion Student Life 553.3 2045Husky Union Building Student Life 93.1 2043IMA Building Student Life 24.3 2030IMA Locker Room & Pool Upgrades Student Life 0.0 2032Radford Court Apartments Student Life 25.2 2032Nordheim Court Student Life 16.6 2033Bothell Student Center Student Life 15.8 2046Ethnic Cultural Center Student Life 11.6 2043UW Tacoma YMCA Student Life 10.8 2046Other Student Life Student Life 23.1 various

Subtotal Student Life $773.8UW Tower Academic Support 88.0 2037HR Payroll Modernization Academic Support 25.4 2027UW Finance Transformation Academic Support 0.0 2038Cobb Building Academic Support 29.8 2045West Campus Utility Plant Academic Support 24.8 20474225 Roosevelt Academic Support 12.1 20294545 Building Academic Support 11.2 2024Other Academic Support Academic Support 25.5 various

Subtotal Academic Support $216.8Husky Stadium Athletics 212.6 2045Husky Ballpark Athletics 11.1 2045Other Athletics Athletics 2.7 various

Subtotal Athletics $226.4

Available Proceeds Unallocated 38.3 TBDTotal University Outstanding Debt $2,357.3

(1) Estimated allocation. Will not exactly match ILP balances reflected in the Semi-Annual ILP report due to bond premium and use of the CAP and FAST programs

Projects still drawing on ILP loans

% by Purpose

100%

Outstanding External Debt (in millions)

Long-Term Credit Rating: Aaa/AA+Internal Lending Rate: 4.25%

Weighted Average Cost of Capital: 3.62%

Unallocated, 1.6%

Athletics, 9.7%

Academic Support,

9.3%

Student Life, 33.1%

UW Medicine, 28.5%

Instruction and Research,

18.5%

Semi-Annual Debt ReportDecember 2020

F-2.2/212-20 12/10/20

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Executive Summary••

•••

••••

Daily Operating Liquidity

Monthly Invested Funds Balances2 FY19-FY21 Operating Liquidity

Historical Inflows and Outflows4 Daily Operating Liquidity Projection5

1 As of September 30 2020, the payable balance due to the University was $124 million.2 Excludes primary demand deposit account, illiquid and restricted pools; Capital Assets Pool and Supplemental Retirement Pool.3 Max of 25% per year, consists of Consolidated Endowment Funds (CEF) units and are included in the CEF market value.4 Excludes impact of investment activity.5 Based on information available to date. Projections will continue to be updated as additional information is available.

FY20’s days cash for the Consolidated Clinical Enterprise is 67 days, up from 64 days in FY191.

The University operating funds are highly liquid, ~50% of the total funds have liquidity of 30 days or less. The University of Washington Investment Management Company (UWINCO) and UW Finance made a strategic decision to focus on liquidity due to the uncertainty in capital markets and the uncertainty of University revenues resulting from the global pandemic. The UW maintains a $200m line of credit to meet extraordinary liquidity requirements. The line has not been utilized to date.

Inflows of cash are above the five-year median and outflows are in line with the median.Total Invested Funds (IF) balances have increased since FY19, driven by increases in daily operating liquidity.

Cash levels are projected to fluctuate over the next 12 months in line with the business cycle but, are projected to remain relatively flat for the next 12 months. Due to unknown future impacts of Covid-19 and other uncertainties, actual results may vary materially from the projections presented.

Days cash for FY20 increased to 167 days from 155 days in FY19. Peer data for FY20 will be available later in the fiscal year.

UW Finance Cash and Liquidity ReportAs of September 30, 2020

$ in millions

Nearly all of the University’s liquidity is restricted for specific purposes.

Total daily operating liquidity is up ~$400M from a year ago. Fundraising and support associated with the COVID-19 pandemic played a significant role in the increase. The total includes ~$183M in deferred FICA taxes and Medicare accelerated payments to be repaid. These higher fund balances are largely restricted for specific uses and do not represent an increase in discretionary funds.

$740 $832 $770 $697

$988 $894 $923 $1,060 $1,083 $1,088 $1,079 $1,030

$1,159

-

$200

$400

$600

$800

$1,000

$1,200

$1,400

Sep '19 Oct '19 Nov '19 Dec '19 Jan '20 Feb '20 Mar '20 Apr '20 May '20 Jun '20 Jul '20 Aug '20 Sep '20

Balance Liquidity

Daily Operating Liquidity $1,159 1-30 days

Short Term Funds $549 1-30 days

Intermediate-Term Pool $518 3-365 days

Long-term Pool3 $661 60 days - 4 years

Supplemental Retirement Pool $345 Restricted

Capital Assets Pool $130 Illiquid

Total Operating Funds $3,362 Total

Other: Line of Credit $200 1-2 days

-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

FY19 FY20 FY21

($1,000)

($500)

-

$500

$1,000

Sep '19 Nov '19 Jan '20 Mar '20 May '20 Jul '20 Sep '20

Inflows Outflows Net

Inflows(5 Year Median)

Outflows(5 Year Median)

Net(5 Year Median) 1,675

1,375

1,076

$-

$500

$1,000

$1,500

$2,000

Oct '20 Dec '20 Feb '21 Apr ' 21 Jun '21 Aug '21

1 STDEV Above Projection 1 STDEV Below

CONTAINS UNAUDITED DATA

ATTACHMENT 3F-2.3/212-20 | 12/10/20 Page 1 of 1

ACTIVE CAPITAL PROJECTS SUMMARY as of November 19, 2020

Project Name Financial Details Schedule Project Health Trending

Regent Approval Budget Current

Forecast Funding

Committed Target Forecast Budget Funding Schedule Safety Business Equity

M/W Equity Goal %

M/W Equity

Forecast

Kincaid Hall Renovation Perkins+Will/Skanska II, 04/19 $45.96 $45.95 $45.01 3/21 3/21

(1)

15% 23%

Seismic Improvements - Phase 2 Mithun Architects/CLARKCONS Delegated $16.32 $16.32 $15.00 12/21 12/21

(2)

(3)

5% 10%

Founders Hall (old Mackenzie) LMN Architects/Hoffman II, 11/19 $75.10 $75.55 $75.10 12/21 12/21

15% 15%

UWMC NW Hospital Childbirth Center ZGF Architects/ABBOTT II, 11/18 $30.60 $30.60 $30.59 3/22 3/22

15% 20%

Health Sciences Education Building Miller Hull Partnership/LCL II, 12/19 $100.62 $100.46 $100.62 5/22 5/22

15% 15%

IMA Locker Rooms and Pool Upgrades / 11/20 $28.00 $28.22 $28.00 1/23 1/23

UW Tacoma Milgard Hall (Academic Innovation) Architect Research Office/ANDCON I, 11/19 $50.50 $52.00 $4.50 1/23 3/23

(2)

(4)

15% 15%

UW Bothell | Cascadia College STEM 4 Mithun Architects/LCL II, 03/19 $79.65 $80.54 $79.40 8/23 8/23

(2)

15% 15%

Behavioral Health Teaching Facility SRG Partnership/Clark/Abbott 07/19 $224.50 $230.23 $33.25 11/23 8/23

(2)

15% 15%

Interdisciplinary Engineering Building /Hensel Phelps 06/20 $75.07 $75.07 $29.67 4/24 4/24

TBD TBD

ICA Basketball Ops & H2P Center / 02/20 $60.54 $60.54 $53.00 12/23 5/24

TBD TBD

U District Station Building Perkins+Will/GLY II, 12/19 $0.00 $0.00 $0.00 TBD 1/25

TBD TBD Totals $786.85 $789.02 $501.66 $ All Dollars in Millions Targets Legend Budget: Budget is equal to or greater than Forecast (1% Tolerance) Meeting Target

Funding: Funding and cashflow as planned Not Meeting Target, Plan in Place

Schedule: Forecast is equal to or sooner than Target Not Meeting Target, No recovery Plan in Place Safety: Total Recordable Incident Rate of 2 or lower Pause Business Equity: Green=meeting plan; Yellow=behind plan, recovery plan in place; Red=currently behind plan, recovery not possible.

ATTACHMENT 4F-2.4/212-20 | 12/10/20 Page 1 of 2

ACTIVE CAPITAL PROJECTS SUMMARY as of November 19, 2020

Notes:

(1) The project has experienced two recordable safety incidents. A demolition worker arm laceration and a strained back removing dehumidification equipment from the building. The safety metric calculation based on remaining project hours can not meet the TRIR 2.0 goal and the health indicator is red.

(2) The project budget exceeds the target as is often the case at this phase of project development. A recovery plan is in place to align and recover the budget to plan. (3) An individual working on demolition sustained a laceration that required stitches and medical care. The project safety metric can be achieved provided no additional injuries

occur through the duration of the project. (4) The project completion is forecast roughly 4-6 weeks later than the approved schedule. There are opportunities to recover the schedule and/or accept the delay while

considering cost implications to recover. (5) The revised project budget of $53 million reflects a reduced project scope and cost due to ICA no longer having the ability to commit reserves to the project.

Summer 2021

Haring Center Renovation

The Haring Center project utilizes donor funding to renovate 42,000 GSF to support the College of Education’s Early Education Unit (EEU). Revitalizing this “hidden gem” and realizing its future as a “living laboratory” to test emerging teaching strategies is a key objective of this project. Additional project objectives;• Eliminate health, safety / security issues, and achieve universal accessibility• Upgrade infrastructure to improve thermal comfort, achieve seismic resiliency, and meet all technology needs• Improve the functionality and flexibility of program spaces • Improve the drop-off/pick-up sequence and wayfinding

Summer/ 2023$33M

Husky Village Apartments will be demolished and replaced with developer-built mixed-use project on land leased from UW. The project would provide a minimum of 900 student beds in a variety of residential unit sizes, plus ground floor office and a dining hall. The proposal maintains University control over the land while providing the near-term student housing consistent with the UWB|Cascadia College 2017 Campus Master Plan.

$315M

Stage 1, 12/ 2019 Stage 2

Fall 2021

Summer 2023UW Bothell Husky Village Redevelopement Dec. 2020

The building will be approximately 340,000 GSF and will house UW clean energy researchers and other public and private sector tenants with compatible research and technologies. Using a P3 procurement method, a developer will design, finance, construct, operate and maintain a development that provides well-integrated core uses aligned with UW goals as well as house a variety of uses that provide a variety of supporting benefits, such as spaces for dining, meeting and informal gathering consistent with the 2019 CMP.

$309M TBDW27 Development

PENDING PROJECT APPROVALas of Nov. 20, 2020

Project Overview Planned Regent Action

Scheduled Completion

Financial EstimatesProject Name

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