This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or filing under the securities laws of any such jurisdiction. * Preliminary, subjecttochange Dated: June___, 2018 Dated: DateofDelivery BOOK-ENTRY-ONLY NEW ISSUE regulations, judicial decisions and rulings, interest on the Series 2018 Bonds is exempt from income taxation in the in taxation income State ofIndiana.See“TAXMATTERS,”“ORIGINALISSUEDISCOUNT,”“BONDPREMIUM”andAPPENDIXEherein. from exempt is Bonds 2018 Series the on interest rulings, and decisions judicial regulations, laws, existing under Counsel, Bond Indiana, Indianapolis, LLP, Miller Ice of opinion the In defined). Covenants hereinafter Tax (as the with compliance continuing on conditioned is opinion Such 2018. 1, January to prior began that years taxable for income taxable minimum alternative corporate calculating in earnings current adjusted in included a specific preference item for purposes of the federal alternative minimum tax, although Bond Counsel tax observes that it is income for federal excluded is defined) hereinafter purposes (as from gross income under Bonds Section 103 of the Internal 2018 Revenue Code of 1986, Series as amended (the “Code”), and the is not on interest rulings, and decisions DTC inNewYork, onoraboutJune___,2018. IceMillerLLP, by to delivery for available be will form definitive in Bonds 2018 legality Series the that expected is It of University. the to counsel Indiana, approval tothe and notice, without offer Indianapolis, the Indiana, Bond Counsel. Certain legal of matters will be passed upon for modification the University by DeFur Voran LLP, or Muncie, withdrawal to sale, prior to must readtheentireOfficialStatementtoobtaininformation essentialtomakinganinformedinvestmentdecision. or fund of the University or the State of Indiana, except to the extent of the Pledged Funds. See “SECURITY FOR THE BONDS.” defined and described herein). The Series 2018 Bonds are not a general obligation debt, liability or charge against any property secured by a pledge of the Pledged Funds (as defined and described herein) and additionally payable from Available Funds (as the campusofUniversity,asfurtherdescribedherein. construction, expansion, renovation or equipping of certain Housing and Dining Facilities (as defined and described herein) on Supplemental Fourth the and supplemented, Indenture, collectively, heretofore the “Indenture”). as The Indenture, proceeds of Original the Series (the 2018 Bonds Trustee will be the used primarily and to financeUniversity the acquisition, the between Indenture”) Supplemental “Fourth (the 2018 1, June of as dated Indenture Supplemental Fourth a by supplemented further as “University”) and an Indenture of Trust, dated as of January 1, 2006 (the “Original Indenture”), as heretofore supplemented and OF SERIES2018BONDS-RedemptionOptionalMandatorySinkingFundRedemption”. the DTCParticipantsandIndirectParticipants.See“DESCRIPTIONOFSERIES2018BONDS-Book-Entry-Only System.” Bonds. The final disbursements of such payments to the Beneficial Owners of the Series 2018 Bonds will be the responsibility of (the “Trustee”) under the Indenture (hereinafter defined), so long as DTC or its nominee is agent paying and trustee as Indiana, the Indianapolis, in office trust corporate designated a with registeredN.A.), Company, Trust Merchants owner of the Series 2018 together with any premium, will bepaiddirectly to DTC by The Bank of New York Mellon Trust Company, N.A. (successor to is payableonJanuary1andJulyofeachyear,beginning1,2019.PrincipalinteresttheSeries2018 Bonds, Series 2018Bondswillbeissuedindenominationsof$5,000oranyintegralmultiplethereof.Interestonthe Bonds “Beneficial Owners”) will not receive physical delivery of certificates representing their interests in the Series 2018 Bonds. The in the Series 2018 Bonds will be made in book-entry only form. Purchasers of beneficial interests in the Series 2018 Bonds (the interests beneficial of Purchases (“DTC”). York New York, New Company, Trust Depository The for nominee as Co., & CEDE (the “Series 2018 Bonds”), will be issued only as fully registered bonds and, when issued, will be registered in the name of The Series2018Bondsarebeingofferedwhen,asandifissued bytheUniversityandreceivedUnderwriters,subject Investors issue. this of summary a not is It only. reference quick for information certain contains page cover This In theopinionofIceMillerLLP,Indianapolis,Indiana,BondCounsel,underexistinglaws,regulations,judicial The Series2018BondsandanyadditionalbondsissuedonaparitytherewitharelimitedobligationsoftheUniversity, The Series2018BondsarebeingissuedpursuanttoresolutionsadoptedbytheBallStateUniversityBoardofTrustees (the The Series 2018 Bonds are subject to redemption prior to maturity as described in this Official Statement. See “DESCRIPTION The BallStateUniversityBoardofTrustees,HousingandDiningSystemRevenueBonds,Series 2018
Ball StateUniversityHousingandDiningSystemRevenueBonds,Series2018
PRELIMINARY OFFICIAL STATEMENT DATED MAY 23, 2018
BALL STATE UNIVERSITY BOARD OF TRUSTEES See theinsidecoverpageformaturities,principalamounts, interest rates,prices,yieldsandCUSIPnumbers $82,330,000* Due: July1,asshownontheinsidecoverpage S&P: Moody’s: RATINGS
AA- Aa3
MATURITIES, PRINCIPAL AMOUNTS INTEREST RATES, PRICES, YIELDS AND CUSIP1 NUMBERS
$82,330,000* Ball State University Housing and Dining System Revenue Bonds, Series 2018
$72,690,000* Serial Bonds
Date of Maturity Principal Amount* Interest Rate Price Yield CUSIP1 July 1, 2019 $2,490,000 July 1, 2020 2,620,000 July 1, 2021 2,750,000 July 1, 2022 2,895,000 July 1, 2023 3,040,000 July 1, 2024 3,200,000 July 1, 2025 3,360,000 July 1, 2026 3,535,000 July 1, 2027 3,715,000 July 1, 2028 3,905,000 July 1, 2029 4,105,000 July 1, 2030 4,315,000 July 1, 2031 4,540,000 July 1, 2034 5,115,000 July 1, 2035 5,380,000 July 1, 2036 5,655,000 July 1, 2037 5,915,000 July 1, 2038 6,155,000
$9,640,000* _____% Term Bonds due July 1, 2033* -- Price ____% -- Yield ____% -- CUSIP1 ______
1 Copyright 2018, American Bankers Association. CUSIP data herein provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers are provided for convenience and reference only. Neither the University nor the Trustee is responsible for the selection or use of the CUSIP numbers, nor is any representation made as to their correctness on the Series 2018 Bonds or as indicated above.
* Preliminary, subject to change
No dealer, broker, salesman or any other person has been authorized by the University or the Underwriters to give any information or to make any representation other than those contained in this Official Statement, and if given or made, such information or representations must not be relied upon as having been authorized by the University or the Underwriters. Certain information in this Official Statement has been obtained from the University and other sources considered to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed to be the representation of the Underwriters. This Official Statement should be considered in its entirety and no one factor considered more or less important than any other by reason of its position in this Official Statement. Any information or expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create an implication that there has been no change as to the affairs of the University and other parties referred to herein since the date of this Official Statement or since any earlier date as of which information is stated to be given.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Series 2018 Bonds in any jurisdiction in which or to any person to whom it is unlawful to make such offer, solicitation or sale.
In connection with this offering, the Underwriters may overallot or effect transactions which stabilize or maintain the market price of the Series 2018 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
The Series 2018 Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or registered in any state and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state or other governmental entity or agency will have passed upon the accuracy or adequacy of this Official Statement nor approved the Series 2018 Bonds for sale.
In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merit and risk involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPECTIVE RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCE OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
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______
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “believe,” “expect,” “estimate,” “anticipate,” “intend,” “projected,” “budget,” “could,” or other similar words. Additionally, all statements in this Official Statement, including forward-looking statements, speak only as of the date they are made, and none of the University or the Underwriters undertakes any obligation to update any statement in light of new information or future events.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NEITHER THE UNIVERSITY, THE UNDERWRITERS NOR ANY OTHER PARTY PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN THEIR EXPECTATIONS, OR EVENTS, CONDITIONS, OR CIRCUMSTANCES UPON WHICH SUCH STATEMENTS ARE BASED OCCUR.
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TABLE OF CONTENTS
Page SUMMARY STATEMENT ...... v INTRODUCTION ...... 1 DESCRIPTION OF SERIES 2018 BONDS...... 3 ESTIMATED SOURCES AND USES OF FUNDS ...... 10 PLAN OF FINANCE ...... 10 THE SERIES 2018 PROJECT...... 10 SECURITY FOR THE BONDS ...... 11 THE FACILITIES AND THE SYSTEM ...... 14 ANNUAL DEBT SERVICE REQUIREMENTS ...... 21 DEBT SERVICE COVERAGE ...... 22 TAX MATTERS ...... 22 ORIGINAL ISSUE DISCOUNT ...... 23 BOND PREMIUM...... 24 ENFORCEABILITY OF RIGHTS AND REMEDIES AND LEGAL OPINIONS ...... 25 LITIGATION ...... 26 CERTAIN LEGAL MATTERS ...... 26 FINANCIAL INFORMATION ...... 26 UNDERWRITING ...... 26 CONTINUING DISCLOSURE ...... 27 RATINGS ...... 30 SPECIAL RELATIONSHIPS ...... 31 MISCELLANEOUS ...... 31
APPENDIX A - BALL STATE UNIVERSITY ...... A-1 APPENDIX B - BALL STATE UNIVERSITY FINANCIAL REPORT FOR THE YEAR ENDING JUNE 30, 2017 ...... B-1 APPENDIX C - DEFINITIONS ...... C-1 APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ...... D-1 APPENDIX E - FORM OF BOND COUNSEL OPINION ...... E-1
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BALL STATE UNIVERSITY BOARD OF TRUSTEES Muncie, Indiana Board of Trustees Richard Hall, Chair E. Renae Conley, Vice Chair Thomas C. Bracken, Secretary Matt Momper, Assistant Secretary R. Wayne Estopinal, Trustee Brian Gallagher, Trustee Jean Ann Harcourt, Trustee Mike McDaniel, Trustee Marlene Jacocks, Student Trustee Officers of the Board of Trustees Richard Hall, Chair E. Renae Conley, Vice Chair Thomas C. Bracken, Secretary Matt Momper, Assistant Secretary Bernard M. Hannon, Treasurer Principal Administrative Officers Geoffrey S. Mearns, President Sue Hodges Moore, Chief Strategy Officer Marilyn Buck, Interim Provost and Interim Executive Vice President for Academic Affairs* Kay Bales, Vice President for Student Affairs and Enrollment Services and Dean of Students Bernard M. Hannon, Vice President for Business Affairs and Treasurer Mark Sandy, Director of Intercollegiate Athletics (retiring June, 2018)* Rebecca Polcz, Vice President for Governmental Relations Kathy Wolf, Vice President for Marketing and Communications Sali Falling, Vice President and General Counsel Loren Malm, Interim Vice President for Information Technology* Principal Administrative Officer of the Ball State University Foundation Cheri O’Neill, President and Chief Executive Officer Trustee The Bank of New York Mellon Trust Company, N.A. Indianapolis, Indiana Bond Counsel Ice Miller LLP Indianapolis, Indiana
* Susana Rivera-Mills will commence service as Provost and Executive Vice President for Academic Affairs, effective July 1, 2018. Beth Goetz will commence service as Director of Intercollegiate Athletics effective June 18, 2018. A search is currently underway for the position of Vice President for Information Technology.
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SUMMARY STATEMENT
Subject, in all respects, to more complete information contained in the Official Statement.
BALL STATE UNIVERSITY. The University was founded as a state institution in 1918 with a gift by the Ball brothers of Muncie of the land and buildings of the Muncie Normal Institute to the State of Indiana. The Ball State University Board of Trustees (the “University”) serves and controls Ball State University and consists of nine members appointed by the Governor. Ball State University is located in Muncie, approximately 56 miles northeast of Indianapolis. Ball State University offers seven associate-level programs, 178 undergraduate programs, 99 master’s level programs, 16 doctoral-level programs and two specialists programs providing professional and pre-professional specialization as well as education in the liberal arts and sciences. Ball State University’s 2017 on/off campus unduplicated fall semester full-time equivalent enrollment totaled 19,014, with total on/off campus unduplicated headcount of 22,513.
Purposes of Issue: The Series 2018 Bonds are being issued to (i) finance all or a portion of the cost of the Series 2018 Project (as defined herein), (ii) reimburse previously expended costs of the Series 2018 Project, and (iii) pay costs of issuing the Series 2018 Bonds.
Security: The Series 2018 Bonds are limited obligations of the University secured by and payable solely from a pledge of and first lien on the Net Income of the Housing and Dining System as provided in the Indenture, any insurance proceeds and investment income thereon, and any moneys on deposit in the Sinking Fund, the Project Fund or the Reserve Fund established under the Indenture (collectively, the “Pledged Funds”). The Series 2018 Bonds are not a general obligation debt or liability of the University or the State of Indiana, and no recourse shall be had for the payment of the principal of or interest on the Series 2018 Bonds against the State of Indiana, the University, or against the property or funds of the University or the State of Indiana, except to the extent of the Pledged Funds.
Available Funds: In addition to Pledged Funds, the University covenants that Available Funds shall be used, if needed, to pay principal, premium and interest on the Bonds. Available Funds include any and all other funds of the University legally available for transfer to the Sinking Fund, and not otherwise restricted, except for state appropriations or mandatory student fees assessed students attending Ball State University (unless specifically authorized by the Indiana General Assembly).
Housing and Dining System: The Housing and Dining System (the “Housing and Dining System” or the “System”) consists of a variety of residence halls and dining services owned and operated by the University, on its Muncie campus, for single and married students. Accommodations offer both undergraduate and graduate students housing and dining options including room and board, board only and apartments. As of Fall 2017, approximately 40% of the student population lived in campus housing, which places the University among the more highly residential campuses in the nation. Freshman and transfer students are required to live in residence halls. The Housing and Dining System includes facilities listed as follows:
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(a) Residence Halls and Dining Services: Residence hall facilities provide housing opportunities for approximately 6,962 students in 25 residence halls, grouped in twelve housing complexes. All complexes are multi-storied facilities containing student rooms, lounges, recreation areas, computer labs and laundry facilities. All residence halls have wireless access to internet services and University systems. The Residence Hall Dining Services operates eleven dining service centers providing multiple food service options for students and the general public including food courts, special all-you-can-eat buffets, micro cafes, convenience stores, and late night food services.
(b) University Apartments: There are approximately 524 University owned and operated apartments located near or adjacent to the campus. Students and families living in the apartments are within walking distance of the campus or are served by a University operated shuttle bus service. The majority of all apartments are unfurnished and include one, two, and three bedroom units.
Net income from the Housing and Dining System is pledged for the payment of debt service on the Bonds. For additional information regarding the Housing and Dining System, see “THE FACILITIES AND THE SYSTEM” herein. See also “APPENDIX C – DEFINITIONS” for a definition of the “Housing and Dining System.”
Debt Service Coverage: The following debt service coverage summary is based on Net Income of the Housing and Dining System.
Year Ended June 30 (rounded to nearest thousand) 2015 2016 2017 Net Income $18,185 $17,831 $22,852 Average Annual Debt Service(1)* $11,250 $11,250 $11,250 Coverage of Average Annual Debt Service* 1.62 times 1.59 times 2.03 times
(1) Utilizes the Average Annual Debt Service in Fiscal Years 2018 and forward, following issuance of the Series 2018 Bonds.
Rate Covenant: The University covenants that it will establish and collect rates and charges for the use of the Housing and Dining System sufficient to generate Net Income in each Fiscal Year equal to no less than the sum of (i) the Annual Debt Service Requirement for such Fiscal Year, and (ii) any other amounts to be paid from Net Income with respect to such Fiscal Year, in accordance with the Indenture.
No Reserve Fund: No Reserve Fund Requirement exists for the Series 2018 Bonds, and holders of the Series 2018 Bonds shall have no claim on any Reserve Fund established for any subsequent series of First Lien Bonds.
First Lien Bonds: The Series 2018 Bonds will be issued on a parity with the Ball State University Housing and Dining System Revenue Bonds, Series 2013 (the “Series 2013 Bonds”),
* Preliminary, subject to change
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currently outstanding in the aggregate principal amount of $28,325,000, and the Ball State University Housing and Dining System Revenue Bonds, Series 2016 (the “Series 2016 Bonds”), currently outstanding in the aggregate principal amount of $48,400,000. The University may issue Additional Bonds, the payments of which are secured by a pledge of and first lien on Pledged Funds (the Series 2013 Bonds, the Series 2016 Bonds, the Series 2018 Bonds and all such Additional Bonds, collectively, the “First Lien Bonds”); provided, among other things, that the actual Net Income received by the University during the preceding Fiscal Year (or actual Net Income adjusted as provided in the Indenture) is at least equal to the Average Annual Debt Service to become due in succeeding Fiscal Years on all First Lien Bonds then outstanding under the Indenture including the First Lien Bonds to be issued; provided, that for purposes of this computation, Net Income shall include the amount on deposit at the beginning of the Fiscal Year in the Revenue Fund and the Reserve Fund up to 25% of the Annual Debt Service Requirement for such Fiscal Year. In addition, First Lien Bonds may be issued to refund Bonds (as hereinafter defined, including First Lien Bonds and Junior Lien Obligations (as hereinafter defined)) and to avoid a default, as more fully described in this Official Statement. First Lien Bonds may be issued by the University which have no claim on the Reserve Fund.
In addition to the Series 2018 Project, the University presently anticipates that construction of a second new residence hall will began in the summer of 2019, at a cost of approximately $50 million, to complete the replacement of LaFollette Complex. This will constitute Phase 2 of the North Residential Neighborhood. The University presently anticipates that it will use Housing & Dining Repair and Replacement Reserves as the funding source for the second new residence hall.
Continuing Disclosure. Pursuant to the continuing disclosure requirements promulgated by the Securities and Exchange Commission in SEC Rule 15c2-12, as amended, the University entered into an Amended and Restated Continuing Disclosure Undertaking Agreement, dated as of February 15, 2011, as heretofore supplemented, to be further supplemented by a Fifth Supplement to Amended and Restated Continuing Disclosure Undertaking Agreement dated as of June 1, 2018, pursuant to which the University will agree to provide (i) on an annual basis to the Municipal Securities Rulemaking Board (the “MSRB”), as the only nationally recognized municipal securities information repository, certain annual financial information and (ii) notice to the MSRB upon the occurrence of certain reportable events more fully described herein.
In order to assist the Underwriters in complying with the Underwriters’ obligations pursuant to the SEC Rule, the University represents that it has identified certain deficiencies with regard to its undertakings which occurred during the previous five years, including, but not limited to, the following instance: The University did not file a reportable event notice with respect to the redemption of its outstanding Parking System Revenue Bonds, which were redeemed in full using available cash on April 2, 2015. The bondholders in question did, however, receive timely 30 day notice of the redemption on March 2, 2015. The University makes no representation as to any potential materiality of such prior instance, as materiality is dependent upon individual facts and circumstances. Otherwise, there have been no instances in the past five years when the University has failed to comply, in all material respects, with any undertakings in a written contract or agreement as specified in paragraph (b)(5)(i) of the SEC Rule. See “CONTINUING DISCLOSURE.”
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$82,330,000* Ball State University Board of Trustees Ball State University Housing and Dining System Revenue Bonds, Series 2018
INTRODUCTION
This Official Statement, including the cover page and the appendices, is furnished by the Ball State University Board of Trustees to provide information concerning the offering of $82,330,000* aggregate principal amount of its Ball State University Housing and Dining System Revenue Bonds, Series 2018 (the “Series 2018 Bonds”).
The University
Ball State University was founded as a state institution in 1918 with a gift by the Ball brothers of Muncie of the land and buildings of the Muncie Normal Institute to the State of Indiana. The Ball State University Board of Trustees (the “University” or the “Issuer”) serves and controls Ball State University and consists of nine members appointed by the Governor. Ball State University is located in Muncie, approximately 56 miles northeast of Indianapolis. Ball State University offers seven associate level programs, 178 undergraduate programs, 99 masters level programs, 16 doctoral level programs, and two specialist programs providing professional and pre-professional specialization as well as education in the liberal arts and sciences. Ball State University’s 2017 on/off campus unduplicated fall semester full-time equivalent enrollment totaled 19,014, with total on/off campus unduplicated headcount of 22,513. For more information about the University see “APPENDIX A -- BALL STATE UNIVERSITY.”
The Series 2018 Bonds
The Series 2018 Bonds are being issued by the University to provide the funds necessary to: (i) finance the acquisition, construction, expansion, renovation or equipping of certain Housing and Dining Facilities on the University’s Muncie campus (the “Series 2018 Project”); (ii) reimburse the University for certain costs previously expended for acquisition, construction, expansion, renovation or equipping of the Series 2018 Project; and (iii) pay certain related costs. See “PLAN OF FINANCE.”
The Series 2018 Bonds are authorized pursuant to Indiana Code 21-35-1 et seq. The Series 2018 Bonds will be issued on a parity with the Ball State University Housing and Dining System Revenue Bonds, Series 2013 (the “Series 2013 Bonds”), issued on October 30, 2013 and currently outstanding in the aggregate principal amount of $28,325,000, and the Ball State University Housing and Dining System Revenue Bonds, Series 2016 (the “Series 2016 Bonds”) issued on January 27, 2016 and currently outstanding in the aggregate principal amount of $48,400,000. Additional bonds may be issued under the Indenture pursuant to Indiana Code 21- 35-1 et seq., as it may be amended or supplemented from time to time, including any other provision which may be added to the Indiana Code authorizing revenues of any designated
* Preliminary, subject to change
related facilities to be pledged for the payment of debt service (collectively, the “Act”). The Act permits the University to issue revenue obligations, erect, construct, reconstruct, extend, remodel, improve, complete, equip, furnish, operate, control and manage certain auxiliary facilities, including University housing and dining facilities, and to pledge the revenues from such facilities, in addition to unobligated revenues from any other revenue-producing facility, to the payment of such revenue obligations.
The Series 2018 Bonds are being issued pursuant to a resolution adopted by the Board of Trustees of the University on May 4, 2018 (the “Resolution”), and in accordance with the provisions of an Indenture of Trust dated as of January 1, 2006 (the “Original Indenture”), as heretofore supplemented and as further supplemented by a Fourth Supplemental Indenture dated as of June 1, 2018, between the University and The Bank of New York Mellon Trust Company, N.A. (successor to Merchants Trust Company, N.A.), Indianapolis, Indiana, as trustee and paying agent (the “Trustee”) (the “Original Indenture”, as heretofore supplemented, and the Fourth Supplemental Indenture, collectively, the “Indenture”). Under the Indenture, the University may pledge revenues to the payment of Bonds (as hereinafter defined) from any revenue-producing University Housing and Dining Facility (as hereinafter defined) authorized under the Act.
The Series 2018 Bonds, together with the Series 2013 Bonds, the Series 2016 Bonds and any additional bonds issued on parity with the Series 2013 Bonds, the Series 2016 Bonds and the Series 2018 Bonds (collectively, the “First Lien Bonds”), are limited obligations of the University, secured by a pledge of and parity first lien on (a) the Net Income of the System (each, as defined herein), (b) any insurance proceeds and investment income thereon, and (c) any amounts held in the Sinking Fund, the Project Fund or the Reserve Fund (each as defined herein) and the investment income thereon (collectively, the “Pledged Funds”). See “SECURITY FOR THE BONDS” and “APPENDIX C - DEFINITIONS.”
Upon the issuance of the Series 2018 Bonds, the Pledged Funds will include the Net Income of the housing and dining facilities on the University’s Muncie campus (individually, a “Facility” or “Housing and Dining Facility,” and collectively, the “Facilities,” “Housing and Dining Facilities” or “System”). The University may from time to time determine to include in Net Income all revenues derived from any other Housing and Dining Facility not currently part of the System, less the costs of operating, maintaining and repairing such Housing and Dining Facility, except where these costs are otherwise paid and permitted by the Act and the Indenture pursuant to a supplemental indenture. In addition to Pledged Funds, the University covenants to use other funds of the University legally available for transfer to the Sinking Fund (see definition of “Available Funds” in APPENDIX C hereto), to make timely principal and interest payments on the Bonds (hereinafter defined), in the event Pledged Funds are insufficient. The University considers Available Funds to include (but not to be limited to) unrestricted operating fund balances, auxiliary fund balances, and certain other fund balances of the University and selected related entities, in each case without any priority among any such fund balances and only to the extent not pledged, restricted, or specifically authorized for other purposes, now or in the future, or otherwise restricted by law. Available Funds does not include generally assessed student fees or appropriations by the State of Indiana (the “State”), except to the extent specifically authorized by the Indiana General Assembly. No assurance can be provided as to the availability or adequacy of any such Available Funds as of any particular date. See “SECURITY FOR THE BONDS.”
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The University may issue additional bonds under the Indenture (“Additional Bonds”) consisting of either First Lien Bonds or bonds subordinated to First Lien Bonds as to principal and interest repayment (“Junior Lien Obligations”), which are payable out of other Pledged Funds remaining after the payment of the First Lien Bonds (all obligations issued under the Indenture which are payable out of Pledged Funds, including all First Lien Bonds and any Junior Lien Obligations, collectively, the “Bonds”). See “SECURITY FOR THE BONDS -- Issuance of Additional Bonds.” The Bonds are not a general obligation debt, liability or charge against any property or fund of the University or the State, except to the extent of the pledge of Pledged Funds under the Indenture. See “SECURITY FOR THE BONDS.”
DESCRIPTION OF SERIES 2018 BONDS
General
The Series 2018 Bonds will be issued in the aggregate principal amount of $82,330,000* and will be dated and bear interest from the date of their delivery. Interest on the Series 2018 Bonds will be payable on January 1 and July 1 of each year, commencing January 1, 2019 (each such date, an “Interest Payment Date”).
The principal of and redemption premium, if any, on each Series 2018 Bond will be payable upon presentation and surrender thereof by the registered owners thereof (the “Bondholders”) (such Bondholders being DTC, as hereinafter defined or its nominee, for so long as the Series 2018 Bonds are held in book-entry-only form) at the designated corporate trust office of the Trustee for the Series 2018 Bonds in Indianapolis, Indiana. Interest on the Series 2018 Bonds will be paid by check of the Trustee mailed on each Interest Payment Date to the Bondholders appearing on the registration books maintained by the Trustee as of the close of business on the last day of the month preceding such Interest Payment Date (the “Record Date”). However, Bondholders of at least $1,000,000 in principal amount may request in writing that such payment be made by wire transfer to an account specified in writing.
For so long as the Series 2018 Bonds are held in book-entry-only form, payments of principal of and redemption premium, if any, and interest on the Series 2018 Bonds will be paid by the Trustee only to DTC or its nominee. Neither the University nor the Trustee will have any responsibility for a Beneficial Owner’s receipt from DTC or its nominee, or from any DTC Participant or Indirect Participant, of any payments of principal of or redemption premium, if any, or interest on any Series 2018 Bonds. See “Book-Entry-Only System” in this section.
Redemption
Optional Redemption. The Series 2018 Bonds maturing on or after July 1, 2029* are subject to redemption prior to maturity at the option of the University at any time on or after July 1, 2028*, in whole or in part, in any order of maturity designated by the University (less than all of such Series 2018 Bonds of a particular maturity to be selected by lot in such manner as may be designated by the Trustee), at the redemption price of 100% of the principal amount to be redeemed, plus accrued interest to the date of redemption, without premium.
* Preliminary, subject to change
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Mandatory Sinking Fund Redemption. The Series 2018 Bonds maturing on July 1, 2033* (the “2033* Term Bonds”) are subject to mandatory sinking fund redemption by lot prior to maturity on the dates and in the amounts set forth below at a price equal to 100% of principal amount to be redeemed, plus accrued interest to the date of redemption, without any premium.
Series 2018 Bonds due July 1, 2033*
July 1* Amount* 2032 $4,735,000 2033 4,905,000 (final maturity)
Notice of Redemption. Notice of redemption of the Series 2018 Bonds will be given by the Trustee by mailing a copy of the redemption notice by first-class mail not less than 30 or more than 45 days prior to the date fixed for redemption to the registered owner of each Series 2018 Bond to be redeemed (such Bondholder being DTC or its nominee, for so long as the Series 2018 Bonds are held in book-entry-only form); provided, however, that failure to give such notice, or any defect therein, with respect to any such registered Series 2018 Bond shall not affect the validity of any proceedings for the redemption of other Series 2018 Bonds. If for any reason it is impossible or impractical to mail such notice of call for redemption in the manner described above, then the mailing will be made in a manner approved by the Trustee and will constitute sufficient notice. Likewise, the Trustee may provide notice in any other manner which may be approved by the Trustee from time to time in accordance with prevailing industry standards and practices. The University also may direct the Trustee to publish any redemption notice in a newspaper or financial journal of general circulation published in New York, New York, not less than 30 days or more than 45 days prior to the redemption date. On and after the redemption date specified in the notice of redemption, the Series 2018 Bonds or portions thereof called for redemption (provided funds for their redemption are on deposit at the place of payment) will not bear interest, will no longer be protected by the Indenture and will not be deemed to be outstanding under the provisions of the Indenture, and the Bondholders will have the right to receive only the redemption price thereof, plus accrued interest thereon to the date fixed for redemption.
The redemption described in any such notice of redemption may be made conditional on the successful issuance of Bonds intended to provide funds to refund or advance refund the Outstanding Series 2018 Bonds (or portions thereof) to be redeemed.
For so long as the Series 2018 Bonds are held in book-entry-only form, the Trustee will mail notices of redemption of Series 2018 Bonds only to DTC or its nominee, in accordance with the preceding paragraph. Neither the University nor the Trustee will have any responsibility for any Beneficial Owner’s receipt from DTC or its nominee, or from any DTC Participant or Indirect Participant, of any notices of redemption. See “Book-Entry-Only System” in this section.
Partial Redemption. If less than all of the Series 2018 Bonds are called for redemption, the Series 2018 Bonds will be redeemed only in whole multiples of the denominations authorized
* Preliminary, subject to change
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for such Series 2018 Bonds. For purposes of redemption, each authorized denomination of principal will be considered as a Bond. If less than all of the Series 2018 Bonds are called for redemption, the principal amount, series and maturity of the particular Series 2018 Bonds redeemed will be selected by the University and the Trustee will select the particular Series 2018 Bonds to be redeemed by lot within a series and maturity in such manner as the Trustee may determine.
For so long as the Series 2018 Bonds are held in book-entry-only form, the Trustee will select for redemption only Series 2018 Bonds or portions thereof registered in the name of DTC or its nominee, in accordance with the preceding paragraph. Neither the University nor the Trustee will have any responsibility for selecting for redemption any Beneficial Owner’s interests in the Series 2018 Bonds. See “Book-Entry-Only System” in this section.
Registration, Transfer and Exchange
The University will cause books for the registration and the transfer and exchange of the Bonds to be kept by the Trustee. The University and the Trustee may deem and treat the person in whose name any Bond is registered as the absolute owner of such Bond (such person being DTC or its nominee, for so long as the Bonds are held in book-entry-only form), for the purpose of receiving nor the Trustee will be affected by any notice to the contrary.
The owner of any Bonds (such owner of the Series 2018 Bonds being DTC or its nominee, for so long Series 2018 Bonds are held in book-entry-only form) may transfer or exchange such Bonds by surrendering such Bonds at the principal office of the Trustee, duly endorsed by, or accompanied by a written instrument or instruments of transfer or exchange in form satisfactory to the Trustee, and duly executed by such Bondholder or such Bondholder’s attorney duly authorized in writing. Upon any such surrender for transfer or exchange, the University will execute, and the Trustee will authenticate and deliver, in the name of the transferee or exchangee, as appropriate, a new Bond or Bonds of the same series and maturity for a like aggregate principal amount or for a like aggregate amount of fully registered Bonds of other authorized denominations of the same series and the same maturity. The Trustee will not be required to transfer or exchange any Bond either after the mailing of notice calling such Bond for redemption or during a period of fifteen days next preceding mailing of a notice of redemption of any Bond. No service charge or payment will be required to be made by the owner of any Series 2018 Bond requesting a transfer or exchange of such Bond, but the University and the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange. The execution by the University of any fully registered Bond of any denomination shall constitute full and due authorization of such domination, and the Trustee shall thereby be authorized to authenticate and deliver such registered Bond.
For so long as the Series 2018 Bonds are held in book-entry-only form, the Series 2018 Bonds will be registered in the name of DTC or its nominee, and the University and the Trustee will deem and treat DTC or its nominee as the absolute owner of the Series 2018 Bonds for all purposes whatsoever. The Trustee will transfer and exchange Series 2018 Bonds only on behalf of DTC or its nominee, in accordance with the preceding paragraph. Neither the University nor
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the Trustee will have any responsibility for registering, transferring or exchanging any Beneficial owners interests in the Series 2018 Bonds. See “Book-Entry-Only System” in this section.
Book-Entry-Only System
The information in this sub-section has been furnished by The Depository Trust Company, New York, New York (“DTC”). No representation is made by the University, the Trustee or the Underwriters as to the completeness or accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. No attempt has been made by the University, the Trustee or the Underwriters to determine whether DTC is or will be financially or otherwise capable of fulfilling its obligations. Neither the University nor the Trustee will have any responsibility or obligation to Direct Participants, Indirect Participants (both as defined below) or the persons for which they act as nominees with respect to the Series 2018 Bonds, or for any principal, premium, if any, or interest payment thereon.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Series 2018 Bonds. The Series 2018 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2018 Bond certificate will be issued for each maturity of the Series 2018 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
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Purchases of Series 2018 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2018 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2018 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Series 2018 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2018 Bonds, except in the event that use of the book-entry system for the Series 2018 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2018 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2018 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2018 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2018 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2018 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2018 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2018 Bond documents. For example, Beneficial Owners of the Series 2018 Bonds may wish to ascertain that the nominee holding the Series 2018 Bond for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2018 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2018 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the University as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2018 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
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Redemption proceeds, distributions, and other payments on the Series 2018 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the University or the Trustee, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the University or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and other payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of’ DTC) is the responsibility of the University or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series 2018 Bonds at any time by giving reasonable notice to the University or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2018 Bond certificates are required to be printed and delivered.
The University may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2018 Bond certificates will be printed and delivered.
The information in this section concerning DTC and DTC’s book-entry-system has been obtained from sources that the University believes to be reliable, but the University takes no responsibility for the accuracy thereof.
Disclaimer
THE INFORMATION PROVIDED ABOVE UNDER THIS CAPTION HAS BEEN PROVIDED BY DTC. NO REPRESENTATION IS MADE BY THE UNIVERSITY, THE TRUSTEE OR THE UNDERWRITERS AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY DTC OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF.
The University and the Trustee will have no responsibility or obligation with respect to:
(i) the accuracy of the records of DTC, its nominee or any Direct Participant or Indirect Participant with respect to any beneficial ownership interest in any Series 2018 Bonds;
(ii) the delivery to any Direct Participant or Indirect Participant or any other person, other than an owners, as shown in the bond register, of any notice with respect to any Series 2018 Bond including, without limitation, any notice of redemption;
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(iii) the payment to any Direct Participant or Indirect Participant or any other person, other than an owner, as shown in the bond register, of any amount with respect to the principal of or premium, if any, or interest on any Series 2018 Bond; or
(iv) any consent given by DTC or its nominee as registered owner.
Prior to any discontinuation of the book-entry only system described under this caption, the University and the Trustee may treat DTC as, and deem DTC to be, the absolute owner of the Series 2018 Bonds for all purposes whatsoever, including, without limitation:
(i) the payment of the principal of and premium, if any, and interest on the Series 2018 Bonds;
(ii) giving notices of redemption and other matters with respect to the Series 2018 Bonds;
(iii) registering transfers with respect to the Series 2018 Bonds; and
(iv) the selection of Series 2018 Bonds for redemption.
Revision of Book-Entry-Only System
In the event that either (i) the University receives notice from DTC to the effect that DTC is unable or unwilling to discharge its responsibilities as a clearing agency for the Series 2018 Bonds, or (ii) the University elects to discontinue its use of DTC as a clearing agency for the Series 2018 Bonds, and in either case the University does not appoint an alternative clearing agency, then the University and the Trustee will do or perform or cause to be done or performed all acts or things, not adverse to the rights of the holders of the Series 2018 Bonds, as are necessary or appropriate to discontinue use of DTC as a clearing agency for the Series 2018 Bonds, and to transfer the ownership of each of the Series 2018 Bonds, to such person or persons, including another clearing agency as the holders of the Series 2018 Bonds may direct in accordance with the Indenture. See “Registration, Transfer and Exchange” in this section.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds of the Series 2018 Bonds is shown below:
Sources of Funds Principal Amount of Series 2018 Bonds Plus: Net Bond Premium Total Sources
Uses of Funds Series 2018 Project Costs Costs of Issuance(1) Total Uses ______(1) Including Underwriters’ discount, legal fees and expenses, printing expenses, Trustee fees and expenses, and other expenses.
PLAN OF FINANCE
The Series 2018 Bonds are being issued for the principal purpose of providing funds to (i) finance the acquisition, construction, expansion, renovation or equipping of certain Housing and Dining Facilities on the University’s Muncie campus (the “Series 2018 Project”); (ii) reimburse the University for certain costs previously expended for acquisition, construction, expansion, renovation or equipping of the Series 2018 Project; and (iii) pay certain related costs, including costs of issuance.
THE SERIES 2018 PROJECT
The proceeds of the Series 2018 Bonds will be used in part to finance costs of the Series 2018 Project. The Series 2018 Project consists of the construction of Phase 1 of the North Residential Neighborhood, located on the University’s campus in Muncie, Indiana. At an expected cost of $82,330,000, the Series 2018 Project will be financed in whole from proceeds of the Series 2018 Bonds.
The Series 2018 Project will be constructed using the Construction Manager as Constructor (CMc) delivery method and will consist of the construction of Phase 1 of the North Residential Neighborhood, including (i) the realignment of McKinley Avenue (Architect – Schmidt Associates, Indianapolis, Indiana), (ii) the construction of a new 500 bed residence hall north of LaFollette Complex (Architect – Schmidt Associates, Indianapolis, Indiana), (iii) the construction of a stand-alone dining facility north of LaFollette Complex (Architect - CSO Architects, Indianapolis, Indiana, and (iv) all related landscaping and site preparation work.
Work on the Series 2018 Project is expected to begin in May, 2018 and is scheduled for completion in Summer 2020.
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SECURITY FOR THE BONDS
The Bonds are limited obligations of the University secured by a pledge of the Pledged Funds. The Bonds are not a general obligation debt or liability, or a charge against any property or fund of the University or the State of Indiana, except to the extent of the pledge of the Pledged Funds under the Indenture.
Under the Indenture, the University pledges the Pledged Funds for the repayment of the Bonds. At the time of issuance of the Series 2018 Bonds, such pledge includes a pledge of the Net Income of the System, together with any insurance proceeds and investment income thereon, any amounts held in the Sinking Fund, the Project Fund, the Reserve Fund and investment income thereon. In addition to Net Income, the University covenants to transfer to the Sinking Fund other Available Funds, if any, to make timely principal and interest payments on the Bonds, in the event Net Income is insufficient. However, no assurance can be provided as to the availability or adequacy of such other Available Funds as of any particular date. Available Funds does not include generally assessed student fees or State appropriations, except to the extent specifically authorized by the Indiana General Assembly. See “APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
Revenues and Net Income
Revenues means all revenues derived from the operation of the System, including rents, fees, fines, rates and charges for use of the Facilities that make up the System, and certain investment earnings thereon and on other Funds established under the Indenture. Net Income consists of Revenues, less Operation and Maintenance Expenses of the System. Operation and Maintenance Expenses include all current expenses of operation, maintenance, insurance, and normal incidental repair of the Housing and Dining Facilities excluding General Administrative Expenses, Capital Improvements, Depreciation, Financing Expenses and amortization of financing costs. See “APPENDIX C - DEFINITIONS.”
All Revenues will be deposited in the Revenue Fund, and all Operation and Maintenance Expenses will be paid out of the Revenue Fund. The University covenants and agrees in the Indenture to transfer from the Revenue Fund to the Trustee for deposit into the Sinking Fund, on the Business Day (as defined in the Indenture) before each interest payment date, amounts sufficient to pay the principal of and interest on the Bonds. See “APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE - Flow of Funds.”
Rate Covenant
The University will establish and collect rates and charges for the use of the System so as to generate Net Income in the next following Fiscal Year equal to no less than the sum of:
(a) an amount equal to the Annual Debt Service Requirement (as defined in “APPENDIX C - DEFINITIONS”) for such Fiscal Year; and
(b) any other amounts reasonably required or anticipated to be paid from Net Income with respect to such Fiscal Year in accordance with the Indenture.
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The University covenants to monitor the rents, fees, rates and other charges for the use and occupancy of the System on a regular basis, and to make such adjustments as may be necessary to provide the University with sufficient amounts to make the required deposits into the Sinking Fund. In the event that the University uses Available Funds to make payment of debt service on Bonds, the University covenants to re-establish and adjust the rents, fees, rates and other charges for the use and occupancy of the System so as to generate Net Income sufficient to make the required deposits into the Sinking Fund for the remainder of such Fiscal Year.
Other Covenants of the University
The University makes several covenants in the Indenture, including the following:
(a) The University covenants that it has a valid and existing right to the use and occupancy of the System and the right to construct, equip, operate, and manage the Housing and Dining Facilities constituting the System; that, except as otherwise expressly authorized herein, it will not encumber the System or the Net Income therefrom; and that it will, within three (3) months after accrual, pay and discharge or cause to be paid and discharged all lawful claims and demands of mechanics, laborers, and others which, if unpaid, might by law become further liens upon the System;
(b) The University covenants that if (i) the cost of acquiring, constructing, equipping, completing and furnishing any Housing and Dining Facility or improving any such Housing and Dining Facility in such manner that it is useful and adequate, free of all liens, claims, and encumbrances other than the lien of current taxes and assessments not in default and putting the same into use so that it shall be revenue-producing, exceeds (ii) the available proceeds of the Bonds issued to finance the same, the University will pay or cause to be paid into the Project Fund the amount of such excess out of any other funds legally available to the University for such purpose; and
(c) As a part of the University’s annual budgeting process, and following adoption of the University’s official budget for all operations for the next Fiscal Year, the Treasurer or authorized designee, prior to July 1, shall approve an annual operations budget for the next Fiscal Year which shall include a detailed estimate of the Revenues, Operation and Maintenance Expenses, and Net Income for each Housing and Dining Facility operating unit as well as a summary budget for the Housing and Dining System. The budget will include (i) the estimated Annual Debt Service Requirement, and (ii) any required deposits to the Funds and Accounts established by the Indenture.
For further information, see “APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
Issuance of Additional Bonds
Additional Bonds may be authorized and executed by the University, authenticated by the Trustee or Registrar, and issued under the Indenture from time to time in order to provide funds for any one or more of the following purposes: (a) to erect, construct, improve, renovate, equip, and furnish additional Housing and Dining Facilities; (b) to acquire by purchase, lease,
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condemnation, gift, or otherwise, such property, real or personal, as may be necessary in connection with additional Housing and Dining Facilities or for improvements, rehabilitation, or renovation made or to be made on existing Housing and Dining Facilities; (c) to refinance indebtedness incurred, or reimburse the Issuer for funds advanced, for purposes of (a) or (b) above; (d) to refund or advance refund Outstanding Bonds or other outstanding obligations of the University; or (e) to exchange for Outstanding Bonds. Additional Bonds may be categorized as either First Lien Bonds or Junior Lien Obligations. First Lien Bonds means Additional Bonds which are secured as to the payment of principal and interest (other than Optional Maturities, if any, for which a Credit Facility is provided) by a pledge, assignment and grant of a security interest and a parity first lien on the Pledged Funds. Additional Bonds may be issued under the Indenture specifically to evidence liability of the University in favor of any entity providing a Credit Facility (“Credit Facility Obligations”). In such event, whether such Credit Facility Obligations are First Lien Bonds will depend on the ability of the University with regard to those Credit Facility Obligations to meet the test described below at the time that funds are advanced pursuant to such Credit Facility and not immediately reimbursed by the University. If such test cannot be met, the rights of the holders to receive the principal of and interest on such Credit Facility Obligations will be subordinated to the holders of all First Lien Bonds. See “APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE--Flow of Funds.”
First Lien Bonds may be issued if the actual Net Income during the preceding Fiscal Year, as adjusted to reflect:
(a) any anticipated changes to the schedule of rents, fees, rates, or other charges for the Housing and Dining Facilities to become effective at the beginning of the semester, quarter or other school period next following the end of the preceding Fiscal Year;
(b) any anticipated changes in Operation and Maintenance Expenses and any anticipated changes in Financing Expenses;
(c) any addition of any Net Income for Housing and Dining Facilities being added to the System in that Fiscal Year; and
(d) any loss of any Net Income for Housing and Dining Facilities being replaced or withdrawn from the System in that Fiscal Year, shall be equal to or greater than 100% of the Average Annual Debt Service to become due in the succeeding Fiscal Years on Bonds Outstanding and on such series of First Lien Bonds; provided, that for the purposes of the above computation, Net Income shall include the amount on deposit at the beginning of the Fiscal Year in the Revenue Fund and the Reserve Fund up to twenty-five percent (25%) of the Annual Debt Service Requirement for such Fiscal Year.
First Lien Bonds also may be authorized and executed by the University and authenticated and delivered by the Trustee or Registrar to refund or advance refund Outstanding Bonds or other outstanding obligations of the University or to exchange for Outstanding Bonds without compliance with the above-described provisions, if the issuance of such Bonds results in
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a reduction (on a net present value basis) in the amount of debt service to be paid on the Bonds to be refunded or exchanged.
First Lien Bonds also may be authorized and executed by the University and authenticated and delivered by the Trustee or Registrar to refund or advance refund Outstanding Bonds or other outstanding obligations of the University or to exchange for Outstanding Bonds without compliance with the above-described provisions when necessary or appropriate, in the opinion of the Trustee upon advice from nationally recognized bond counsel, to avoid a default hereunder.
All such computations required shall be made by the Treasurer. Compliance with these provisions shall be conclusively evidenced to the Trustee and Registrar by a certificate of the Treasurer.
Reserve Fund
No Reserve Fund Requirement exists for the Series 2018 Bonds, and the Series 2018 Bonds shall have no claim on the Reserve Fund described in “APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” The Series 2018 Bonds will have no claim on the Reserve Fund established for any subsequent series of First Lien Bonds.
THE FACILITIES AND THE SYSTEM
General
A Housing and Dining Facility may include any University facility permitted under the Act. As of the date of this Official Statement, the Housing and Dining System consists of substantially all of the Housing and Dining Facilities located on the University’s Muncie campus.
Residence halls and dining services at the University date back to the opening of Lucina Hall, a gift from the Ball family, in the Fall of 1927. Residence halls are expected to be operated on a financially sound basis while contributing significantly to educational programs of the University. The Vice President for Business Affairs and Treasurer and the Vice President for Student Affairs and Enrollment Services and Dean of Students of the University share responsibility for the overall operation of the residence hall and dining service facilities.
The Housing and Dining Facilities consist of a variety of residence halls and dining services owned and operated by the University for students. Accommodations including room and board and apartments are available to both undergraduate and graduate students.
Facilities
Housing and Dining System: The Housing and Dining System consists of a variety of residence halls and dining services owned and operated by the University, on its Muncie campus, for students. Accommodations offer both undergraduate and graduate students housing and dining options including room and board and apartments. Approximately 40% of the student population lives in campus housing. Freshman and transfer students are required to live in
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residence halls with some exceptions. The Housing and Dining System includes facilities listed as follows:
(a) Residence Halls and Dining Services: Residence hall facilities provide housing opportunities for approximately 6,962 students in 25 residence halls, grouped in twelve housing complexes. All complexes are multi-storied facilities containing student rooms, lounges, recreation areas, computer labs and laundry facilities. All residence halls have wireless access to internet services and University systems. Dining locations include a variety of food courts, all-you-care-to-eat buffets, cafes, convenience stores, and several national brands, such as Chick-fil-A, Starbucks, Taco Bell, Jamba Juice, and Papa John’s Pizza. A catering department within Dining offers service for campus events and provides football stadium suite-level food service.
(b) University Apartments: There are approximately 524 University owned and operated apartments located near or adjacent to the campus. Students and families living in the apartments are within walking distance of the campus or are served by a University operated shuttle bus service. The majority of all apartments are unfurnished and include one, two, and three bedroom units.
Net income from the Housing and Dining System is pledged for the payment of debt service on the Bonds. See “APPENDIX C – DEFINITIONS” for a definition of the “Housing and Dining System.”
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The table below sets forth the year of initial occupancy and the capacity of the Housing and Dining Facilities as of Fall 2017.
Initial Spaces Occupancy Available Residence Hall and Frank Elliott Ball Hall ...... 1937 119 Dining Facilities: Frances Woodworth Ball Hall ...... 1956 590 W. E. Wagoner Hall ...... 1957 316* Grace DeHority Hall ...... 1960 551 Ralph Noyer Hall ...... 1962 757 Mark E. Studebaker Hall - West ...... 1964 963 Mark E. Studebaker Hall - East ...... 1965 439 Robert LaFollette Hall ...... 1964 1,048** Botsford/Swinford Hall in Johnson Complex .. 1967 572 Schmidt/Wilson Hall in Johnson Complex ...... 1969 505 Don Park Hall ...... 2007 502 Thomas J. Kinghorn Hall ...... 2010 600
Apartments: Anthony Apartments - I ...... 1958 38 - II ...... 1962 48 - III ...... 1964 45 Scheidler Apartments - I ...... 1967 78 - II ...... 1968 130 - III ...... 1971 185
*Wagoner Hall is used to house high school students attending the Indiana Academy for Science, Mathematics, and Humanities. ** The LaFollette Hall number reflects the reopening of Shively (188 spaces), and the demolition of LaFollete Woody/Shales Halls and one wing of Mysch/Hurst Halls (707 spaces).
The Series 2018 Project will be included in the Housing and Dining System immediately upon completion. See “THE SERIES 2018 PROJECT.”
Management
The residence hall facilities are managed by a central administrative staff headed by the Associate Vice President for Student Affairs and Director of Housing and Residence Life. He is assisted by two associate directors, ten assistants, and more than 30 residence hall directors, graduate assistant residence hall directors, and resident managers for university apartments.
The dining hall facilities are also managed by a central administrative staff headed by the Director of Dining and Dining Initiatives. The Director is responsible for more than 1,000 employees, 700 of whom are students working on a part-time basis. The University operates a “Best Practice” campus dining program by offering: (1) choice and variety in dining experiences; (2) hours of operation that respond to the extended learning day and busy schedules of students; and (3) high quality and a variety of food options.
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Occupancy
The following table is a breakdown of the type of residence facility available and the occupancy percentage for the past five Fiscal Years.
Fiscal Year Ended June 30 2013-14 2014-15 2015-16 2016-17 2017-18 Residence Halls: Spaces Available 7,200 7,011(3) 7,127(3) 6,975(4) 6,962(5) Spaces Occupied 6,546 6,466 6,304 6,637 6,750 Occupancy Percentage(1) 91% 92% 88% 95% 97% Apartments: Apartments Available 524 524 524 524 524 Apartments Occupied 501 494 477 411 388 Occupancy Percentage(2) 96% 94% 91% 78% 74%
(1) Computed on the basis of an academic year not including summer. (2) Computed on the basis of a 12-month period. (3) Reflects closure of Shively Hall (-192 spaces). (4) Reflects closure of Woody Hall Floors 6, 7 and 8 (-153 spaces). (5) Reflects opening of Schmidt/Wilson (+508), reopening of Shively (+188), reclaimed space in Williams (+1), and closure of halls that were demolished or repurposed at LaFollette (Mysch -216, Woody -63, Hurst -214, Shales - 214).
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Rental Rates
The University operates its academic programs on a two semester and summer session basis. The following table gives the minimum and maximum rates per year by type of facility for the past five Fiscal Years. A variety of payment plans is available to accommodate student needs.
Fiscal Year Ended June 30 2013-14 2014-15 2015-16 2016-17 2017-18 Residence Halls:(1)(2) Minimum Academic Year Rate $7,950 $8,340 $8,715 $8,970 $9,060 Maximum Academic Year Rate 11,946 12,532 13,096 13,478 13,614 Apartments:(3)(4) Minimum Monthly Rate $522 $548 $573 $590 $590 Maximum Monthly Rate 814 854 915 825 825
(1) Computed on the basis of an academic year not including summer. (2) A variety of room types are available from a small double to group living units as well as a limited number of single rooms. Various dining plans are available for student selection. Students have the choice of 10-, 14-, 18, or 21-meal dining plans. Students also get varying amounts of “Dining Plus” dollars depending on the plan they choose. In addition, an incentive plan called the Premium Plan offers students a two-year housing agreement with a guaranteed room and board rate for two academic school years. Students who choose the Premium Plan also are given additional dining plus dollars, standard vehicle registration, preferred room scheduling in the second year and an earlier move in date. This plan allows parents and students to better manage college expenses. (3) Computed on the basis of a 12-month period. (4) One, two and three bedroom units are available, each furnished with stove and refrigerator, including internet and all utilities except telephone.
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Financial Operations
The following table, prepared by the University, presents a summary statement of combined Revenues and Operating and Maintenance Expenses for the Housing and Dining System for the past five Fiscal Years.
Summary of Revenues and Operating and Maintenance Expenses Fiscal Years Ended June 30
2013(1) 2014(1) 2015 2016 2017 Revenues Housing $30,362,514 $31,080,591 $32,126,273 $32,271,101 $34,751,829 Dining $35,589,471 $36,606,436 $37,442,169 $38,207,053 $41,257,837 Total Revenue $65,951,985 $67,687,027 $69,568,442 $70,478,154 $76,009,666
Operating and Maintenance Expenses Housing $20,671,973 $20,053,239 $19,621,663 $20,118,675 $19,575,234 Dining $30,770,219 $31,636,690 $31,761,623 $32,528,546 $33,582,845 Total Expenses $51,442,192 $51,689,929 $51,383,286 $52,647,221 $53,158,079 Net Income $14,509,793 $15,997,098 $18,185,156 $17,830,933 $22,851,587
Average Annual Debt Service(2)* $11,250,423 $11,250,423 $11,250,423 $11,250,423 $11,250,423
Coverage* 1.29 times 1.42 times 1.62 times 1.59 times 2.03 times
(1) Housing and Dining System Revenue and Expenses were restated for these years to exclude intra-university transfers. These restatements did not materially change the Net Income.
(2) Utilizes the Average Annual Debt Service in Fiscal Years 2018 and forward, following issuance of the Series 2018 Bonds.
* Preliminary, subject to change
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The following table, prepared by the University, presents combined projected operating results for the Housing and Dining System for the Fiscal Years ending June 30, 2018 through 2020.
Projected Operating Results of the Housing and Dining System Fiscal Years Ending June 30
2018 2019 2020 Budgeted Projected(2) Projected(2) Revenues Housing $34,860,487 $35,557,697 $36,268,851 Dining $43,342,028 $44,208,869 $45,093,046 Total Revenue $78,202,515 $79,766,565 $81,361,897
Operating and Maintenance Expenses Housing $21,188,227 $21,611,992 $22,044,231 Dining $36,330,145 $37,056,748 $37,797,883 Total Expenses $57,518,372 $58,668,739 $59,842,114 Net Income $20,684,143 $21,097,826 $21,519,782
Average Annual Debt Service(1)* $11,250,423 $11,250,423 $11,250,423
Coverage* 1.84 times 1.88 times 1.91 times
(1) Utilizes the Average Annual Debt Service in Fiscal Years 2018 and forward, following issuance of the Series 2018 Bonds. (2) For projected figures, room and board rates are anticipated to increase annually by 2%. The University projects that Revenues for the Housing and Dining System will increase annually by 2%. The Housing and Dining System Operating and Maintenance Expenses are projected to increase annually by 2%
Additional Capital Projects: Housing and Dining Facilities
In 2001, as a means of updating its plans, the University engaged the consulting firm of Anderson Strickler to study the University’s existing facilities and make recommendations for future improvements. As a result of this process, the University has been systematically renovating many of its residence halls as well as constructing new residence halls to provide the type of facilities desired by students attending college today. Over the past seven years, the University has invested nearly $100 million in a variety of upgrades and major remodeling projects in its residence hall and dining facilities, all designed to keep the facilities serviceable and attractive. The University has a multi-year plan in place to renovate and replace additional residence halls. The North Residential Neighborhood project is the next step in this plan. When completed, the North Residential Neighborhood project will allow for the demolition of LaFollette Complex, one of the largest and oldest halls on campus. Also upon completion of the project, substantially all of the facilities will be new or modernized and surplus inventory will have been reduced. This should result in higher demand and lower operating costs. The Series
* Preliminary, subject to change
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2018 Project will finance Phase 1 of the North Residential Neighborhood project, including realignment of McKinley Avenue and construction of one new residence hall and a stand-alone dining facility. Phase 1 will begin in May 2018 and be completed by Summer 2020. A second new residence hall will be constructed in Phase 2 with financing of the $50 million project coming from internal housing and dining reserves. Phase 2 construction is anticipated to start in Summer, 2019 and be ready for occupancy in Fall, 2021.
ANNUAL DEBT SERVICE REQUIREMENTS
The following table sets forth, for each Fiscal Year, the Annual Debt Service Requirements for the Bonds payable by the University from the Pledged Funds.
Fiscal Year Series 2018 Bonds Ending June 30 Series 2013 Bonds Series 2016 Bonds Principal* Interest Total Debt Service 2018 $2,547,875 $5,087,450 $0 2019 2,549,125 5,091,450 0 2020 2,547,375 5,083,575 2,490,000 2021 2,542,625 5,093,325 2,620,000 2022 2,544,625 5,090,200 2,750,000 2023 2,543,125 5,084,200 2,895,000 2024 2,538,125 5,075,075 3,040,000 2025 2,539,375 5,077,200 3,200,000 2026 2,536,625 5,065,200 3,360,000 2027 2,534,750 2,728,575 3,535,000 2028 2,528,625 2,724,700 3,715,000 2029 2,528,000 2,721,450 3,905,000 2030 2,537,800 2,718,575 4,105,000 2031 2,533,800 2,720,700 4,315,000 2032 2,520,375 2,717,575 4,540,000 2033 2,521,250 2,714,075 4,735,000 2034 2,516,375 2,734,350 4,905,000 2035 2,709,875 5,115,000 2036 2,706,000 5,380,000 2037 5,655,000 2038 5,915,000 2039 6,155,000
* Preliminary, subject to change
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DEBT SERVICE COVERAGE
The following table shows coverage of Net Income of the Housing and Dining System for the past three Fiscal Years, compared to the Average Annual Debt Service on the Series 2013 Bonds, Series 2016 Bonds and Series 2018 Bonds. Year Ended June 30 (rounded to nearest thousand) 2015 2016 2017 Net Income $18,185 $17,831 $22,852 Average Annual Debt Service(1)* $11,250 $11,250 $11,250 Coverage of Average Annual Debt Service* 1.62 times 1.59 times 2.03 times
(1) Utilizes the Average Annual Debt Service in Fiscal Years 2018 and forward, following issuance of the Series 2018 Bonds.
TAX MATTERS
In the opinion of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel, under existing laws, regulations, judicial decisions and rulings, interest on the Series 2018 Bonds is excludable for federal income tax purposes from gross income under Section 103 of the Internal Revenue Code of 1986, as amended and in effect on the issuance date of the Series 2018 Bonds (the “Code”), and is not a specific preference item for purposes of the federal alternative minimum tax, although Bond Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income for taxable years that began prior to January 1, 2018. Such opinion is conditioned on continuing compliance by the University with the Tax Covenants (hereinafter defined). Failure to comply with the Tax Covenants could cause interest on the Series 2018 Bonds to lose the exclusion from gross income for federal income tax purposes retroactive to the date of issue.
In the opinion of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel, under existing laws, regulations, judicial decisions and rulings, interest on the Series 2018 Bonds is exempt from income taxation in the State of Indiana. This opinion relates only to the exemption of interest on the Series 2018 Bonds for the State of Indiana income tax purposes. See APPENDIX E for the form of opinion of Bond Counsel with respect to the Series 2018 Bonds.
The Code imposes certain requirements which must be met subsequent to the issuance of the Series 2018 Bonds as a condition to the exclusion from gross income of interest on the Series 2018 Bonds for federal income tax purposes. The University will covenant not to take any action, within its power and control, nor fail to take any action with respect to the Series 2018 Bonds that would result in the loss of the exclusion from gross income for federal income tax purposes of interest on the Series 2018 Bonds pursuant to Section 103 of the Code and will covenant to adopt and maintain appropriate procedures to accomplish such purpose (collectively, the “Tax Covenants”). The Tax Covenants are based solely on the laws and regulations in effect on the date of delivery of the Series 2018 Bonds. The Indenture and certain certificates and
* Preliminary, subject to change
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agreements to be delivered on the date of delivery of the Series 2018 Bonds establish procedures under which compliance with the requirements of the Code can be met. It is not an event of default under the Indenture if the interest on the Series 2018 Bonds is not excludable from gross income for federal income tax purposes or otherwise pursuant to any provision of the Code which is not in effect on the issue date of the Series 2018 Bonds.
Indiana Code (IC) 6 5.5 imposes a franchise tax on certain taxpayers (as defined in IC 6 5.5) which, in general, include all corporations which are transacting the business of a financial institution in Indiana. The franchise tax is measured in part by interest excluded from gross income under Section 103 of the Code minus associated expenses disallowed under Section 265 of the Code. Taxpayers should consult their own tax advisors regarding the impact of this legislation on their ownership of the Series 2018 Bonds.
Although Bond Counsel will render its opinion that interest on the Series 2018 Bonds is excludable from federal gross income and that interest on the Series 2018 Bonds is exempt from State of Indiana income tax, the accrual or receipt of interest on the Series 2018 Bonds may otherwise affect a Bondholder’s federal income or State tax liability. The nature and extent of these other tax consequences will depend upon the Bondholder’s particular tax status and a Bondholder’s other items of income or deduction. Taxpayers who may be affected by such other tax consequences include, without limitation, financial institutions, certain insurance companies, S corporations, certain foreign corporations, individual recipients of Social Security or railroad retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the Series 2018 Bonds. Bond Counsel expresses no opinion regarding any other such tax consequences. Prospective owners of the Series 2018 Bonds should consult their own tax advisors with respect to the foregoing and other tax consequences of owning the Series 2018 Bonds.
Legislation affecting municipal bonds is considered from time to time by the United States Congress. There can be no assurance that legislation enacted or proposed after the date of issuance of the Series 2018 Bonds will not have an adverse effect on the tax-exempt status of the Series 2018 Bonds or the market price of the Series 2018 Bonds.
ORIGINAL ISSUE DISCOUNT
The initial public offering prices of the Series 2018 Bonds maturing on ______(collectively, the “Discount Bonds”) are less than the principal amounts payable at maturity. As a result the Discount Bonds will be considered to be issued with original issue discount. The difference between the initial public offering price of the Discount Bonds, as set forth on the cover page of this Official Statement (assuming it is the first price at which a substantial amount of that maturity is sold) (the “Issue Price” for such maturity), and the amount payable at maturity of the Discount Bonds will be treated as “original issue discount.” A taxpayer who purchases a Discount Bond in the initial public offering at the Issue Price for such maturity and who holds such Discount Bond to maturity may treat the full amount of original issue discount as interest which is excludable from the gross income of the owner of that Discount Bond for federal income tax purposes and will not, under present federal income tax law, realize taxable capital gain upon payment of the Discount Bond at maturity.
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The original issue discount on each of the Discount Bonds is treated as accruing daily over the term of such Bond on the basis of the yield to maturity determined on the basis of compounding at the end of each six-month period (or shorter period from the date of the original issue) ending on January 1 and July 1 (with straight line interpolation between compounding dates).
Section 1288 of the Code provides, with respect to tax-exempt obligations such as the Discount Bonds, that the amount of original issue discount accruing each period will be added to the owner’s tax basis for the Discount Bonds. Such adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Discount Bonds (including sale, redemption or payment at maturity). Owners of Discount Bonds who dispose of Discount Bonds prior to maturity should consult their tax advisors concerning the amount of original issue discount accrued over the period held and the amount of taxable gain or loss upon the sale or other disposition of such Discount Bonds prior to maturity.
As described above in “TAX MATTERS,” the original issue discount that accrues in each year to an owner of a Discount Bond may result in certain collateral federal income tax consequences. Owners of any Discount Bonds should be aware that the accrual of original issue discount in each year may result in a tax liability from these collateral tax consequences even though the owners of such Discount Bonds will not receive a corresponding cash payment until a later year.
Owners who purchase Discount Bonds in the initial public offering but at a price different from the Issue Price for such maturity should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds.
The Code contains certain provisions relating to the accrual of original issue discount in the case of subsequent purchasers of bonds such as the Discount Bonds. Owners who do not purchase Discount Bonds in the initial offering should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds.
Owners of Discount Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning the Discount Bonds. It is possible under the applicable provisions governing the determination of state or local income taxes accrued interest on the Discount Bonds may be deemed to be received in the year of accrual even through there will not be a corresponding cash payment until a later year.
BOND PREMIUM
The initial public offering prices of the Series 2018 Bonds maturing on ______(collectively, the “Premium Bonds”) are greater than the principal amounts payable at maturity or the call date. As a result, the Premium Bonds will be considered to be issued with amortizable bond premium (the “Bond Premium”). An owner who acquires a Premium Bond in the initial offering will be required to adjust the owner’s basis in the Premium Bond downward as a result of the amortization of the Bond Premium, pursuant to Section 1016(a)(5) of the Code. Such adjusted tax basis will be used to determine taxable gain or loss upon the disposition of the Premium Bonds including sale, redemption or payment at maturity or call date. The amount of
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amortizable Bond Premium will be computed on the basis of the owner’s yield. Rules for determining (i) yield, (ii) the amount of amortizable Bond Premium and (iii) the amount amortizable in a particular year are set forth at Section 171(b) of the Code and the Regulations accompanying that section. No income tax deduction for the amount of amortizable Bond Premium will be allowed pursuant to Section 171(a)(2) of the Code, but the amortization of Bond Premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining other tax consequences of owning the Premium Bonds. Owners of the Premium Bonds should consult their tax advisors with respect to the precise determination for federal income tax purposes of the treatment of Bond Premium upon the sale or other disposition of such Premium Bonds and with respect to the state and local tax consequences of owning and disposing of Premium Bonds.
Special rules governing the treatment of Bond Premium, which are applicable to dealers in tax-exempt securities, are found at Section 75 of the Code. Dealers in tax-exempt securities are urged to consult their own tax advisors concerning the treatment of Bond Premium.
ENFORCEABILITY OF RIGHTS AND REMEDIES AND LEGAL OPINIONS
The enforceability of the rights and remedies of the Trustee or the holders of the Series 2018 Bonds under the Indenture, and the availability of remedies to any party seeking to enforce the pledge of the Pledged Funds, are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code), the rights and remedies provided in the Indenture and any other agreement in this financing, and the rights and remedies of any party seeking to enforce the pledge of the Pledged Funds, may not be readily available or may be limited.
The various legal opinions to be delivered concurrently with the delivery of the Series 2018 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by, inter alia, the valid exercise of the constitutional powers of the State of Indiana and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The exceptions would encompass any exercise of federal, State or local police powers (including the police powers of the University and the State), in a manner consistent with the public health and welfare. Enforceability of the Indenture, and availability of remedies to a party seeking to enforce the pledge of the Pledged Funds in a situation where such enforcement or availability may adversely affect public health and welfare may be subject to these police powers.
The various legal opinions to be delivered concurrently with the delivery of the Series 2018 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment of the transaction opined upon or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
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LITIGATION
At the time of delivery of the Series 2018 Bonds, the University will certify that there is no litigation or other proceeding pending or, to the University’s knowledge, threatened, in any court, agency or other administrative body restraining or contesting the issuance of the Series 2018 Bonds, or the pledging of Pledged Funds, or in any way affecting the validity of any provision of the Series 2018 Bonds, the Resolution or the Indenture.
CERTAIN LEGAL MATTERS
Certain legal matters incidental to the authorization and issuance of the Series 2018 Bonds are subject to the approval of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel. The form of approving opinion of Bond Counsel with respect to the Series 2018 Bonds is attached hereto as APPENDIX E. Certain legal matters will be passed upon for the University by DeFur Voran LLP, Muncie, Indiana, as counsel to the University.
Bond Counsel has not undertaken independently to verify any information contained in this Official Statement, except that representatives of such firm participating in the issuance of the Series 2018 Bonds have reviewed the information under the headings “SUMMARY STATEMENT,” “INTRODUCTION,” “DESCRIPTION OF SERIES 2018 BONDS (except for the information under Book-Entry-Only System),” “PLAN OF FINANCE,” “SECURITY FOR THE BONDS,” “TAX MATTERS,” “ORIGINAL ISSUE DISCOUNT,” “BOND PREMIUM,” and “CONTINUING DISCLOSURE” and APPENDICES C, D and E and determined that such information conforms in all material respects to the provisions of the documents and other matters set forth therein. Bond Counsel has not undertaken to review the accuracy or completeness of statements under any other heading of this Official Statement, including particularly matters related to the financial condition of the University and other financial data concerning the University and expresses no opinion thereon or assumes any responsibility therewith.
FINANCIAL INFORMATION
A financial report of the University is prepared annually by the Office of the Vice President for Business Affairs and Treasurer. The most recent financial information currently available regarding the University is the report for the Fiscal Year ended June 30, 2017. A copy of this report is appended hereto as APPENDIX B.
UNDERWRITING
The Underwriters have jointly and severally agreed to purchase the Series 2018 Bonds from the University at an aggregate Underwriters’ discount of $______from the initial public offering prices set forth or reflected on the inside cover page of this Official Statement, from which the Underwriters will pay certain expenses. The obligations of the Underwriters to purchase the Series 2018 Bonds are subject to certain customary conditions precedent to closing and the Underwriters will be obligated to purchase all of the Series 2018 Bonds if any Series 2018 Bonds are purchased. The Underwriters have agreed to make a bona fide public offering of all the Series 2018 Bonds at prices not in excess of the initial public offering prices set forth or reflected on the inside cover page of this Official Statement. The Series 2018 Bonds may be
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offered and sold to certain dealers (including the Underwriters and other dealers depositing such Series 2018 Bonds into investment trusts) at prices lower than such public offering prices and, after completion of the initial bona fide public offering, such public offering prices may be changed, from time to time, by the Underwriters.
The Underwriters have entered into distribution agreements with other broker-dealers (that have not been designated by the University as Underwriters) for the distribution of the Series 2018 Bonds at the original issue prices. Such agreements generally provide that the Underwriters will share a portion of their underwriting compensation or selling concession with such broker-dealers.
CONTINUING DISCLOSURE
Pursuant to continuing disclosure requirements promulgated by the Securities and Exchange Commission in SEC Rule 15c2-12, as amended (the “SEC Rule”), the University entered into an Amended and Restated Continuing Disclosure Undertaking Agreement, dated as of February 15, 2011, as heretofore supplemented, to be further supplemented by a Fifth Supplement to Amended and Restated Continuing Disclosure Undertaking Agreement, dated as of June 1, 2018 (together, the “Undertaking”). Pursuant to the terms of the Undertaking, the University will agree to provide the following information while any of the Series 2018 Bonds are Outstanding:
• Audited Financial Statements. To the Municipal Securities Rulemaking Board (the “MSRB”), when and if available, the audited financial statements of the University for each fiscal year, beginning with the fiscal year ending June 30, 2018, together with the auditor’s report and all notes thereto; and
• Financial Information in this Official Statement. To the MSRB, within 180 days of the close of the University’s fiscal year, beginning with the fiscal year ending June 30, 2018, annual financial information, other than the audited financial statements described above, including (i) unaudited financial statements of the University if audited financial statements are not available and (ii) operating data (excluding any demographic information or forecasts) of the general type provided under the following headings in this Official Statement (as well as other Official Statements of the University for its Student Fee Bonds, as designated below) (collectively, the “Annual Information”):
THE FACILITIES AND THE SYSTEM -- Housing and Dining System Revenue Bonds ANNUAL DEBT SERVICE REQUIREMENTS -- Student Fee Bonds ANNUAL DEBT SERVICE REQUIREMENTS -- Housing and Dining System Revenue Bonds DEBT SERVICE COVERAGE -- Housing and Dining System Revenue Bonds BALL STATE UNIVERSITY (Appendix A) Enrollment Student Admissions Tuition and Fees
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State Appropriations Financial Aid to Students Financial Operations of the University Outstanding Indebtedness
• Reportable Events. In a timely manner within 10 business days of the occurrence of any of the following events, if material (which determination of materiality shall be made by the University in accordance with the standards established by federal securities laws), to the MSRB:
• non-payment related defaults; • modifications to the rights of owners of the Series 2018 Bonds; • Series 2018 Bond calls (other than scheduled mandatory sinking fund redemptions for which notice is given in accordance with the Indenture); • release, substitution or sale of property securing repayment of the Series 2018 Bonds; • the consummation of a merger, consolidation, or acquisition, or certain asset sales, involving the obligated person, or entry into or termination of a definitive agreement relating to the foregoing; and • appointment of a successor or additional trustee or the change of name of a trustee.
In a timely manner within 10 business days of the occurrence of any of the following events, regardless of materiality, to the MSRB:
• principal and interest payment delinquencies; • unscheduled draws on debt service reserves reflecting financial difficulties; • unscheduled draws on credit enhancements reflecting financial difficulties; • substitution of credit or liquidity providers, or their failure to perform; • defeasances; • rating changes; • adverse tax opinions or other material events affecting the tax exempt status of the Series 2018 Bonds; the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the securities; • tender offers; and • bankruptcy, insolvency, receivership or similar event of the obligated person.
• Failure to Disclose. In a timely manner, to the MSRB, notice of the University failing to provide the annual financial information as described above.
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If any Annual Information or audited financial statements relating to the University referred to above no longer can be provided because the operations to which they related have been materially changed or discontinued, a statement to that effect, provided by the University to the MSRB, along with any other Annual Information or audited financial statements required to be provided under the Undertaking, shall satisfy the Undertaking. To the extent available, the University shall cause to be filed along with the other Annual Information or audited financial statements operating data similar to that which can no longer be provided.
The University has agreed to make a good faith effort to provide Annual Information. However, failure to provide any component of Annual Information because it is not available to the University on the date by which Annual Information is required to be provided hereunder, shall not be deemed to be a breach of this Agreement. The University has further agreed to supplement the Annual Information filing when such data is available.
Dissemination Agent. The University may, at its sole discretion, utilize an agent (a “Dissemination Agent”) in connection with the dissemination of any annual financial information required to be provided by the University pursuant to the terms of the Undertaking.
Remedy. The sole remedy against the University for any failure to carry out any provision of the Undertaking shall be for specific performance of the University’s disclosure obligations under the Undertaking and not for money damages of any kind or in any amount. The University’s failure to honor its covenants thereunder shall not constitute a breach or default of the Series 2018 Bonds, the Indenture or any other agreement to which the University is a party.
In the event the University fails to provide any information required of it by the terms of the Undertaking, any holder or beneficial owner of Series 2018 Bonds may pursue the remedy set forth above in any court of competent jurisdiction in the State of Indiana. Any challenge to the adequacy of the information provided by the University by the terms of the Undertaking may be pursued only by holders or beneficial owners of not less than 25% in principal amount of Series 2018 Bonds then Outstanding in any court of competent jurisdiction in the State of Indiana. An affidavit to the effect that such persons are holders or beneficial owners of Series 2018 Bonds supported by reasonable documentation of such claim shall be sufficient to evidence standing to pursue the remedy set forth above.
Prior to pursuing any remedy for any breach of any obligation under the Undertaking, a holder or beneficial owner of Series 2018 Bonds shall give notice to the University, by registered or certified mail, of such breach and its intent to pursue such remedy. Fifteen (15) days after the mailing of such notice, and not before, such remedy may be pursued under the Undertaking if and to the extent the University has failed to cure such breach within such fifteen (15) days.
Modification of Undertaking. The University may, from time to time, amend or modify the Undertaking without the consent of or notice to the owners of the Series 2018 Bonds if either (a)(i) such amendment or modification is made in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the University, or type of business conducted, (ii) the Undertaking, as so amended or modified, would have complied with the requirements of the Rule on the date hereof, after taking
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into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (iii) such amendment or modification does not materially impair the interests of the holders of the Series 2018 Bonds, as determined either by (A) any person selected by the University that is unaffiliated with the University (including the trustee under the Indenture, or nationally recognized bond counsel) or (B) an approving vote of the holders of the requisite percentage of Outstanding Series 2018 Bonds as required under Section 16.01 of the Indenture at the time of such amendment or modification; or (b) such amendment or modification (including an amendment or modification which rescinds this Agreement) is permitted by the Rule, as then in effect.
Past Compliance. In order to assist the Underwriters in complying with the Underwriters’ obligations pursuant to the SEC Rule, the University represents that it has identified certain deficiencies with regard to its undertakings which occurred during the previous five years, including, but not limited to, the following instance: The University did not file a reportable event notice with respect to the redemption of its outstanding Parking System Revenue Bonds, which were redeemed in full using available cash on April 2, 2015. The bondholders in question did, however, receive timely 30 day notice of the redemption on March 2, 2015. The University makes no representation as to any potential materiality of such prior instance, as materiality is dependent upon individual facts and circumstances. Otherwise, there have been no instances in the past five years when the University has failed to comply, in all material respects, with any undertakings in a written contract or agreement as specified in paragraph (b)(5)(i) of the SEC Rule.
EMMA. The Securities and Exchange Commission approved the submission of continuing disclosure filings with the Electronic Municipal Market Access (“EMMA”) system established by the MSRB, as the sole nationally recognized municipal securities information repository recognized by the SEC, effective July 1, 2009. Accordingly, all continuing disclosure filings under the Undertaking shall be filed solely by transmitting such filings to EMMA at www.emma.msrb.org.
RATINGS
Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) have assigned their municipal bond ratings of “Aa3” and “AA-” to the Series 2018 Bonds, respectively.
An explanation of the rating by Moody’s may be obtained from such agency at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. An explanation of the rating by S&P may be obtained from such agency at 130 East Randolph St., Suite 2900, Chicago, IL 60601. Such ratings reflect only the view of the rating agencies and are not a recommendation to buy, sell or hold any of the Series 2018 Bonds. There is no assurance that any rating will continue for any given period of time or that any rating will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of any rating may have an adverse effect on the market price or marketability of the Series 2018 Bonds.
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SPECIAL RELATIONSHIPS
Ice Miller LLP, Indianapolis, Indiana, is serving as Bond Counsel and as special disclosure counsel.
MISCELLANEOUS
During the initial offering period for the Series 2018 Bonds, copies of the Indenture will be available for inspection at the Office of the Vice President for Business Affairs and Treasurer, Ball State University, 2000 University Avenue, Muncie, Indiana 47306; or at the Public Finance Division of Piper Jaffray & Co., 444 West Lake Street, Suite 3300, Chicago, Illinois 60606.
The execution and delivery of this Official Statement have been duly authorized by the Ball State University Board of Trustees.
BALL STATE UNIVERSITY BOARD OF TRUSTEES
By: Bernard M. Hannon, Treasurer
Dated: June ___, 2018
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APPENDIX A
BALL STATE UNIVERSITY
[THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A
BALL STATE UNIVERSITY
General
Ball State University (the “University” or “Ball State”), located in Muncie, Indiana, was founded as Indiana State Normal School, Eastern Division, in 1918. Its antecedents, all housed in what is now the Ball State Administration Building, were also normal schools, owned and operated under various names. In 1918, the Ball brothers, a prominent Muncie industrial family, bought the property and donated it to the State of Indiana, which, in turn, transferred control of the school to the Board of Trustees of the Indiana State Normal School. In 1922, in recognition of the generosity of the Ball brothers, the Board added Ball Teachers College to the school’s name. In 1929, the Indiana General Assembly separated the two colleges, naming the campus in Muncie Ball State Teachers College. In 1965, the General Assembly renamed the institution Ball State University, in recognition of its phenomenal growth in enrollment and physical facilities, the variety and quality of its educational programs and services, and in anticipation of the much broader role it would be expected to assume in the future.
Leadership
Geoffrey S. Mearns became the 17th President of Ball State University on May 15, 2017. President Mearns came to Ball State from Northern Kentucky University, where he served as president for five years. Prior to that President Mearns served as provost and senior vice president for academic affairs at Cleveland State University. He previously served as dean and professor of law at Cleveland State’s Cleveland-Marshall College of Law. President Mearns also practiced law for fifteen years, including serving as a federal prosecutor in the U.S. Department of Justice. He earned his undergraduate degree in English from Yale University and his J.D. from the University of Virginia.
Strategic Plan
Ball State celebrates its centennial anniversary in 2018 and planning for the celebration has included the launch of a new marketing campaign and the launch of a new strategic planning process.
In late fall 2017, President Mearns announced the launch of a more visible and vocal marketing campaign which includes a refreshed Beneficence logo and the new “We Fly” theme. “We Fly” celebrates the spirit of intellectual curiosity that challenges all of the University community including students, graduates, faculty and staff.
In January, 2018, President Mearns appointed a Strategic Planning Committee and charged the committee with designing and leading the planning process to begin the University’s second century. The plan will include a mission statement, core values, 2019-23 strategic plan goals, and the 2040 vision.
Guiding the Strategic Planning Committee’s work will be Sue Hodges Moore who joined Ball State as its first Chief Strategy Officer in early March, 2018. As Chief Strategy Officer,
A - 1 Moore will be responsible for assisting with the development and implementation of a new strategic plan for the University as well as assisting divisions, colleges, and units with developing and implementing their own individual plans that align with the University’s overall plan.
In early spring, 2018, President Mearns announced updates related to the work completed by the Strategic Planning Committee. Those updates include a timeline, organization of various working groups, and ways in which input may be given by faculty, staff, students, alumni and community partners. Additionally the strategic planning process was titled, “Spreading our Wings.”
Work will continue on the strategic plan throughout summer of 2018. The final draft of “Spreading our Wings” is scheduled to be presented to the Board of Trustees for approval by the end of 2018.
Organization
Ball State is organized into seven academic colleges: Architecture and Planning; Business; Communication, Information, and Media; Fine Arts; Science and Humanities; Teachers College, and the newly formed College of Health. Ball State offers 7 associate-level programs, 178 undergraduate programs, 99 master’s level programs, 16 doctoral-level programs and 2 specialists programs providing professional and pre-professional specialization as well as education in the liberal arts and sciences.
University and Program Highlights
University-Wide
Completing construction in 2018 on the largest ground source geothermal system in the country, spurring jobs throughout Indiana and the nation. The system will heat and cool over 45 buildings throughout the approximately 700-acre campus, cutting the University’s carbon footprint roughly in half and saving about $2 million a year in energy costs.
Named one of the best universities in the Midwest by The Princeton Review for 13 years.
Designated a doctoral university: higher research activity by The Carnegie Classification of Institutions of Higher Education.
Earned the Community Engagement Classification from the Carnegie Foundation for the Advancement of Teaching. The classification recognizes colleges and universities that demonstrate an institution-wide commitment to public service, civic involvement, and community partnerships.
Received a Higher Education Excellence in Diversity (HEED) Award from Insight into Diversity in 2016 and 2017. This honor is for exemplary initiatives focusing on all aspects of diversity and inclusion, including gender, race, ethnicity, veterans, people with disabilities, and members of the LGBTQ community.
A - 2 Ranked in the top 20 in the country for three graduate programs in U.S. News & World Report’s 2017 “Best Online Programs”: MBA was 12th, nursing was 13th, and education was 16th. U.S. News also ranked the online bachelor’s programs 36th.
Recognized as the first higher education institution in the country to earn Quality Matters’ Learner Support Program Certification. Quality Matters, known as QM, provides a nationally recognized standard of best practices for online and blended learning.
Ranked in U.S. News & World Report’s 2015 “Best Online Programs for Veterans” at No. 7 in graduate education, No. 14 in MBA, No. 22 in graduate nursing, and No. 29 in bachelor’s programs.
Named a Military Friendly School for eight years by Victory Media. In 2016 Victory Media also ranked online programs No. 8 in the country.
Named among only 24 schools in the country to make The Princeton Review’s Green Honor Roll announced in 2017. Schools on this list received a perfect score of 99, covering such issues as academics, construction, food sources, and recycling. Ball State is also on the organization’s 2017 Guide to 375 Green Colleges.
Academic Programs
College of Architecture and Planning
All of the College of Architecture and Planning’s professional degree programs are nationally accredited.
Ball State’s architecture, landscape architecture, and urban planning programs are uniquely blended in a studio-oriented design college, where all freshman students follow a common first-year curriculum introducing them to all three disciplines.
The Department of Architecture is Indiana’s only state-supported architecture program.
Ball State’s fourth-year architecture studio was named one of the nation’s seven best courses in sustainable design in 2016 by Architecture 2030. Students are designing and building a home that will produce all the energy it needs from renewable sources. The course will receive support from Architecture 2030, a nonprofit organization that seeks solutions to climate change in the built environment.
DesignIntelligence has consistently ranked Ball State’s landscape architecture programs in the top 15 in the country. In 2016, the undergraduate program was ranked No. 6 and the graduate program No. 12. Hiring professionals also placed Ball State in the top five for communication skills, construction methods and materials, cross-disciplinary teamwork, and design.
Teamwork between graduate architecture and undergraduate construction management students culminated in all four teams receiving a finalist designation and one team
A - 3 placing first in the Department of Energy’s 2017 Race to Zero competition on the design of energy efficient residential typologies.
The Community Based Projects program helped address planning and development issues around the memorial site where United Airlines Flight 93 crashed during the 9/11 attacks.
The graduate program in historic preservation is one of the first of its kind in the Midwest and is uniquely housed in the Department of Architecture.
The interior design program is accredited by the Council for Interior Design Accreditation, attained by less than one-third of such programs, and the National Association of Schools of Art and Design (NASAD).
Miller College of Business
The Miller College of Business is accredited by AACSB International -- The Association to Advance Collegiate Schools of Business -- and was the first state-supported institution in Indiana to hold separate AACSB accreditation for the accounting program. Less than 5 percent of the world’s business schools have earned AACSB accreditation.
Accounting
Public Accounting Report’s 2015 survey of accounting professors ranked Ball State’s undergraduate accounting program seventh in the nation among those of similar size, and ranked the master’s program 15th.
Economics
The bachelor of science in economics program has been accepted into the CFA (Chartered Financial Analyst) Institute University Recognition Program. This status is granted to institutions whose degree programs incorporate at least 70 percent of the CFA Program Candidate Body of Knowledge and emphasize the CFA Institute’s code of ethics and standards of practice.
Entrepreneurial Management
The entrepreneurial management program was ranked 20th in the nation in 2017 by The Princeton Review and Entrepreneur magazine.
Students may receive assistance in starting their own businesses through a business incubator program that fosters entrepreneurial activity in the community, particularly within the growing communications and information technology sectors.
Management
Allegre, Ball State’s popular student-operated restaurant, gives students an opportunity to learn everything from food preparation and presentation to restaurant management.
A - 4 Ball State’s residential property management (RPM) program, one of only nine such programs in the country, is supported by the National Apartment Association. Ball State is among only a few universities that offers students—typically sophomores and juniors—the opportunity to earn the National Apartment Leasing Professional (NALP) designation.
Insurance and Risk Management
In 2017, Ball State was one of only 20 universities worldwide to be designated a Global Center of Insurance Excellence by the International Insurance Society.
The risk management, insurance, and actuarial science program is a collaborative effort between Miller College and the College of Sciences and Humanities that provides opportunities for research and interaction with industry.
Information Systems
Students in computer information systems have built a powerful cluster computer and have used it to test complex software for the U.S. Department of Defense and to regularly work with area businesses.
A state-of-the-art networking lab teaches students how to protect computer networks and other information systems from cyber-attacks. The lab features the latest equipment, providing a technologically advanced setting for students to manage all types of networks.
Marketing
The Center for Professional Selling is one of only 28 full member schools with the University Sales Center Alliance. The center’s annual Sales Career Fair is one of the largest of its kind in the country.
The Sales Education Foundation has listed Ball State’s sales program among its “Top Universities for Professional Sales Education” since 2013.
The apparel design program is accredited by the National Association of Schools of Art and Design (NASAD).
MBA
The master of business administration (MBA) program was ranked 12th in U.S. News & World Report’s 2017 “Best Online Programs.”
The Princeton Review, in partnership with Entrepreneur magazine, included Ball State in its 2016 “Top 25 Online MBA Programs.”
U.S. News & World Report’s 2015 “Best Online Programs for Veterans” ranked the MBA program No. 14.
A - 5 Discover Business listed the MBA program on its “2015-2016 Top Recommended Online MBA Programs.”
College of Communications, Information, and Media
Telecommunications
Ball State students and faculty have won 66 Emmys. The honors also include two gold Student Academy Awards.
Sports Link, an immersive learning program that has produced content for Fox College Sports and NCAA March Madness Live, has won multiple Emmys and a College Sports Media Award.
Sportscasters Talent Agency of America named Ball State the No. 3 sports broadcasting school in the country in 2017.
The student-created documentary Everlasting Light: The Story of Indiana’s Bicentennial Torch Relay was shown during the 2017 Heartland Film Festival. Other awards for the film include a Gold Aurora Award and a Society of Professional Journalists award. The entire immersive learning project, where students produced daily videos, photos, articles, and social media, won a Mercury Award for Best Public Relations Campaign from the U.S. Travel Association and a Summit Emerging Media Award, among others.
Unmasked: The Stigma of Meth, produced by an immersive learning class, won the Associated Press Media Editors (APME) 2017 Innovator of the Year Award for College Students.
From their very first semester, students in the Department of Telecommunications receive hands-on experience with sophisticated audio and video equipment, including HD cameras.
Journalism
In 2016-17, Ball Bearings magazine won two first place Pacemaker awards from the Associated Collegiate Press, three Pinnacle Awards from the College Media Association, four Gold Circle Awards from the Columbia Scholastic Press Association (CSPA), and a Hearst. The student-run newspaper, The Ball State Daily News, was recognized with 71 Gold Circle awards from CSPA and nominated for the Pacemaker in 2017.
The BSU Athletics App, the official app for interactive annual reports, media guides, and more for Ball State University sports, received a 2015 Best of the Festival King Foundation Award from the Broadcast Education Association. The app was developed by the Ball State Digital Publishing Studio in collaboration with Sports Link and Ball State Athletics.
The University’s journalism graphics program is one of the leading programs of its type in the country.
A - 6 Advertising and Public Relations
The Ball State chapter of the Public Relations Student Society of America received a Star Chapter Award from PRSSA at the organization’s 2016 national conference.
Cardinal Communications, one of the nation’s first student-operated public relations and advertising agencies, is among about 30 student agencies in the country to be designated a National Affiliation Program with the Public Relations Student Society of America.
The master’s degree in public relations is the first graduate program in the nation to receive Certification in Education for Public Relations (CEPR) by the Public Relations Society of America (PRSA). The undergraduate public relations program in 2016 was one of only 38 certified programs in the world.
Communication Studies
Ball State won the team championship at the 2016, 2017 and 2018 National Educational Debate Association (NEDA) National Championship Debate Tournament.
College of Fine Arts
Music
Ball State has one of the nation’s leading music teacher-training programs.
The music media production program is one of only a few of its kind in the nation, blending science and music and encouraging students to explore electronic music with the latest digital technology.
The School of Music’s annual Chamber Music Festival is believed to be the longest- running continuous university-affiliated series of its kind in the country.
Ball State’s Musical Arts Woodwind Quintet is one of the nation’s oldest and most distinguished chamber ensembles of its kind.
The School of Music is an All-Steinway School, where all pianos used by music students for practicing or performing are Steinway.
The Jazz Lab Ensemble has performed four times at the Montreux Jazz Festival in Switzerland, the world’s largest music festival and leading jazz festival.
Since 1964, the Ball State University Singers have been recognized as one of America’s top collegiate entertainment organizations, performing as Indiana’s Official Goodwill Ambassadors in nearly 20 countries, at major entertainment competitions, and at presidential inaugurations.
A - 7 The Music Instruction Building features a 600-seat “tunable” performance hall, a digital studio that can record performances in the hall and practice rooms, and state-of-the-art music technology studios.
Theatre and Dance
Since 2004, students from the Department of Theatre and Dance have been invited as national qualifiers to the yearly Kennedy Center American College Theater Festival (KCACTF), one of the nation’s premier events for collegiate theatre programs.
Ball State has Indiana’s largest theatre and dance program.
Art
Programs in the School of Art are accredited by the National Association of Schools of Art and Design (NASAD).
With more than 11,000 works in its collection, the David Owsley Museum of Art at Ball State University is one of four art museums in Indiana with a notable, well-rounded collection, and the only such facility in east central Indiana.
The David Owsley Museum of Art is nationally recognized for excellence through accreditation from the American Association of Museums. The Museum loans works for major exhibitions at museums across the country and overseas, including the Musee du Louvre in Paris and the Metropolitan Museum of Art in New York.
School of Art faculty members have works in prestigious private and corporate collections and many museums.
College of Health
Nursing, radiography, and respiratory therapy students continue a tradition of outstanding performance on licensing examinations, including a nearly 100 percent pass rate.
The radiography program was recognized as one of nine Best Radiologic Technologist Training Programs across the country in 2016 by AuntMinnie.com.
Ball State’s graduate nursing programs were ranked 13th in U.S. News & World Report’s 2017 “Best Online Programs.”
U.S. News & World Report’s 2015 “Best Online Programs for Veterans” ranked the graduate nursing programs No. 22.
The Human Performance Lab is internationally renowned for studying exercise and its effects on human physiology. The center’s researchers are working with NASA astronauts and Russian cosmonauts to study the effects of long space missions on muscle tissue.
A - 8 Seventy percent of the licensed certified speech language pathologists in Indiana are Ball State graduates.
The School of Kinesiology offers one of the few aquatics majors in the country.
The fully accredited dietetics internship program is the largest in Indiana.
Ball State’s doctorate in audiology is the country’s oldest existing four-year program.
Many sport administration majors intern with professional sport teams or state and national governing organizations.
Ball State’s bachelor of social work (BSW) program is the oldest accredited undergraduate program in Indiana and the largest.
Military science students had 100 percent successful completion of the Cadet Leaders Course at Fort Knox, Kentucky.
College of Sciences and Humanities
The Department of Chemistry’s longtime summer research program is a model for other universities and a major partner in the interuniversity Center for Authentic Science Practice in Education (CASPiE), a National Science Foundation funded program to advance undergraduate research in chemistry.
Ball State formed Indiana’s first student chapter of the American Society for Microbiology (BSUASM).
The Charles W. Brown Planetarium is the largest in Indiana. The state-of-the-art projector can simulate a night sky with 10 million stars, and its audience can fly virtually through Saturn’s rings, land on Mars, or travel to distant stars and galaxies.
At the Center for Computational Nanoscience, undergraduate and graduate students work on research projects in nanoscience, the study of objects at the molecular level.
The Field Station and Environmental Education Center is a collaboration of the Departments of Biology, Natural Resources and Environmental Management, Landscape Architecture, Geology, and others.
Each summer, Ball State geography students travel to America’s Tornado Alley in search of severe storms to hone their weather forecasting skills and learn how tornadoes are formed.
The risk management, insurance, and actuarial science program is a collaborative effort between Miller College and the College of Sciences and Humanities that provides opportunities for research and interaction with industry. Actuarial science students contend successfully in international competitions, applying their skills to real-world problems.
A - 9 The Bowen Center for Public Affairs conducted the 2017 Old National Bank/Ball State University Hoosier Survey about political and social concerns. All members of the General Assembly and elected state officials receive the survey’s results.
Ball State’s Department of Criminal Justice and Criminology was the first program in the United States to be accredited by the Academy of Criminal Justice Sciences.
Teachers College
All Teachers College education programs are fully accredited by the Council for the Accreditation of Educator Preparation (CAEP), the Higher Learning Commission, and the Indiana Professional Standards Board. In addition, 34 programs have received national recognition through their respective professional associations.
Ball State graduates have a nearly 90 percent pass rate on the Indiana Core Assessment for licensure in Indiana.
Ball State was one of four universities in Indiana selected by the Woodrow Wilson National Fellowship Foundation to pilot a program to help overhaul teacher education and encourage exceptional science and math teacher candidates to seek long-term careers in high-need classrooms. This program is now expanding beyond Indiana’s borders.
Ball State is the first university in Indiana authorizing charter schools, helping to provide more choices in public education.
The Teacher Educator, a Teachers College publication, is the official journal of the Indiana Association of Teacher Educators. It has been in publication since 1965.
Programs
Schools Within the Context of Community (SCC) received the 2017 Best Practice Award in Support of Multicultural Education and Diversity from AACTE (American Association of Colleges for Teacher Education) and the 2016 Christa McAuliffe Excellence in Teacher Education Award from the American Association of State Colleges and Universities (AASCU). Started in 2009, SCC is a partnership between Teachers College, Longfellow Elementary School, Huffer Memorial Children’s Center, Buley Community Center, and Muncie’s Whitely neighborhood. During and after school, Ball State students and professors supplement the work of Longfellow teachers, and students are matched with community mentors and attend events such as dinners, athletic competitions, and church services. Ball State had previously received the McAuliffe Award in 2005 for its Learning Assessment Model Project (LAMP).
The Department of Special Education has the only deaf education teacher-training program in Indiana. Students complete a one-year residency at the Indiana School for the Deaf in Indianapolis.
The graduate education programs were ranked 11th in U.S. News & World Report’s 2017 “Best Online Programs.”
A - 10 U.S. News & World Report’s 2015 “Best Online Programs for Veterans” ranked the graduate education programs No. 7.
Technology
Starting in their freshman classes, Ball State’s education students are exposed to advanced instructional technology -- including assembling an electronic portfolio -- to prepare them for the 21st century classroom.
Teachers College is the home of Ball State’s first technology spin-off company, rGrade. As an ongoing research and development effort within Teachers College, rGrade has generated more than $1.5 million in grants for research and outreach programs that address assessment of student learning.
Teachers College’s technologies have been featured on Apple’s website, at the University of Cincinnati’s Vision 2020 Conference, and in the Consortium for the Application of Technology and Learning Innovations in Schools of Education (CATALISE).
Schools
Burris Laboratory School, which serves Ball State’s teaching majors, has been listed among the nation’s best high schools since 2007 in analyses by U.S. News & World Report. In 2017, Burris was named a U.S. Department of Education Green Ribbon School for its commitment to sustainable practices.
The Indiana Academy for Science, Mathematics, and Humanities earned a Gold Medal on U.S. News & World Report’s 2017 Best High Schools list. In 2016 it was named No. 3 on Niche’s “Best Public High Schools in America” and No. 1 on the organization’s “Best Public High Schools in Indiana.”
Ball State’s Child Study Center has been accredited by the National Association for the Education of Young Children (NAEYC) since 1998. It is home-licensed by the State of Indiana and has achieved the highest rank, Level 4, on Paths to Quality, an Indiana Family and Social Services Administration program.
Accreditation and Memberships
The University is fully accredited in all of its departments and divisions by the Higher Learning Commission. Numerous other professional agencies, licensing boards, and state agencies have accredited various schools, departments and programs within the University. For example, the Miller College of Business is accredited by the Association to Advance Collegiate Schools of Business.
The Board of Trustees
The University is governed by a nine member Board of Trustees. The Governor of Indiana appoints the Trustees, one of whom is a full-time student at the University and two of whom are nominated or selected by the Ball State University Alumni Association. All members
A - 11 of the Board of Trustees are appointed for terms of four years, except for the student member whose term is two years. The current members of the Board of Trustees are listed below:
Richard Hall, Chair E. Renae Conley, Vice Chair Thomas C. Bracken, Secretary Matt Momper, Assistant Secretary R. Wayne Estopinal Michael McDaniel Jean Ann Harcourt Brian A. Gallagher Marlene Jacocks, Student Trustee
Principal Administrative Officers of Ball State University
The current principal administrative officers who manage the administration and academic affairs of Ball State University are listed below:
Geoffrey S. Mearns, President Sue Hodges Moore, Chief Strategy Officer Marilyn Buck, Interim Provost and Interim Executive Vice President for Academic Affairs* Kay Bales, Vice President for Student Affairs and Enrollment Services and Dean of Students Bernard M. Hannon, Vice President for Business Affairs and Treasurer Mark Sandy, Director of Intercollegiate Athletics (retiring June, 2018)* Rebecca Polcz, Vice President for Governmental Relations Kathy Wolf, Vice President for Marketing and Communications Sali Falling, Vice President and General Counsel Loren Malm, Interim Vice President for Information Technology*
Facilities
Ball State facilities include approximately 125 buildings totaling approximately 7 million gross square feet. The University also owns over 1,000 acres of land. The current replacement value of campus facilities is more than $2.5 billion.
The University has long had a systematic plan for ongoing capital repair and renewal of its facilities. Academic and administrative buildings, accounting for approximately 45 percent of the campus square footage, are funded, in part, through state appropriated funds allocated on a biennial basis by the Indiana General Assembly. The remaining 55 percent of the campus square footage consists of buildings which are not state supported. The 1950’s and 1960’s saw a substantial increase in gross square footage of non-state supported buildings, including dining and residence halls, parking facilities, the student center, Emens Auditorium, athletic facilities,
* Susana Rivera-Mills will commence service as Provost and Executive Vice President for Academic Affairs, effective July 1, 2018. Beth Goetz will commence service as Director of Intercollegiate Athletics effective June 18, 2018. A search is currently underway for the position of Vice President for Information Technology.
A - 12 and conference venues. At the present time, these non-state supported buildings have a current replacement value of approximately $1.1 billion. For the period from 2018 to 2024, the University plans to invest over $250 million, in current dollars, in renewal projects on these facilities. Currently, $123.5 million has been allocated from auxiliary operations revenues and student fees for the stewardship and renewal of these facilities. The University believes that pre- funding these critical needs sets Ball State apart from many other institutions of higher learning, and constitutes a sound financial management practice.
Following several national reports with titles such as “Crumbling Academe” and “The Decaying American Campus: A Ticking Time Bomb,” attention has been focused nationally on the need for a systematic and thoughtful approach to long term facility stewardship. Financial Planning Guidelines for Facility Renewal and Adaption, a study sponsored by the Lilly Endowment and conducted by the Society for College and University Planning, the National Association of College and University Business Officers, the Association of Physical Plant Administrators of Universities and Colleges, and Coopers and Lybrand (now Pricewaterhouse Coopers), estimates that between two percent and four percent of plant replacement cost needs to be provided, on average, each year in order to adequately fund repairs and renewal, and to adapt facilities to changing code requirements and to evolving, contemporary needs. Based on this and other studies, as well as direct experience over many years managing complex University facilities, the University believes that an annual target of three percent of current replacement value is in order to adequately fund its stewardship responsibility for housing, dining, and other non-state supported buildings and avoid even higher costs caused by accumulated deferred maintenance. For parking facilities, which are comprised of multi-level structures and paved and gravel lots, an annual target of two percent of current replacement value has been established. This methodology is based on the premise that users should pay their fair share for the deterioration of the facilities they use. The University’s goal is to maintain competitive, quality facilities at the lowest long term cost to students.
New Construction and/or Renovation Projects in the Last Ten Years
DeHority Complex: Completed in Summer 2009, the DeHority Complex renovation project included major exterior and interior renovation. In addition, the building was updated with various building core enhancements and improved connectivity for residents as well as the addition of eighty-nine beds.
L.A. Pittenger Student Center: Completed in Winter 2010, the L.A. Pittenger Student Center Renovation project consisted of replacing and upgrading building systems including windows, plumbing, mechanical and electrical equipment, elevators, sprinkler systems, selected interior finishes and ceilings, the addition of a new food court, and bringing the building into compliance with current building code and ADA requirements. The project also enhanced the usability and function of this student focused building to enhance the student experience at the University.
Honors College: Completed in the Spring of 2010, the Edmund F. and Virginia B. Ball House was renovated for use as the new home of the Honors College. The Honors College is a four-year University-wide program featuring special course offerings, colloquia, seminars, and independent study. Relocating the Honors College to the former residence of Ed and Virginia
A - 13 Ball placed the Honors College in a visible location central to academic life on campus and more accessible to students, faculty, and visitors.
Thomas J. Kinghorn Hall: Completed in Fall 2010, Kinghorn Hall represents the University’s second new residence hall opened in the last nine years. The 187,400 square feet building provides heated and air-conditioned accommodations for more than 600 students. The hall features double occupancy rooms clustered around semi-private baths and a limited number of single occupancy rooms with private baths. The facility includes accommodations for disabled access, living areas, and community areas with room arrangements and design that will promote social interaction, provide flexible spaces, integrate technology, and provide computer labs and study lounges.
The Marilyn K. Glick Center for Glass: Also completed in Fall 2010, the Glick Center contains 9,200 gross square feet of newly constructed space. The facility was built to support and promote the practice of the contemporary glass arts at Ball State University and in the East Central Indiana Region. The Center’s studio spaces, equipment, faculty, and staff support a broad-based and dynamic undergraduate and graduate curriculum in contemporary glass, as well as community outreach and education about the glass arts.
Jo Ann Gora Student Recreation and Wellness Center: Also completed in Fall 2010, the Jo Ann Gora Student Recreation and Wellness Center represents a building that all Ball State students have the opportunity to enjoy. This facility includes more than 400,000 square feet of new or renovated space. It features a new fitness space on all three levels, a suspended 200- meter track, 20,000 square feet of artificial indoor turf, an extensive outdoor pursuits center and climbing wall, and seven traditional basketball and volleyball courts as well as racquetball courts.
North Quadrangle Building: The renovated North Quadrangle Building reopened in the Spring of 2012. The renovation consisted of converting the stacks space into classrooms, improved accessibility, enhancements to offices and classrooms, simplified circulation paths, and mechanical, plumbing, and electrical replacement.
Studebaker East Residence Hall: Completed in Fall 2012, the Studebaker East renovation included major interior and exterior renovation. A new addition to the residence hall provides two-story lounges and gathering spaces. The hall houses approximately 430 students and is home to the International and Modern Languages Living-Learning Communities.
Teachers College: The renovation of Teachers College followed North Quad as the second of three buildings to be renovated as part of the Central Campus Academic Renovation and Utilities Improvement Project. The renovation, completed in 2013, included installation of a fire suppression system, replacement of the vertical electric bus system, replacement of all main air handling units, and evaluation of all other systems. Public areas and offices were also updated.
Heat Plant (Geothermal Energy System): In May, 2009, the University broke ground on a new geothermal energy system that will heat and cool more than 45 buildings over 700 acres. It will be the largest full-scale district geothermal project in the country, cutting the University’s carbon footprint roughly in half. This system includes four components: well fields, heat pump
A - 14 chillers or energy centers, hot and cold district loops, and building interfaces. Phase I of the system became operational in March, 2012. Work continues on Phase II with an estimated completion date in 2018.
Dr. Joe and Alice Rinard Orchid Greenhouse: Completed in Spring 2014, the new greenhouse allows for improved access, more educational opportunities, and greater interdisciplinary use. The 3,400 square foot facility provides an ideal tropical rainforest environment for more than 1,800 plants in the world-renowned Wheeler-Thanhauser Orchid Collection and Species Bank.
Charles W. Brown Planetarium: The new planetarium, which opened in Fall 2014, is the largest planetarium in Indiana and one of the top ten university planetariums in the country. The 52-foot diameter dome and state-of-the-art projector transforms teaching and learning for science students, faculty, professionals, and the community.
Applied Technology: The Applied Technology Building is the third academic building to be renovated as part of the Central Campus Academic Renovation and Utilities Improvement Project. The renovation of this building, which was completed in the Spring of 2016, involved upgrading of laboratories and related infrastructure, replacement of lighting systems, improvements to heating, cooling, and ventilation systems, replacement of plumbing and plumbing fixtures; and installation of new electrical and communication systems. In addition, accessibility was improved and floor, ceiling, and wall materials original to the building were replaced.
Johnson A (Botsford/Swinford) Residence Hall: The renovation of Botsford/Swinford Halls within the Johnson Complex was completed in Summer 2015. The renovation provided for a complete make-over of the interior and exterior features of the residence hall. A new tower connecting the two wings provides greater accessibility and added approximately 130 beds.
Johnson B (Schmidt/Wilson) Residence Hall: The renovation of Schmidt/Wilson Halls within the Johnson Complex was completed in Summer 2017. The building exterior was removed and replaced with a more energy-efficient masonry wall assembly, roof and windows. Lighting, plumbing and electrical systems were replaced throughout the building. A new elevator tower was added to the east end of the building serving all floors, and a relatively small addition to the west end allowed for a new stairwell and an increase in capacity by approximately 48 beds.
First Merchants Ballpark: The softball and baseball venues at First Merchants Ballpark underwent a multi-phase renovation that was completed in Fall 2015. The improvements included turf fields for both diamonds, new dugouts, a new press box and grandstands at the baseball field, and a new multi-use building at softball. This project was made possible, in part, through the Cardinal Commitment capital campaign.
Ron and Joan Venderly Football Center: Also funded by the Cardinal Commitment capital campaign, the Venderly Football Center opened in Spring 2016. The new facility features a theater style meeting room that can accommodate the entire team, dedicated coaches’ offices, a full coaching staff meeting room, and a recruiting lounge.
A - 15 Emens Auditorium Lobby Expansion and Renovation: The expansion of the lobby area at Emens Auditorium was completed in Fall 2017. The improvements include a facelift to the external structure of the building, first-floor restrooms, a more spacious lobby, an indoor box office, a second-story hospitality room, two concession stands, and an additional 12,000 square feet overall.
Earl Yestingsmeier Golf Center: The 6,400 square-foot Yestingsmeier Golf Center opened in late 2017 and provides dedicated space for men’s and women’s golf. The facility features a golfing simulator, a 2,200 square-foot putting green and chipping area, a club repair room, four hitting bays, and putting labs. Construction of the facility was funded by the Cardinal Commitment capital campaign.
Dr. Don Shondell Practice Center: The Shondell Practice Center will be completed in Summer 2018. The facility, connected to Worthen Arena, will provide needed practice space for the women’s and men’s basketball and volleyball teams. Amenities include two regulation-size courts that can be utilized by either basketball or volleyball, eight retractable basketball goals, an athletic training room, a study room, and two team meeting rooms. Funding for the facility is coming from the Cardinal Commitment capital campaign.
Health Professions Building: The new Health Professions Building is currently under construction in the new academic quadrangle on the east side of the campus. The 165,000 square-foot building will be home to the University’s new College of Health and will serve departments such as Nursing, Nutrition and Health Science, Social Work, Speech Pathology and Audiology, Counseling Psychology, Social Psychology and Counseling, and the Social Science Research Center. Project funding is provided by the Series R Student Fee Bonds issued in January 2017, and construction is expected to be complete in Fall 2019.
North Residential Neighborhood Phase 1: The North Residential Neighborhood Project will serve as the replacement for the housing and dining options located in the aging LaFollette Complex. Work on Phase 1, which will include reconfiguration of McKinley Avenue and construction of a new residence hall and stand-alone dining facility, will begin in Summer 2018. Project funding is provided by the Series 2018 Bonds, and construction is expected to be complete in Summer 2020.
Faculty and Employees
As of the beginning of the 2017-18 academic year, the University’s staff and faculty totaled approximately 3,155 on a full-time basis and 434 on a part-time basis. This number does not include student employees and graduate assistants.
For the 2017 Fall semester, the University’s instructional staff on campus totaled 1,291 with 1,022 full-time staff and 269 part-time or temporary instructional staff. The full-time staff consisted of 210 professors, 227 associate professors, 338 assistant professors, and 247 instructors. Of the full time instructional staff, nearly 65% held tenured positions or were in tenure track positions and about 96% of the tenure or tenure-track faculty members held terminal degrees in their disciplines.
A - 16 The American Federation of State, County and Municipal Employees (AFSCME) Local Number 293 is the bargaining agent for certain janitorial, maintenance, and food service personnel of the University. The University meets and confers with AFSCME about specific working conditions under the framework of “Conditions of Cooperation,” a policy statement adopted by the Board of Trustees. As an instrumentality of the State of Indiana, the University and its employees are not subject to the provisions of the National Labor Relations Act, as amended. In accordance with the “Conditions of Cooperation,” AFSCME’s status as the exclusive representative of certain of the University’s employees is conditioned upon its disavowal of the right to strike, picket, slowdown, or take any other concerted action to impede, or threaten to impede, the Board of Trustees or administrative officials in the proper, orderly, and normal operation of the University.
Retirement Plans
Ball State provides a retirement program for all eligible employees. Faculty and professional staff are provided the choice of participation in an Alternate Pension Plan (APP), which is a defined contribution plan providing 100% immediate vesting, or the Teachers’ Retirement Fund 1996 Account (TRF 1996), which is a cost-sharing, multiple-employer defined benefit plan providing 100% immediate vesting in the annuity portion and 10 year vesting in the pension portion of the benefit at age 65. Additional vesting opportunities are available based on age and years of service. The funds available in the APP are administered by the Teachers’ Insurance and Annuity Association (TIAA), the College Retirement Equities Fund (CREF), Fidelity Investments Institutional Services Company, Inc., Voya Financial (formally ING Financial Advisers, Inc.), Lincoln Financial Group, AUL (OneAmerica Financial Partners, Inc.), and AXA Equitable Financial Services, LLC. Clerical and service staff participate in the Public Employees Retirement Fund (PERF), which is a cost-sharing, multiple-employer defined benefit plan funded from employer contributions. The eligibility and vesting for PERF is the same as that for the TRF 1996 plan.
All of the defined benefit plans are administered by the Indiana Public Retirement System (INPRS) Board, which administers the retirement plans for all state employees. The financial report that includes all the financial statements and required supplementary information for the plans is available at www.in.gov/inprs/annualreports.htm.
Benefits of each of the plans are designed to be comparable. Effective with the fiscal year ended June 30, 2015, the University must include its proportionate share of the unfunded liability associated with both PERF and TRF 1996 plans on its financial statements due to GASB Statement 68, Accounting and Financial Reporting for Pensions, and GASB Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. The University’s net pension liability under these retirement plans is based on wages reported by employers relative to the collective wages of the plan. This basis of allocation measures the proportionate relationship of an employer to all employers, and is consistent with the manner in which contributions to the pension plan are determined. Neither of these plans (PERF and TRF 1996) are special funding situations. The University is current with all amounts due under each type of retirement plan provided to employees.
A - 17 Employees in a benefits eligible status are also provided with the opportunity to contribute additional funds deducted from their pay to the TRF 1996 account or PERF account, via a voluntary tax deferred annuity program.
The University also has eligible active and retired employees participating in the Teachers’ Retirement Fund Pre-1996 Account. In 1995, legislation was passed that closed this plan to newly hired members. This plan is also administered by INPRS. However, this plan is a special funding situation as the State of Indiana makes contributions as the sole non-employer contribution entity. The contributions are made from funds designated for such purpose by the Indiana General Assembly through biennial appropriations. As the contributions are made directly to INPRS on the University’s behalf, the University does not report or recognize a liability associated with this plan.
The University also offers health care and life insurance benefits for eligible retired employees. Substantially all of the University’s regular employees may become eligible for these benefits if they retire from the University after accruing the required years of service. Like pensions, other post-employment benefits (OPEB) are a form of deferred pay, part of an exchange of salaries and benefits for employees’ service. The cost to the University accrues over the period of employment, although the benefits are not provided until later.
Most public institutions and governments have historically recognized the annual outlays required to pay OPEB costs on an ongoing basis, and have not accrued a liability for their future obligations. Under GASB Statement 45, OPEB costs are measured and reported as they are incurred during the employment period. The actuarial methods used to estimate liabilities are similar to those for pension plans. Beginning with the fiscal year ended June 30, 2017, the plans that have trusts associated with them are subject to GASB 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. At the June 30, 2018 fiscal year end, GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will be in effect which supersedes GASB 45. These two standards will greatly impact the calculation of the liability of the plans and how the net liability is reported on the employer’s financial statements. The unfunded portion of the liability will be presented in the financial statements rather than being reflected only in the notes to the financial statements.
Many institutions may face a significant unfunded liability as a result of these standards. As of June 30, 2017 after the implementation of GASB 74, Ball State’s OPEB 115 Trust, which was established to help fund the cost of retiree life insurance benefits, was 113.9 percent funded. This plan has been fully funded since June 30, 2013. The Voluntary Employee Beneficiary Association (VEBA) trust fund established for the purpose of funding future retiree health care was approximately 94.38 percent funded at June 30, 2017. The funding rates have remained high even after the plans implemented a new cost method and adopted new mortality tables for actuarial valuation. Both of these changes to valuation should have had a significant impact in driving down the funded percent; however, asset valuations and reduced claim experience offset these changes. Ball State has successfully funded more than the required actuarially determined contribution each year. This practice has resulted in a well-funded trust for both plans.
A - 18 Enrollment
The Fall 2017 enrollment of 22,513 is the highest total enrollment in the University’s history. The University attracts students from a variety of backgrounds and geographical locations. As of Fall 2017 approximately 81.6 percent of the University’s on campus students are characterized as Indiana residents; however, all 50 states and the District of Columbia and 68 foreign nations are represented in the student body.
Ball State participates in two programs which facilitate growth in out-of-state enrollments. The Midwest Higher Education Compact’s Midwest Student Exchange Program enables students from eight regional states to attend Ball State at 150% of in-state tuition. The Indiana-Ohio reciprocity agreement provides in-state tuition for students from 14 Ohio counties.
The table below presents the University’s on-campus blended student enrollment (includes on campus students and on campus students taking off campus courses) for the Fall term of the academic years 2013-14 through 2017-18.
On Campus & Blended Student Enrollment
Headcount Headcount Academic Under- Full Part Full-Time Year Graduate Graduate Total Time Time Total Equivalent 2013-14 15,631 1,594 17,225 15,945 1,280 17,225 16,765 2014-15 15,378 1,627 17,005 15,741 1,264 17,005 16,493 2015-16 14,997 1,605 16,602 15,362 1,240 16,602 16,118 2016-17 15,304 1,504 16,808 15,634 1,174 16,808 16,369 2017-18 15,379 1,446 16,825 15,715 1,110 16,825 16,390
The table below presents the University’s off-campus only student enrollment (includes only students taking only off campus courses for the Fall term of the academic years 2013-14 through 2017-18). Off campus courses include: online courses and off-main campus courses (ex. Fishers Center, Indy Center, field studies, overseas centers, and dual credit).
Off Campus Only Student Enrollment
Headcount Headcount Academic Under- Full Part Full-Time Year Graduate Graduate Total Time Time Total Equivalent 2013-14 669 2,609 3,278 653 2,625 3,278 1,575 2014-15 1,037 2,613 3,650 715 2,935 3,650 1,762 2015-16 1,605 2,989 4,594 749 3,845 4,594 2,113 2016-17 1,707 3,483 5,190 755 4,435 5,190 2,402 2017-18 1,625 4,063 5,688 725 4,963 5,688 2,624
The following table presents the University’s on/off unduplicated student enrollment for the Fall term of the academic years 2013-14 through 2017-18.
A - 19 On/Off Unduplicated Student Enrollment Headcount Headcount Academic Under- Full Part Full-Time Year Graduate Graduate Total Time Time Total Equivalent 2013-14 16,300 4,203 20,503 16,598 3,905 20,503 18,340 2014-15 16,415 4,240 20,655 16,456 4,199 20,655 18,255 2015-16 16,602 4,594 21,196 16,111 5,085 21,196 18,230 2016-17 17,011 4,987 21,998 16,389 5,609 21,998 18,771 2017-18 17,004 5,509 22,513 16,440 6,073 22,513 19,014
Considerable effort is also being placed on retention of existing and future students. The University continues to implement new programs that enable freshmen to be academically successful, to bond with faculty and staff, and to get involved on campus. Freshman retention continues to rise from 74.5% in Fall 2006 to 78.5% in Fall 2017.
Student Admissions
The table below sets forth the total number of freshmen applications received and accepted, and the number of students enrolled at Ball State University, for the academic years indicated.
Academic Applications Applications Percent Students Percent Year Received Accepted Accepted Enrolled* Enrolled 2013-14 17,136 10,363 60% 3,600 35% 2014-15 18,105 10,829 60% 3,583 33% 2015-16 22,145 13,385 60% 3,493 26% 2016-17 24,306 15,068 62% 3,857 26% 2017-18 24,221 15,031 62% 3,962 26%
* Represents degree seeking first time freshman
Over the past five years the number of freshman applications has increased by 41%. Selectivity remains high with 62% of applicants being admitted. The average high school G.P.A. for enrolled students is 3.5, up from 3.35 in 2012. 72.7% of the freshmen enrolled in 2017-18 had an academic honors or equivalent diploma from high school, which is a 10% increase compared to five years ago.
The table below sets forth the average scores on the SAT (Scholastic Aptitude Test) for the University’s entering freshmen classes for the academic years indicated. Following changes to the SAT in 2016, the figures reported for 2017-18 in the table below are based on a concorded two-part to three-part score. The average two-part score for students admitted in Fall 2017 is 1,161 which remains above the national average.
2013-14 2014-15 2015-16 2016-17 2017-18* SAT Data 1607 1629 1638 1611 1609
* Based on concorded two-part to three-part score.
A - 20 Tuition and Fees
The University operates its academic programs on a two semester and summer session basis. The general fee and other fees vary by resident status and course load.
In 2010, the University developed a task force to review the University’s tuition and fees structure. In response to the task force’s recommendation, the University restructured tuition and fees with a goal towards a more transparent fee structure. A restructured tuition and fees schedule was incorporated in Fall 2011. The new tuition structure makes it easier for students to create hybrid course schedules with both on campus and online courses. The changes facilitate time-to-degree by offering more ways to increase the number of courses in a semester without additional charges and more affordable classes during summer sessions.
The table below sets forth the general fees for on-campus undergraduate instruction (not including housing and related fees) assessed annually for a normal course load of 12-18 hours per term, for the academic years 2013-14 through 2017-18.
Academic Year Indiana Resident Non-Resident 2013-14(a) $9,160 $24,124 2014-15(a) $9,344 $24,610 2015-16(a) $9,498 $25,016 2016-17(a) $9,654 $25,428 2017-18(a) $9,774 $25,942
(a) Fees include additional health fee of $152, additional technology fee of $336, and additional student recreation center fee of $174.
All graduate students taking courses on the main Ball State campus, Independent Learning, off-campus, short-term, online or distance education courses pay $402 per credit hour as Basic Graduate Tuition. Graduate students also pay the Student Services Fee and other mandatory fees or course fees as applicable.
Student Fee Revenues: The total amount of Student Fee revenues, including academic, tuition, and other fees charged during the past five Fiscal Years, are as follows:
Student Fees Fiscal Year Ended June 30 2013 2014 2015 2016 2017 2018 Actual Actual Actual Actual Actual Budget
General Fund $179,825,652 $184,461,670 $187,463,640 $196,013,809 $206,456,871 $211,786,000 Designated 35,787,273 35,692,693 35,062,127 34,233,761 34,612,244 35,230,000
Total Student Fees $215,612,925 $220,154,363 $222,525,767 $230,247,570 $241,069,115 $247,016,000
A - 21 These Student Fee totals do not include fees collected from students at the Indiana Academy for Science, Mathematics and Humanities, and, therefore, do not match the Student Tuition and Fees line item on the Statement of Revenues, Expenses and Changes in Net Position.
Room and Board: Room and Board rates are combined. Students may choose from the following: 10-meal plan, 14-meal plan, 18-meal plan, and 21-meal plan. Each plan includes a number of specified meals in addition to varying amounts of “Dining Plus” dollars. Plans are graduated in price, based on the number of meals each provides. For Fall 2017, the range for a standard double room with meal plan is as follows: $9,060 for a 10-meal plan, $9,914 for a 14- meal plan, $10,264 for an 18-meal plan and $10,346 for a 21-meal plan. The amount shown in the table below is for a 14-meal dining plan which was the most popular plan chosen. In addition, there is also a residence hall technology fee as shown below.
The following table sets forth room and board charges for the past five academic years: Academic Year Room and Board* 2013-14 $8,820 (14- meal) 2014-15 $9,246 (14- meal) 2015-16 $9,657 (14- meal) 2016-17 $9,936 (14- meal) 2017-18 $10,034 (14- meal) * Charge includes $120 residence hall technology fee.
Estimated Costs: The following student budget has been used by the University’s Admissions Office and represents estimated average student costs for the 2017-18 academic year.
Basic Costs Indiana Resident Non-Resident Instruction and Fees $9,774 $25,942 Room and Board (14- Meal Plan) 10,034 10,034 Books and Supplies 1,330 1,330 Personal Expenses 1,700 1,700 Transportation 1,500 2,100 Total $24,338 $41,106
State Appropriations
The University receives a major portion of the revenues needed to sustain its educational and research activities from the State of Indiana, from student fees, and from the federal government.
The University has annually received and anticipates receiving appropriations from the Indiana General Assembly, which are to be applied to the educational and general expenditures of the University. In addition, the General Assembly previously appropriated to the University an amount equal to the annual debt service requirements due on all previously outstanding
A - 22 Building Facilities Fee Bonds (which were refunded with issuance of the University’s Student Fee Bonds, Series A). Beginning in the 1987 biennium and all subsequent biennia, the General Assembly has appropriated amounts relative to debt service on certain outstanding Student Fee Bonds (the “Fee Replacement Appropriations”). Under the Constitution of the State of Indiana, the General Assembly cannot bind subsequent General Assemblies to the continuation of Fee Replacement Appropriations. However, the University anticipates that the policy of Fee Replacement Appropriations will be continued in future years. The Fee Replacement Appropriations are not pledged under the trust indenture for Student Fee Bonds.
The state appropriations received by the University in recent years, and the appropriations budgeted for 2017-2018, are set forth below: State Appropriations (Dollars in Thousands)
Fiscal Year General Fee Repair and Total Ended June 30 Operating (1) Replacement Rehabilitation Academy (2) Appropriations
2013 $121,223 $14,016 - (3) $4,274 $139,513 2014 122,167 (5) 15,075 $2,379 4,297 (5) 143,918 (4) 2015 122,167 (6) 14,307 2,379 4,385 143,238 2016 126,743 12,957 2,647 4,385 146,732 2017 128,895 12,086 2,647 4,385 148,013
Current 2018 133,056 16,009 2,715 4,385 156,165
(1) Beginning in the 2007-09 Biennium, the State of Indiana added a new line item for Ball State University designated as the Entrepreneurial College. This allocation is included here with the General Operating Appropriation. The Entrepreneurial College additional support is intended to fund items related to admissions objectives, retention, graduate rates, immersive learning opportunities, technology related items, and growth in research. Additionally, in the 2013-15 Biennium, the State of Indiana added a new line item for Dual Credit. It is included here with the General Operating appropriation as well. (2) Includes appropriations for the Indiana Academy for Science, Mathematics and Humanities; but excludes that portion based upon a formula using average daily attendance for the Academy (which is budgeted at $1,908,470 in 2017-18). Does not include appropriations for the Burris Laboratory School. (3) The Indiana General Assembly did not approve any funds for Repair and Rehabilitation for the 2011-13 biennium. (4) Does not include a $30,000,000 cash appropriation received in the 2013-14 fiscal year from the State for completion of the geothermal project. These funds were appropriated by the 2013 Indiana General Assembly. (5) In 2013-14, the state appropriation allocated by the Indiana General Assembly was as follows: General - $124,660,125 and Indiana Academy - $4,384,956; however, due to the financial condition of the State of Indiana, 2% was withheld. (6) In 2014-15, the state appropriation allocated by the Indiana General Assembly was as follows: General $124,660,125 and Indiana Academy - $4,384,956; however, due to the financial condition of the State of Indiana, 2% was withheld on the General portion only. The withheld amount was restored in July, 2015 and is not reflected in this schedule.
In its Spring 2017 Fiscal Survey of States, the National Association of State Budget Officers stated that general fund spending is expected to increase just 1.0 percent in fiscal 2017- 2018 as compared to estimated spending levels for fiscal 2016-2017. This would represent the
A - 23 smallest increase recommended by governors since fiscal 2009-2010 when most states were heavily impacted by the Great Recession. The budget recommendations call for increased spending in K-12 education, Medicaid, corrections, higher education, public assistance, and transportation, while all other program areas are expected to see decreased spending. States continue to contend with slow revenue growth and limited budget flexibility as well as uncertainty at the federal level. Overall, general fund revenues are projected to increase 3.1 percent in fiscal 2017-2018 as a result of continued job growth and modest recovery in energy- producing states.
According to their respective published 2017 outlooks for higher education, both Moody’s Investors Service and Standard & Poor’s Ratings Services announced a stable outlook for U.S. higher education. In its report, Moody’s noted that all revenue streams are expected to grow over the next 12-18 months, with aggregate annual revenue growth at or above 3 percent. Standard & Poor’s remarked that demand for higher education in the U.S. remains strong and continues to grow. Both agencies cited increases in pension and OPEB liabilities, affordability, and uncertainty regarding federal policies, including student loan and grant programs, as being factors that could negatively impact the higher education market. The University’s ratings for all outstanding debt were confirmed in November 2016 by Moody’s (Aa3/stable outlook) and Standard & Poor’s (AA-/stable outlook).
Ball State, as a public university, relied on the State of Indiana for approximately 29 percent of the total financial resources in fiscal year 2016-2017. State revenues for fiscal year 2016-2017 were 0.7 percent above forecast and 3.1 percent above fiscal year 2015-2016, allowing the state to close the year with a $42.0 million surplus. State reserves ended the year at $1.8 billion despite $427.9 million in appropriations for road funding. The State of Indiana is rated Aaa by Moody’s and AAA by Standard & Poor’s, making it one of only a handful of states with top rankings by both ratings agencies.
Since 2004, the State of Indiana has used a performance funding formula for higher education. The formula is drafted and managed by the Indiana Commission for Higher Education (ICHE), which uses the formula to recommend funding to the Indiana legislature for appropriations to the various public universities in the state. The two constants in the funding formula have been to recommend increases in funding to campuses that increase the number of degrees awarded to resident undergraduate students, and to campuses that increase graduation rates. Due to deliberate actions by Ball State leadership the University received a measurable operating increase during the 2017-2019 biennium.
Ball State is classified as a research campus and earns funding under the formula primarily for an increase in the number of degrees awarded to resident students, increases in the number of “high-impact” degrees awarded to resident students (as chosen by ICHE, primarily in Science, Technology, Engineering, and Math (STEM) disciplines), and increases in the resident undergraduate four-year graduation rate. Ball State takes very seriously the goals set forth by ICHE in creating its budget recommendations. With an eye toward increasing the amount of funding that Ball State receives under the performance funding formula, while being true to its strategic direction of becoming better and not bigger, the University continues to focus on enrolling students who are increasingly better prepared academically. Due to Ball State’s increasing selectivity in student admissions, and a concerted set of policy initiatives, the
A - 24 University’s graduation and retention rates have been growing substantially. In a study conducted by ICHE, Ball State showed the largest increase in on-time (within four years) graduation rates among all Indiana public universities between 2009 and 2014.
The increase in selectivity of the University’s student body is demonstrated in the fall 2017 freshman class which continues the tradition of strong academic abilities, posting an average GPA of 3.50. Also, 72.7 percent earned the Indiana Academic Honors Diploma or its equivalent, a nearly ten point increase since 2012. The average SAT for the fall 2017 freshman class was 1609, above the national norm.
Ball State also rolled out a four-point affordability plan in the fall of 2011, designed to both increase the graduation rate and to keep college affordable for students and families. The four-point plan included: (1) reducing the number of credit hours required for a baccalaureate degree from 126 to 120 for most majors; (2) allowing students to take on-line courses as part of the 12-18 credit hour bracket for no additional charge, giving students the ability to complete more credit hours for less money and more flexibility in scheduling courses; (3) reducing the cost of summer school; and (4) granting a $500 Completion Scholarship to any resident student who graduates in four calendar years or less.
These policies and initiatives play a major part in increasing student performance as measured by the State’s performance funding formula. Indeed, for the 2017-19 budget cycle Ball State made progress on all performance funding metrics used by the State to fund research campuses. As a result, the General Assembly awarded Ball State with an increase in operating appropriation of 3.2% for 2017-18 and an additional 1.7% for 2018-19, compared to the 2016-17 funding level.
Financial Aid to Students
During the 2016-17 academic year, approximately $298 million of financial assistance was available to University students. Of this amount, $157 million (53%) was available from federal programs; $69 million (23%) from University funds; $29 million (10%) from the State Student Assistance Commission of Indiana; and $43 million (14%) from private organizations and foreign governments.
By type of aid, loans accounted for 50% of the total; gift aid (scholarships, grants, and fee waivers) constituted 44%; and on-campus work totaled 6%. Approximately 18,457 students received some type of financial aid for the 2016-17 academic year. There can be no assurance that federal and state financial aid to students will be available in the future at the same levels and under the same terms and conditions as presently apply.
A - 25 The following table summarizes the financial aid provided by the University to students for the five years ended June 30, 2017.
Ball State University Foundation
The Ball State University Foundation was established in 1951 as a private, non-profit, tax-exempt corporation to solicit, receive and administer gifts and bequests for the benefit of the University.
Cheri O’Neill currently serves as the President and Chief Executive Officer of the Ball State University Foundation.
The Ball State University Foundation’s net assets include (1) permanently restricted assets which are subject to the restrictions of gift instruments requiring that the principal be maintained in perpetuity and that only the income be utilized, either for donor-specified purposes or for general purposes of the University; (2) temporarily restricted assets which represent expendable funds received which, by decision of the Board of Directors of the Foundation, have been retained and invested for future use, in accordance with the donor’s restrictions or at the discretion of the Board of Directors of the Foundation; and (3) unrestricted net assets.
A - 26 The market value of the Foundation’s endowment for the Fiscal Year ended June 30, 2017 was $201.6 million (based on the definition of endowment as used in the NACUBO - Commonfund Study on Endowments). The total net assets of the Foundation for the past five Fiscal Years are shown in the following table:
Fiscal Year Total Ended June 30(1) Net Assets 2013 $185,048,895 2014 209,250,642 2015 213,369,439 2016 196,193,138 2017 217,209,884
(1) All Fiscal Years above are reported in accordance with SFAS 116 and SFAS 117, restating the Foundation’s financial statements in a net asset presentation and including contributions receivable.
Fund Raising Campaign
In 1988, Ball State University initiated its first comprehensive campaign, “Wings for the Future,” which raised $44 million over five years. In late 1999, the University began another comprehensive fund-raising campaign called “Above and Beyond.” This campaign concluded in June 2002 and raised over $112 million. An effort to raise funds to expand the football stadium was initiated in November 2004 and raised more than $13.5 million. The stadium effort served as the initial phase for a third comprehensive campaign.
In September 2008, the University kicked off its “Ball State Bold: Investing in the Future” campaign. The campaign goal was $200 million and concluded with $210.8 million raised by June 2011. The campaign goals were based on the initiatives outlined in the University’s strategic plan. The campaign priorities and results were as follows: $40.8 million for funding more than 200 new scholarships; $17.5 million for creating more immersive learning experiences; $35 million to build national recognition by funding endowed chairs, professorships, faculty fellows, centers of excellence, and emerging media initiatives; $66.7 million for capital projects (including a portion of the cost of the Student Recreation and Wellness Center, Honors College, and Museum of Art expansion); and $50.8 million for University enhancements such as the Ball State Fund.
The “CARDINAL COMMITMENT: Developing Champions” capital, campaign was announced on April 20, 2013 with a goal of $20 million. In January 2015, the University concluded the campaign after having successfully raised more than $20.6 million. Funds raised by the campaign are going towards improvements and expansion of facilities critical to athletic success, including the recently completed improvements to the softball and baseball facilities and football team meeting complex. Other Cardinal Commitment projects are currently in the planning phase for men’s and women’s golf, men’s and women’s basketball, and men’s and women’s volleyball.
The University is in the process of developing a new strategic plan that will lead Ball State into its second century. Once the plan is completed and approved, which is expected to
A - 27 occur in the fall of 2018, it will be used as a basis to begin exploring a comprehensive campaign. If a campaign is approved, a feasibility study will be conducted in the spring/summer of 2019 with a goal of entering the silent/leadership phase in the fall of that year or the beginning of calendar year 2020. Gifts The University solicits private gifts, grants and contracts for current operating purposes and other needs. Total gifts collected for the University through the Ball State Foundation for the five years ended June 30, 2017 amounted to approximately $93 million. Approximately 24,500 alumni and friends made gifts to Ball State University in Fiscal Year 2016-17. Sponsored Projects During the Fiscal Year ended June 30, 2017, the University’s Office of Sponsored Programs Administration (SPA) received 289 new project awards, totaling approximately $11.7 million in grant awards, contracts awarded to University Centers and Institutes, and funding for the Ball State University Foundation. Various industries, foundations, and non-profit organizations constituted a large part of the support for these projects, funding 245 projects amounting to $7.5 million. Federal agencies funded 22 projects totaling $2.1 million. Various state agencies awarded 22 projects totaling $2.1 million. Notable proposals funded in fiscal year 2016-17 included continued work by the Bowen Center on the Voting System Technical Oversight Program; a partnership with other Indiana institutions for the Luis Stokes Alliance for Minority Participation; ongoing assistance with the State’s “Launch Indiana” initiative; multiple awards from the National Science Foundation supporting research projects in Biology, Chemistry, Computer Science and Anthropology; and State-funded projects from the Departments of Education, Natural Resources, and Economic Development Corporation. Grant awards may include cash received in advance, letters of credit, and cost reimbursable projects. The following table sets forth the amounts of grants and contracts received by the University during the past five Fiscal Years, identified by source. The table represents awards, (not moneys received) and does not include federal student financial aid.
Fiscal Year Ended June 30 2013 2014 2015 2016 2017 Federal Sources $5,339,237 $5,326,523 $4,758,061 $5,248,521 $2,155,596 State of Indiana 2,000,058 1,879,187 868,609 3,411298 2,150,422 Other Governmental Grants 51,879 79,287 302,130 121,481 155,235 Private Gifts, Industry, & Foundations* 11,286,597 9,423,479 3,712,457 15,291,528 3,776,966 Non-Profits, including Higher Education 1,559,536 1,523,074 1,513,881 1,691,252 3,503,526 $20,237,307 $18,231,550 $11,155,138 $25,764,080 $11,741,745
* Private Gifts, Industry, & Foundations: SPA external funding totals include Ball State University Foundation funds that are considered as externally sponsored projects, as well as funding self-administered by University Service Centers. The change reflects a commitment to consistency throughout various University reports on sponsored programs activity.
A - 28 Financial Operations of the University
The University reports financial information under the methodology set forth in Governmental Accounting Standards Board Statement 35.
The table below prepared by the University sets forth the University’s Statement of Revenues, Expenses and Changes in Net Position for the Fiscal Years ended June 30, 2013 through June 30, 2017. The table is based on audited financial statements for the Fiscal Years ended June 30, 2013 through June 30, 2017.
A - 29 Ball State University State of Revenues, Expenses and Changes in Net Position June 30, 2013 through June 30, 2017
2013 2014 2015 2016 2017
Operating Revenues: Student Tuition and Fees $ 217,476,258 $ 222,842,172 $ 227,094,099 $ 232,846,880 $ 242,310,313 Scholarship Allow ances (67,776,493) (75,433,696) (64,402,799) (68,154,632) (73,983,322) Net Student Tuition and Fees $ 149,699,765 $ 147,408,476 $ 162,691,300 $ 164,692,248 $ 168,326,991 Federal Grants and Contracts 6,836,429 6,158,114 5,561,137 5,561,193 4,654,999 State & Local Grants and Contracts 2,471,052 1,684,823 1,622,278 2,584,002 2,432,258 Non-Governmental Grants and Contracts 7,146,986 5,994,425 4,345,768 3,972,010 6,126,332 Sales and Services of Educational Departments 12,759,993 9,941,338 10,509,521 9,094,559 9,141,266 Auxiliary Enterprises: Residential Life (Net of Scholarships and Allow ances: 2017 - $12,060,040; 2016 - $10,226,3 56,819,743 57,438,723 55,414,926 55,934,465 59,650,650 Other 8,038,457 10,848,762 9,244,856 11,535,834 10,899,429 Other Operating Revenues 7,558,205 10,851,104 12,806,433 11,628,170 12,775,021 Total Operating Revenues $ 251,330,630 $ 250,325,765 $ 262,196,219 $ 265,002,481 $ 274,006,946 Operating Expenses: Personnel Services $ 216,089,205 $ 223,401,128 $ 231,215,375 $ 237,570,267 $ 241,757,718 Benefits 69,903,749 79,491,469 76,308,128 89,808,828 96,879,658 Utilities 12,197,026 13,147,394 12,791,665 11,968,177 12,695,991 Repairs and Maintenance 13,676,386 13,435,936 17,187,467 19,432,632 16,841,701 Other Supplies and Expenses 81,428,222 86,048,964 83,362,786 81,160,280 81,739,709 Student Aid 4,027,667 4,400,138 15,884,773 15,417,584 15,711,576 Depreciation 23,813,272 24,635,858 28,346,751 26,488,249 27,440,008 Total Operating Expenses $ 421,135,527 $ 444,560,887 $ 465,096,945 $ 481,846,017 $ 493,066,361 Operating Income/(Loss) $ (169,804,897) $ (194,235,122) $ (202,900,726) $ (216,843,536) $ (219,059,415) Non-Operating Revenues/(Expenses): Federal and State Scholarship and Grants $ 41,402,424 $ 47,183,397 $ 48,015,068 $ 49,905,136 $ 52,408,370 State Appropriations 139,513,297 141,538,979 143,352,066 144,084,123 145,366,234 Investment Income 399,241 2,416,213 2,834,541 3,403,502 2,011,538 Interest on Capital Asset Related Debt (7,651,334) (8,703,514) (8,718,647) (8,118,784) (9,671,225) Private Gifts 7,212,364 7,299,442 6,715,720 8,255,215 7,951,836 State Pension Contributions - - 7,249,126 15,717,760 8,760,094 Other Non-Operating Income 5,782,692 4,250,688 5,050,101 7,110,039 6,995,717 Net Non-Operating Revenues/(Expenses) $ 186,658,684 $ 193,985,205 $ 204,497,975 $ 220,356,991 $ 213,822,564 Income Before Other Revenues, Expenses, Gains or Losses $ 16,853,787 $ (249,917) $ 1,597,249 $ 3,513,455 $ (5,236,851) Capital Appropriations - 14,220,896 13,780,490 3,603,291 5,448,228 Capital Gifts 3,658,732 4,126,108 1,010,323 4,387,712 2,231,141 Increase in Net Position Before Extraordinary Item $ 20,512,519 $ 18,097,087 $ 16,388,062 $ 11,504,458 $ 2,442,518 Extraordinary Item: Loss from Extraordinary Item $ - $ (10,022,705) $ - $ - $ - Increase in Net Position After Extraordinary Item 20,512,519 8,074,382 16,388,062 11,504,458 2,442,518
Net Position – Beginning of Year 697,417,286 717,929,805 726,004,187 713,357,876 724,862,334 Change in Accounting Policy - - (29,034,373) - - Net Position – End of Year $ 717,929,805 $ 726,004,187 $ 713,357,876 $ 724,862,334 $ 727,304,852
Source: Ball State University Financial Statements (audited for the Fiscal Years ended June 30, 2013 through June 30, 2017).
A - 30 Budgeting Procedures
The University adopts an operating budget for each Fiscal Year based on a detailed budget for each of Ball State University’s departments or budgetary units. Budgets are reviewed by the appropriate professional personnel and the President prior to approval by the Board of Trustees. In conjunction with its budgeting process, the University submits a biennial appropriation request to the State Budget Agency, the Indiana Commission for Higher Education and the General Assembly. The State appropriation includes various components for operations, fee replacement, maintenance, research, public service and other special functions. For more information, see “State Appropriations.” The Board of Trustees considers the amount of appropriations, when determined, along with the University’s budget requirements and other revenue sources in establishing Student Fees and other fees for each academic year.
The University has adopted a balanced operating budget for the Fiscal Year ending June 30, 2018 which is in alignment with the University’s strategic plan. Total estimated revenue for 2017-18 for which the University has fiscal responsibility is approximately $507,834,000. The 2017-18 budget anticipates the receipt of $149,065,000 in State appropriations and $247,016,000 in Student Fee revenue.
Each year, the University prepares and updates its ten year capital improvement program. This provides the basis for a capital appropriation request which the University submits each biennium to the State Budget Agency, the Indiana Commission for Higher Education, and the General Assembly. The request identifies the projects, purpose, priority and the amount and source of funds. The General Assembly may approve or decline, in its capital appropriation program for the University, each project and may stipulate the source of funding (either direct appropriation or debt) and the amount. Under the various enabling statutes, the University may only issue Student Fee debt up to the amount authorized by the General Assembly. For the 2017-19 biennium, the State authorized $5,430,000 for General Repair and Rehabilitation projects. One half of this authorized amount was requested for the 2017-18 fiscal year, and the remainder of the appropriation has been requested for the second year of the biennium. Also in 2017, the State authorized $87.5 million in Student Fee debt financing for the Foundational Sciences Building, to be issued in Spring 2019.
Capital Programs and Additional Financing
The University has an on-going capital improvement program of new construction and the renovation of existing facilities. Capital improvement projects are expected to be funded from a variety of sources, including gifts, state appropriations, debt financing and University funds.
The University received approval for a cash appropriation of $30 million from the Indiana General Assembly in 2013 for completion of the geothermal energy system. The Indiana General Assembly also authorized the first two phases of the STEM and Health Professions Facility Project. Phase I, for which Series R Student Fee Bonds were issued in January 2017, is funding construction of a new Health Professions Building that will support the University’s College of Health. Phase II of the STEM and Health Professions Facility Project was authorized by the 2017 General Assembly in the amount of $87.5 million and provides for the construction
A - 31 of a new Foundational Science Building that will provide needed space for Biology, Chemistry, and Physiology. Student Fee Bonds will be issued for Phase II in the spring of 2019. Debt service on the Student Fee Bonds for both phases is being fee replaced by the State.
In addition, donor gifts have supported recent projects such as the new $1.7 million Yestingsmeier Golf Center, the $5.0 million Emens Auditorium Lobby Expansion and Renovation, the new $3.7 million Venderly Football Center, the $5.0 million in improvements completed at First Merchants Ballpark, the new $4.6 million Brown Planetarium, and the new $1.35 million Rinard Orchid Greenhouse. Donor-supported projects currently underway include the new $6.4 million Shondell Practice Center.
Over the last six years, the University has completed major projects that were funded with internal resources, including the $24.1 million renovation of Studebaker East, as well as many smaller capital projects. The $35.7 million renovation of the Botsford/Swinford Residence Halls within the Johnson Complex, and the $40.1 million renovation of the Schmidt/Wilson Residence Halls within the Johnson Complex, were funded using proceeds of Housing and Dining System Revenue Bonds.
The University will soon start construction on Phase 1 of the North Residential Neighborhood at a cost of $90 million, which will be funded with proceeds of the Series 2018 Bonds. Over the next five years, the University plans to utilize existing capital repair and replacement reserve funds to fund approximately $141.4 million for major projects and on-going minor capital projects for non-state supported facilities. The largest of these reserve-funded projects is the $50 million Phase 2 of the North Residential Neighborhood Project, which is currently in the design phase. Phases 1 and 2 of the North Residential Neighborhood Project, when completed, will allow for the demolition of the aging LaFollette Complex. Existing reserve funds also will be used to fund construction of a new parking structure to replace the Emens Parking Structure. That project is scheduled for completion in Fall 2019.
Other Indebtedness
The University is authorized by various acts of the Indiana General Assembly to issue bonds for the purposes of financing construction of housing facilities, student union buildings, halls of music, athletic facilities, parking, and academic and administrative facilities. The University has never failed to pay punctually and in full all amounts due for principal of and interest on any indebtedness.
Total indebtedness of the University as of January 1, 2018, including (i) debt on Bonds secured by Student Fees, and (ii) debt on bonds secured by revenue of the Housing and Dining System, was $236,045,000, and is summarized in the following table.
A - 32 Final Outstanding as of Title of Indebtedness Maturity January 1, 2018 Bonds Outstanding Student Fee Bonds, Series L 2021 $4,180,000 Student Fee Bonds, Series N 2027 11,315,000 Student Fee Bonds, Series Q 2032 27,510,000 Student Fee Bonds, Series R 2036 116,315,000 Housing and Dining System Revenue Bonds, Series 2013 2033 28,325,000 Housing and Dining System Revenue Bonds, Series 2016 2035 48,400,000 Total Indebtedness $236,045,000
Physical Property
Physical property owned by the University or otherwise available to and utilized by the University consists primarily of over 1,000 acres of land and approximately 125 buildings totaling approximately 7 million gross square feet. The buildings and land, together with equipment and furnishings, were valued at an insurable cost of approximately $2.5 billion as of June 30, 2017. The following table sets forth the investment in plant at cost and insurable value since June 30, 2013.
Fiscal Year Ended Investment in Estimated Insurable June 30 Plant (at cost) Value of Plant 2013 $926,798,235 $2,097,000,000 2014 984,693,388 2,199,000,000 2015 1,015,459,943 2,292,000,000 2016 1,059,424,759 2,410,000,000 2017 1,086,354,293 2,506,000,000
Insurance
All Risk of Direct Physical Loss or Damage Coverage. All facilities of the University and their contents are insured under a blanket property insurance policy. Buildings under construction are also insured under the blanket property insurance policy. The blanket form policy covers each building and its contents for loss up to the total of its replacement cost value for all risks of direct physical loss to the property from any external cause subject to standard exclusions. The limits for either flood or earthquake are $100 million.
Premises and Operations Liability. The University, through its general liability policy, provides insurance for liability to third parties arising out of accidents on the premises of the University and in connection with University operations off-premises. The limit is $1,000,000 per occurrence for bodily injury and property damage. The University’s umbrella liability policy in the amount of $30 million annual aggregate applies as excess to this and certain other liability insurance coverages.
Loss of Income and Tuition Fees. The University has business interruption insurance in the amount of $15 million to cover the loss of revenues for residence halls, parking facilities,
A - 33 tuition, and other revenue generating activities in the event of physical loss of or damage to such facilities.
For the three items listed above, the following apply. The sum of the deductible shall not be less than $100,000 in any one loss. The University self-insures those losses that might fall within the deducible through a reserve for self-insurance. The balance of the reserve for self- insurance as of June 30, 2017 was $1,567,500.
Muncie Community Schools
In December 2017, Indiana’s Distressed Unit Appeal Board (DUAB) voted 5‐0 to designate Muncie Community Schools (MCS) a “distressed political subdivision” and thereby take full control of both the finances and academics of MCS. MCS had previously been working with an appointed emergency manager after being designated a “fiscally impaired school corporation” on April 28, 2017. In January 2018, House Bill 1315 was introduced to the Indiana House Ways and Means Committee. HB 1315 was adopted by the Indiana General Assembly during a special session on May 14, 2018, and was signed into law by Indiana Governor Eric Holcomb that same day. The University’s Board of Trustees adopted a resolution on May 16, 2018 accepting the responsibilities imposed by HB 1315.
The new law provides that Ball State shall appoint a new school board to manage MCS, effective July 1, 2018. The law makes it clear, however, that Ball State and MCS will remain separate entities. The law expressly preserves the financial and legal independence of Ball State and MCS. Ball State will not assume financial responsibility for MCS debt or its operating costs. Ball State will not receive any compensation from the State for assuming this new responsibility. Rather, the monies allocated by the State to the emergency manager will be provided to MCS to fund its operations. Ball State will not use any of its financial resources to subsidize the operation of MCS, nor will it use any of its Student Fee revenue or any of its regular State funding to support MCS. The only resources which will be devoted by Ball State to its new responsibility will be the in-kind expertise of its faculty, staff, students, alumni and University leadership.
A - 34
APPENDIX B
BALL STATE UNIVERSITY FINANCIAL REPORT FOR THE YEAR ENDING JUNE 30, 2017
[THIS PAGE INTENTIONALLY LEFT BLANK] Financial Report Year Ended June 30, 2017 Table of Contents
Ball State University Financial Report 2016-2017
To the President and Board of Trustees ii
Report of the Treasurer iii-iv
General Information v
Board of Trustees and President of Ball State University vi
Independent Auditor’s Report viii-x
Management’s Discussion and Analysis 1-16
Statement of Net Position 18
BSU Foundation Combined and Consolidated Statements of Net Position 19
Statement of Revenues, Expenses and Changes in Net Position 20
BSU Foundation Combined and Consolidated Statements of Activities 21
Statement of Cash Flows 22-23
BSU Foundation Combined and Consolidated Statements of Cash Flows 24
Notes to Financial Statements 25-49
Required Supplemental Information 50-54
Supplemental Information 55-60
To
The President and Board of Trustees
Ball State University
This financial report presents
the financial position of
Ball State University at June 30, 2017
and the results of activities for
the year then ended.
Bernard M. Hannon Vice President for Business Affairs and Treasurer
Ball State University’s Report Date…..…………………..……..………November 7, 2017
ii Ball State University—2017 Financial Report Report of the Treasurer
On behalf of the Board of Trustees of Ball State University, I am pleased to submit the Annual Financial Report of Ball State University for the year ended June 30, 2017. The audit opinion letter from the Indiana State Board of Accounts which shows an unmodified opinion appears on the following pages.
This Annual Financial Report includes the financial statements for the year ended June 30, 2017, as well as other useful information that helps ensure the University’s accountability to the public. Responsibility for the accuracy of the information and for the completeness and fairness of its presentation, including all disclosures, rests with the management of the University. We believe the information presented is accurate in all material respects and fairly presents the University’s financial position, revenues, expenses, and other changes in net position.
About Us
Ball State University came into existence from the philanthropic ideals and generosity of the five Ball Brothers nearly a century ago. Their contribution to the University which bears their name is also symbolized in the pillars and statue of Beneficence, our institutional icon. The University and the Muncie community have prospered from the giving nature of this family and many others. However, our growth from a Teacher’s College to a multi-disciplinary University with many nationally recognized programs would not have been possible without the support from the State of Indiana for which we are deeply grateful.
The University and the City of Muncie are committed to work together toward common goals. Each recognizes that the accomplishments and challenges facing each of us will in fact impact the other. The City of Muncie is a community of 70,000 residents, many with ties to the University. Together, we take pride in the upcoming centennial anniversary of the University in 2018. The University has gone through many changes during these 100 years, but our core values remain unchanged.
Mission and Vision
“As a public research university, we focus on students and high-quality, relevant educational outcomes. Disciplinary knowledge is integrated with application. We do this in a manner that fundamentally changes students, researchers, and our external partners, who look to the university for guidance. We transform information into knowledge, knowledge into judgement, and judgement into action that addresses complex problems.” –- Ball State University Mission
“Ball State aspires to be the model of the most student-centered and community-engaged of the 21st century public research universities, transforming entrepreneurial learners into impactful leaders—committed to improving the quality of life for all.” – Ball State University Vision
Finance and Facilities – A look to the past, a plan for the future
In order to offer top-notch educational opportunities to our students from high quality faculty using state-of-the-art facilities and equipment that will best position them for their future careers, we must strategically envision the needs of all our current programs as well as the future areas of growth. For almost a century, the stewards of Ball State University have made prudent and measured decisions to keep the University growing in a steady and stable pace. We operate in a lean and responsible manner and continue to be good stewards of the resources entrusted to us by families and taxpayers.
As regulation, technology and the needs of education change, so must our facilities and infrastructure. The University has been very fortunate to largely keep pace with the demands of repair and maintenance on our buildings in order to keep them in good shape. However, inevitably there are building renovations or replacements that are necessary. When renovations or new buildings are designed, it is done so with sustainability measures in mind. The University is committed to reducing its energy consumption, waste production and carbon footprint.
As evidenced by the information contained in this document, the University is in a strong financial position for the next century. Our budget is structurally balanced; our debt load is manageable; and we have a strong bond rating. We have positive financial ratios, bolstered by substantial unrestricted net assets. Most importantly, a Ball State education is highly valued as evidenced by near all-time highs in applications and in enrollment.
Ball State University—2017 Financial Report iii Conclusion
Ball State will continue its efforts to differentiate from other public institutions by enhancing the quality of the academic experiences to all students, by attracting students of even higher quality, by supporting strong faculty and academic programs, by enhancing a vibrant and diverse University community, and by providing a distinctive impact on the economic and social well-being of our community, the State of Indiana and, indeed, the world.
Bernard M. Hannon Vice President for Business Affairs and Treasurer
* This report has been prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) for governmental colleges and universities as put forth by the Governmental Accounting Standards Board (GASB). See the accompanying Notes to Financial Statements for a full disclosure of the accounting principles observed.
* GAAP require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of the Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately following the Independent Auditor’s Report.
iv Ball State University—2017 Financial Report This financial report has been prepared by the Office of University Controller Ball State University, Muncie, Indiana 47306
Ball State University is committed to the principles of nondiscrimination and equal opportunity in education and employment. Further, the University is committed to the pursuit of excellence by prohibiting discrimination and being inclusive of individuals without regard to race, religion, color, sex (including pregnancy), sexual orientation, gender identity or gender expression, disability, genetic information, ethnicity, national origin or ancestry, age, or protected veteran status. This commitment enables the University to provide qualified individuals access to all academic and employment programs on the basis of demonstrated ability without regard to personal factors that are irrelevant to the program or job requirements involved.
The University assigns a high priority to the implementation of this equal opportunity policy and, through its affirmative action program, seeks to expand its efforts to guarantee equality of opportunity in employment. Affirmative action is taken to attract and recruit diversity, including underrepresented minority groups, females, protected veterans or individuals with disabled veteran status, and otherwise qualified persons with disabilities. Ball State will hire, transfer, recruit, train, promote, assign work, compensate, layoff and/or terminate based upon the tenets of this policy.
The University President affirms the commitment to equal opportunity and accepts responsibility for the implementation of the affirmative action program along with the vice presidents, deans, directors and heads of units. All persons involved in the decision-making process, including members of faculty and other employee committees, shall act in a nondiscriminatory manner. The Director of Employee Relations and Affirmative Action has been specifically designated to be responsible for overall compliance with all federal and state laws and regulations regarding nondiscrimination and for implementation and coordination of the University’s affirmative action program. Information concerning the University's affirmative action program can be obtained from the Director of Employee Relations and Affirmative Action, Ball State University, Muncie, IN 47306.
To ensure equal employment opportunity and nondiscrimination, each member of the Ball State University community must understand the importance of this policy and his/her responsibilities to contribute to its success. This policy seeks to encourage the reporting of incidents so they may be addressed. Employees and applicants shall not be subjected to harassment, intimidation, threats, coercion, discrimination, or retaliation because they have engaged or may engage in any of the following: 1) filing a complaint; 2) assisting or participating in an investigation, compliance review, hearing, or any other activity related to the administration of any federal, state, or local law requiring equal employment opportunity; 3) opposing an act or practice deemed unlawful by a federal, state, or local law requiring equal employment opportunity; or 4) exercising any right according to this policy and/or any other lawfully protected right.
Complaints regarding unlawful discrimination or retaliation should be filed within 45 calendar days following the alleged act or incident giving rise to the complaint with the Director of Institutional Equity and Internal Investigations in accordance with the Ball State University Equal Opportunity and Affirmative Action Complaint Investigation Procedure and Appeal Process. A copy of this document may be obtained by contacting the Director of Institutional Equity and Internal Investigations. Any individual or group found to have violated this policy will be subject to disciplinary or remedial action, up to and including termination of employment or expulsion from the University.
The University maintains an audit and reporting system to determine overall compliance with its equal employment opportunity and affirmative action mandates. As a part of this system, the President will review the University's equal opportunity and affirmative action policy and program at least once each year, measure progress against the objectives stated in the affirmative action program, and report findings and conclusions to the Board of Trustees.
Revised by the Board of Trustees July 17, 2015
Ball State University—2017 Financial Report v Ball State University Board of Trustees and President
2016-2017
Thomas C. Bracken, Muncie, IN
E. Renae Conley, Chicago, IL
R. Wayne Estopinal, Jeffersonville, IN
Brian Gallagher, Chevy Chase, MD (appointed January 1, 2017)
Marianne Glick, Indianapolis, IN (resigned July 7, 2016)
Richard J. Hall, Carmel, IN
Jean Ann Harcourt, Milroy, IN (appointed July 8, 2016)
Frank Hancock, Indianapolis, IN (resigned October 28, 2016)
Hollis E. Hughes Jr., South Bend, IN (completed term December 31, 2016)
Mike McDaniel, Indianapolis, IN (appointed November 29, 2016)
Matthew Momper, Fort Wayne, IN
Marlene Jacocks, Fishers IN (appointed July 1, 2017)
Dustin Meeks, Fishers, IN (completed term June 30, 2017)
Officers
Richard J. Hall ………………………………………………………………………………………. Chair E. Renae Conley ...... Vice Chair Thomas C. Bracken ...... Secretary Matthew Momper ...... Assistant Secretary Bernard M. Hannon ...... Treasurer
University President (interim ended May 14, 2017 – retired June 9, 2017) Terry S. King
University President (began May 15, 2017) Geoffrey S. Mearns
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Ball State University—2017 Financial Report vii viii Ball State University—2017 Financial Report Ball State University—2017 Financial Report ix x Ball State University—2017 Financial Report Ball State University Management’s Discussion and Analysis June 30, 2017
The University
Ball State University, located in Muncie, Indiana was founded in 1918 as the Indiana State Normal School, Eastern Division. The Ball brothers, a prominent Muncie industrial family, had acquired the land and buildings of a private normal school and donated the property to the State of Indiana. In 1929, the Indiana General Assembly separated the Muncie campus from Indiana State Normal School, naming the Muncie campus Ball State Teachers College. In 1965, the General Assembly renamed the institution Ball State University, in recognition of its significant growth in enrollment and physical facilities, the variety and quality of its educational programs and services, and in anticipation of the much broader role it would be expected to assume in the future. The University is governed by a nine-member Board of Trustees, which includes a full-time student and two members nominated by the Ball State University Alumni Association. All members of the Board are appointed by the Governor of Indiana to four-year terms, except for the student member, who is appointed to a two-year term.
Ball State University’s eight academic colleges offer six associate-level programs, 170 undergraduate degree programs, 88 masters-level programs, 16 doctoral-level programs and two education specialists programs. The University is fully accredited by the Higher Learning Commission. Various schools, departments and programs are also accredited by numerous other professional agencies, licensing boards, and state agencies. The University operates Indiana’s only K-12 laboratory school, as well as the Indiana Academy for Science, Mathematics and Humanities, the state’s only residential high school for gifted and talented students.
Enrollment for fall 2016 totaled 18,771 full-time equivalent students from a total headcount of 21,998. On-campus and blended (on-campus students taking off-campus courses) enrollment totaled 16,369 full-time equivalent students from a total headcount of 16,808. The University attracts students from a variety of backgrounds and geographical locations. As of fall 2016, approximately 82 percent of the University’s students are characterized as Indiana residents; however, all 50 states and the District of Columbia and 69 foreign nations are represented in the student body. The University provides on-campus housing in residence halls and apartments for approximately 7,500 students. As of the beginning of the 2016-2017 academic year, the University’s staff and faculty (not including student employees and graduate assistants) totaled approximately 3,131 full-time and 387 part-time personnel. The campus facilities include approximately 125 buildings totaling over seven million gross square feet on over 1,000 acres. Using this Report This section of Ball State University’s (University) annual report presents management’s discussion and analysis of the financial performance of the University for the year ended June 30, 2017, with selected comparative information for the two fiscal years ended June 30, 2016, and 2015. The financial statements, note disclosures and this discussion are the responsibility of University management. This information is presented to assist the reader in understanding the University’s financial position and operating activities.
This financial report includes three basic financial statements: the Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position and the Statement of Cash Flows, prepared in accordance with principles from the Governmental Accounting Standards Board (GASB). These financial statements focus on the financial condition, results of operations, and cash flows of the University as a whole. Important features of these statements, which are mandated by the Governmental Accounting Standards Board, include:
Revenues that are charges for services and goods, including tuition and fees and non-capital grants, are recorded as operating revenues. This means that state appropriations, which are used primarily for operations, are required to be shown as non-operating revenue.
Scholarship allowances are required to be recorded in three different places: as a reduction to tuition and fees, as a reduction to room and board, and as an operating expense. The user must total the three amounts in order to ascertain the total scholarship aid received by students from the University. Not included in these amounts are scholarship aid received directly by students, as well as loan and work-study aid.
Federal and state scholarships and grants received by the University, the proceeds of which are reported as a reduction of operating income, are reported as non-operating revenue.
Ball State University—2017 Financial Report 1 Management’s Discussion and Analysis
Capital assets include construction in progress and infrastructure, as well as completed capital projects and capital acquisitions.
Net pension liability and related deferred inflows and outflows of defined benefit pension plans administered by the Indiana Public Retirement System (INPRS) are included in the University’s financial statements beginning with the fiscal year ended June 30, 2015. Prior to this date, the information was presented in the Notes to Financial Statements.
This financial report also includes the financial statements and significant notes to the financial statements for the Ball State University Foundation. The Ball State University Foundation is a legally separate, not-for-profit corporation which solicits, collects and invests donations for the sole benefit of Ball State University. The Foundation’s financial statements are presented in accordance with the reporting principles of the Financial Accounting Standards Board and therefore are not comparable to those of the University. Financial Highlights
The total net position of the University increased by $2.4 million compared to the fiscal year 2015-2016, primarily due to a $2.8 million increase in net position restricted for external grants. The issue of student fee bonds to finance the new Health Professions Building accounted for an offsetting decrease in investment in capital assets, net of accumulated depreciation and related debt, an increase in net position restricted for construction, and a decrease in unrestricted net position due to the premium on the bonds. A more detailed discussion of the change in net position can be found later in this report. For fiscal year 2015-2016, the total net position of the University increased by $11.5 million as compared to fiscal year 2014-2015, and was driven primarily by increases in restricted expendable net position of $9.4 million and unrestricted net position of $1.8 million. The increase in restricted expendable net position was primarily a result of unspent proceeds from the issue of the bonds to finance the now completed renovation of Schmidt/Wilson Residence Hall.
The current ratio for the University, which is calculated by dividing current assets by current liabilities, increased from 4.01 to 1 at June 30, 2016, to 4.87 to 1 at June 30, 2017. The June 30, 2015, ratio was 4.11 to 1. This ratio measures the University’s ability to meet short term obligations with short term assets. One of the most basic determinants of clear financial health is the availability of expendable net position to cover debt should it become necessary to settle those debt obligations. The viability ratio measures the University’s ability to fund these long-term obligations. At June 30, 2017, the University’s viability ratio was 1.24 to 1, compared to 1.28 to 1 at June 30, 2016, which was down slightly from the June 30, 2015, viability ratio of 1.36 to 1. A ratio above 1 to 1 indicates that the University is able to respond to adverse conditions as well as attract capital from external resources and fund new objectives.
Studebaker Hall West
2 Ball State University—2017 Financial Report Management’s Discussion and Analysis
The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Net Position
The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Net Position report in summary fashion the financial position of the University as a whole and on its activities, focusing on the University’s net position. These statements include all assets, liabilities, revenues and expenses using the accrual basis of accounting. The only exceptions are gifts, grants, and interest on student loans, which are generally recorded only when received.
The following is a summary of the University’s assets, deferred outflows and inflows of resources, liabilities, and net position as of the end of the previous three fiscal years.
Net Position As of June 30, 2017, 2016, and 2015
2017 2016 2015 Assets: Current Assets $ 242,597,539 $ 197,933,498 $ 186,001,562 Noncurrent Assets: Capital Assets, Net of Depreciation 667,350,402 664,658,279 644,270,731 Other 172,495,176 166,161,888 158,624,055 Deferred Outflows of Resources 26,628,804 25,062,319 7,589,809 Total Assets and Deferred Outflows of Resources $ 1,109,071,921 $ 1,053,815,984 $ 996,486,157 Liabilities: Current Liabilities $ 49,774,724 $ 49,411,657 $ 49,078,031 Noncurrent Liabilities 327,311,261 273,716,582 227,290,917 Deferred Inflows of Resources 4,681,084 5,825,411 6,759,333 Total Liabilities and Deferred Inflows of Resources $ 381,767,069 $ 328,953,650 $ 283,128,281 Net Position: Net Investment in Capital Assets $ 416,710,402 $ 452,598,279 $ 452,275,434 Restricted 77,536,738 29,598,161 20,239,087 Unrestricted 233,057,712 242,665,894 240,843,355 Total Net Position $ 727,304,852 $ 724,862,334 $ 713,357,876 Total Liabilities, Deferred Inflows of Resources and Net Position $ 1,109,071,921 $ 1,053,815,984 $ 996,486,157
Current and Noncurrent Assets
Current assets, such as cash and cash equivalents, accounts receivable, and inventories, support the current operations of the University. Current assets increased $44.7 million, or 22.6 percent, from the previous year, primarily due to a net increase in cash and cash equivalents and short term investments of $43.4 million. The net increase can be attributed primarily to market forces favoring shorter duration assets and the issuance of new bonds in fiscal year 2016-2017. Deposit with bond trustee increased by $3.5 million, also a result of the issuance of new bonds. The remaining current asset line items showed minimal variance to the prior fiscal year.
In fiscal year 2015-2016, current assets increased $11.9 million, or 6.4 percent, from the previous year primarily due to an increase in cash and cash equivalents of $6.2 million. Accounts receivable, net, and unbilled costs also increased by $2.3 million while prepaid retiree benefits increased by $2.0 million. The remaining current asset line items showed minimal variance to the prior fiscal year.
Noncurrent assets primarily consist of investments and capital assets, net of depreciation. Noncurrent assets at June 30, 2017, showed a $9.0 million, or 1.1 percent, increase over the previous year. The increase included a $5.7 million increase in investments and a $2.7 million increase in capital assets, net of depreciation. Noncurrent assets at June 30, 2016, showed a $27.9 million, or 3.5 percent, increase over the previous year, primarily due to a $20.4 million increase in capital assets, net of depreciation. Investments also increased by $7.3 million over the previous year.
The Capital Assets section of the Management’s Discussion and Analysis provides greater detail of the projects and renovations addressed during the fiscal years ended June 30, 2017, and June 30, 2016.
Ball State University—2017 Financial Report 3 Management’s Discussion and Analysis
Deferred Outflows of Resources and Deferred Inflows of Resources
Deferred outflows of resources and deferred inflows of resources represent consumption or receipt of resources applicable to a future reporting period. The amounts recorded result from the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27; and GASB Statement No. 71, Pension Transition for Contributions Made subsequent to the Measurement Date an amendment of GASB Statement No. 68. The balances reported on these line items represent changes of the net pension liability (total pension liability less the fiduciary net position). Most changes to net pension liability are to be included in pension expense in the period of the change. However, certain changes are required to be expensed over current and future periods. Changes of economic and demographic assumptions or of other inputs and differences between expected and actual experience are required to be recorded as deferred outflows of resources or deferred inflows of resources as appropriate. Changes and differences to deferred outflows at June 30, 2017, was a $1.6 million, or 6.25 percent, increase, while changes and differences to deferred inflows was a $1.1 million, or 19.6 percent, decrease. Changes and differences to deferred outflows at June 30, 2016, was much higher at $17.5 million, related primarily to annual activity for pensions during fiscal year 2015-2016. The measurement date of the defined benefit pension plans that are administered by INPRS is June 30, 2016, for the 2016-2017 financial report, and June 30, 2015, for the 2015-2016 financial report.
Students walking in front of David Letterman Communication and Media Building
Current and Noncurrent Liabilities
Current liabilities consist primarily of trade accounts and interest payable, accrued compensation and related benefits, deposits, unearned revenue, and the current portion of bonds that are payable within one year or less. Accounts payable and accrued liabilities may fluctuate from year to year based on timing of University initiatives and programmatic costs. For fiscal year 2016-2017, the University’s current liabilities increased by $0.4 million, or 0.7 percent. The net increase was primarily due to a decrease in accounts payable of $3.0 million and an increase in the current portion of bonds payable of $2.9 million. For fiscal year 2015-2016, the University’s current liabilities increased minimally by $0.3 million, or 0.7 percent.
Noncurrent liabilities are predominantly comprised of bonds payable, pension liability, liability for compensated absences, and the Perkins loan program. Total noncurrent liabilities increased by $53.6 million, or 19.6 percent, in fiscal year 2016-2017. Pension liability, recorded in accordance with GASB Statements 68 and 71, increased by $6.7 million. Bonds payable (long
4 Ball State University—2017 Financial Report Management’s Discussion and Analysis term liabilities, net) increased $46.9 million over the previous fiscal year due to the issuance of new student fee bonds for the construction of the new Health Professions Building and the refunding of older student fee bonds at a lower rate.
In fiscal year 2015-2016, total noncurrent liabilities increased by $46.4 million, or 20.4 percent. The effect of the GASB Standards for fiscal year 2015-2016 was an increase of $20.1 million to pension liability. Bonds payable (long term liabilities, net) increased $27.0 million over the previous fiscal year due to the issuance of new housing & dining system revenue bonds for the renovation of Schmidt/Wilson Residence Hall and the refunding of older revenue bonds at a lower rate.
Debt Administration
The University employs various sources such as philanthropy, internal cash reserves, cash appropriations from the state, and bond proceeds to fund new construction and large renovation projects on campus. As of June 30, 2017, the University had $250.6 million of capital-related bond indebtedness outstanding, compared to $212.1 million and $192.0 million outstanding as of June 30, 2016, and June 30, 2015, respectively. The increase in indebtedness is due, as noted above, to the issuance of new student fee bonds, offset in part by regularly scheduled debt payments as well as refunding of older revenue bonds at a lower rate. All of the University’s bonds are fixed-rate, tax-exempt issuances that are secured by student fees or auxiliary revenues, depending on the original purpose of the bond.
Ball State University’s rating of AA-/Stable by Standard & Poor’s and Aa3/Stable by Moody’s was reaffirmed in November 2016. S&P noted the University’s solid operating performance, healthy financial resource ratios relative to the rating category, steady demand and stable enrollment, manageable debt burden, while Moody’s called out the consistently strong capital and operating support from the State of Indiana, very good unrestricted liquidity, and the University’s stature as a large provider of higher education within the state. More details regarding the University’s bonds payable are presented in the Notes to Financial Statements.
Shafer Tower
Capital Assets
As of June 30, 2017, the University had $416.7 million invested in capital assets, net of accumulated depreciation of $419.0 million and related debt of $250.6 million. Depreciation charges totaled $27.4 million for the current fiscal year. All of these amounts reflect cost of construction rather than replacement cost. As of June 30, 2016, the University had $452.6 million invested in capital assets, net of accumulated depreciation of $394.8 million and related debt of $212.1 million. Depreciation charges totaled $26.5 million for fiscal year 2015-2016.
Ball State University—2017 Financial Report 5 Management’s Discussion and Analysis
The renovation of Schmidt/Wilson Residence Hall, part of the Johnson Complex, was completed near the end of fiscal year 2016-2017 and will welcome students back in the fall semester of 2017. The renovation included a completely new building envelope, new elevators accessing all floors, and new mechanical, electrical, and plumbing systems. The renovated hall will serve as a living-learning community for the Department of Theatre and Dance students. Approximately $11.8 million and $23.7 million was spent on the project in the last two fiscal years, respectively.
Johnson Complex-Schmidt/Wilson Halls Expansion and renovation of the lobby at the John R. Emens College-Community Auditorium Renovation was completed in the summer of 2017. The improvements include a 12,000 square foot addition to the venue to provide additional gathering space for pre-event, intermission and post-event crowds, new restrooms adjacent to the lobby, relocation of the box office of the interior of the lobby, and new hospitality space, conference room and offices, and support space on the second story. Construction expenditures on this project totaled $4.5 million during fiscal year 2016-2017 and $0.7 million during fiscal year 2015-2016.
Design work for the new Health Professions Building, home to the recently formed College of Health, has been completed and sitework is underway. The building is expected to be open in the fall of 2019 and will include modern classrooms, teaching laboratories, and clinical spaces. Approximately $2.1 million was expended on this project during fiscal year 2016-2017 and nearly $0.4 million during fiscal year 2015-2016.
“No Boundaries” by Julie Borden, commemorating the 50th anniversary of John R. Emens College-Community Auditorium (1964-2014)
6 Ball State University—2017 Financial Report Management’s Discussion and Analysis
New College of Health Building rendering
With renovations to both Botsford/Swinford and Schmidt/Wilson Residence Halls of the Johnson Complex now complete, the focus now turns to the eventual replacement of the aging LaFollette Complex on the north side. Portions of LaFollette were demolished during fiscal year 2016-2017 at a cost of $1.4 million. Meanwhile, designs for the first phase of the new North Residential Neighborhood are underway. Phase 1 will include a new stand-alone dining facility and a new residence hall, along with realignment of McKinley Avenue. Expenditures for this first phase of work totaled $0.9 million during fiscal year 2016-2017.
LaFollette demolition
Ball State University—2017 Financial Report 7 Management’s Discussion and Analysis
Current operating funds were utilized to purchase $3.8 million in capital equipment in fiscal year 2016-2017 and $6.3 million in fiscal year 2015-2016. Some of these purchases replaced mostly fully-depreciated equipment dispositions originally costing $3.1 million in fiscal year 2016-2017 and $3.0 million in fiscal year 2015-2016.
Net Position
At June 30, 2017, total net position for the University was $727.3 million, up $2.4 million over the previous year. Net position is classified into four categories: Net investment in capital assets, restricted nonexpendable, restricted expendable, and unrestricted. Net investment in capital assets accounted for approximately $416.7 million as of June 30, 2017. This balance represents the University’s investment in land, buildings, infrastructure, land improvements, and equipment, and is reported net of accumulated depreciation and related debt. Additional discussion of capital assets is available in the Capital Assets section of this report as well as in the accompanying Notes to Financial Statements.
Restricted nonexpendable net position remained unchanged from the previous year and accounts for only $0.9 million of net position. These funds represent permanent endowments received by donors, the principal of which must be held in perpetuity with only present and future income earnings being used to support the wishes of the donor. Restricted expendable net position represents funds that have restrictions imposed by third parties in their purpose. Restricted expendable net position increased by $47.9 million in fiscal year 2016-2017, totaling $76.6 million as of June 30, 2017. Of these restricted expendable funds, $67.2 million are funds restricted for construction, such as the bond proceeds for the new Health Professions Building or state appropriations for repair and rehabilitation. $6.8 million is restricted for external grants, and $2.6 million is restricted for student loans. The overall change in restricted expendable net position was primarily due to unspent proceeds from the sale of student fee bonds offset by bond premiums on the same issue.
Johnson Complex-Schmidt/Wilson Halls with Botsford/Swinford Halls in foreground
Aside from capital assets and restricted net position, the remaining $233.1 million of net position is in unrestricted net position. Unrestricted net position is not subject to externally imposed restrictions. However, portions of the unrestricted net position are internally restricted for specific authorized purposes at the end of each fiscal year. The specific purposes for which these assets are internally restricted include the stewardship and renewal of capital assets, campus development and infrastructure, technological advancements, self-insurance reserves, unforeseen contingencies, and other purposes. In addition, adjustments
8 Ball State University—2017 Financial Report Management’s Discussion and Analysis to unrestricted net position are required each year for prepaid expense related to retiree benefits as calculated in accordance with GASB Statement No. 45 (an increase to unrestricted net position), and pension liability as required by GASB Statements No. 68 and 71 (a reduction to unrestricted net position). Additional information regarding GASB Statements No. 68 and 71 are discussed within the Notes to Financial Statements. Overall, unrestricted net position decreased by $9.6 million over the prior fiscal year primarily due to a $8.8 million reclassification of negative restricted net position, a $6.0 million decrease in operating fund surpluses, a $4.0 million increase in the pension liability, and a $2.2 million decrease in endowment funds. The decrease in unrestricted net position was partially offset by an $11.1 million increase in internal reserves.
At June 30, 2016, the University’s net position was $724.9 million. Approximately $452.6 million was comprised of net investment in capital assets. Additionally, the University had other net positions totaling $272.3 million as of June 30, 2016, of which $29.6 million was restricted net position. The $29.6 million restricted net position was comprised of: $0.9 million in nonexpendable endowment restricted for student scholarships, $2.6 million restricted for student loans, $22.1 million restricted for construction, and $4.0 million restricted for external grants. Restricted net position increased by $9.4 million, primarily due to unspent proceeds from the sale of housing and dining system revenue bonds offset by bond premiums on the same bond issue.
Unrestricted net position at June 30, 2016, was $242.7 million, an increase of $1.8 million over the prior fiscal year which was primarily attributable to increases in funds set aside for repair and rehabilitation of auxiliary buildings.
Change in Net Position
The following is a summary of the revenues and expenses resulting in the changes in net position as of the end of the previous three fiscal years. Note that, for purposes of this statement, state appropriations are considered non-operating revenues.
Change in Net Position Years Ended June 30, 2017, 2016, and 2015 2017 2016 2015 Operating Revenues $ 274,006,946 $ 265,002,481 $ 262,196,219 Operating Expenses 493,066,361 481,846,017 465,096,945 Net Operating Income/(Loss) $ (219,059,415) $ (216,843,536) $ (202,900,726) Net Non-Operating Revenues 213,822,564 220,356,991 204,497,975 Other Revenue – Capital Appropriations and Gifts 7,679,369 7,991,003 14,790,813 Increase in Net Position $ 2,442,518 $ 11,504,458 $ 16,388,062 Net Position - Beginning of Year 724,862,334 713,357,876 726,004,187 Change in Accounting Policy - - (29,034,373) Net Position - End of Year $ 727,304,852 $ 724,862,334 $ 713,357,876
Operating Revenues
Operating revenues increase net position and include all transactions that result in sales and/or receipts from goods and services such as tuition and fees, housing, dining, and athletics. In addition, federal, state, and private grants are considered operating if they are not for financial aid or capital purposes. Revenues from tuition and fees and auxiliary enterprises are reported net of allowances for scholarships.
Total operating revenues increased $9.0 million, or 3.4 percent, in fiscal year 2016-2017. Gross revenue from student tuition and fees for fiscal year 2016-2017 increased 4.1 percent while scholarship allowances increased by 8.6 percent resulting in a net revenue increase of $3.6 million. The rise in tuition and fees resulted from a modest rate increase of 1.65 percent coupled with increased enrollment of 3.0 percent. These increases were slightly offset by a decrease in course fee revenue associated with a decline in electronic textbook sales. Auxiliary enterprise revenue for residential life which includes housing and dining increased $3.7 million, or 6.6 percent, after scholarship allowances.
In fiscal year 2015-2016, total operating revenues increased $2.8 million, or 1.1 percent. Gross student tuition and fees for fiscal year 2015-2016 increased 2.5 percent while scholarship allowances increased by 5.8 percent resulting in a net revenue increase of $2.0 million. The small increase in tuition and fees resulted from a modest rate increase and a slight enrollment upturn that was offset by an increase in student scholarship allowances. Auxiliary enterprise revenue for residential life stayed fairly flat with an increase of $0.5 million, while other auxiliary enterprises including revenue from parking, athletic events, and cultural events saw an increase of $2.3 million.
Ball State University—2017 Financial Report 9 Management’s Discussion and Analysis
For fiscal year 2016-2017, grants and contracts revenue increased by $1.1 million from the prior year to total $13.2 million. For fiscal year 2015-2016, grants and contracts revenue increased by a modest $0.6 million from the prior year to total $12.1 million. Total Revenues by Source
2016-2017 2015-2016 2014-2015 Tuition &