Trustees approve Memphis land buy, Knoxville lease and broiler facility increase; state rule opens limited new debt capacity

The University of Tennessee Finance and Administration Committee approved three capital transactions and heard a separate announcement of a new state policy that will expand academic facility debt capacity for eligible institutions.

Acquisitions and leases: The committee voted to acquire 23 South Pauline in Memphis, a 0.42‑acre parcel, for $4,000,000. System staff said the current 66,000‑square‑foot apartment building on the parcel is vacant and the seller will demolish the structure before closing; the land provides contiguous development capacity near a planned College of Medicine site. The committee also approved a 10‑year base lease with a 10‑year extension option for 2400 Sutherland Avenue (about 26,000 square feet), an off‑campus administrative and parking‑services location approximately 1.6 miles from the Knoxville campus. Staff estimated the initial 10‑year financial commitment at approximately $5,200,000 and an estimated $11,800,000 if the extension is exercised; base rent was reported at about $12.50 per square foot plus operating costs.

Broiler research facility: Trustees approved a $3,000,000 budget increase for the UT Institute of Agriculture (UTIA) broiler research and teaching lab at the Middle Tennessee Research and Education Center, raising the project from $10,100,000 to $13,100,000. System staff said the first $10.1 million is funded through American Rescue Plan Act federal grant funding; the requested $3.0 million would come from UTIA plant funds to complete the research and teaching lab building that was not covered by the ARPA allocation. Senior vice chancellor Keith Carver told trustees the infrastructure on the site required unforeseen water‑line work and that the additional investment would support research and collaboration across the system.

New state policy on debt capacity: Separately, system leadership described a Tennessee State School Bond Authority policy change that allows eligible institutions to apply a percentage of unrestricted education and general (E&G) revenue — capped at 3% of that revenue in any year — to support debt service on academic facilities. System staff said eligibility requires five years of continuous growth in unrestricted E&G revenue and projected growth for three additional years; institutions that do not meet those thresholds are not immediately eligible.

Using the system's unrestricted E&G revenue figure cited in the meeting (~$2,400,000,000), staff estimated 3% would equate to roughly $72,000,000 annual debt service capacity, less approximately $29,000,000 of existing specialized‑fee supported debt service, leaving about $43,000,000 of incremental annual debt service capacity — which staff said could support roughly $626,000,000 of new borrowing on a 30‑year bond at an assumed 5.5% interest rate. Staff stressed the policy is conservative and a one‑time enabling approach to accelerate priority academic projects; use of the capacity will be subject to additional fiscal safeguards.

Trustees approved the three capital items by motion and voice vote; an implementation plan and oversight provisions will be brought forward as projects proceed.

Ending: The new state policy was described as a one‑time tool to accelerate projects and will be subject to board‑level conservancy and financing approval for each project financed under this mechanism.