Senate debates higher-education revenue bonds as bill advances to third-reading calendar

Senators on Tuesday moved Senate Bill 25, a measure authorizing higher-education institutions to issue revenue bonds for projects financed by non-tax sources, onto the third-reading calendar after extended floor debate about who will pay future operating-and-maintenance costs.

Senator Bueller, sponsor of the bill, said the measure provides the legislature's authorization for institutions to issue revenue bonds for projects funded through grants, research contracts, donations or ticket revenues — not by direct state tax dollars. "This is for projects that are financed by other than tax dollars," Bueller said, adding examples including stadium renovations and research facilities.

The bill prompted sustained questioning from colleagues worried that projects financed by revenue bonds can create long-term O&M liabilities for the state. "If you think you have an income flow that will amortize the cost to the building, that's fine, but what you have to have is an income flow that amortize the cost of the building and an endowment fund that will pay for the building," said Senator Watson, urging that gifts include funds for future maintenance.

Senator Reese recommended that future requests for revenue bonds be routed to the capital facilities and appropriations subcommittee for prioritization and fiscal review. "In the future, these types of bills ought to be referred to the capital facilities committee rather than coming to a standing committee," Reese said, citing the subcommittee's ability to prioritize long-term obligations.

Senator Howell, citing an independent firm’s analysis, said studies indicate expanded seating and other revenue sources at Rice Stadium would generate the additional receipts needed for debt service. "KPMG...has done that for the University of Utah," Howell said, describing projections that support the stadium expansion's revenue model.

Sponsors and supporters emphasized the projects' potential economic-development benefits and the institutional research dollars that back some facilities. Bueller noted private contributions (for example, a previously reported $5 million gift to a biology research building) and research funding as revenue sources.

Several senators pressed for clearer disclosures in fiscal notes and asked institutions to specify which revenue streams would be pledged to bond repayment and how O&M would be covered. "The institutions badly do need these projects, but we need to factor in future realities of these costs," Watson said.

After debate and a committee memo recommending that future revenue-bond requests be reviewed by the capital facilities subcommittee, the Senate recorded the bill as having 26 aye votes and placed it at the top of the third-reading calendar.

Next steps: SB25 was placed on the third-reading calendar for final consideration; sponsors and multiple senators signaled a desire for additional fiscal detail before final passage.