VENDOR EQUIPMENT FINANCING SYRUS EN, FINANCING & TREASURY CSU OFFICE OF THE CHANCELLOR

Transcription

1 Together Towards Tomorrow Chancellor s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus VENDOR EQUIPMENT FINANCING SYRUS EN, FINANCING & TREASURY CSU OFFICE OF THE CHANCELLOR Special Contributors: Tony Balcorta, IBM Global Financing Rebecca Lowe, JPMorgan Chase Equipment Financing Tom Seybold, U.S. Bancorp Government Leasing and Finance, Inc. 3/25/2015 Vendor Equipment Financing 1

2 AGENDA Elements of Tax-Exempt Equipment Financing Master Enabling Agreement (MEA) Financing Parties and Related Roles Program Issues, Objectives and Goals Panel Discussions

3 ELEMENTS OF TAX-EXEMPT EQUIPMENT FINANCING CSU Tax-Exempt Financing Programs CSU Systemwide Revenue Bonds Program Capital projects (campus housing/parking/student union) Tax-Exempt, Long-Term, Fixed Rate Financing Commercial Paper Equipment Financing Program Personal property and services (CMS, equip.) Tax-Exempt, 1-Year Adjustable rate financing Financed through CSU via lease financing w/campuses Vendor Equipment Financing Program Personal property and services Tax-Exempt, Fixed rate financing Financed through participating third-party lenders

4 ELEMENTS OF TAX-EXEMPT EQUIPMENT FINANCING Executive Order 669: Delegated authority to campus presidents or assignees to execute leases Executive Order 775: Acquisition of personal property, software and services Master Enabling Agreement Pre-negotiated and pre-approved terms and conditions by and between the CSU and participating lenders Standardized documents: Master Agreement Order Form, Equipment Schedule, Acceptance Certificate Streamlined financing and documentation process

5 MASTER ENABLING AGREEMENT (MEA) Key Financing Provisions Lease-financing subject to state appropriations Prepayment option Title and right to use equipment vest in the CSU Lender security interest in financed equipment Essential Use: Furthering higher education mission Key requirements: CSU certificate of self-insurance Validation and approval of contract via signed form of CSU Opinion of Counsel (OPC) IRS Form 8038-G/GC filing

6 MASTER ENABLING AGREEMENT (MEA) Assets Eligible for Financing /Term of Financing IT equipment /1-5 yrs. IT projects/up to 7 yrs. Modular building/up to 10 yrs. Energy Projects Central chiller/boiler and cogeneration plant /up to 20 yrs. Photovoltaic /up to 13 yrs. Efficiency lighting upgrades /up to 10 yrs. Water filtration system /up to 12 yrs. Electrical infrastructure /up to 20 yrs. Energy Substation /up to 10 yrs. FCC Radio license /up to 19 yrs. Prepaid Warranty Hardware/Software Svcs./up to 5 yrs.

7 MASTER ENABLING AGREEMENT (MEA) CSU-approved financial services providers Banc of America Public Capital Corp. Comerica Bank Dell Financial Services IBM Global Financing JPMorgan Chase Equipment Financing, Inc. Key Government Finance, Inc. Pinnacle Public Finance LLC Princeton Credit LLC Santander Bank, N.A. U.S. Bancorp Government Leasing and Finance, Inc.

8 FINANCING PARTIES AND RELATED ROLES Campus Places purchase orders with vendors Requests at least 3 bids from lenders Selects and awards winning bid/lender Lender (selected) Verifies purchase orders and costs Prepares MEA docs, payment schedule for campus execution Arranges for external escrow account, if applicable Funds vendor for campus equipment purchase

9 FINANCING PARTIES AND RELATED ROLES CSU Chancellor s Office Financing & Treasury Reviews and approves MEA doc package Files IRS 8038-G/GC Coordinates with CSU Office of General Counsel on the validation and approval of financing transaction via signed Opinion of Counsel (OPC) Reviews terms and conditions of external escrow agreement, if applicable Coordinates with external bond counsel on tax due diligence (applicable to energy project financings)

10 FINANCING PARTIES AND RELATED ROLES Bond Counsel (applicable to energy financing) Due diligence and disclosures Private Use Arbitrage/Rebate Ruling Tax Certificate Tax Opinion Verifies payment schedule, yield, Weighted Average Maturity Files Form 8038-G/GC with the IRS Legal cost funded through financing or out-of-pocket

11 FINANCING PARTIES AND RELATED ROLES IRS VENDOR 5 5a IRS 8038-G BOND COUNSEL Tax Certificate Tax Opinion IRS 8038-G 8038-G/GC CO-F&T 3 OPC LENDER 4 $$$ MEA Order Package (Lender/campus doc. flow) Self Insurance Cert.(Campus) Essential Use Letter (Campus) RFQs (Campus) Purchase Orders (Campus) 2 1 * Equipment Pricing * Equipment Delivery * POs/Invoices CSU CAMPUS MEA Transaction: Steps 1 thru 5 MEA Energy: Steps thru 1 5a

12 PROGRAM ISSUES, OBJECTIVES AND GOALS Issues: Unmet areas in Non-MEA Type of Transactions Straight Lease/Rental or Fair Market Value Zero-Percent Financing Program Lessor Document Req ts: (IRS 8038-G, CSU legal opinion) Supplements to MEA Financing Documents Tax Opinion, Tax Certificate, Escrow Agreement (Energy) Special Rider (Prepaid warranty/maintenance services) Objectives: On-going Tax Compliance Mitigating Private Use Risk Preserving Tax-Exempt Status of financing transactions Proper and timely filing of IRS 8038-G/GC Future goals: Standardizing MEA for Escrow Services and Leasing Transactions

13 PANEL DISCUSSIONS-IBM, JPMORGAN CHASE, U.S. BANCORP GOVT. LEASING Lender Financing Criteria Type of Assets Eligible for Financing Term of Financing Size of Financing Recent Financing Transactions IBM Global Financing: Prepaid Warranty Service Financing JPMorgan Chase Equipment: Water Filtration System U.S. Bancorp Govt. Leasing.: Modular Building Other Non-MEA Lease Agreement Straight leasing /rental Documentation Requirements

14 PANEL DISCUSSIONS - IBM GLOBAL FINANCING (IGF) Lender Financing Criteria Information Technology Hardware, Software, & Services (IBM and OEM) Lease Purchase (MEA) or Fair Market Value Leases of Hardware Bundled or Standalone Transactions IT Projects with Up-Front and On-going Implementation Costs Standard Financing terms 12 Mo. To 60 Mo. Terms of up to 84 Mo. with IGF Management approval Financing Transaction Size $5K to $10M or Higher (based on credit approval) IT Project Financing Size No Min, Max up to Credit Approval Limit IT Desktop Laptop/Tablet/Mobility Technology Lease Programs Leverage High Residual Value or Buyback Values Match IT Lifecycles with Lease Financing Terms 0% Financing Programs Prepaid Hardware Maintenance and Prepaid Software Maintenance

15 PANEL DISCUSSIONS - IBM GLOBAL FINANCING (IGF) Recent Financing Transactions CSU San Marcos IT Desktop/Laptop/Tablets CSU Fresno IT Desktop/Laptop/Tablets CSU San Jose 5yr Prepaid Cisco SmartNet Maintenance Lease Documentation for Cisco SmartNet Financing Standard Lease Purchase MEA and documents plus Special Rider as Supplemental Document Certificate of Provider from Cisco Pricing Compliance Prepaid Maintenance Services T s and C s Compliance Financing Meets IRS Guidelines for Tax-Exempt Financing

16 PANEL DISCUSSIONS - IBM GLOBAL FINANCING (IGF) Benefits of Leasing with IBM Global Financing Technology Lessor/Lender Over 33 Yrs. experience Wholly-owned subsidiary of IBM Corporation Global Asset Recovery Services (GARS) Buyback Disposal Security Other Non-MEA Lease Agreement Master Lease Agreement IBM Credit LLC Fair Market Value Hardware Leases

17 PANEL DISCUSSIONS JPMORGAN CHASE Lender Financing Criteria Essential-Use Assets: IT, Security Equipment, Vehicles, Maintenance Equipment, Furniture Fixtures & Equipment, Energy Efficiency Projects, Water Projects Financing Term: Up to 15 years Transaction Size: Minimum $500,000 no maximum Payment Frequency: monthly/quarterly/semi-annual or annual Recent Financing Capital Project: Acquisition and installation of water filtration plant and a wastewater line $8M Project Cost: $4.6M Filtration + $3.4M waste line Project Cost: Approx. 30% soft-related costs and 70% hard equipment $2.5M campus contribution via grant funding covered soft costs Net Project Financing: $5.50M

18 PANEL DISCUSSIONS JPMORGAN CHASE Recent Financing (Continued) Proposed term: 10 or 12 years Selected term: 12 years Lease Documentation for Water Filtration Financing Standard Lease Purchase MEA and documents plus Escrow Agreement as Supplemental Document Investment of loan funds in highly stable, liquid money market fund, U.S. treasury obligation funds Payment Draw Request pending review and approval by JPM Chase Tax Opinion, Tax Certificate (issued by external bond counsel)

19 PANEL DISCUSSIONS JPMORGAN CHASE Benefits of working with Chase Equipment Finance Banking Market leader & credit provider to the higher- Education Sector Nationwide Over 30 years of equipment finance experience in California & over 20 years within the CSU System Local CA Team global scale with local delivery

20 PANEL DISCUSSIONS U.S. BANCORP GOVERNMENT LEASING AND FINANCE, INC. Lender Financing Criteria Any essential use equipment; Information Technology, Vehicles, Aircraft, FF&E, Energy Performance Contracts, Medical and Scientific Equipment Financing Term: 2 to 16 years Transaction Size: Minimum $250,000 no maximum Payment Frequency: monthly/quarterly/semi-annual or annual Recent Financing California Maritime Academy Modular Building for Police and Emergency Operations Center $700K Total Cost - $225K Capital contribution = $475K Net Financing Terms requested : 10yr & 12yr Term Provided: 10yr

21 PANEL DISCUSSIONS U.S. BANCORP GOVERNMENT LEASING AND FINANCE, INC. Together Towards Tomorrow Chancellor s Office Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San Jose San Luis Obispo San Marcos Sonoma Stanislaus Lease Documentation for Modular Building Standard Lease Purchase MEA and documents plus Escrow Agreement as Supplemental Document Investment of proceeds in high grade money market fund Disbursements from escrow to Vendors within 24 hours True Lease Agreements (Non MEA) U.S. Bancorp Technology Finance Fair Market Value Hardware Leases Residual & Tax based pricing

22 CHANCELLOR S OFFICE CONTACT INFORMATION Syrus En Financing & Treasury (562) sen@calstate.edu Website: