Gov. Ralph Northam announced a plan Tuesday to restructure the debt of Virginia’s colleges and universities, which could save them an estimated $300 million.
The project will refinance debts that would have come due through 2023, and defer payments 20 years. Northam said refinancing now takes advantage of current low interest rates, brought on by the pandemic, to save the $300 million.
“Our treasury department has already run this plan by the bond rating agencies, and no red flags were raised. This is the thing they like to see: a win-win where money is saved and debts are paid,” Northam said during a briefing at George Mason University.
He said the project will focus on restructuring debt in two pools. The first of those, for which Northam has already authorized the restructuring, can save Virginia higher education institutions an estimated $185 million.
The second pool of bonds, however, will require legislation. Secretary of Finance Aubrey Layne said lawmakers will have to approve the refinancing of bonds in the second pool by a two-thirds vote.
“For the 9-C debt, which is our general obligation, meaning the full faith and credit of the commonwealth is behind it, we will need the General Assembly’s help in January,” he said.
Layne said the plan will not affect school credit ratings, and any Virginia university can participate. He added that historically Black colleges and universities will enjoy significant savings.
According to the Richmond Times-Dispatch, Virginia State University could save a projected $12.8 million under Northam’s plan, and Virginia Commonwealth University could save around $23 million.