Weekly Market Update

SENATE TAX LEGISLATION ON HIGHER EDUCATION

Thursday, December 7, 2017

The Senate passed its version of tax reform legislation early Saturday morning. The Senate bill includes numerous provisions that could have massive implications for the higher education sector as well as the broader municipal market. While the Senate bill does not include the provision to eliminate Private Activity Bonds, it does include a provision that eliminates the ability for issuers to issue tax-exempt advance refunding bonds. Similar to the House bill, the Senate bill also includes a 1.4% excise tax on private endowments. However, this excise tax only applies to endowments valued at more than $500,000 per full-time student. The Senate's version excludes a provision in the House bill that strips many tax benefits for students pursuing a college or graduate degree or paying off student loans. The Senate tax bill could also have major implications on the way that students and parents save for college as it adjusts the rules surrounding 529 accounts by allowing households to use up to $10,000 a year from such accounts to pay for tuition at private and religious K-12 schools or to offset some education expenses for home-schooled students. In addition to the provisions directly focused on the higher education sector, the increase to the standard deduction could reduce the levels of charitable giving to higher education and not-for-profit institutions, as fewer households will itemize deductions.

In Other News

  • Citing uncertainty over federal policies as a contributing factor, Moody's on Tuesday downgraded its outlook for higher education to negative from stable. The credit ratings agency predicted that the growth of the industry's expenses will outpace revenue growth for the next 12-18 months, with public universities facing more pressure on revenues than private universities.
  • Columbia University's medical school received a $250 million gift, The New York Times reported. The medical school plans to use $150 million of the gift for an endowment to support financial aid and to minimize student debt. Total expenses for students at the medical school are about $90,000 a year for four years, making debt issues a top concern.
  • McLaren Health Care Corp. plans to build a new $450 million replacement hospital in south Lansing and expand its academic partnership on health care with Michigan State University, officials announced Monday.
  • The University of Louisville's accreditation is no longer under probation. The Southern Association of Colleges and Schools Commission on Colleges ended the University's probation originally imposed due to concerns about its administration, governance, and financial condition.
  • Wayne State University finalized Thursday a 40-year, $1.4 billion partnership with Corvias to develop, finance, and operate the school's student housing. Under the agreement, the Rhode Island-based property management firm will create 840 or more new beds and renovate 368 beds.
  • The University of Michigan endowment plans to invest in startup accelerator Y Combinator and to increase investments in private credit, litigation funds, and real estate.
  • In anticipation of the tax bill, municipal bond issuers are rushing to close deals before the end of the year. Despite the resulting increase in supply, yields on 30-year AAA MMD declined from 2.85% on November 30th to as low as 2.46% on December 7th. Next week's new issue calendar is expected to be $17.1 billion with $2.7 billion for higher education issues.
  • Last week, the National Football League proposed joining players in donating $89 million to what ESPN called "causes important to African-American communities." The United Negro College Fund, which provides scholarships for students attending historically black, private institutions, will receive a fourth of the donation. Some are questioning the sincerity of the NFL's motivation for the donation.

Rating Agency Update

  • Moody's assigned A2 to Bentley University's Series 2017 Revenue Bonds. The outlook is stable.
  • Moody's assigned Aa2 to Bowdoin College's Series 2017 Revenue Bonds. The outlook is stable.
  • Moody's assigned A1 to Arkansas State University's Series 2017 Housing System Revenue Refunding Bonds.
  • Moody's assigned Aa1 to University of Utah's Series 2017B General Revenue Refunding Bonds. The outlook is stable.
  • Moody's assigned Aa2 to University of California's Series 2017 General Revenue Bonds. The outlook is stable.
  • Moody's assigned Aa3 to University of California, San Francisco's Series 2017 Revenue Bonds. The outlook is stable.
  • Moody's assigned Baa1 to University of Tulsa's Series 2017 Revenue Refunding Bonds. The outlook is negative.
  • Moody's assigned Aa3 to Santa Clara University's Series 2017C Revenue Bonds. The outlook is stable.
  • Moody's assigned A1 to Western Washington University's Series 2018A&B Housing and Dining System Revenue Refunding Bonds. The outlook is stable.
  • Moody's assigned A2 to Fordham University's Series 2017 Revenue Bonds. The outlook is stable.
  • Moody's assigned Aa3 to Colorado State University's Series 2017C&D System Enterprise Revenue Refunding Bonds. The outlook is stable.
  • Moody's revised New York Institute of Technology's outlook from negative to stable and affirmed its Baa2 rating.
  • Moody's and S&P assigned A1 and A, respectively, to University of Toledo's Series 2017B General Receipts Bonds. The outlook is stable.
  • Moody's and S&P assigned Aa3 and AA, respectively, to Pepperdine University's Series 2017B Revenue Bonds. The outlook is stable.
  • Moody's and S&P assigned Aa3 and A+, respectively, to Colorado School of Mines' Series 2017C Institutional Enterprise Revenue Refunding Bonds. The outlook is negative.
  • Moody's and S&P assigned Aa1 and AA, respectively, to Ohio State University's Series 2017 General Receipts Bonds. The outlook is stable.
  • Moody's and S&P assigned Baa3 and BBB-, respectively, to Georgian Court University's Series 2017G Revenue and Revenue Refunding Bonds and Series 2017H Revenue Refunding Bonds. The outlook is stable.
  • S&P revised Dickinson College's outlook from positive to stable and affirmed its A+ rating.
  • S&P affirmed Ramapo College's A rating. The outlook is stable.
  • S&P assigned A to Fordham University's Series 2017 Revenue Bonds. The outlook is negative.
  • S&P assigned A- to Fairfield University's Series R-1 and R-2 Revenue Debt. The outlook is stable.
  • S&P assigned BBB+ to Nazareth College of Rochester's Series 2017A&B Revenue Bonds. The outlook is stable.
  • S&P assigned AA+ to University of Utah's Series 2017B-1&B-2 General Revenue Refunding Bonds. The outlook is stable.
  • S&P affirmed Brandeis University's A+ rating. The outlook is stable.
  • S&P affirmed Arcadia University's BBB rating. The outlook is stable.
  • S&P assigned AA to University of Nebraska's Series 2017A&B Revenue Refunding Bonds. The outlook is stable.
  • S&P revised Boston University's outlook from stable to positive and affirmed it's A+ rating.
  • S&P affirmed Regent University's BB+ rating. The outlook is negative.
  • S&P assigned A+ to the University of North Carolina at Charlotte's Series 2017 Revenue Refunding Bonds. The outlook is stable.