JSU officials say they have no plan to issue such a bond, but just wanted to know what their options were.
"This meeting is really just to educate us so we can make the decisions that will make JSU better and stronger," said Sen. Vivian Davis Figures, D-Mobile, a member of the board of trustees.
Seven members of the board, as well as JSU staff, met in Montgomery with representatives from Merchant Capital, a financial firm headquartered in the state capital. There were no action items on the agenda for the meeting, which was advertised as a public meeting for "reviewing of bond options."
Merchant Capital representative Mike Dunn gave the board an overview of the university's current debt. The university has $79.5 million in debt, much of it acquired in the building of a new stadium and dormitories. Paying off that debt costs the university about $6.1 million per year, according to Dunn's numbers.
The university's 9,000-plus students pay an average of $7,950 per year in tuition and fees, Dunn's numbers indicate, below the $8,275 median cost for students at the state's public universities. Still, the cost of going to JSU has doubled in the past 10 years.
While interest rates remain low, Dunn said, refinancing the university's loans isn't a good option because of "negative arbitrage" – essentially, the likelihood, in the current economy, that the university's investments won't earn enough to pay back the interest on the loan.
"You probably will have an opportunity to refinance these bonds at some time in the future," Dunn said.
Dunn's presentation also included projections on a "Proposed Series 2013" bond: a hypothetical future $25 million bond issue. Dunn's figures showed that if the bond were issued on Dec. 1 of this year, the debt service would cost $1.4 million per year, and could be paid for by a $160-per-year increase in tuition, introduced in $40-per-year increments between 2015 and 2018.
Members of the board said the proposal was purely hypothetical, done for planning purposes. Dunn said the bond issue amount and start date were all of Merchant Capital's creation.
Still, JSU officials said they needed to know how much borrowing ability the university actually has. President Bill Meehan cited the recent failure of several air conditioning units on campus — all now fixed — as an example of a situation where a sudden for capital spending might arise.
Meehan noted that the university already has a list of capital projects it hopes to complete. The university announced in May that it hopes to eventually spend $10 million on a new music performance building, $2.6 million on athletic facility improvements and $2.5 million for classroom technology upgrades — needs JSU officials hope to meet through a $35.1 million fundraising campaign.
Competition for students has helped drive the need for facility improvements, Meehan said. Schools are increasingly using top-of-the-line gym facilities and dormitories to lure students, he said. By contrast, Meehan said that when he attended JSU in the late 1960s, only a few buildings even had air conditioning.
Meehan said tuition has risen largely because of decreases in the share of university costs paid for by the state.
"Alabama is one of the top four states in the country that have cut their appropriations for higher education," he said.
Capitol & statewide correspondent Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.