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Funding Source

Capital projects are funded by means of state appropriations, state bonds, privatization funding and lease funding.

State appropriations State appropriations can be General Fund (GF) or Non-general Fund (NGF) appropriations. GF appropriations typically are restricted to facilities supporting educational and general programs. NGF appropriations are provided for sponsored research, auxiliary enterprise or hospital facilities. GF appropriations are supported by state tax dollars while NGF appropriations are derived from institutional funds.
State bonds Three types of bonds are issued by the commonwealth of Virginia to finance capital projects. They are authorized in accordance with the requirements of Article X, Sections 9(b), 9(c), and 9(d) of the Virginia Constitution.

  • 9(b) bonds: Legislative and voter approval are required for issuance of 9(b) debt. These bonds are rated triple “A.” These bonds have been issued only twice since 1971 to finance projects at public institutions of higher education, the most recent being approved by voter referendum in 1992.
  • 9(c) bonds: Revenue producing capital projects are funded through 9(c) debt. These bonds are rated triple “A” and are secured by the full faith and credit of the state. Net revenues derived from the use of the capital projects are expected to pay principal and interest on the 9(c) bonds. Generally, 9(c) bonds are used to finance auxiliary enterprise facilities, such as residence halls, parking decks and student recreational facilities. 9(c) debt must be approved by the General Assembly.
  • 9(d) bonds: Unlike 9(b) and 9(c) bonds, 9(d) bonds do not carry the full faith and credit pledge of the state. 9(d) bonds may be issued by the state or the university.
Privatization funding Privatization funding refers to contractual arrangements between public and private entities in which public facilities are owned, operated or provided by the private entity. It is likely that debt issued through privatization funding will be at taxable rates of interest, up to 2.5 percent higher than equivalent tax exempt rates of interest under conventional public state funding. The advantages of privatization funding include faster design and construction and less demand on institutional debt capacity.
Lease funding Lease funding is a method of acquiring and financing capital projects through another entity that will own and lease the project to the institution. VCU makes use of lease funding through the VCU Real Estate Foundation, which acquires and renovates property and then leases it to the university. Lease rates are based on the costs incurred by the foundation for acquiring the property and typically reflect the market rate appropriate for the type and class of space being provided. All leases with the foundation must be approved by the state.

VCU’s capital budget is dynamic. Projects financed through state appropriations and state bonds must follow the conventional biennial state budgeting cycle and are authorized in the Appropriation Act. The majority of VCU’s capital budget is developed based on this process. Privatization funding and lease funding, however, offer financing alternatives outside the biennial state capital budget process, and thus can be undertaken anytime.

Learn more about the university’s budget.