Bond underwriter Mark Valenzuela, who is also a Tech graduate, told the Board of Regents, “We walked into a great market. Thanks to the luck of the market, we sold them at a strong rate.”
The board met in regular session August 5 in Albuquerque. The board held its annual retreat Saturday, August 6, also in Albuquerque.
Valenzuela said he anticipated that Tech’s bonds would sell at about 4.5 percent interest. Due to the drastic one-day plunge, the bonds sold at 4.26 percent. The difference will save Tech about $200,000 over the 20 year life of the bonds, he said.
On that day, only a few municipal bonds were on sale and the university’s issue was the only one from New Mexico, Valenzuela said.
Most of the buyers were investment advisors purchasing the bonds for their clients, Valenzuela said. Standard & Poors rated the university at A+, but Valenzuela said the university’s bonds sold more like an AA-rated bond.
“Investors bought it and they liked it,” he told the Board. “We had more investors than we had bonds so we were able to reduce the yield.”
The revenue bond will raise capital for New Mexico Tech to build a new 150-bed dorm and some funding for the Magdalena Ridge Observatory Interferometer.
The dorm will be built in the location of the current Child Care Center, which will be razed after the new Center is built near Macey Center. The new dorm is expected to be ready for the fall 2013 semester.
During his announcements, President Dr. Daniel H. Lopez told the Regents about the newly formed Charles and Jessie Headen Endowment, which he described as a significant donation.
Chuck Headen passed away earlier this year and left the bulk of his estate to New Mexico Tech. In the 1960s, Headen started a title and abstract business in Socorro that eventually grew to include more than a dozen such companies across New Mexico.
About 10 years ago, Headen started selling the title companies and got into the oil business.
“Everyone thought he was crazy,” board member and estate attorney Jerry Armijo said. “But he did it and he hired the right people. He started his own oil company, purchased many mineral leases and started developing them. Today, this oil company is strong and profitable. Plus, he owned real estate – significant real estate in terms of market value and cash.”
Armijo said the Headens’ assets will be liquidated and the proceeds will be transferred to an educational trust to benefit New Mexico Tech. Half of the annual profits from the trust will fund scholarships; the other half of the profits will be reinvested in the trust, Armijo said.
Lopez said, “It’s premature to talk about values, but it will be significant.”
Board member Richard N. Carpenter and university attorney Mark Adams each offered personal comments about Chuck Headen’s business acumen and sense of humor.
Alex Thyssen, Tech’s internal auditor, gave a report on the New Mexico Tech Foundation, for which he is a board member. He said the Foundation provides about $1 million of support to the university each year, mostly in scholarships.
Thyssen said the Foundation had only $30,000 when he joined the board in 1976.
“Then came the nicotine patch and that changed the face of the research foundation,” he said.
Dr. Frank T. Etscorn, then a professor of psychology at Tech, invented the transdermal patch at New Mexico Tech in the late 1970s. The university secured the patent, with Etscorn and New Mexico Tech sharing the royalties.
Regent Deborah Peacock, who joined the Tech board this year, was the patent attorney for the university during that time.
She fought legal battles to secure the patent in the United States, then fought more battles in court to secure the European patent.
“Most patents don’t make money, but this was amazing,” she said. “Industry approached us.”
Thyssen said he was shocked to see the first royalty check – for $5 million.
“When the first check came in from the pharmaceutical company, I couldn’t believe it,” he said. “The deposit slip didn’t have enough spaces for all those zeros.”
From 1991 to 2008, when the patent ran out, the New Mexico Tech Research Foundation reaped the rewards of that invention.
Thyssen said the Foundation manages about 30 patents and tries to market or license each one. The latest patent that shows promise is from the computer science department. Tech has formed a company with the inventor and has a license for 10 percent royalties on future sales, he said.
In other business:
- Dr. Peter Gerity, vice president of academic affairs, announced that Dr. Barbara Bonnekessen is the new chair of the Communication, Liberal Arts and Social Sciences Department, or CLASS. She replaces Dr. Mary Dezember, who was recently named the new associate vice president for academic affairs.
- Dr. Lopez reported on the effort to revamp the state’s higher education funding formula. The Legislative Finance Committee and Governor Susana Martinez set a deadline of October 15 for university presidents to submit a proposed formula. Lopez said he is fighting to have an element related to student employment included in the formula. He is also hoping that the formula will be based on student outcomes instead of inputs.
- The Board approved the five-year facilities plan and the Research and Public Service Project funding requests, which are similar. In both plans, Tech has the following priorities:
- Bureau of Geology building, $22.4 million
- Chemistry / Materials Engineering facility, $16 million
- Student Wellness Center, $16 million
- Brown Hall addition and renovation, $5 million
- Research Facility matching funds, $4 million
- Geothermal district heating system, $4 million
- Melissa Jaramillo-Fleming, vice president of student and university relations, reported that fall 2011 enrollment is exceeding last year’s record incoming class. As of July 31, 425 new students have paid their application fee, compared with 411 last year. Total applications were 1,499 for this year, compared with 1,399 for the same time in 2010.
- The board approved a budget adjustment request to account for increased retirement contributions.
- Lonnie Marquez, vice president of finance, reported that the financial analysis for June 2011 is within budget. For the Instruction and General budget, revenue was 17.5 percent higher than budgeted and expenditures were 9 percent lower than projected.
- The Regents approved the budget for the Langmuir Endowment, which helps fund the Langmuir Laboratory for Atmospheric Research. The budget is $210,000 for 2011-2012.
- The Regents approved a revised property policy, which now is compliant with latest Office of Naval Research requirements. Training sessions for staff have already commenced.
- Marquez presented Regents with two purchases greater than $100,000 from restricted fund accounts. EMRTC paid $111,061 to Zia Engineering and Environmental for water testing and analysis at the Playas Training and Research Center. EMRTC also paid $2.5 million to Syndetix Inc. for support services at Playas.
- The Board approved two purchases greater than $250,000. One contract is for bulk fuel with Short Co. at Playas. The other is for $397,000 to North American Communication Resources to provide network core nodes for the Information Services Division at Tech. The company will upgrade network hardware and software for the main campus. Tech received 14 bids, nine of which were rejected.
- The Board approved a “security clearance exception resolution,” which states that Regents do not have access to secure information.
- Gerity presented graduation lists for June 2011 and July 2011. Tech awarded two master’s and two doctoral degrees in June. Tech awarded one bachelor’s, nine master’s and one doctoral degree in July.
- Marquez reported that the Employee Benefit Trust has an unexpectedly large series of expenditures during June. The Trust, which administers the university’s health insurance, had to borrow cash from the university to cover expenses in June. “We were making progress (toward profitability), but then we had this setback,” Marquez said. “We’re a victim of increasing medical costs.” University officials heard presentations from five health insurance providers and have issued a request for proposals – to consider options for changing the system. Lopez said the Trust will examine options to increase revenue.
- The Board moved its meetings to Fridays for 2011-2012. Meeting dates are September 23, October 21, November 18, February 10, March 23, April 27 and May 11. The retreat will be Aug. 2-4, 2012. The November meeting will be in Albuquerque and the February meeting will be in Santa Fe. The remaining meetings (apart from the retreat) will be in Socorro.
– NMT –
By Thomas Guengerich/New Mexico Tech