The University has implemented a Blended Interest Rate Cost of Capital (the Blended Rate). This rate provides:
capital funding more equitably to departments across the University
a rate more reflective of the University’s actual costs
assistance in recording and projecting our capital expenses more accurately
In the past, most working capital loans and long-term externally financed loans were directly related to a specific project, but in general, the terms had no specific relationship to the University’s actual cost of the funds. One department could benefit greatly over another by being assigned the actual bond rate in favorable vs. negative interest rate environments. Consequently, capital planning was unpredictable and a perception of inequity evolved across the University.
The University’s blended rate:
is computed annually during the budget process
is based upon the outstanding external debt portfolio of the University, including taxable and tax-exempt commercial paper
has been applied uniformly since 2001 for externally financed projects and since 2004 for working capital loans
As mentioned above, the blended rate is calculated annually, however, it is unlikely that it will change significantly from year to year, as it is based upon a large debt pool that utilizes multiple types of borrowing mechanisms with different rate structures.
Please keep in mind that any amortization that you receive or request related to a project is only an estimate, as the blended rate can change annually, thus, changing the interest expense and debt service payment required.
Please contact Treasury Operations at (919) 684-5148 if you have any questions about the blended rate.