University of Virginia Library

Debt Affordability Measures

Debt Burden Percentage

This ratio measures the University’s debt service burden as a percentage of total university expenses. The target for this ratio is intended to maintain the University’s long-term operating flexibility to finance existing requirements and new initiatives.

ANNUAL DEBT SERVICE
TOTAL OPERATING EXPENSES

The measure is based on aggregate operating expenses as opposed to operating revenues because expenses typically are more stable (e.g., revenues may be subject to one-time operating gifts, investment return fluctuations, variability of Commonwealth funding, etc.) and better reflect the operating base of the University. This ratio is adjusted to reflect any non-amortizing or non-traditional debt structures that could result in significant single year fluctuations including the effect of debt refundings.

Debt Service Coverage Ratio

This ratio measures the University’s ability to cover debt service requirements with revenues available for operations. The target established is intended to ensure that operating revenues are sufficient to meet debt service requirements and that debt service does not consume too large a portion of income.

OPERATING GAIN/(LOSS)
+ NON-OPERATING REVENUE
+ DEPRECIATION >3x
ANNUAL DEBT SERVICE

This ratio is adjusted to reflect any non-amortizing or

non-traditional debt structures that could result in significant single year fluctuations including the effect of debt refundings.