Ohio State is the first public university to issue 100-year bonds, the principal of which will not be due to investors for 100 years, Jim Lynch, an OSU spokesman, said in an email to The Lantern.

The $500 million in taxable bonds, also known as century bonds, were issued in October. Due to the high level of interest from more than 70 investors, the university sold $200 million more than initially had been advertised, Lynch said.

“That demand, from insurance companies, pension funds and other money managers, sends a clear signal about investor confidence in Ohio State and is a reflection of the university’s strength and strong credit rating,” he said. “The bonds require Ohio State to make only interest payments until 2111, when the $500 million in principal will be due. Funds will be invested to raise the $500 million that will be needed a century from now.”

The bonds were issued at the interest rate of 4.8 percent, keeping interest payments to a minimum, though they will still be about $24 million annually, Lynch said. President E. Gordon Gee told The Lantern at an editorial conference Feb. 6 that this is the best rate given to any institution for bonds.

“We came out with $500 million at 4.8 percent, which is the best rate ever given in this country to any institution, not only universities,” Gee said. “And that is a real tribute to this institution’s financial strength and its management and its planning.”

Alex Morrison, a second-year in economics, said it was hard to imagine 100-year bonds but that they will be beneficial to the university.

“I thought it was kind of crazy because … I’m not expecting to be alive, like once those bonds are up, ‘cause that’s so far down the road. It’s obviously groundbreaking, since we’re the first public university to do that,” he said. “It’s good publicity for the university and if … things are going well in like 25, 30 years, it’ll definitely look good that we made that move.”

According to a column Gee wrote for The Chronicle of Higher Education in October 2011, less than $20 million will be invested, and over the course of the 100 years, will mature at normal interest rates to be worth at least $500 million.

“Each and every day, I grapple with the central question of how to finance a great public research university in a future of radically changed financing,” Gee said in the column. “We must ask ourselves a series of questions that are critical to our existence. We must ask how we sustain ourselves, how we fund excellence, how we invest in new ideas and new partnerships and how we extend our reach even further to those in need.”

Lynch said the funds will contribute to $2 billion in capital expenditures being planned, including more than $1 billion in expanding the newly-renamed Wexner Medical Center at The Ohio State University. Additional housing on campus, as well as enhancing existing housing, will also be part of the capital investment.

Other universities that have issued 100-year bonds include the Massachusetts Institute of Technology and the state of California on behalf of University of Southern California. Morrison said he was surprised that no other public university had issued century bonds yet.

“Ours is actually the lowest interest rate of the three, so it’s going to work out pretty well for the university,” Morrison said. “I guess I was kind of surprised that a public university hadn’t done it already, but I’m not surprised that Ohio State was the first.”

Morrison also said OSU’s $2 billion in debt is a lot and he hopes the university has weighed this carefully in its decision to issue the bonds.

“It’s a pretty big number, especially for like a single university,” he said. “But I have to think that with how well the administration here handles most issues that they’ve really planned this out and looked at, you know, ‘What if this happens in five years?’ like ‘Where is that gonna leave us with taking on that much debt?’ So I’m hoping that they have really thought out all of the things that could happen.”