State Universities Tap Student Fees for Unintended Projects

Oh, no! You won't be getting a printed SCUP–45 Preliminary Program in the mail this year. Instead, SCUP is going green and regularly updating this digital version (PDF), which you can download at any time.

Check it out! You don't want to miss higher education's premier planning conference, and your one chance this year to assemble with nearly 1,500 of your peers and colleagues: July 10–14, Minneapolis.

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SCUP Link

Did you ever wonder why there are usually separate capital budgets from operating funds? This Los Angeles Times article by Jack Dolan highlights some California instances using student fees for capital-related expenditures in ways that have drawn some ire. Just avoiding articles that begin like this might be one good reason:

While California universities have faced round after round of crippling budget cuts and protests against increased fees have flared on campuses, administrators have tapped funds meant for classrooms and students to cover some extraordinary costs: losses on ill-timed real estate deals, loans to high-ranking officials and an ambitious construction project.

Experts say the moves, made without wide student knowledge or public oversight, show that administrators have put aggressive business plans ahead of the teaching mission. When things go wrong, they're dipping into student fees, scholarship funds and money meant for classes to pick up the tab.

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SCUP's Planning Institute: Enjoy the F2F company of your colleagues and peers while you engage in one of the three SCUP Planning Institute Steps. In addition to being offered on demand, on campuses to teams of campus leaders, the institute steps are also offered to all professionals at varying times and venues. Currently scheduled are:

• May 22–23, Ann Arbor, MI - Step I
• July 10, Minneapolis, MN - Step I (in conjunction with SCUP–45)
• October 2, Ann Arbor, MI - Step I
• January 21–22, Tuscon, AZ - Step II and Step III

Facilities Funding Thaws? Really?

"Frozen capital markets had a chilling effect on new construction in 2009. But, some resources are still flowing, with developer-financed housing projects, bundled mixed-use facilities, and other creative deals on the rise" is how Business Officer describes this new article by Roger Bruszewski, Sam Jung, and Jeffrey Turner. It's a good resource with lots of brief vignettes, and includes some nice photographs as well as informative side bars.

Due to the changes in the financial market, funding options that worked only a few years ago are simply not possible in today's environment. But, the freeze in some funding areas has created new, unique development structures that allow for freer flow of dollars that make such projects attractive and beneficial to institutions.

Despite these changes, it is clear that institutions will continue to rely on the private sector to meet some of their important capital project needs. While private partners have also been affected by the downturn in the economy, they remain committed to working with institutions that must move their mission-critical projects forward both effectively and efficiently. The ingenuity of the private sector will continue to help colleges grow and adapt to changes in the higher education marketplace for years to come.

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Regional SCUP Events! Enjoy the F2F company of your colleagues and peers at one of three SCUP regional conferences this spring:

• March 14–16: Baltimore, MD
• March 24–26: Cambridge, MA
• April 5–7, San Diego, CA

Why Is There a Capital Budget/Operating Budget 'Chasm'?

We really like the questions that Inside Higher Ed's anonymous sustainability blogger asks. (He, or she, will be at SCUP-44 in Portland, BTW.)

"The other thing that's important to realize is that the reason even the 'marginal improvement' question is being asked at all is because a relatively few folks, working through organizations like AIA, NACUBO, SCUP, and ACPA . . . have been asking questions which conventional thinking has a hard time answering."

Read more here:
http://www.insidehighered.com/blogs/getting_to_green/don_t_know_much_about

Stimulus Law Offers Breaks for Public-College Bond Issues

A lesser-known part of the stimulus package:

Tucked into the economic-stimulus package signed into law last month by President Obama is a new financial tool, Build America Bonds, that could help public colleges and public academic medical centers save money when borrowing for capital projects.

The bonds, which are available to government issuers but not private colleges, would be taxable securities subsidized by the federal government.

The subsidy would come in one of two ways. In some instances, buyers of the bonds would receive a tax credit equal to 35 percent on the interest payments they received; in other cases, the issuers of the bonds would receive a subsidy from the federal government equal to 35 percent of the interest they are paying.

CP&M's 2009 College Construction Report

College Planning and Management's annual College Construction Report is something that many SCUPers eagerly await. This year's is here (PDF). It starts by noticing some frozen projects, then author Paul Abramson, who has been doing this report since 1995, looks over the history of the annual college and university capital construction budget:

I have been tracking college construction for College Planning & Management magazine since 1995, when $6.1B worth of construction was put in place (see Table 1). Construction stayed close to $6B a year from 1995 through 1999, when it reached $6.8B. . . . Starting in 2000, college construction began to shift into a higher gear. In 2000 it broke the $7B barrier for the first time ever, then jumped to $9.8B and then $11B the next two years, largely in response to a growing demand for seats in college classrooms and beds in residence halls. . . . By 2005, annual construction was up above $13B. In 2006, it topped $15B before falling back slightly to $14.5B in 2007, as reported a year ago. . . . At that time, I suggested that the drop to $14.5B in completed construction probably was not significant. But the projections we were showing for major cuts in construction spending in 2008 could be a sign of significant belt-tightening and even cutbacks. . . . As the United States and world economies have continued to deteriorate in the last year, those projected cuts have now occurred. College construction fell to just under $13.3B in 2008, a drop of $1.2B from the year before, and it is projected to fall even further in 2009. And that is construction funding. It says nothing about the funding necessary to furnish and staff the new buildings.

Life-Cycle Funding for Capital Assets

This Business Officer article by Douglas Christensen of BYU, is subtitled "Brigham Young University’s long-term view for monitoring and funding capital assets achieves significant savings, keeps things in good repair, and attracts other institutions to the model."

Little did we know the future impact of a capital assets study requested of the board of trustees of Brigham Young University Provo’s facilities division back in 1981. In fact, the study results would spur a transition to a comprehensive capital needs management system for not only the university but the entire worldwide Church of Jesus Christ of Latter-Day Saints, including all of the LDS Educational System of which BYU in Provo, Utah, is a part.

The advantage of the resulting capital needs analysis (CNA) approach is that it is part of a holistic, data-driven system that allows us to make effective decisions about resource allocation. On a micro level, it establishes a comprehensive, life-cycle inventory of current assets and incorporates them into a listing of all retrofits, repairs, or additional projects that need to be completed. The integrated approach creates a complete capital plan that can project the total cost of asset ownership for the institution. In dollars and cents, this life-cycle approach to asset monitoring has saved millions of dollars each year by maximizing length of asset use and managing the decisions needed to optimize return on investment. Another major benefit is that, after the cost of an initial inventory, the only additional cost is for keeping the inventory database valid. This initial investment has paid for itself many times.

One of the most important aspects of CNA has been the ability to leverage the concept. All institutions use the same program to deal with annual and projected capital needs. However, since the software program is based on general principles, it allows each institution to adapt CNA to its culture and management style. Detailed documentation of revenues and auxiliary support divisions’ assets also allows each institution to view all its capital needs as well as those of the entire system.

Financing Approaches for Funding Renewable Energy Initiatives

Writing in Business Officer, Michael Philips and Lee White show us how it is still possible, even in the face of the financial crisis, to fund alternative energy projects. Their subheads are: Clean Renewable Energy Bonds, Governmental Purpose and Private Activity Bonds, Endowment Fund Loans, Private-Sector Tax Incentives, Performance Contracts, Renewable Energy Hedge Agreements, Power Prepayments, and Financing Energy Security.

Across the United States, an increasing number of higher education institutions are pursuing large-scale renewable energy projects, in some cases as part of their commitment to achieving carbon neutrality under the American College & University Presidents Climate Commitment (www.presidentsclimatecommitment.org). While many projects benefit from some grant or gift funding, very few are funded exclusively this way.

So, where does the rest of the capital come from? What financing structures are available to institutions that want to install solar, wind, geothermal, or biomass systems that can generate a sizeable share of their campus energy needs? And, how can costs be lowered by structuring deals with private investors? What follows is an overview of some of the more common and emerging financing sources and structures for campus renewable energy projects.

Tough Times, Silver Lining: Builders Lower Their Bids

As Scott Carlson puts it, in this article, "Now is a great time for colleges to get bids on construction projects — if they have the money to pay for them." It's nice to know that someone we know will be saving money. Bottom line: Materials costs are going down and construction people are offering lower cost bids. But not everyone is in a position to benefit:

Over the past several years, colleges have endured eye-popping escalation in the cost of campus construction, with the budgets swelling by more than 40 percent in some cases. The increases resulted from similarly rising costs for energy and petroleum-based building materials, and from growing demand for staples like steel and cement amid a booming construction market, both overseas and in the United States. Construction firms consistently bid high because of the demand for their work and to cover the risk of escalating costs on materials.

But times have changed. As the financial, housing, and major-construction markets have headed toward meltdowns, those same construction firms are looking for jobs, even while the prices of energy and materials have fallen. The prices of essential construction materials like structural steel, cement, and lumber are all expected to decline through 2009, according to Engineering News-Record, a trade magazine for the construction industry, published by McGraw-Hill. Because of those declines, building costs are likely to go down slightly this year.

In Connecticut, Building Plans Hit the Skids

This article's "blurb" ends with a phrase that we all should be thinking about as we slash and burn budgets of various sorts: "The governor's budget freeze has put state school projects on ice, but [W]ill it really save money? (emphasis added) And SCUPer Nancy Tinker of Eastern Connecticut State University is interviewed to help make the point:

But that's not how Nancy Tinker, director of facilities, management and planning at Eastern Connecticut State University in Willimantic, sees it. Tinker says an extra year will make a big difference, because time is money — money lost — and in "no place is that more true than in the construction industry."

"In the long run, unless you cancel a project altogether, you don't save anything by delaying things," says Tinker. "It actually costs the taxpayers more, or the taxpayers get less than they could have for the same amount of money."

To prove her point, Tinker cites ECSU's planned $71.5 million fine arts building, a project she describes as "critical" to the school's stated goal of becoming the state's premier public liberal arts college. Planning for the fine arts center was completed in 2000, when the cost was estimated at $54 million; eight years later it has gone up by $17.5 million, or 32 percent.

"When they finished the [planning] in 2000, they didn't think it was going to take eight years to get to the next phase," says Tinker.

Harvard Slows Its Growth in a Boston Neighborhood

We don't know if this is going "from eating brie to cheddar," but even Harvard University is finding that the financial crisis has an impact on its expansion plans into the Allston neighborhood:

The university is reviewing its plans for a four-building, $1 billion science center in Allston, which is across the Charles River from the Cambridge campus. It was scheduled to be completed in 2011.

The university plans to finish the complex’s foundation and build to ground level, but plans after that are uncertain.

“As we approach the end of the current construction phase,” the university president, Drew Gilpin Faust, said in a letter to the Harvard community, “we will examine whether economic conditions are enough improved to allow us to continue construction, or whether to reconfigure the building in ways that yield either new cost savings or new space realization, or whether we need to pause construction.”

Integrity Based Budgeting for Management of Large Facility Portfolios

This excellent article from Facilities Manager (PDF) describes the experience of the U.S. Department of Defense with regard to the integration of data for support of capital budgeting of 800,000 facilities across various defense departments and agencies such as the Army, the Navy, and the Defense Logistics Agency.

Three important issues were critical to the evolution of a solution. First, what degree of accuracy was affordable? Second, with over 800,000 properties, how could this number be distilled to make a solution understandable to the user and still retain meaningfulness? And third, how would facilities requirements be defined? . . . Making all this work was somewhat like the famous Monty Python sketch teaching children how to play the flute on the children’s show, Blue Peter. The sketch taught the flute by saying you simply blow through here and move your fingers up and down, and “that’s how to play the flute.” While clearly an over-simplification, the next step for SRM was to build cost models for each of the FACs – these included sustainment (what should be spent), modernization (what should be designated for facilities renewal), and most recently operations models for each, covering utilities, fire and emergency services, pest control, pavement clearance, research reports, and state/local governments. The second source category is defined as costs obtained from DoD sources. The third source, representing only 3 percent of the total requirement, is developed by analogy to other FACs of similar complexity and durability. This category represents those very few unique facilities that typically only the military owns – for example, missile shelters or gunnery ranges.

Ten Rules for Naming Buildings and Places

From the "Reality Check" blog on Inside Higher Ed, a useful checklist—1. Only name buildings for dead people, 2. Only use the names of admirable people, . . . 10. Be prepared for controversy over naming choices—and some thoughtful narrative, such as:

Often interesting old buildings already have a name, and frequently the name dates from a period when donations were not relevant to naming choices. When we receive a gift to renovate an old building or otherwise support an important activity in that building, and the donor expresses an interest in renaming the building, we run into our fifth rule. Renaming buildings is always problem. While we make today’s donor happy by doing it, we may well send a signal to future donors that our assertions about the permanence of building names are suspect. If the old name did not acknowledge a gift, the conversation is easier than if the old name recognized a previous gift. Sometimes we finesse this by hyphenating the building name: The Sam George—Susan Peters building. These conversations can sometimes produce volatile responses from alumni with emotional attachments to old buildings, or friends and relatives of the original honoree. Still, we need the gift, and most universities know that if the gift is substantial and the institutional need great, careful consultation and preparation will help smooth over any potential issues, and the next generation of students who will become alumni will have no vested interest in the old name.

Special Delivery: Public Institutions Slow to Adopt Design-Build?

The article, "Special Delivery," is from University Business magazine's July 2007 issue by Julie Sturgeon: "Competitive bidding may rule the construction scene, but that doesn't make it the best choice for all campus projects. Here's how your peers are breaking out of the box."

Let's be perfectly clear: No one is kicking the traditional design-bid-build model to the curb. It remains the most widely accepted model for getting campus construction projects done, because its linear process is easy to manage and it sets the stage for the lowest, responsible price. After all, the system offers college and university officials more than one set of checks and balances and controls, and it works in real time for truly market-driven invoices.

But sometimes it pays to get the cart before the horse. For instance, campus architects and pencil pushers aren't hesitant to explore alternative delivery methods when opening a dormitory faster means an income stream sooner, or when the facility design becomes complicated and the available in-house staff amounts to just a handful of already overworked architects.