FY2013 ROPA Presentation. University of Alaska System

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1 FY2013 ROPA Presentation University of Alaska System

2 A vocabulary for measurement The Return on Physical Assets ROPA SM Asset Value Change Operations Success The annual investment needed to ensure buildings will properly perform and reach their useful life Recurring Capital The accumulated backlog of repair/ modernization needs and the resource capacity to correct them One-Time Capital The effectiveness of the facilities operating budget, staffing, supervision and energy management The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery Annual Stewardship Asset Reinvestment Operational Effectiveness Service System Comparisons Connecticut Maine Mississippi Missouri New Hampshire Oregon Pennsylvania

3 Summary of main points University of Alaska System Campus & regional characteristics are demanding A combination of factors make both operational and capital management of facilities at UA System more difficult: Complex building systems impact maintenance coverage, skill mix, and cost High building intensity more buildings to tend to and different types, also impacts maintenance coverage, skill mix, and costs High cost regional costs means dollars don t go as far as they do for peers Higher levels of daily service compensate for campus demands Facilities operating budget has grown more quickly than peers UA System s maintenance and custodial departments are covering more buildings than peers and has increased coverage by over 15% in the last 3 years Customer satisfaction survey highlights improvements & opportunities Rising investments, closing the target gap Stronger investments into existing facilities has primarily come from one-time sources of capital and has helped narrow the gap between targets Upcoming renewal needs are expected to be greater than the historical recurring capital levels, furthering the importance of continued campus reinvestment

4 Majority of space in high-need category $/GSF $60 $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Average Life Cycle Costs Standard Academic Building Annual Life Cycle Cash Flow Amortization of Life Cycle Expenses Under 10 19% Years 21% Years 51% Over 50 9% * Life cycle costs based on the average tech 3 academic space.

5 Total capital spending Heavier recent investment in new construction $250.0 Total Capital Spending* $200.0 Millions $150.0 $100.0 $98M $50.0 $0.0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 Existing Space New Space/Non Facilities

6 NAV index steadying with increased investment System is nearing Systemic Renovation Stage 100% 90% NAV Index Capital Upkeep Stage: Primarily new or recently renovated buildings with minor capital needs; You pick the projects 80% 70% 60% 76% 76% 76% 75% 73% 75% 74% 72% 72% 72% 74% 73% 71% 70% 69% 68% Repair & Maintain Stage: Buildings beginning to show their age, may require more significant investment on a case-by-case basis Systemic Renovation Stage: Buildings require more significant repairs and large capital infusions; The projects pick you 50% 40% 30% Without asset reinvestment investments, NAV would Repl. decrease Value by 8% Backlog and over NAV = $607M would be added Repl. to Value backlog within 7 years Transitional/Gut Renovation/Demo Stage: Major buildings components are in jeopardy of failure. Reliability issues are widespread throughout the building 20% UA System NAV UA System NAV w/o AR

7 ROPA+ prediction model 10 year total renewal need: $235.7M; annual deferral $120.0 UA System ROPA+ Prediction Model 10 years $100.0 $80.0 Low Risk (Space Renewal) Medium Risk (Envelope) High Risk (Mechanical) Millions $60.0 $40.0 $20.0 $23.6M avg. $ *B-Line does not reflect existing deferred maintenance, utility & grounds infrastructure needs or upcoming modernization need

8 Key Takeaway #2 The UA System already has an estimated $1.13B in deferred maintenance, infrastructure, and modernization backlog: $425M of deferred maintenance identified through ROPA+ analysis Estimated $708M backlog in campus infrastructure and modernization Over the past 8 years, the UA System has invested an average of $35.5M into the existing facilities. If the historic investment trend continues over the next 10 years the total expected investment would be $355M, roughly $778M less than the existing backlog of deferred maintenance and modernization need. $1,200 $ in Millions $1,000 $800 $600 $400 $200 $708 $778 $425 $355 Remaining Backlog with Sustained Reinvestment Spending 10-Year Average Reinvestment Spending $- Backlog Future Reinvestment

9 Key Takeaway #3 If reinvestment investments increased by 15% over the next ten years, UA system would be able to invest approximately $408M into deferred maintenance, infrastructure, and modernization needs. Increase in overall investment results to a rising NAV by 6%. $1, year investment scenario Projected NAV 100% $ in Millions $1,000 $800 $600 $400 $1,133 -$355 -$53 Additional Investment by 15% +$149 $874 90% 80% 70% 60% 50% 40% 72% 72% 73% 74% 74% 75% 76% 76% 77% 78% 78% $200 30% $- FY13 Backlog 10-Year Reinvestment Spending Additional Deferral FY23 Projected Backlog 20%

10 Key Takeaway #5 Continue to communicate strategic plans, such as the Investment Quadrant Chart, University Building Fund, and Sustainability Funding Plan to each campus to aid in projecting upcoming needs and capital planning.

11 Key Takeaway #6 Identify key metrics for monitoring performance toward future goals. The upcoming detailed analysis of the customer satisfaction survey could identify some areas for improvement. Sample Performance Dashboards Capital Investment (% Invested in Envelope/Mechanical) Change in Energy Consumption (% Change in total BTU s/gsf) Operating Budget (% difference budget vs. actual) Goal +5% -5% +/- 1% Planned Maintenance (% of facilities operating budget) 8%