Minutes are not final until approved by the Board of Regents at the June 2010 meeting

Transcription

1 Minutes are not final until approved by the Board of Regents at the June 2010 meeting BOARD OF REGENTS and its INVESTMENT AND FACILITIES COMMITTEE NEVADA SYSTEM OF HIGHER EDUCATION Building D, Room 101 College of Southern Nevada 6375 West Charleston Boulevard, Las Vegas March 4, 2010 Members Present: Other Regents Present: Others Present: Mr. Michael B. Wixom, Chair Mr. William G. Cobb, Vice Chair Mr. Cedric Crear Mr. Ron Knecht Dr. Raymond D. Rawson Dr. Jason Geddes Mr. James Dean Leavitt Dr. Jack Lund Schofield Mr. Daniel J. Klaich, Chancellor Dr. Maurizio Trevisan, EVC and CEO, HSS Dr. Jane Nichols, Vice Chancellor, Academic & Student Affairs Dr. Mike Reed, Vice Chancellor, Finance Dr. Marcia Turner, Vice Chancellor & COO, HSS Mr. Scott Wasserman, CEO & Special Counsel to the Board Ms. Crystal Abba, Assistant Vice Chancellor Mr. Hank Stone, System Counsel and Director of Real Estate Planning Ms. Ruby Camposano, NSHE Mr. John Kuhlman, NSHE Dr. Michael D. Richards, President, CSN Dr. Stephen Wells, President, DRI Dr. Fred Maryanski, President, NSC Dr. Maria C. Sheehan, President, TMCC Dr. Neal Smatresk, President, UNLV Dr. Carol A. Lucey, President, WNC Ms. Shari Lyman, CSN-NFA Mr. James Matovina, CSN-NFA Mr. Joseph Alexander, CSN Ms. Alene Andersen, CSN Ms. Diana Anson, CSN Dr. Sondra Cosgrove, CSN Mr. Richard Hinckley, CSN Ms. Beverly Jackson, CSN Ms. Ann Johnson, CSN Ms. Shirley Johnston, CSN (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 1 of 17

2 Investment Committee Minutes Page 2 Others Present: (continued) Ms. Melise Leech, CSN Ms. Sheri Payne, CSN Mr. Terry Pippin, CSN Ms. Abigail Rakvica, CSN Dr. Cleve McDaniel, DRI Ms. Jacqueline Lemback, GBC Ms. Lynn Mahlberg, GBC Ms. Julie Smith, GBC Dr. Lesley DiMare, NSC Mr. Cesar Benitez, TMCC Mr. Kyle George, UNLV-GPSA Ms. Christian Hardigree, UNLV Dr. Cecilia Maldonado, UNLV Ms. Sandra Owens, UNLV Mr. Michael Sauer, UNLV Mr. Bill Wood, UNLV Ms. Karen Hinton, UNCE Mr. Greg Wilson, UNCE Mr. Gabriel Matute, UNR-The Nevada Sagebrush Mr. Frank Flavin, UNR Dr. Marc Johnson, UNR Mr. Ron Zurek, UNR Ms. Connie Capurro, WNC Mr. David Breiner, Cambridge Associates Mr. Mark Bennett, Commonfund {via telephone} Mr. Jeff Long, Commonfund {via telephone} Mr. David Main, Commonfund Mr. Scott Nash, JNA Consulting Group, LLC Mr. Curt Carlson, S H Architecture Faculty senate chairs in attendance were Dr. Alan Gertler, DRI; Dr. Frank Daniels, GBC; Dr. Gregory Robinson, NSC; Mr. Jim Lowe, System Administration; Mr. Scott Huber, TMCC; Dr. John Filler, UNLV. Student body presidents in attendance were Ms. Paulette Batayola, GBC; Ms. Amsala Alemu-Johnson, NSC; Mr. Adam Porsborg, TMCC; Ms. Jessica Lucero, UNLV; Mr. Eli Reilly, UNR. Chair Wixom called the meeting to order at 8:30 a.m. with all members present. 1. Approved-Minutes The Committee recommended approval of the minutes from the December 3, 2009, meeting (Ref. IF-1 on file in the Board office). Regent Knecht moved approval of the minutes from the December 3, 2009, meeting. Regent Crear seconded. Motion carried. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 2 of 17

3 Investment Committee Minutes Page 3 2. Approved-Asset Allocation and Investment Returns The Committee recommended approval for the operating pool cash administered under the Commonfund Treasury Access to be equally allocated, 50%-50%, between the State Street Institutional Government Money Market Fund and the JP Morgan Prime Money Market Fund. Mr. David Breiner, Cambridge Associates, referred to page i in the discussion materials (on file in the Board office). He reported the performance for the endowment pool resulted in a solid year. The returns for the fourth quarter 2009 were 3.3%, and for the full year was 23.5%. This was in line with the policy benchmark, peers of a similar size and ahead of what a 70%-30% stock bond portfolio would have delivered. In short, the strength was driven by equities, broadly speaking, and real assets. There was also an advantage from the manager performance in fixed income and the absolute return categories, which offset the manager underperformance in international equities. Mr. Breiner continued that page ii showed the operating pool returns at 1.7% in the fourth quarter 2009, and 14.2% for the full year. These returns were ahead of the policy benchmark for both periods. Equities, absolute returns and hedge funds did the best. There was also added performance from the fixed income manager, namely PIMCO. Mr. Breiner referred to the information/action items on page 1. The only action item was the allocation of funds of the newly opened Commonfund Cash account administered under the Commonfund Treasury Access. Mr. Breiner indicated that, as discussed at the December 2009 meeting, Commonfund was closing the Government Securities Fund, which was the fund that the operating pool cash account was invested in. At that meeting the Committee approved to close the Government Securities account and transfer the funds to the Commonfund Treasury Access. Cambridge Associates is now recommending allocating the funds between two of the five funds offered in the Commonfund Treasury Access program: 50% in the State Street Government Money Market Fund, and 50% in the JP Morgan Money Market Fund. Mr. Breiner explained that the rationale behind the split is diversification. The two funds are a good combination of an ultra-safe, very low yielding, and a very safe slightly higher yielding prime money market fund, which will bring a good balance to the pool. All money market funds presented are rated AAA, and the underlying holdings are rated AAA or A- 1/P-1, or equivalent, as of December 31, Regent Knecht understood that the recommendation to allocate the money in two funds was driven by the liquidity issue that NSHE had previously experienced. The funds are all top rated and it is not unreasonable to diversify between prime corporate and the government sector. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 3 of 17

4 Investment Committee Minutes Page 4 2. Approved-Asset Allocation and Investment Returns (continued) Regent Knecht moved approval for the operating pool cash administered under the Commonfund Treasury Access to be equally allocated, 50%-50%, between the State Street Institutional Government Money Market Fund and the JP Morgan Prime Money Market Fund. Regent Cobb seconded. Motion carried. Mr. Breiner stated concern about the lagging benchmark and underperformance of the Commonfund Emerging Markets Fund indicated on page 24. Right now there is no panic or recommended action. The top set of numbers shows the benchmark was exceeded only two out of ten years, and it lagged considerably last year but so did many other high quality emerging market managers. The bottom set of numbers indicate that the benchmark is behind for the compounded periods for 10 years. When comparing the relative performance over the compounded periods of two years and greater, it has not lagged by much - between 1 and 2 percentage points net of fees, and lagged over the 10 years by less than a percentage point. More importantly, the volatility of this fund is lower than the benchmark, which is a good thing, and should be considered when looking at the underperformance. Regent Knecht asked if the fund, on a prospective basis, has an expected return that is on the efficient risk reward frontier. Mr. Breiner replied that, historically, that has more or less been the case. Regent Knecht stated that past performance is no guarantee of future returns. The decisions the Committee makes when allocating funds and investments is a prospective one and should be done with the belief that it is on the efficient risk reward frontier. Regent Knecht felt satisfied that this meets those criteria. Mr. Jeff Long and Mr. Mark Bennett, Commonfund, joined the meeting via telephone. Mr. Long explained that the fund is a fund-of-funds with three managers, two of which are broad-based emerging markets managers: The Boston Company Asset Management, LLC, is a valuation biased manager; London based F&C Fund Management, Ltd. runs a more style agnostic core-type emerging markets mandate. Global Situational Investors, a Hong Kong based Asia ex Japan manager, has been in the fund and covers most of the emerging markets out of Asia. Mr. Long reported that the objective is to have intelligent stock picking within the fund and to structure it so that it adheres to a point of view that Commonfund has had for some years, which is more of an Asia bias, hence GSI and the fund. A change was made in the fund last year when F&C was brought in and GMO was (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 4 of 17

5 Investment Committee Minutes Page 5 2. Approved-Asset Allocation and Investment Returns (continued) taken out. The point was to move away from a value bias, quantitative-type manger and progress to a more core-type of structure. Chair Wixom asked if Commonfund was moving away from an Asia bias towards other emerging markets. Mr. Bennett said Commonfund continues to maintain a bias in the portfolio toward Asian countries and stocks. Going forward there will be more discrimination. Potential alpha to portfolios will be enhanced through a top-down and bottom-up view. From a top-down perspective, it is felt the Asian countries are in a better fiscal position to sustain economic growth. The currencies of those countries are in much stronger financial positions compared to other areas of the world. Chair Wixom observed that overall performance for this fund lagged over the past few years. Mr. Bennett explained that the underlying managers were sensitive to valuation in the portfolio, which has generally provided a return stream to outperform in down markets and underperform in up markets. Recent performance was lost in very strong markets on the up-side, primarily in , relative to the index, and it lagged to other managers. However, it paid off in 2008 when the market was down. Going back to the early 1990 s there were eight calendar years that the markets were negative and the portfolio outperformed in six of those years. There was also seven years where the index returned greater than 30%. It underperformed in all but one of those years, so down side protection was traded for not keeping up in very strong momentum driven up markets. Beyond those two years the index returned between 0% and 30% and, in those environments, outperformed in both of those years. Historically, it generally added value in periods of downward volatility. Chair Wixom asked about the dollar being weak against Asian countries and strong against European and other emerging markets. Mr. Bennett agreed and felt that GDP growth would be greater in Asia because it can sustain equity markets for a period of time. Regent Knecht asked about the Asia bias being related to the Asian emerging market countries having positive balances of trade with the U.S. and other parts of the world. Mr. Long said it is a factor. Mr. Bennett said the exposure that the Hong Kong manager is offering is more in businesses that have a strong foothold in the domestic areas of their economies. There is no investment in companies relying on exports to the U.S., but more on a rebalancing of underlying economies towards domestic demand and consumption. Regent Knecht asked about the health and prospects of the Japanese economies. Mr. Bennett replied that Japan has declined significantly as an in-market. China is the stronger market. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 5 of 17

6 Investment Committee Minutes Page 6 2. Approved-Asset Allocation and Investment Returns (continued) Regent Knecht asked to what extent the bias was predicated on the growth of China. Mr. Bennett said it is based on a continuation of some form of sustainable growth, be it 8% or 9% is debatable. In a relative sense the attractiveness of those opportunities are greater in Asia than other parts of the world. Regent Knecht asked about the consequence of falling to 4% or 5%. Mr. Long indicated that there would be some rebalancing in the portfolio. Mr. Bennett said the overweight to Asia is approximately 6 to 7 percentage points above the index. It will not drive the overall exposure in the portfolio. There is still a sizeable percentage of the portfolio invested outside of China. Regent Knecht asked if there was a non-fund-of-funds alternative and requested a positive rationale to embrace the fund-of-funds option. Mr. Breiner responded that there are a number of options. One potential positive to fund-of-funds could be portfolio construction skills, though that is difficult to assess. 3. Information Only-Operating Pool Update Ms. Ruby Camposano, Director, Banking & Investments, reported the most current balance of the reserve account of the operating pool fund. Ms. Camposano reported that the operating pool reserve as of Tuesday, March 2, 2010, was negative $1.5 million. Chair Wixom reminded the Committee that it was once negative $77.6 million. Chair Wixom stated that allocations from the operating pool reserve were suspended but there have been questions about resuming them. He felt it was better to wait. Regent Knecht thought the conservative method would be to wait until the reserve is in positive territory. Regent Knecht was hoping that the Committee, staff and consultants would revisit a thorough and complete policy review of the management of the endowment and operating funds and make a watershed policy decision on whether to continue in an active direction or go to a more passive index-type stance. He requested to take up the matter and make a timely decision at the next meeting. Chair Wixom asked that this issue be included on the agenda for the next meeting. 4. Information Only-Report from JNA Consulting Concerning Possible NSHE Bond Refinancing Mr. Scott Nash, JNA Consulting Group, LLC, presented information relating to bond refinancing options, bond redemption provisions, NSHE bond refunding criteria, the call provisions on outstanding bonds and bond restructuring options (Ref. IF-4 on file in the Board office). Mr. Nash explained that the Board of Regents approves bond issues from time to time for various construction projects which are paid over a 20 to 30 year period. Because interest rates go up and down when bonds are issued, the rate may be (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 6 of 17

7 Investment Committee Minutes Page 7 4. Information Only-Report from JNA Consulting Concerning Possible NSHE Bond Refinancing (continued) high or low. Bonds are sold when the money is needed for a project. Most bonds have a 10 year call provision meaning that they cannot be called, prepaid or refunded for 10 years. That provision is generally put in when the bonds are sold and results in a lower initial interest rate on the bonds. Mr. Nash reported that the NSHE Board has done two types of refunding in the past. One is a current refunding where the bonds have passed their call date and are currently callable and, like refinancing, money is borrowed at low rates and that money is used to pay off the old bond at higher rates and pocket the difference with interest rate savings. The other type of refinancing is called advance refunding where the bonds are refunded ahead of the 10 year call provision. The issuer borrows money at interest rates lower than the outstanding bonds and uses the proceeds to fund a bond escrow account. The bond escrow account remains in place until the call date, at which time the escrowed proceeds are used to pay off the outstanding bonds. A low interest rate is locked in, which effects the refinancing. Federal tax law permits one opportunity to do the advance refunding. There is a certain interest rate environment for it to work; relatively low long-term interest rates for borrowing the money and somewhat higher interest rates on the short-term where the money will be invested. Mr. Nash continued that the current long-term interest rates are favorable. However, the reason JNA has not suggested refunding the NSHE bonds for interest savings is because of the outstanding debt portfolio and the call provision on the outstanding debt. Chair Wixom observed that there was no particular reason to do any funding at this time because there will be no material savings. Mr. Nash agreed that there would be no advantage. Regent Knecht asked about seeing an inverted yield curve emerge regarding advanced refunding. Mr. Nash said that would be desirable. Regent Knecht said the 10 year treasury is remarkably low by historic standards, but the.25 overnight yields are even lower relative to historic short-term yields. Mr. Nash added that as soon as the Federal Reserve begins raising interest rates it should be looked at again. The longer the time, the more inefficient it is. Time changes the calculation. Chair Wixom asked that another column for transaction costs be added to the report and requested that this be an ongoing agenda item. Dr. Mike Reed, Vice Chancellor, Finance, will work closely with JNA to have the most current information. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 7 of 17

8 Investment Committee Minutes Page 8 5. Information Only-Fire Science Academy Mr. Ron Zurek, Vice President, Administration & Finance, UNR, presented a progress report on the Fire Science Academy (Ref. IF-5 on file in the Board office). Mr. Zurek reported that in February 2009, the Board approved UNR to pursue the sale of the Fire Science Academy site to the State of Nevada for the Department of the Military, for $10 million, for construction of the new Carlin Readiness Center. The Board also supported the notion of co-location of the Readiness Center with the Fire Science Academy, both operationally and financially, if possible. A task force chaired by former U.S. Senator Richard Bryan was convened, with membership consisting of representation from the Nevada National Guard, Senator Harry Reid s office, the Elko County commission, private business, the State Public Works Board and the State Lands Division. Both Regent Geddes and Chair Wixom were consulted. Regent Geddes attended the task force meeting. Mr. Zurek continued that the task force has been working through a myriad of details associated with two areas: First, the terms of the Fire Science Academy site sale and removing the education deed restriction on the property. Second, there is also dialogue about developing joint use plans between the National Guard and the Fire Science Academy, including how the O&M might eventually be allocated, and in what form that request will take at the next Legislature. Mr. Zurek indicated that there are also issues not yet finalized: the terms of the lease back from the National Guard for the Fire Science Academy, and closure responsibilities and costs - should the FSA program need to shut down sometime in the future. The Nevada National Guard is engaged in dialogue with the National Guard Bureau in Washington, D.C. Timing is important to match federal military construction dollars with state dollars that have already been appropriated and are being held by the IFC. It is likely that a recommendation to sell the Fire Science Academy to the Nevada National Guard will be proposed at the June 2010 Board meeting. Mr. Zurek noted that concurrent with the Carlin Readiness Center concept, there has been a Stakeholder s Financial Sustainability Plan in place since approved by the Board at the February 2009 meeting. The goal of that plan was to make sure that the Fire Science Academy did not incur additional operating losses while it sought longer-term, stable, federal funding for the Academy. The plan included tuition increases for those attending the Fire Sciences Academy, surcharges on training, vendor support and corporate giving. To date, even though there continues to be industry consolidation and some reduction in the number of customers, and notwithstanding the general economic environment, people have stepped up and UNR stakeholder commitments are on schedule. Additionally, the FSA s performance continues to be on plan. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 8 of 17

9 Investment Committee Minutes Page 9 5. Information Only-Fire Science Academy (continued) Mr. Zurek felt the key to the long-term viability of the Academy s program at that site is dependent on stable federal funding. In summary, Mr. Zurek believed the sale of the Fire Science Academy site to the state, for the benefit of the Nevada National Guard, has a very high probability. Whether the Academy program remains viable is dependent upon this issue of long-term federal funding. The two paths are separate, but obviously related. Chair Wixom explained that there is a co-location proposal to sell the Fire Science Academy to the National Guard. There appears to be federal funding for the sale but there is still the matter of final approval. Mr. Zurek clarified that there is a combination of state funding to be matched by federal funding to complete the $10 million sale. The state funding was approved in the 2009 session of the Legislature and appropriated to the IFC. The IFC will only release those funds when an acceptable plan is presented. Chair Wixom noted that the Nevada National Guard will then use the state funds, matched by the federal funds, to purchase the facility. Assuming that the System continues to operate the Fire Science Academy, a lease will be required with the Academy as the lessee, and the Nevada National Guard as the lessor. Mr. Zurek concurred and added that the terms of the lease will be presented to the Board at a later time, most likely after the site sale. Chair Wixom added that another issue to be negotiated as part of the lease would be the remediation costs when the Fire Science Academy is closed. Chair Wixom asked if the federal funds required for the ongoing viability of the Academy are federal acquisition funds in connection with the acquisition of the Academy or operational funds for the operation of the Academy. Mr. Zurek said they are net new programmatic funds, which will support the operational costs of the Academy. Chair Wixom observed that there are two separate distributions from the federal government. The first distribution is for the National Guard to acquire the Academy and the second distribution consists of operational program funds to allow for the continued operation of the Academy. Mr. Zurek agreed and reported that the first distribution will come out of the federal military construction budget. Any second distribution will come from the Department of Energy or Homeland Security, or a combination thereof. Chair Wixom indicated that there is a relatively high likelihood that there may be access to the first assignment of federal funds, but was not sure about the second portion. Mr. Zurek replied that the probability of receiving the second portion of federal funds has been improving weekly of late, and further detail may be available for either the April or June 2010 Board meeting. Mr. Zurek added that many stakeholders feel that even without the second distribution of federal funds there is life in the First Science Academy, but a bona fide analysis has not been made. Chair Wixom stated that it should not be presumed that the Fire Science Academy will continue operation without the second allotment of federal funds. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 9 of 17

10 Investment Committee Minutes Page Information Only-Fire Science Academy (continued) Mr. Daniel J. Klaich, Chancellor, said the first share of funds was appropriated for the construction of a new National Guard armory in Elko. Federal approval is required to re-direct those funds to the Carlin site. He understood that, on a current basis, the Academy is not running at an operating deficit. Mr. Zurek said for fiscal year ending 2009 there was a $156,000 surplus, excluding state O&M and capital debt repayment. Since the start of the FSA financial reporting, O&M and capital debt repayment have been below the operating results line, which entail direct Academy revenues versus incurred direct costs. Upon a sale, some of the state O&M will be redirected to the State of Nevada for the Department of the Military. Regent Cobb asked if there would be an impact on students if the second share of funds is assigned. Mr. Zurek replied that should the $10 million sale go through, President Glick had previously testified to the Board, and the Legislature, that the proceeds would be used to reduce the impact on students. Chancellor Klaich confirmed that was consistent with the way President Glick testified to the Senate Finance Committee. Regent Geddes added that the Guard made it clear that they are completely committed to locating on the site. The $10 million will buy down the debt issues at the facility. Regardless of what the Guard does, the decision will be impacted by what the Fire Science Academy will do going forward. The decision should be forthcoming in December Chair Wixom felt the issue has to be resolved this year. 6. Approved-Buyout of U.S. Governments Partial Ownership of Property in Stead, Nevada-UNR The Committee recommended approval for UNR to pay the required abrogation fee of $118,830 to the United States of America to obtain full, unrestricted title to 7.76 acres (APN ) in Stead, Nevada (Ref. IF-6 on file in the Board office). Mr. Zurek reported that the funds for the buyout will come from the UNR unrestricted property acquisition fund. The reason for the buyout is that there is a requirement in the deed which states that if the property is not being used for educational purposes, then an abrogation fee is to be paid to the U.S. Government or the property reverts to the federal government. The property is appraised at $510,000. By paying the $118,830, equity in the amount of $371,000 is preserved. There is another 38 acre parcel adjacent to the 7.76 acres and the longterm plan is to put these two parcels together. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 10 of 17

11 Investment Committee Minutes Page Approved-Buyout of U.S. Governments Partial Ownership of Property in Stead, Nevada-UNR (continued) Regent Cobb moved approval for UNR to pay the required abrogation fee of $118,830 to the United States of America to obtain full, unrestricted title to 7.76 acres (APN ) in Stead, Nevada. Regent Crear seconded. Motion carried. 7. Approved-Purchase Request 4955 Energy Way, Reno, Nevada, for the University of Nevada Cooperative Extension, Washoe County Office UNR The Committee recommended approval for the University of Nevada Cooperative Extension to purchase real property located at 4955 Energy Way in Reno, Nevada, for $885,000.00, for use as the Cooperative Extension Washoe County Office (Refs. IF-7a; IF-7b (Progress Drawing) on file in the Board office). Regent Cobb left the meeting. Dr. Marc Johnson, Executive Vice President and Provost, UNR, explained that the Cooperative Extension Washoe County office was currently part of the Mill & McCarran property that was sold. Now, the flood project would like to have the building cleared, so the Cooperative Extension has to move to another location. Provost Johnson reported that a building large enough to meet the needs of the Cooperative Extension has been located. Funds for the building will be provided from Washoe County special revenue funds collected for Cooperative Extension operations. These funds can only be expended in Washoe County for Cooperative Extension programs and facilities. Current appraisal is $950,000 and the Phase I Environmental Report has been completed. Regent Knecht moved approval for the University of Nevada Cooperative Extension to purchase real property located at 4955 Energy Way in Reno, Nevada, for $885,000, for use as the Cooperative Extension Washoe County Office. Regent Rawson seconded. Motion carried. 8. Approved-Charleston Campus: Dedicated Right Turn Lane Easement CSN The Committee recommended approval of an easement to allow the City of Las Vegas (at their expense) to construct a dedicated right turn lane at the intersection of Torrey Pines Drive and Oakey Blvd. (Ref. IF-8 on file in the Board office). Dr. Michael D. Richards, President, CSN, said this is a request for approval for an above-ground easement providing a right turn lane near the fire station which is (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 11 of 17

12 Investment Committee Minutes Page Approved-Charleston Campus: Dedicated Right Turn Lane Easement CSN (continued) under construction to the south of the campus. The city did a survey of traffic in the area and recommended that a right-turn lane be constructed to ease traffic flow. Ms. Sherri Payne, Associate Vice President, Facilities, CSN, explained that when the fire station was being constructed, the City of Las Vegas asked CSN to provide an easement for a right-hand turn lane on the corner of Oakey and Torrey Pines. The traffic counts indicate that, for safety and congestion reasons, a righthand turn lane will be needed for traffic heading west on Torrey Pines. This easement is located within the land lease already established between CSN and the City of Las Vegas to construct the new fire station. It will be approximately 10 feet wide by 150 feet long so that at a future date the right-hand turn lane can be constructed. The City of Las Vegas will assume the cost. Regent Cobb returned to the meeting. Regent Rawson moved approval of an easement to allow the City of Las Vegas (at their expense) to construct a dedicated right turn lane at the intersection of Torrey Pines Drive and Oakey Blvd. Regent Knecht seconded. Motion carried. 9. Approved-Land Lease with the Bureau of Land Management for the Northwest Campus - CSN The Committee recommended approval for CSN to submit a long-term lease application to the Bureau of Land Management (BLM) for the Northwest Campus property (Ref. IF-9 on file in the Board office). President Richards stated that Senate Bill 940 in the U.S. Senate would provide a land patent transferring approximately 40 acres to the System and CSN for the development of the Northwest Campus. The city has approached CSN to apply for a BLM lease, which can be done concurrently with the action in the Congress. Mr. Richard Hinckley, General Counsel, CSN, said this is a backup alternative to the federal legislation. It is a lease application. The city would relinquish the lease they currently have to CSN s favor. It provides the opportunity to have this processed and then any and all decisions will be brought back to the Board. This is not taking any action that binds the Board in any way relative to the actual construction going forward. The reason for this request is because the federal government requires bringing a resolution from CSN s governing body indicating that they are aware and agree to have the lease processed. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 12 of 17

13 Investment Committee Minutes Page Approved-Land Lease with the Bureau of Land Management for the Northwest Campus - CSN (continued) Regent Rawson moved approval for CSN to submit a long-term lease application to the Bureau of Land Management (BLM) for the Northwest Campus property. Regent Knecht seconded. Regent Geddes cautioned staff not to spend too much time or resources in developing a campus until there is a longer term vision for financing. Motion carried. 10. Approved-Update Space Study Working Group The Committee recommended approval of the second quarterly report of the activities of the Space Study Working Group, tasked with developing a recommendation for space utilization and inventory metrics. In so doing, the Committee concurs with the Working Group s recommendation to simplify the utilization metrics by seeking to report the number of hours per week rooms are used, and how full the rooms are when in use. In addition, the Committee advises the Space Study Working Group to include the times of day the rooms are used and the days of the week the rooms are used (Ref. IF-10 on file in the Board office). Vice Chancellor Reed said that this is an update on the Space Study Working Group to provide new metrics on how space is used; to develop those metrics to be more easily transparent and understood; to make sure all the activities being utilized by System facilities are included; to make sure there is a connection in such ways that allow people to understand utilization of the facilities by days of week and time of day; and from that to further develop metrics that would allow an understanding of utilization rates in all facilities within the System and to use it as a benchmark to build construction budgets. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 13 of 17

14 Investment Committee Minutes Page Approved-Update Space Study Working Group (continued) Regent Rawson moved approval of the second quarterly report of the activities of the Space Study Working Group, tasked with developing a recommendation for space utilization and inventory metrics. In so doing, the Committee concurs with the Working Group s recommendation to simplify the utilization metrics by seeking to report the number of hours per week rooms are used, and how full the rooms are when in use. In addition, the Committee advises the Space Study Working Group to include the times of day the rooms are used and the days of the week the rooms are used. Regent Knecht seconded. Regent Knecht said the Audit Committee initiated a series of audits on space utilization and facilities and the problem was they did not have good metrics. The important thing to do is assure the public and the Legislature that space is being optimally used and there are no underutilized or unused areas at the facilities. It appears the motion will help measure, report and take action to the extent that it is found that there are opportunities to minimize and reduce costs. Motion carried. 11. Information Only-2011 Capital Improvement Program Proposal Mr. Daniel J. Klaich, Chancellor, updated the Committee regarding the 2011 Capital Improvement Program. Chancellor Klaich stated that capital budgets are funded from two sources: the surplus from the prior years budget and capacity from the state s bonds. Unfortunately, there are no funds from either of those sources. With all the discussions, there has been no significant time spent on these talks because of the lack of funds and the lengthy list of projects approved by the Board last year that were not funded. There will be an additional work product brought to the Board in April Regent Rawson said that the Legislature sensed this was a growing problem 15 years ago. Going forward with the budget there should be a dedicated way of preserving a capital improvement fund. It will never happen if it is not proposed and it cannot be dismissed for another six to eight years. It sends the entire university system in another direction. It is important to make a proposal and have the Legislature actively debate the problem. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 14 of 17

15 Investment Committee Minutes Page Information Only-2011 Capital Improvement Program Proposal (continued) Chair Wixom expressed concern with the deferred maintenance issue and the deterioration of the capital plan. It is crucial to preserve the health and integrity of the buildings. In spite of the budgetary problems it is a priority not to lose sight of deferred maintenance. It should be kept as a priority. 12. Approved-Update, Life Cycle Cost Analysis Implementation Procedure The Committee recommended approval of the status report concerning the recommendation for a two-phased approach to implement life cycle cost analyses for new buildings requested during the biennial capital budget cycle. In so doing the Committee concurs with the institutional recommendations to pursue the following methodology: (1) to seek concurrence from the State Public Works Board to update its existing Project Cost Estimating System in order to provide baseline life cycle cost analysis during the pre-award stage of the new building request. The Committee understands that the drivers for the estimating system will require further refinement during the current budget cycle and in the absence from concurrence with the State Public Works Board, institutions agree to provide the Board with similar information; and (2) to instruct the institutions to work with the System Office to secure a third-party solution for consideration by the Board to obtain the detailed life cycle cost analysis during the post-planning stage of the new building, which will be effective beginning with the 2013 capital budget cycle (Ref. INV-12 on file in the Board office). Vice Chancellor Reed stated that with real dollars the life cost analysis would be built into everything that is done, at two levels: 1) software that would track, in detail, the number of systems and sub-systems within a building for the deferred maintenance needs; and 2) working with the State Public Works Board to build in baseline estimates for life cycle costing. Working with the State Public Works would help detail life cycle cost estimates once buildings are planned and designed. Regent Knecht asked if there would be a simple one or two-page description detailing the quantitative methodology for arriving at these life cycle costs. Vice Chancellor Reed said an example could be presented at the June 2010 meeting. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 15 of 17

16 Investment Committee Minutes Page Approved-Update, Life Cycle Cost Analysis Implementation Procedure (continued) Regent Crear moved approval of the status report concerning the recommendation for a two-phased approach to implement life cycle cost analyses for new buildings requested during the biennial capital budget cycle. In so doing the Committee concurs with the institutional recommendations to pursue the following methodology: 1) to seek concurrence from the State Public Works Board to update its existing Project Cost Estimating System in order to provide baseline life cycle cost analysis during the pre-award stage of the new building request. The Committee understands that the drivers for the estimating system will require further refinement during the current budget cycle and in the absence from concurrence with the State Public Works Board, institutions agree to provide the Board with similar information; and 2) to instruct the institutions to work with the System Office to secure a third-party solution for consideration by the Board to obtain the detailed life cycle cost analysis during the post-planning stage of the new building, which will be effective beginning with the 2013 capital budget cycle. Regent Cobb seconded. Chair Wixom explained that this is part of an ongoing effort by the Committee and the Board to improve the analysis of building requests. It is one step, in an ongoing process, to give more information to the Committee to make informed decisions. It is not a commitment to a specific methodology. Regent Knecht stated his support for this and requested that, in addition to the detail or a summary of the methodology involving particular assumptions, and especially discount rates, he would like to know what the basic assumptions are and what values are being used. Vice Chancellor Reed said that information will be included in the material for the next Board meeting. Motion carried. (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 16 of 17

17 Investment Committee Minutes Page Information Only Real Property Reports Vice Chancellor of Finance, Mike Reed, advised the Committee of the issuance of the initial Real Property Report of NSC, and updates to the Real Property Reports of UNLV, UNR and CSN (Ref. IF- 13 on file in the Board office). Vice Chancellor Reed said the reference material contained the regularly scheduled real property report updates for NSC, UNLV, UNR and CSN. 14. Public Comment None. 15. New Business None. The meeting adjourned at10:18 a.m. Prepared by: Submitted for approval by: Nancy Stone Administrative Assistant IV Scott G. Wasserman Chief Executive Officer & Special Counsel to the Board of Regents (INVESTMENT AND FACILITIES COMMITTEE 06/03/10) Ref. IF-1, Page 17 of 17