Making the Case for Funding Deferred Maintenance Before it s Too Late

Transcription

1 Making the Case for Funding Deferred Maintenance Before it s Too Late Jim Kadamus Vice President Sightlines Cuba Plain Assistant Vice President for Budget Planning and Development University of Missouri System Walt Branson Vice Chancellor for Finance and Administration Missouri University of Science and Technology Bob Simmons Associate Vice Chancellor for Administration University of Missouri Kansas City

2 Changing the Conversation Space Understand how age profile drives capital and operational demands Capital Multiyear plans that align to mission & risk Operations Improve effectiveness & lower facilities overhead impact

3 Sightlines National and Regional Trends Speaker: Jim Kadamus, Vice President Company: Sightlines, LLC Date: October 6, 2014

4 CACUBO Region 49 Total Campuses 29 Public campuses 20 Private campuses 342,947,907 Total GSF 725,057 Students educated Included CACUBO States: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, South Dakota Purple states: Sightlines & CACUBO members Grey States: CACUBO but not Sightlines members

5 Campus Space and Enrollment 9% Growing Campus Enrollment CACUBO Average within Sightlines Database Percent Change of Enrollment & Space 8% 7% 6% 5% 4% 3% 2% 1% 0% Regional Space Growth Regional Enrollment Growth

6 Campus Space and Enrollment Percent Change of Enrollment and Space 12% 10% 8% 6% 4% 2% 0% Growing Campus Enrollment CACUBO Region By Constituent Group Comprehensive Institution Research Institution Small Institution % Space Growth Enrollment Growth

7 Database Construction Trends 60 Constructed Space Since 1880 Pre-War Post-War Modern Complex 12% Total Database GSF Constructed (Millions) % 8% 6% 4% 2% 0 0% Sightlines Database CACUBO (%)

8 The Aging Campus Square Footage by Age Category CACUBO Region Renovation Age 100% 90% 80% 70% Public Average Private Average % of Space 60% 50% 40% 30% 20% 10% 0% Under to to 50 Over 50

9 Capital Spending Public vs Private $6.00 Public Average Capital Investment into Existing Space CACUBO Region Private Average $5.00 $4.00 $/GSF $3.00 $2.00 $1.00 $ Annual Capital One Time Capital Average

10 Facilities Backlogs Continue to Rise Backlog $/GSF CACUBO Region $ Public Average Private Average 30% $ % $ % $/GSF $60.00 $40.00 $77 $80 $83 $86 $90 $94 $98 $82 $83 $84 $87 $93 $96 $101 15% 10% $ % $ % Backlog/GSF Percentage Change of Backlog

11 Facilities Operating Budgets Flat $4.50 CACUBO Operating Budget Average $4.00 $3.50 $0.24 $0.24 $0.26 $0.27 $0.27 $0.29 $0.30 $3.00 $/GSF $2.50 $2.00 $1.50 $1.00 $0.50 $3.43 $3.61 $3.59 $3.52 $3.49 $3.56 $3.52 $ Daily Service Planned Maintenance

12 Operating Budgets 14%+ Short of Inflation CACUBO Operating Budgets Public vs. Private $4.50 Public Average Private Average $4.39 $4.35 $4.00 $3.50 $0.23 $0.24 $0.26 $0.28 $0.29 $0.33 $0.34 $0.24 $0.24 $0.27 $0.26 $0.25 $0.24 $0.26 $3.00 $/GSF $2.50 $2.00 $1.50 $3.44 $3.53 $3.63 $3.54 $3.50 $3.57 $3.57 $3.41 $3.70 $3.56 $3.51 $3.47 $3.53 $3.47 $1.00 $0.50 $ Daily Service Planned Maintenance

13 Conclusions In the CACUBO region, campus enrollment is growing faster than campus space, increasing campus density Aging facilities are competing with faculty needs and financial aid for funding Capital funding has only just returned to historic levels following the recession, private universities in the region have surprisingly seen less growth Backlogs are growing and at public campuses reaching unsustainable levels Funding for facilities operations have not kept pace with inflation, meaning cuts in staffing and contracts

14 University of Missouri System Speaker: Cuba Plain, Assistant Vice President for Budget Planning and Development Institution: University of Missouri System Date: October 6, 2014

15 System Profile 29.5M GSF 1,500+ Buildings Total Operating Budget: $3B 24,000 Employees 75,272 Student Headcount 58,163 Student FTE $8.5B Facilities Replacement Value Land grant institution with four campuses, hospital & clinics, system administration, experiment station and farms

16 Changes and Challenges 34% growth in headcount and 42% growth in FTE students since FY2001 Legislative limits on tuition increases equal to CPI State operating appropriations down almost $30 million since FY2001 in nominal terms Flat nominal state operating appropriations since 2010 which resulted in a cumulative real loss of $300 million No new state capital appropriations since FY2008, minimal investment between FY2001 and FY2008

17 State Appropriations Over Time $550 $500 $450 $ in Millions $400 $350 $300 $250 $200 $150 $100 $50 $0 FY10 FY11 FY12 FY13 FY14 Actual Appropriation Received CPI Adjusted Appropriation Cumulative Difference

18 Funding Levels Fall Short $ in Millions $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 UM Annual M&R Spending by Sightlines Institutional Recurring Capital One time capital Sources Sightlines Recommended Annual M&R Target Backlog Stabilized Backlog Increases

19 Backlog of Need Increased by 57% $1, $1, Facilities Needs Backlog by Priority $1,317 M $ in Millions $1, $ $ $838 M $ $ $0.00 FY09 FY13 Critical Now Urgent < 1Yr Necessary 2 5 Yr Recommended 6 10 Yr

20 Facilities Condition by Campus UM System FCNI Rating of E&G Buildings 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Poor Condition Below Average Condition Fair Condition Good Excellent Condition 43% 38% 39% MU UMKC S&T UMSL 80%

21 Shaping Campus Policies

22 Predicting Future Condition 60% 50% FCNI Best Practice 0.30 FCNI 56% 40% 30% 41% 36% 39% 41% 20% 28% 26% 27% 10% 0% MU UMKC S&T UMSL FY 2014 FCNI INDEX FY 2023 PROJECTED FCNI INDEX

23 Potential Funding Sources State Bond Issue $200 million plan 15 Year financing $17.7 million annual debt service 50/50 Match Private gifts and State Funding Dedicated Recurring State Appropriation Student Facilities Fee $300 to $350 annual fee per student FTE

24 Projected Impact of $200M Assuming consistent investment from FY13 and $200M spent over 5 years $ UM Annual M&R Spending by Sightlines $ Discuss potential spending timeframe for $200M investment $80.00 $ in Millions $60.00 $40.00 $20.00 $ Annual M&R Renovation and Other Capital $200M Funding Impact Sightlines Recommended Annual M&R Target

25 Missouri University of Science & Technology Speaker: Walter Branson, Vice Chancellor for Finance and Administration Institution: Missouri University of Science and Technology Date: October 6, 2014

26 Campus Profile 2.7M GSF 165 Maintained Acres Founded 1870 Sightlines member since ,100 Students Leader in green: First US university to receive ISO certification for environmental management Environmental village

27 Smaller Buildings Than Peers STEM focus drive campus profile 90,000 80,000 70,000 60,000 50,000 Average Building Size Operating Costs by Building Size $1.00/GSF GSF 40,000 30,000 20,000 10,000 0 A B C D M S&T F G H I $3.00/GSF *Ozanne analytics

28 Space Profile Renovations and new construction are managing campus age % of Total Campus GSF 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Campus Age by Renovation Age Category 20% 20% 19% 29% 41% 42% 43% 29% 19% 25% 28% 24% 21% 10% 13% 17% Missouri S&T FY03 Missouri S&T FY08 Missouri S&T FY13 Peer Average Under to to 50 Over 50

29 Capital Profile Capital investments falling short of target $25.00 $20.00 Total Dollars in Millions $15.00 $10.00 $5.00 $ Institutional Recurring Capital One Time Capital Sources Target Need

30 Capital Profile Significant infrastructure spending for geothermal energy $25.00 $20.00 Total Dollars in Millions $15.00 $10.00 $5.00 $ Institutional Recurring Capital One Time Capital Sources Infrastructure

31 Historic Spending Mix Spending focused on bang for buck projects 5 Year Historical Investment Mix 35 Average Life Cycle 3% 17% % Years % 10 5 Envelope Space Systems Safety/Code 0 Envelope Systems Space Safety/Code

32 Total Backlog Recent investment curbs growth in infrastructure, Repair/Maint continues to grow $250 Backlog Growth Since FY03 $200 $ in Millions $150 $100 $50 $0 Backlog Maint/ Repair Backlog Modernization Backlog Infrastructure

33 Balancing Institutional Demands

34 University of Missouri Kansas City Speaker: Bob Simmons Associate Vice Chancellor, Administration Institution: University of Missouri Kansas City Date: October 6, 2014

35 University of Missouri Kansas City 5.1M GSF 149 Maintained Acres Founded 1933 Sightlines member since ,397 Students Engaged and Green: The President s Higher Education Community Service Honor Roll with Distinction. RecycleMania 2012 Grand Champion Winner.

36 Changing Campus Density 20% Density Factor Rate of Change 15% Strategy Statement: By 2020 we will grow enrollment to 20,000 and increase graduation rates 10% by ensuring student success through a small college experience as Kansas City s community engaged urban research institution, while leveraging our strengths in the visual and performing arts, life and health sciences and entrepreneurship. Change in Density Factor 10% 5% 0% 5% *Density Factor is measured in Users/100kGSF UMKC Change Peer Change

37 Age Shifts over Last 10 Years 100% 90% 80% Campus Renovation Age 14% 24% Buildings over 50 Life cycles of major building components are past due. Failures are possible. Highest risk % of Total Campus GSF 70% 60% 50% 40% 30% 20% 45% 18% 46% 21% Buildings 25 to 50 Major envelope and mechanical life cycles come due. Higher Risk Buildings 10 to 25 Short life cycle needs; primarily space renewal. Medium Risk 10% 0% 23% 10% UMKC '03 UMKC '13 Buildings Under 10 Little work. Honeymoon period. Low Risk Under to to 50 Over 50

38 Changing Funding Sources As state funding decreases, shifting toward creative use of bond funding $70 UMKC Capital History Sources $60 $50 $ in Millions $40 $30 $20 $10 $ State Federal Private Campus Bonds Other (PPP)

39 Capital Spending and Backlog Large infusions of capital have significant impact on backlog Backlog $/GSF $ $ $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Capital Spending vs. AR Backlog $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $ Capital $/GSF Backlog Maint/ Repair Capital Spending/GSF

40 Leaner Budget Than Peers $6.00 Daily Service Daily Service Over Time $5.00 $4.00 $/GSF $3.00 $2.00 $1.00 $0.00 A B C D UMKC F G H I J

41 Planned Maintenance Increased PM efforts has improved in house PM performance $1.80 $1.60 Planned Maintenance UMKC PM $1.40 $ / GSF $1.20 $1.00 $0.80 $0.60 $0.40 $0.31 $0.29 $0.20 $0.00 A B C D UMKC F G H I J Institutions ordered by tech rating $0.12 $0.13 $0.26 $ In House External

42 Driving Capital Investment Strategy SAMPLE DATA Program Value

43 Strategies to Address Deferred Maintenance Strategy 1: Change the conversation throughout higher education. Educate policy makers about the impacts of the space profile, capital plans that are aligned with the institutional mission and risk, and improving operating effectiveness while lowering costs. Strategy 2: Set capital priorities to address the deferred maintenance needs in aging buildings that are determined to be critical to the mission and programmatic needs of universities. Strategy 3: Consider eliminating or replacing aging space with new modern facilities, especially buildings with certain construction vintages where poor quality construction was prevalent. Sometimes less is more when it comes to addressing aging buildings with lots of deferred maintenance.

44 Strategies to Address Deferred Maintenance Strategy 4: New construction must support the mission of the university and support the future program needs of each university. Strategy 5: Make annual stewardship (keep up) investment that addresses building components as they come due a priority at every campus. The more a campus keepsup with life cycles as they come due, the less deferred maintenance grows. Strategy 6: Institute facilities operational practices that are proactive at extending the life cycles of key expensive building components like HVAC, electrical systems and roofs. Proactive maintenance is not only a good idea when it comes to managing university facilities, it will save money in the long run.