Deferred Maintenance and Renewal Program Briefing

Transcription

1 Deferred Maintenance and Renewal Program Briefing Business and Finance December

2 Briefing Overview Nature of the challenge How we compare Progress to date Remaining barriers What s next? 2

3 Context What is the nature and magnitude of the challenge? 3

4 OSU Current Status ~ Five-Year Window All Facilities, all Locations Total Buildings (all locations) Gross square feet 28.4M 29.3M 31.4M 32.3M 33.1M Replacement cost (no utility infrastructure included) $4.7B $5.0B $5.8B $6.2B $6.7B Average building age 27.9 yrs 27.8 yrs 30.1 yrs 29.3 yrs 30.8 yrs Buildings >50 years of age

5 Estimated Backlog of Need Total Campus FY2003 FY2004 FY2005 FY2006 FY2007 Deferred Maintenance Deferred Renewal $246M $294M $241M $257M $260M $286M 1 $275M $337M $462M $467M 1 Infrastructure $302M $297M $288M $276M $267M 1 TOTAL $842M $813M $882M $998M $1B 1 GSF 28,457,710 29,307,388 31,406,462 32,336,955 33,114,871 The total backlog includes all OSU identified need in: Academic Space, Academic Support, Auxiliary & Self Funded Units, Other Locations, and Infrastructure. Infrastructure need was identified in FY2006; historical needs were estimated using the project spending profile (need decreased as utility/infrastructure projects were completed) Totals across all five years have fluctuated as project work has been completed, spaces have been renewed, and new needs have been identified. The addition of GSF also adds to the total need on campus. Estimated backlog are previously reported and have not been adjusted for inflation. 1 Trend data used pending submission by other University units. 5

6 Reinvestment Need Estimate of 2007 Backlog FY2006 Deferred Maintenance Deferred Renewal Total DM/DR Academic and Academic Support Space $130M $221M $351M Includes FOD-supported General Fund space for benchmark comparability totals app. 15.5M GSF. Auxiliary/Self Funded Units Regional and Extended Campuses $99M $43M $224M $36M $323M $79M These categories include athletics, hospitals, student affairs, T&P, regional and extended campuses, etc. - totals app. 17.6M GSF. Infrastructure n/a n/a $267M Includes all Infrastructure Renovation/Replacement costs identified in the Master Plan GRAND TOTAL $272M $481M $1B 1. Trend data was used to estimate current total backlog pending submission of DM information by other University units. 2. Totals were extrapolated from 06 data based on category percentages of the total. 3. Data collection and analysis methodology currently varies by unit. FOD must make many assumptions to align reported data from units with university wide metrics. 4. Data for General Fund facilities is based on life cycle methodology (as opposed to direct audits) which may not capture all deferred maintenance. 6

7 How do we compare with other institutions? 7

8 Sightlines Survey Peer average: $60.75/GSF OSU: $32.28/GSF Infrastructure Deferred Renewal Deferred Maintenance Ohio State Peer Institutions Indiana University Bloomington IUPUI Iowa State University Miami University of Ohio Michigan State University Purdue University The Pennsylvania State University University of Illinois-UC University of Minnesota-Twin Cities 8

9 Comparisons with Benchmark Institutions Age of Facilities Ratio 14 Age of Facilities Ratio (in years) Michigan Penn State Washington UCLA OSU The Age of Facilities Ratio provides a rough measure of the age of an institution s facilities, by comparing accumulated depreciation with annual depreciation expense. In general, a low ratio is better, since it indicates that an institution has made recent investments in its plant facilities. The publication Ratio Analysis in Higher Education suggests that an acceptable level for this ratio is 10 years or less for research institutions. Office of the Controller, 2007 Financial Statements 9

10 Comparisons with Benchmark Institutions Physical Asset Reinvestment Ratio Reinvestment Ratio (3 yr average) Michigan Penn State Washington UCLA OSU The Physical Asset Reinvestment Ratio compares annual levels of capital expenditures with annual depreciation expense. Due to the variability in capital expenditures from year to year, multi-year figures are more relevant for analysis and comparison across institutions. Since depreciation expense reflects historical cost values, target values for this ratio should be well in excess of 1.0. Ratios below 1.0 suggest potential under-investment in campus facilities. Source: Office of the Controller, 2007 Financial Statements 10

11 What are we doing about it? 11

12 Evolution of DM Program October 2000 June 2001 January 2002 March 2002 July 2002 July 2004 March 2006 Nov Academic Plan adopted Comprehensive capital plan process aligned with the Academic Plan First annual report on Maintenance and Renewal Board approves strategic principles for maintenance and renewal New self-funded endowment created to fund scheduled renewal of space added after FY 2000 $500,000 added to General Funds Operating Budget to enhance preventive maintenance Facilities group successfully restructured Renewal and Deferred Maintenance Program re-established and moved to planning Infrastructure Master Plan completed Capital planning process modified to include infrastructure and deferred maintenance review 12

13 Evolution of DM Program - Continued Jan Nov FY Capital Plan approved by Board of Trustees Sept. 07. Allocates substantial financial support to address deferred maintenance and renewal needs, including: - North Academic Core - Infrastructure - Student Housing FY 2008 Operating Budget approved July 2007 providing $500,000 in additional funds for preventive maintenance Deferred Maintenance and Renewal Endowment = $3.3 million as of 6/30/07. Projected to grow to between $150 and $200 million by FY

14 Integrated Approach FOD Planned/Preventive Maintenance Improvements Preventive Maintenance Completed per Quarter Number of Work Orders Th rd nd St rd nd St Th rd nd St 2006

15 What are the remaining barriers and emerging issues? 15

16 Continuing Challenges Growing need Aging facilities Academic and business expectations continue to rise Resources are stretched Escalation of replacement and renewal costs Strains on General Funds Budget Uncertainty regarding state support Complexity of project approval process (state and university) 16

17 The maintenance and renewal problem is particularly acute for the Columbus Campus General Funds space Annualized Need Replacement Value (15.5M GSF x $209/GSF) $3.2B Depreciation at 2% $66M Current Resources Annualized (1) State Capital Project Funds $35M State Renovation and Repair $9M University Renovation and Repair $6M University Deferred Maintenance Endowment $2M Total $52M Gap (at least $14M annually) (1) Reflects budgeted amounts only. Actual expenditures will differ. ($14M) Note: Does not address deferred maintenance and renewal or infrastructure 17

18 Priority and Plan Alignment Critical to Infrastructure and R&DM Planning Revised Medical Center Master Facilities Plan Student Affairs Expanded/Accelerated Housing Program Athletics Master Plan Development Campaign Off-Campus Development 18

19 What needs to happen next? 19

20 Better use of existing resources Assure proper alignment of deferred maintenance needs with other significant University priorities and programs. Improve yield on existing funds. Focus state capital project funds on replacement and renewal of academic space only. Be aggressive in eliminating poor quality space through demolition. Be aggressive in identifying and leveraging poorly utilized space. Create/support a sharing of common space needs collaborative use. Engage auxiliaries to take planning and funding of deferred maintenance needs to the next level. 20

21 Identify new resources Seek to increase state capital support by a minimum of $5M annually Explore increasing POM charge to units for maintenance and renewal from $0.25/asf to $1.00/asf over the next eight years Explore increasing commitment of central funds to deferred maintenance needs by $10M annually over the next 10 years Continue to improve funding support and performance on preventive maintenance Develop a method to continue to commit additional annual funds to preventive and planned maintenance efforts NOTE: These recommendations are preliminary and subject to further review. 21

22 Summary 1. OSU has a deferred maintenance problem of a minimum of $1 billion or a least 15% of replacement value. 2. OSU s challenge is typical among public universities, but better than many. 3. Since identifying this as a University priority in January 2002, some progress has been made. 4. A growing physical plant, aging buildings and flat state support continue to be an issue. 5. Current General Fund resources are not adequate to meet even current requirements and need to be enhanced. 6. Additional resources are needed to address the accumulated deferred maintenance backlog over a multi-year period. 22

23 Committee Discussion and Questions 23

24 Definitions For Reference Ongoing Maintenance - Routine upkeep Preventive Maintenance inspections, adjustment, testing and invasive Facility Renewal Systematic replacement of major building systems Whole Building Renewal Renovation of entire building New Building Construction New facility; may or may not replace existing facilities Deferred Maintenance (DM) Backlog of facility rehabilitation/renewal needs Deferred Renewal Whole building replacement or renovation is overdue Block Obsolescence Simultaneous aging of a large block of facilities Pomerene Hall 24

25 Calculations For Reference When buildings reach 50 years old it is assumed that they require total renovation and the cost of this is equal to the current replacement value (CRV). Current replacement values for all buildings are re-calculated annually If a component reaches the end of its estimated life cycle age, and is not repaired or replaced it is listed as DM with a current estimated replacement value for that component. Note current backlog of repair projects is $237M (projects identified but not funded) Building auditor reviews Net link annually to determine which projects have been accomplished and updates the component life cycle replacement clock on any components that have been replaced or any whole building renovations. 25