BUDGET AND FINANCE COMMITTEE. January 30, Minutes

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1 BOARD OF GOVERNORS 2 BUDGET AND FINANCE COMMITTEE January 30, 2002 Minutes The Budget and Finance Committee convened at 12:19 p.m. in the Alumni Lounge. Secretary Miller called the roll. A quorum was present. Committee Members Present: Governors Atchison, Dunaskiss, Kelly, Miller and Washington; Michael McIntyre, Faculty Representative; Charles Elder, Faculty Alternate Representative, Alex Agius, Student Representative Committee Members Absent: Mohammed Luwemba, Student Alternate Representative Also Present: Governors Hardy and Massaron and President Reid; Provost Bantz and Executive Vice President Gibbs; Vice Presidents Brown, Davis, Johnson, Lessem, and Nelson; and Secretary Miller CONTINGENCY RESERVE REPORT Executive Vice President Gibbs presented the Contingency Reserve Report. The report requests a transfer of $70,000 which will be used to pay consulting fees to help the university work on meeting the new General Accounting Standard Board requirements put into place last year, which are scheduled for implementation this year. Governor Massaron asked if this is a contract that will go out for bid. Executive Vice President Gibbs indicated that PriceWatershouseCoopers has been retained as the consultant. Massaron, the Budget and Finance Committee approved the transfer of $70,000 from the FY 2002 Contingency Reserve to the Division of Finance and Administration to finance the cost of a consultant to assist with the implementation of the new Government Accounting Standards Board (GASB) financial accounting and reporting standards. The motion carried with a vote of 7-0. APPROVAL OF THE MINUTES, NOVEMBER 14,

2 2488 Budget and Finance Committee ACTION: Upon motion by Governor Washington and seconded by Governor Atchison, the Minutes of the November 14, 2001 meeting of the Budget and Finance Committee were approved as presented. The motion carried with a vote of 7-0. MOTT CENTER CHILLER REPLACEMENT Vice President Davis outlined a recommendation to increase the budget for the Mott Center Chiller Replacement from $320,000 to $715,000, with funding for the project coming from the FY 2002 deferred maintenance budget. A number of factors have affected this project, including a power outage in 2000 which caused the university to review the type and strength of the power supply to this building, grant funding which would require laboratory upgrades in the building, and an anticipated increase in the bulk rate the university currently pays for steam from the City of Detroit. Given these factors, the university has reassessed this project, and is now recommending that the current chiller be replaced with an electric chiller rather than a steam absorption chiller. Governor Kelly asked about the anticipated increase in steam rates. Vice President Davis indicated that the rate the university pays for steam from Detroit Edison will almost double. Other institutions in this area will also be adversely affected by these rate increases. Detroit Edison is losing money on steam, and as a consequence of these increases, the university is evaluating all power replacement projects to determine which, if any, can be converted to electricity. The university has a number of buildings that use steam. Professor McIntyre requested a list of deferred maintenance priorities so that a review of this type of expenditure could be judged on a priority basis; Professor Elder indicated that there used to be an annual list of deferred maintenance projects distributed, which would provide this type of information. Vice President Davis agreed to distribute the deferred maintenance list to the committee. Governors Massaron and Kelly referenced an earlier board presentation on deferred maintenance, and the materials prepared for that presentation might suit this purpose. Governor Dunaskiss indicated that if an annual report is prepared, it should not be necessary to do one more often than that. Governor Miller suggested a simple list of all projects, updated to indicate which projects have been completed, and which have moved up in priority. ACTION: Upon motion by Governor Atchison and seconded by Governor Miller, authorize the President or his designee to increase the budget for the Mott Center s Chiller Replacement by $320,000, producing a total project budget not to exceed $715,000. The cost of this project will be funded from the University s FY02 deferred maintenance budget. The motion carried with a vote of 7-0. MOTT CENTER ELECTRICAL UPGRADE Vice President Davis presented a companion recommendation for electrical upgrades to the Mott Center, which will upgrade the electrical system to accommodate the new chiller, and improve the electrical reliability in the building. Miller, the Budget and Finance Committee recommended that the Board of Governors authorize the President or his designee to design, solicit bids and award contracts to upgrade the electrical service within the School of Medicine s C.S. Mott Center for a cost not to exceed $785,000. Funding for this project will be provided from the University s FY 02 deferred maintenance budget. The motion carried with a vote of 7-0.

3 Budget and Finance Committee 2489 RACKHAM BUILDING INFRASTRUCTURE UPGRADE Vice President Davis presented a report and a recommendation regarding several building infrastructure upgrades to the Rackham building, including installation of an elevator, replacement lighting, and modifications to bring the building into ADA compliance. Other improvements include an upgrade to the technology infrastructure, and some security measures. These measures are being taken now, as the building needs to be readied for several university administrative offices and personnel from Sponsored Program Administration that will move into the building. Professor Elder asked how long these personnel will be located in this facility, as the total cost for these upgrades should be considered when looking at the future uses for this facility. Vice President Davis indicated that these personnel will be located in this facility for several years, and there are several other potential uses for the building when the Sponsored Research Office is eventually relocated. The funding for these upgrades will come from three sources: $400,000 in savings from the amount previously approved for the Rackham electrical upgrade project; cancellation of the $400,000 previously approved for the Schaver music renovation project, and $300,000 from the FY 2002 deferred maintenance budget. Governor Kelly asked how much of an interest the University of Michigan retains in this building. Vice Presient Davis indicated that Wayne State University leases the building from the University of Michigan for $1 per year; they retain no interest in the building. WSU occupies 97% of the space, with the remaining retained by the Engineering Society of Detroit, which has an office in the building. ACTION: Upon motion by Governor Miller and seconded by Governor Atchison, authorize the President or his designee to design, solicit bids, and award contracts to construct building infrastructure upgrades at the Rackham Building for a cost not to exceed $1,100,000. Funding for this project will be provided from three sources including bid savings from the previously approved Schaver Music HVAC Renovation project, and from the University s FY02 deferred maintenance budget. The motion carried with a vote of 7-0. MANOOGIAN CHILLER REPLACEMENT Vice President Davis gave a brief overview of this project. The chiller has reached the end of its useful life. It will be unable to function for much longer, and will not last through another summer. It must be replaced now. Vice President Davis indicated that the current chiller is a steam absorption chiller, and it will now be converted to electrical because of the steam issues described earlier in the meeting. Miller, the Budget and Finance Committee recommended that the Board of Governors authorize the President or his designee to design, solicit bids, and award contracts for the Manoogian Hall Chiller Replacement for a cost not to exceed $1,300,000. Funding for this project will be provided from deferred maintenance reserves in the plant fund. The motion carried with a vote of 7-0. MCGREGOR MEMORIAL CONFERENCE CENTER RENOVATIONS: AMENDMENT OF PRIOR RESOLUTION Vice President Davis reported that at a previous meeting, the Board approved the renovation of the McGregor Memorial Conference Center building, and authorized the university to borrow up to $1.8 million from the cash pool to carry over until funds from the McGregor Fund grant were received. The university s original understanding was that the grant would be over a period of 4

4 2490 Budget and Finance Committee years, for a total of $2,500,000. However, when the grant received its final approval, the payout was for a period of 5 years. Today s recommendation is an amendment to the resolution authorizing the university to borrow funds from the cash pool to reflect this new payback schedule. ACTION: Upon motion by Professor McIntyre and seconded by Governor Miller, rescind the resolution submitted on November 14, 2001 and authorize the President or his designee to design, solicit bids and award contracts for the renovation of the McGregor Memorial Conference Center for a cost not to exceed $5,645,000. Funding for this project will be provided, in part, from a $2,500,000 grant from the McGregor Fund with the balance, $3,145,000 being provided from University funds allocated for deferred maintenance and capital projects in the plant fund. And further, that the Board of Governors authorize the President or his designee to borrow up to $2,000,000 from the University s cash pool for the funding of eighty percent (80%) of the project cost that will be paid from the McGregor Fund s grant. The funds will be repaid from the final four of five annual installments of the grant. The motion carried with a vote of 7-0. MICHIGAN UNIVERSITIES SELF-INSURANCE CORPORATION (M.U.S.I.C.) ANNUAL REPORT Vice President Davis presented an informational report, including financial statements, for MUSIC for the year ending June 30, A number of issues affected the insurance market this year. Although the university does not yet have insurance rates for the year, we do expect them to go up significantly. There continue to be significant benefits to belonging to a pool. Professor Elder asked about the potential impact of higher rates on the university, and the obligation on the general fund. Vice President Davis indicated that there could be an increase of approximately $400,000 - $500,000. However, MUSIC has in the past used their surplus to ease increases in premiums; MUSIC currently has a $9.2 million surplus. There are eleven institutions participating in MUSIC at this time; each school has one member on the Board and one alternate member. Premiums are based on a number of factors, including size and experience. AUTHORITY TO ISSUE BONDS SCOTT HALL/SHIFFMAN LIBRARY ENERGY CONSERVATION PROJECT Vice President Davis indicated that when this project was approved by the Board at its last meeting, the financing mechanism had not yet been finalized. After reviewing the alternatives with the university s bonding counsel and underwriter, it has been determined that the best alternative is to move forward with the bond issuance. Governor Dunaskiss asked, in lieu of the fact that the Board has reviewed recommendations for the replacement of 4 different chillers, whether the bid process allows for a company to bid on more than one project, and relate them to each other, to provide cost savings to the university. Assistant Vice President Jim Sears indicated that there are opportunities to consolidate projects, and when possible, the university will do it, but there are many factors, including types of equipment and urgency of need, that will affect its ability to do that. Professor Elder commented that with the projects approved by the committee today, roughly $2 million was added to next year s general fund budget. Vice President Davis replied that when the Scott Hall/Shiffman Library project is completed, the university will have guaranteed savings from utilities, and so the savings will cover the cost of this project.

5 Budget and Finance Committee 2491 ACTION: Upon motion by Governor Miller and seconded by Governor Washington, the Budget and Finance Committee recommended that the Board of Governors adopt the resolution as presented authorizing the issuance of up to $7,400,000, including any interest capitalization cost, of callable Wayne State University general revenue bonds for terms up to 25 years or 30 years. The bonds would be issued to finance the construction cost, including contingency of a number of energy conservation measures in Scott Hall and Shiffman Medical Library plus the replacement of two chillers for Scott Hall. The maximum annual debt service on the new bonds is not to exceed $600,000 with the funding source thereof to be the guaranteed utility cost reduction as detailed and specified in the University s agreement with Honeywell, Inc. to construct the utility conversion measures and installation of the chiller. The motion carried with a vote of 7-0. DISTRIBUTION OF MEETING MATERIALS Professor McIntyre raised an issue with the committee regarding the time table for distribution of meeting materials to committee members. Committee members currently receive materials on Friday. The Faculty Senate s Budget Committee would like to provide useful advice to the Board s Budget and Finance Committee, but need more time to review the materials before their committee meeting, which is currently scheduled on Friday afternoon. He stated that the Board s bylaws indicate that materials will be distributed 7 days in advance of the meeting, and asked if the materials could be received on Thursday. Professor Elder raised the issue of the Board statute requiring 72 hours notice of any request to speak before the Board; given the Board s change from a Friday meeting day to a Wednesday meeting day several years ago, and the Friday distribution of meeting materials, it is difficult to review the documents and meet the 72 hour notice. Governor Washington indicated that the Board Secretary will work with the Board on an alternative, which would be appropriate for all standing committees. Secretary Miller indicated that she recently reviewed the distribution schedule for meeting materials, and that the Friday distribution schedule has been in place for more than 20 years. She indicated that she would work with her staff to see what internal adjustments could be made to accelerate the process. ADJOURNMENT There being no further business, the meeting adjourned at 12:58 p.m. Respectfully submitted, Julie H. Miller