BUDGET AND FINANCE COMMITTEE. October 1, Minutes

Transcription

1 BOARD OF GOVERNORS BUDGET AND FINANCE COMMITTEE October 1, 2003 Minutes The meeting was called to order at 11:00 a.m. by Governor Driker in the Alumni Lounge, Alumni House. Secretary Miller called the roll. A quorum was present. Committee Members Present: Governors Bernstein, Driker, Massaron, and Washington; Michael McIntyre, Faculty Representative Committee Members Absent: Governor Hardy; Charles Elder, Faculty Alternate Representative; Mohammed Luwemba, Student Representative, Joshua Smith, Student Alternate Representative Also Present: Governors Dunaskiss, Hillegonds, and Miller and President Reid; Provost Barrett and Executive Vice President Gibbs; Vice Presidents Davis, Lessem, Nelson, Oliver, Rounding; and Secretary Miller APPROVAL OF MINUTES, JULY 30, 2003 ACTION: Upon motion made by Governor Massaron and supported by Governor Washington, the Minutes of the meeting of July 30, 2003 were approved as presented. CONTINGENCY RESERVE Provost Barrett outlined the request for a transfer of $150,000 to fund Dean searches in the Colleges of Engineering, Fine, Performing and Communication Arts and the Law School, at $50,000 each. 2591

2 2592 and Finance Committee ACTION: Upon motion made by Governor Massaron and supported by Professor McIntyre, the and Finance Committee approved the transfer of $150,000 from the Contingency Reserve to fund the searches for Deans in the College of Engineering, the College of Fine, Performing and Communication Arts, and the Law School. The motion carried. RESEARCH EXCELLENCE FUND CENTERS AND INSTITUTES PROPOSED BUDGET, FY 2004 Vice President Oliver gave an overview of the Research Excellence Fund, which was initially established several years ago by the State legislature, on a separate line-item budget. The funds have since been included in the general university appropriation, but the budgets for these centers have been maintained as separate entities. The budget proposal includes the Center for Molecular Medicine and Genetics, the Institute for Environmental Health Sciences and the Institute for Manufacturing Research. These budgets have been reduced about 10%, reflecting the same reduction imposed on the university s general fund by the State. Governor Massaron indicated that last year he had requested that these budgets be presented to the Board at the same time the general fund budget is presented, and asked for confirmation that this would occur in Vice President Oliver will work with Director Vanessa Rose to ensure this occurs for next year. Professor McIntyre expressed his support for combining the presentation of these budgets with the general fund budget presentation as well. ACTION: Upon motion made by Governor Washington and supported by Governor Massaron, the and Finance Committee recommended that the Board of Governors approve the proposed FY 2004 budget for the following allocations to the Research Excellence Fund (REF) Centers and Institutes: FY 2003 Approved FY 2004 Proposed Center for Molecular Medicine and Genetics $2,351,899 $2,093,190 Institute for Manufacturing Research 1,926,029 1,681,615 Institute of Environmental Health Sciences 1,517,435 1,441,565 REF Administrative Support 363, ,524 Totals $6,159,342 $5,543,894

3 and Finance Committee 2593 The and Finance Committee also recommended that the Board of Governors authorize the President or his/her designee to evaluate performance of each of the REF centers and institutes on a continuing basis and make such adjustments as deemed necessary in the distribution of FY 2004 funding to these programs. The motion carried. JOSEPH F. YOUNG SR. PSYCHIATRIC RESEARCH AND TRAINING PROGRAM PROPOSED BUDGET, FY 2004 Vice President Oliver outlined the proposed budget for this program, and indicated that budget cuts were also reflected in the recommendation for this program, which has both a research and public service component. Governor Driker asked whether this budget will also be brought forward with the other budgets next year, as previously discussed. Vice President Oliver indicated that he will need to determine whether or not, as a separate state appropriation, the timing of the budget presentation can be altered. The funds for this program remain separate from the general fund appropriation. ACTION: Upon motion made by Governor Massaron and supported by Governor Washington, the and Finance Committee recommended that the Board of Governors approve the FY 2004 budget for the Joseph F. Young, Sr. Psychiatric Research and Training Program to be allocated to program areas as follows: Program Area FY 2003 Approved FY 2004 Proposed Research $3,667,083 $3,259,425 Facility Cost 1,196,000 1,089,395 Instruction 1,155, ,578 Public Service 339, ,002 Totals $6,357,900 $5,720,400 The and Finance Committee also recommended that the Board of Governors authorize the President and his/her designee to evaluate performance of each program area of the Joseph F. Young, Sr. Psychiatric Research and Training Program on a continuing basis and make such adjustments as deemed necessary in the distribution of FY 2004 funding to these programs. The motion carried.

4 2594 and Finance Committee PROPOSED AUXILIARY ACTIVITY BUDGETS, FY 2004 Executive Vice President Gibbs presented the budgets for the university s eight auxiliary operations. She reported that the university has been actively working to reduce or eliminate subsidies to a number of the auxiliary operations, and have been successful in these efforts. reductions and cost containment measures have been implemented, and the auxiliary units are affected by the same hiring freeze, retirement incentive program, and restructure/reorganize initiatives experienced by the rest of the campus. She then asked Director Vanessa Rose to go over specific details on these budgets. Ms. Rose indicated that the aggregate total of these budgets is slightly less than $14 million, and that four of the budgets account for 92% of the total. Recent efforts over the past several years to make these units self-supporting have generally been successful, with the exception of the University Press and The South End student newspaper. General fund direct subsidies for auxiliary operations have been reduced from well over $1 million to now about $500,000. She commented on some of the recent initiatives ongoing in the individual units, and identified sources of revenue and expenses. Professor McIntyre asked about extra funds generated by the bookstore that are earmarked for specific university awards. Ms. Rose indicated that these funds are identified in the budget, and come from commissions on the sales of books. Professor McIntyre suggested that these surplus funds should be directed into the general fund, and not earmarked, and be subject to the same review and competition that other initiatives have undergone. President Reid indicated that this process was started before he came to the university, and that the funds are earmarked to recognize faculty excellence in research and teaching. While he was not here when this program was instituted, he believes it is an appropriate use of these funds. Governor Miller commented on the information submitted for WDET related to having the highest concentration of degree holders in their listening audience of any other radio station in this market. Ms. Caryn Mathes, Director of WDET confirmed this statistic. Governor Miller also commended WDET s DRIS reading service program. Ms. Mathes outlined some of the successful DRIS initiatives for volunteerism and fundraising that have taken place this year. Governor Washington asked about community use of the bookstore. Nabeleh Ghareeb indicated that the bookstore has a number of programs for the community, including book signing opportunities with authors, children s programming on Saturday morning, and has recently assigned a new person to head up their marketing efforts to look for opportunities to expand into the local community and beyond. Ms. Ghareeb indicated that when Barnes & Noble opened their WSU store, it was the best school opening they had in the 14 years they have been on college campuses.

5 and Finance Committee 2595 Governor Bernstein asked for clarification on the issue raised by Professor McIntyre, related to the commission paid by the bookstore, and currently used for university awards. Executive Vice President Gibbs indicated that the university entered into a contractual relationship with the bookstore. The university receives a commission, and the university s internal policies determine the distribution of the revenues. Professor McIntyre indicated that the bookstore s contract with the university stipulates how much it will get, and that the university could place it into the general fund if it chose to do so. Professor McIntyre restated his feelings that although the amount in question was relatively small, when compared to the budget as a whole, he believes all of the funds should be in one place, budget priorities set, and monies distributed to match the priorities. Governor Driker asked why the auxiliary budgets are presented after the general fund budget presentation. Ms. Rose indicated that the first priorities are the preparation of the $400 million general fund, and the tuition and fee recommendations, which require extensive planning and in-depth analyses, begun fairly early in the year. Once those are completed, the budget office can focus on these budgets, which are much smaller in size and scope. Governor Driker asked whether these auxiliaries also come from the general fund. Ms. Rose indicated that they do not come from the general fund, that it is separately generated revenue. Governor Driker asked for clarification on whether or not the general fund would support these units if there was a loss in operations. Vice President Davis and Ms. Rose responded affirmatively, that if these units have a loss, in the end, the general fund would have to support them. Vice President Davis further stated that maintaining auxiliaries outside of the general fund is standard accounting practice, and is what is in place in universities across the country. President Reid added that the goal is to have these units support their activities, which has been gradually accomplished over the past several years. There are some units where this is not yet the case, and general fund subsidies are still needed, as is the case with the University Press. Governor Massaron asked whether the full amount of the bookstore commissions is expended in faculty awards and research. Executive Vice President Gibbs indicated that a portion is used for faculty awards and the balance is used to fund other universitywide projects and initiatives. Professor McIntyre indicated that the Senate Committee accepts auxiliary budgeting as a stand on your own system, but believes that surplus funds generated by auxiliaries should be directed back into the general fund. Governor Bernstein asked whether this issue had been raised before; Professor McIntyre indicated that it had been discussed last year, when he reported a similar concern from the Senate Committee. Governor Driker suggested that the Senate Committee revisit this issue. Governor Bernstein suggested that if that faculty Senate has a strong concern on an issue, that it be brought forward to see whether or not a compromise can be identified. Governor Driker raised an issue related to The South End, and the amount of faculty supervision it receives, and opportunities to strengthen the paper. President Reid suggested that this issue be raised during the Student Affairs Committee meeting.

6 2596 and Finance Committee ACTION: Upon motion made by Governor Washington, and supported by Governor Massaron, the and Finance Committee recommended that the Board of Governors approve the following proposed FY 2004 budgets for the auxiliary units as indicated below: Description FY 2003 Approved FY 2004 Proposed Parking and Transportation Services $ 4,999.3 $ 4,807.4 Radio Station WDET-FM 2, ,214.4 Student Center 2, ,594.0 University Press 2, ,098.0 Bookstore The South End Auxiliary Services McGregor Memorial Conference Center Totals $13,933.8 $13, FY 2003 budget restated to reflect combination with Business Services and elimination of management fees 2 FY 2003 budget restated to reflect offset of reimbursement from AVI Food Service, Inc., against compensation expense. The motion carried. Governor Massaron abstained in his vote with regard to auxiliary services and McGregor Memorial Conference Center. BUILDING REPAIR PROJECTS: RACKHAM COOLING TOWER INSTALLATION STADIUM AUXILIARY BUILDING HEATING SYSTEM RENOVATION CENTRIFUGAL CHILLER INCREASE TO BUDGET FOR 10 YEAR PREVENTATIVE MAINTENANCE PROJECT Vice-President Davis presented three building repair projects, and the committee recommended action on them in one motion. Information about these three projects can be found in the background material for this meeting. ACTION: Upon motion made by Governor Massaron and supported by Professor McIntyre, the and Finance Committee recommended that the Board:

7 and Finance Committee 2597 Authorize the President or his designee to design, solicit bids and award contracts to install a new cooling tower at the Rackham Building not to exceed $280,000. Funding for this project shall be provided from the Reserve for Energy Related Projects. Authorize the President, or his designee, to proceed with the design, solicitation of bids and the award of contracts to replace the heating system at the Stadium Auxiliary Building for a total cost not to exceed $275,000. Funding for this project shall be provided from reserves for deferred maintenance in the plant fund. Authorize the President, or his designee, to increase the available funding for the Centrifugal Chiller 10 year Preventative Maintenance Project by $90,000, thereby causing an adjusted project budget of $390,000. Funding for this project will be provided from reserves set aside for deferred maintenance projects. The motions approving all three recommendations carried. BUSINESS PLAN FOR THE PROPERTIES ACQUIRED FROM THE DETROIT PUBLIC SCHOOLS, INCLUDING THE MACCABEES BUILDING INFORMATIONAL REPORT Vice President Davis presented an informational report on the business plan for the properties acquired from the Detroit Public Schools, following detailed presentations previously made to the Board in Executive Committee. Vice President Davis indicated that he had also given a presentation to the Academic Senate s and Policy Committees prior to the Board meeting. He emphasized that revenue projections contained in the plan are dependent on what the market will bear. Governor Washington asked if there have been any further interests in the rental of commercial space on the second and third floors of the building. Executive Vice President Gibbs indicated that there are a number of additional parties expressing interest in the property, and that the university has not yet done any aggressive marketing, which will begin in the near future. Professor McIntyre indicated that the Committee reviewed the plan and is supportive of the approach, however, he indicated concern about the process that was used related to decision-making about and notification to the units that will be moved into the Maccabees building from other areas of the campus. He believes that the faculty and staff in these departments did not have any input into the decision. Vice President Davis indicated that the departments were consulted, and that the departments in question are housed in two buildings that the university s Master Plan had identified for closure. Vice President Davis and his staff continue to consult with

8 2598 and Finance Committee these departments, and will work with them to modify the space to fit the needs of these new tenants. Executive Vice President Gibbs reported that there was a review of the potential uses for the Maccabees building. The two buildings coming off line are not in good condition, and are in need of much maintenance, including elevators that break down regularly. She indicated this was a well thought out plan which will create better quarters for the units moving into the building than those they left behind. AUTHORIZATION TO SELL GENERAL REVENUE BONDS Vice President Davis presented a proposal to authorize the administration to issue $58 million in callable bonds to renovate the space in Hutzel Hospital for the Perinatal Research Branch and to fund $43 million in the renovation of research laboratories. The payment of the debt service for the renovation of research laboratories will be funded by the change in the allocation of indirect cost funds previously presented by Vice President Oliver. Although the specific projects have not yet been identified, Vice President Davis provided a list of the buildings where the renovations will take place. Governor Driker asked Vice President Oliver to talk about the meetings that Vice President Oliver held with various campus faculty groups to discuss the reallocation formula. Vice President Oliver indicated that he met with the Committee of the Academic Senate, and with various faculty assemblies from across the campus. While not everyone is pleased with the reallocation of funds, Vice President Oliver believes they have come to a reasonable agreement on how to move forward with the critical renovation of laboratories. The $43 million will not solve all renovation issues in research labs, but is a good start. Professor McIntyre indicated that the Academic Senate has come to an agreement with Vice President Oliver on the process for this year. Both the Senate and the administration have agreed that a committee will be put in place specific to indirect cost recovery, and the composition of the committee will be the next issue to be discussed. Professor McIntyre indicated that university committees of this nature often have half of the members appointed by the administration and half by the Academic Senate Policy committee, and stated that while faculty are resigned to the reallocation, they are not pleased to see their indirect cost funds reduced. In addition, while all indirect cost recovery funds are subject to reallocation, the funds will be earmarked for specific labs benefiting specific faculty. Professor McIntyre further stated that the Academic Senate s and Policy Committee does not believe that specific funds should be earmarked in the reallocation to support the operational budget of the research division, and that this is a decision that will need to be reconsidered in next year s budget cycle. President Reid reaffirmed that this has been a difficult decision for the faculty, and indicated that there were limited resources available for laboratory renovation. Seventy percent of the indirect costs come through research that takes place in these laboratories. To attract and retain faculty members, improvements must be made.

9 and Finance Committee 2599 President Reid expressed his appreciation for the cooperation of the Senate on this issue. Governor Miller asked about the status of Hutzel Hospital. Vice President Davis indicated that the university had an agreement with the DMC to use Hutzel for the first ten years of the grant, with renewals following thereafter. The university has to make an assumption that the hospital will continue to be in operation and that this project must go forward. President Reid indicated that he has met with the new interim CEO of the DMC to discuss this particular issue, and she understands the importance of this project to the university. Governor Massaron asked Professor McIntyre to clarify that the Senate is in support of the bonding for the lab renovations, and that the issue of the 2N committee regarding indirect cost recovery will not affect the bond issue for the renovations. Professor McIntyre agreed, but indicated that if further bonds were issued, the Senate would want to discuss the revenue source for payback. The Senate agrees that the committee will not have authority to change the total of 7% to fund the bonds Professor McIntyre asked Vice President Davis if it was possible to identify how much of the $43 million would go to fund projects in Scott Hall, the Chemistry Building, and/or other buildings on the list. Will the bulk of the funds go for renovations to labs in the School of Medicine? Vice President Davis indicated that he was not able to answer that question at present. Those discussions are underway now. Provost Barrett indicated that the expectation is that roughly 2/3rds would go to units in the School of Medicine. Governor Driker asked about the total bond indebtedness for the university. Vice President Davis indicated that it is currently about $204 million, and will increase by 25% with this project. Governor Driker asked how the bonding agents will view this transaction. Vice President Davis indicated that there are a number of different ratios by which this can be measured, but that the university does not have excessive indebtedness. The bond agents will be visiting the campus within the next few weeks to see the campus. Governor Driker asked whether the university has refinanced any of its existing bonds to capitalize on lower interest rates; Vice President Davis indicated that bonds were last refinanced in 1999, and those bonds cannot be refinanced again. Vice President Davis will bring a report back to the board once the bonding agents report back their findings. ACTION: Upon motion made by Governor Massaron and supported by Governor Washington, the and Finance Committee recommended that the Board of Governors adopt the resolution as presented authorizing the issuance of up to $58,000,000 of callable Wayne State University general revenue bonds for terms up to 30 years. The bonds would be issued for the following projects/purposes:

10 2600 and Finance Committee 1. Design, renovate and prepare leased space within the Detroit Medical Center s Hutzel Women s Hospital (a.k.a. Harper University Hospital) to support the administrative, clinical and additional laboratory requirements of the National Institute of Health (NIH) Perinatalogy Research Branch (PRB); to renovate Churn space to allocate the current users of the space to be assigned to NIH for the PRB; and to renovate space to be leased to the OB/GYN, Inc., which needs to be located next to the PRB. 2. To renovate and modernize existing research laboratories and/or construct new research laboratories in various buildings across the campus. 3. To assist with the renovation of 5057 Woodward Avenue and the preparation of space in the building for occupancy by the University administration and academic units. The estimated maximum annual debt service on the bonds, if they were all to be sold as debt with long term fixed interest rates, would be approximately $3,930,000. The total amount of bonds to be issued for project/item 2 above will be determined by the annual debt service which would be required if the bonds were all issued as long term fixed rate bonds at the time of the bond sale. The sources of funds for debt service payments for the above projects will be as follows: Estimated Maximum Annual Debt Service* 1. Rental income from the University subleasing the PRB space in Hutzel Hospital and related parking spaces to NIH, and the subleasing of related space in Hutzel Hospital to OB/GYN, Inc. with any possible shortfall to be covered by Facilities and Administrative (indirect) cost reimbursement. 2. Facilities and Administrative (indirect) cost reimbursement to be allocated to research facilities support per the revised University Policy. 3. The reallocation of budget from the general fund for this purpose. $800,000 2,780, ,000 $3,930,000

11 and Finance Committee 2601 The Treasurer will capture money from these sources based upon debt service payments that are derived by using long term fixed interest rates at the time of issuance, even though, in accordance with the attached bond resolution, all or some of the bonds may be variable interest rate bonds for periods of time. The motion carried. ADJOURNMENT There being no further business, the meeting was adjourned at 12:05 p.m. Respectfully submitted, Julie H. Miller Secretary to the Board of Governors JHM:dlh