Making the Case for Funding Deferred Maintenance Before it's Too Late - Sightlines/CACUBO 2014
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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
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This session provides both a system and campus level perspective as well as a finance and facilities outlook on the problems of deferred maintenance and the strategies to make the case for funding. We will also provide the latest national and regional data on the growing problem of deferred maintenance and the operational implications of not addressing the problem.
Transcript of Making the Case for Funding Deferred Maintenance Before it's Too Late - Sightlines/CACUBO 2014
Making the Case for Funding Deferred Maintenance Before it’s
Too Late
Jim Kadamus – Vice PresidentSightlines
Cuba Plain – Assistant Vice President for Budget Planning and DevelopmentUniversity of Missouri System
Walt Branson – Vice Chancellor for Finance and AdministrationMissouri University of Science and Technology
Bob Simmons – Associate Vice Chancellor for AdministrationUniversity of Missouri Kansas City
Changing the Conversation
SpaceUnderstand how age profile drives capital
and operational demands
CapitalMultiyear plans that align to mission &
risk
OperationsImprove
effectiveness & lower facilities
overhead impact
Sightlines’ National and Regional Trends
Speaker:Jim Kadamus, Vice President
Company:Sightlines, LLC
Date:October 6, 2014
CACUBO Region
Included CACUBO States:Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, South Dakota
49 Total Campuses29 Public campuses20 Private campuses342,947,907 Total GSF725,057 Students educated
Purple states: Sightlines & CACUBO membersGrey States: CACUBO but not Sightlines members
Campus Space and Enrollment
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2007 2008 2009 2010 2011 2012 2013
Percen
t Cha
nge of Enr
ollm
ent &
Spa
ce
Growing Campus EnrollmentCACUBO Average within Sightlines Database
Regional Space Growth Regional Enrollment Growth
Campus Space and Enrollment
‐2%
0%
2%
4%
6%
8%
10%
12%
2007 20082009 2010 2011 2012 2013 2007 20082009 2010 2011 2012 2013 2007 20082009 2010 2011 2012 2013
Percen
t Cha
nge of Enr
ollm
ent a
nd Spa
ce
Growing Campus EnrollmentCACUBO Region By Constituent Group
Space Growth Enrollment Growth
Comprehensive Institution Research Institution Small Institution
Database Construction Trends
Pre-War Post-War Modern Complex
0%
2%
4%
6%
8%
10%
12%
0
10
20
30
40
50
60
Tota
l Dat
abas
e G
SF C
onst
ruct
ed (M
illio
ns)
Constructed Space Since 1880
Sightlines Database CACUBO (%)
The Aging Campus
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
% of Spa
ce
Square Footage by Age CategoryCACUBO Region Renovation Age
Under 10 10 to 25 25 to 50 Over 50
Public Average Private Average
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
$/GSF
Capital Investment into Existing SpaceCACUBO Region
Annual Capital One‐Time Capital Average
Capital Spending Public vs Private
Public Average Private Average
Facilities Backlogs Continue to Rise
$77 $80 $83 $86 $90 $94 $98
$82 $83 $84 $87 $93 $96 $101
0%
5%
10%
15%
20%
25%
30%
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
$/GSF
Backlog $/GSFCACUBO Region
Backlog/GSF Percentage Change of Backlog
Public Average Private Average
Facilities Operating Budgets Flat
$3.43 $3.61 $3.59 $3.52 $3.49 $3.56 $3.52
$0.24$0.24 $0.26 $0.27 $0.27 $0.29 $0.30
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2007 2008 2009 2010 2011 2012 2013
$/GSF
CACUBO Operating Budget Average
Daily Service Planned Maintenance
$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
$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
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
$/GSF
Daily Service Planned Maintenance
$4.39 $4.35
CACUBO Operating Budgets – Public vs. Private
Operating Budgets 14%+ Short of Inflation
Public Average Private Average
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
University of Missouri SystemSpeaker:Cuba Plain, Assistant Vice President for Budget Planning and Development
Institution:University of Missouri System
Date:October 6, 2014
Land grant institution with four campuses, hospital & clinics, system administration,
experiment station and farms
24,000 Employees
75,272 Student Headcount58,163 Student FTE
29.5MGSF
1,500+ Buildings
$8.5BFacilities
Replacement Value
Total Operating Budget:
$3B
System Profile
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
Changes and Challenges
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
FY10 FY11 FY12 FY13 FY14
$ in M
illions
Actual Appropriation Received CPI Adjusted Appropriation Cumulative Difference
State Appropriations Over Time
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
2009 2010 2011 2012 2013
$ in M
illions
UM Annual M&R Spendingby Sightlines
Institutional Recurring Capital One‐time capital Sources
Sightlines Recommended Annual M&R Target
Backlog Stabilized
Backlog Increases
Funding Levels Fall Short
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
FY09 FY13
$ in M
illions
Facilities Needs Backlog by Priority
Critical ‐ Now Urgent < 1Yr Necessary 2‐5 Yr Recommended 6‐10 Yr
$838 M
$1,317 M
Backlog of Need Increased by 57%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
MU UMKC S&T UMSL
UM System FCNI Rating of E&G BuildingsPoor Condition Below Average Condition Fair Condition Good Excellent Condition
Facilities Condition by Campus
43% 38% 39%
80%
Shaping Campus Policies
Predicting Future Condition
28%26% 27%
41%41%
36%39%
56%
0%
10%
20%
30%
40%
50%
60%
MU UMKC S&T UMSL
FCNI
FY 2014 FCNI INDEX FY 2023 PROJECTED FCNI INDEX
Best Practice ≤ 0.30 FCNI
Potential Funding Sources State Bond Issue
$200 million plan15 Year financing
$17.7 million annual debt service 50/50 Match – Private gifts and State FundingDedicated Recurring State Appropriation Student Facilities Fee
• $300 to $350 annual fee per student FTE
Projected Impact of $200M
Discuss potential spending timeframe for $200M investment
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$ in M
illions
UM Annual M&R Spendingby Sightlines
Annual M&R Renovation and Other Capital $200M Funding Impact Sightlines Recommended Annual M&R Target
Assuming consistent investment from FY13 and $200M spent over 5 years
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
Leader in green:First US university to receive ISO 14001
certification for environmental managementEnvironmental village
Sightlines member since 2007
2.7M GSF165
Maintained Acres
8,100 Students
Founded 1870
Campus Profile
Operating Costs by Building Size
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
A B C D M S&T F G H I
GSF
Average Building Size
*Ozanne analytics
$3.00/GSF
$1.00/GSF
STEM focus drive campus profileSmaller Buildings Than Peers
21%10% 13% 17%
19%28% 24%
25%
41% 42% 43% 29%
20% 20% 19%29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Missouri S&T FY03 Missouri S&T FY08 Missouri S&T FY13 Peer Average
% of Tot
al Cam
pus GSF
Campus Age by Renovation Age Category
Under 10 10 to 25 25 to 50 Over 50
Renovations and new construction are managing campus ageSpace Profile
Capital ProfileCapital investments falling short of target
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total D
ollars in M
illions
Institutional Recurring Capital One‐Time Capital Sources Target Need
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total D
ollars in M
illions
Institutional Recurring Capital One‐Time Capital Sources Infrastructure
Capital ProfileSignificant infrastructure spending for geothermal energy
17%
48%
32%
3%
5‐Year Historical Investment Mix
Envelope Systems
Space Safety/Code
0
5
10
15
20
25
30
35
Envelope Systems Space Safety/Code
Years
Average Life Cycle
Spending focused on “bang‐for‐buck” projectsHistoric Spending Mix
$0
$50
$100
$150
$200
$250
$ in M
illions
Backlog Growth Since FY03
Backlog Maint/ Repair Backlog Modernization Backlog Infrastructure
Recent investment curbs growth in infrastructure, Repair/Maint continues to growTotal Backlog
Balancing Institutional Demands
University of Missouri – Kansas City
Speaker:Bob SimmonsAssociate Vice Chancellor, Administration
Institution:University of Missouri – Kansas City
Date:October 6, 2014
Engaged and Green:The President’s Higher Education Community Service
Honor Roll with Distinction. RecycleMania 2012 Grand Champion Winner.
Sightlines member since 2007
5.1M GSF149
Maintained Acres
11,397 Students
Founded 1933
University of Missouri – Kansas City
Changing Campus Density
‐5%
0%
5%
10%
15%
20%
Chan
ge in Den
sity Fac
tor
Density Factor Rate of Change
UMKC Change Peer Change
*Density Factor is measured in Users/100kGSF
2010‐2020 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.
23%10%
18%
21%
45%
46%
14%24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
UMKC '03 UMKC '13
% of Tot
al Cam
pus GSF
Campus Renovation Age
Under 10 10 to 25 25 to 50 Over 50
Age Shifts over Last 10 Years
Buildings Under 10Little work. “Honeymoon”
period.Low Risk
Buildings 10 to 25Short life‐cycle needs; primarily space
renewal.Medium Risk
Buildings 25 to 50Major envelope and mechanical life cycles come
due.Higher Risk
Buildings over 50Life cycles of major building components are past due.
Failures are possible.Highest risk
Changing Funding Sources
$‐
$10
$20
$30
$40
$50
$60
$70
$ in M
illions
UMKC Capital History ‐ Sources1990 ‐ 2014
State Federal Private Campus Bonds Other (PPP)
As state funding decreases, shifting toward creative use of bond funding
$‐
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Capital $
/GSF
Back
log $/GSF
Capital Spending vs. AR Backlog
Backlog Maint/ Repair Capital Spending/GSF
Capital Spending and BacklogLarge infusions of capital have significant impact on backlog
Leaner Budget Than Peers
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
A B C D UMKC F G H I J
$/GSF
Daily Service Daily Service Over Time
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
A B C D UMKC F G H I J
$ / G
SF
Planned Maintenance
Planned MaintenanceIncreased PM efforts has improved in‐house PM performance
Institutions ordered by tech rating
$0.13$0.26 $0.27
$0.12
$0.31 $0.29
2011 2012 2013
UMKC PM
In‐HouseExternal
Driving Capital Investment Strategy
Program Value
SAMPLE DATA
Strategies to Address Deferred MaintenanceStrategy 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.
Strategies to Address Deferred MaintenanceStrategy 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 keeps‐up 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.
