Change the Conversation to Address Deferred Maintenance - NACUBO 2015
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The document discusses deferred maintenance in higher education institutions, highlighting the challenges faced by universities such as budget constraints and increasing facility backlogs. Key insights include the necessity of reallocating funding, creating multi-year plans, and reevaluating campus space utilization to address maintenance needs effectively. It also emphasizes partnerships with Sightlines and various strategies for securing additional funding to improve facilities amidst rising demands and decreasing state appropriations.
Change the Conversation to Address Deferred Maintenance - NACUBO 2015
- 1. Change the Conversation to Address Deferred Maintenance Jim Kadamus – Vice President Sightlines Cuba Plain – Assistant Vice President, Budget and Planning 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
- 3. Speaker: Jim Kadamus, Vice President Company: Sightlines, LLC Sightlines’ National and Regional Trends
- 4. Robust membership includes colleges, universities, consortiums and state systems * U.S. News Rankings Serving the Nation’s Leading Institutions: • 70% of the Top 20 Colleges* • 75% of the Top 20 Universities* • 33 Flagship State Universities • 13 of the 14 Big 10 Institutions • 9 of the 12 Ivy Plus Institutions • 7 of 12 Selective Liberal Arts Colleges Sightlines is proud to announce that: • 450 colleges and universities are Sightlines clients including over 325 ROPA members. • 93% of ROPA members renewed in 2014 • We have clients in 42 states, the District of Columbia and four Canadian provinces • More than 100 new institutions became Sightlines members since 2013 Who partners with Sightlines?
- 5. Campus Space and Enrollment 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 2008 2009 2010 2011 2012 2013 2014 PercentChangeofEnrollment&Space Growing Campus Enrollment National Average within Sightlines Database National Space Growth National Enrollment Growth
- 6. Campus Space and Enrollment 0% 2% 4% 6% 8% 10% 12% 14% 2008 2010 2012 2014 2008 2010 2012 2014 2008 2010 2012 2014 PercentChangeofEnrollmentandSpace Growing Campus Enrollment Nation By Constituent Group Space Growth Enrollment Growth Comprehensive Institution Research Institution Small Institution
- 7. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 0 10 20 30 40 50 60 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 TotalDatabaseGSFConstructed(Millions) Constructed Space Since 1880 Sightlines Database Database Construction Trends Pre-War Post-War Modern Complex
- 8. The Aging Campus 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 %ofSpace Square Footage by Age Category Under 10 10 to 25 25 to 50 Over 50 Public Average Private Average
- 9. $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 $/GSF Capital Investment into Existing Space Annual Capital One-Time Capital Average Capital Spending Public vs Private Public Average Private Average
- 10. Facilities Backlogs Continue to Rise $83 $87 $88 $91 $93 $96 $98 $73 $74 $76 $79 $81 $82 $84 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 $/GSF Backlog $/GSF Backlog/GSF Percentage Change of Backlog Public Average Private Average
- 11. Facilities Operating Budgets Flat $4.30 $4.61 $4.43 $4.54 $4.58 $4.60 $4.71 $0.26 $0.27 $0.27 $0.28 $0.29 $0.30 $0.31 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2008 2009 2010 2011 2012 2013 2014 $/GSF National Operating Budget Average Daily Service Planned Maintenance
- 12. $4.17 $4.66 $4.37 $4.50 $4.54 $4.57 $4.71 $4.45 $4.55 $4.53 $4.60 $4.64 $4.63 $4.66 $0.23 $0.24 $0.24 $0.26 $0.27 $0.27 $0.27 $0.31 $0.31 $0.32 $0.32 $0.33 $0.35 $0.37 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 $/GSF Operating Budget – Public vs. Private Daily Service Planned Maintenance Operating Budgets Short of Inflation Public Average Private Average
- 13. The Predictions Have Not Become Reality – Why???
- 14. What Happened to Manage the Past Risks? 1. Maintenance organizations have, by default, taken an effective approach to manage the most critical repair risks for campus. Often lower cost repairs to systems rather than full system replacements have bought extra service time. 2. Because campuses are a collection of buildings – the risk is diversified over the portfolio. 3. Engineering lifecycle estimates are appropriately conservative and therefore systems tend to outperform their statistical target 4. The functional obsolescence of space drives investments that brings outside resources that fixes stuff!
- 15. How Do We Make the Case for Resources? The old approach of defining needs in a way that makes the DM problem bigger and then requesting money will not work. Problem is too big to address in total – must break it down in size and priority How do we … Lower Demands - Space Management Make the Problem “Smaller” – Use Building Portfolio Management Sustain Impact of Finite Funding - Create Multi Year Plans Mitigate Risk - Target Capital to Safety, Reliability and Program Issues Increase Funding - Invest in Operations to release savings that self-funds stewardship
- 16. Speaker: Cuba Plain Assistant Vice President, Budget and Planning University of Missouri System
- 17. Land grant institution with four campuses, hospital & clinics, system administration, experiment station and farms 24,000 Employees 77,283 Student Headcount 59,565 Student FTE 29.5M GSF 1,500+ Buildings $8.5B Facilities Replaceme nt Value Total Operating Budget: $3B System Profile
- 18. 38% growth in headcount and 45% growth in FTE students since FY2001 Legislative limits on tuition increases equal to CPI State operating appropriations per FTE student have declined 32% in nominal terms and 50% in real terms since 2001. Flat nominal state operating appropriations since 2010 which resulted in a cumulative real loss of $300 million through FY14 No new state capital appropriations since FY2008, minimal investment between FY2001 and FY2008 Changes and Challenges
- 19. $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 FY10 FY11 FY12 FY13 FY14 $inMillions Actual Appropriation Received CPI Adjusted Appropriation Cumulative Difference State Appropriations Over Time
- 20. $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 2009 2010 2011 2012 2013 2014 $ in Millions UM Annual M&R Spending by Sightlines One‐time capital Sources Institutional Recurring Capital Sightlines Recommended Annual M&R Target Maintaining or Increasing Value Decreasing Value Funding Levels Fall Short
- 21. Backlog of Need Increased by 69% $0.00 $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 $1,600.00 FY10 FY14 $ in Millions Facility Needs Backlog by Priority Immediate Within 1 Year 2‐5 Years 6‐10 Years $838 $1,415
- 22. Facilities Condition by Campus
- 24. Predicting Future Condition 31% 24% 23% 40% 45% 35% 35% 55% 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
- 25. 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
- 26. $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ in Millions UM Annual M&R Spending by Sightlines Annual M&R Renovation and Other Capital Projected Impact of $200M
- 27. Recent Developments More Aggressive Marketing to Elected Officials State Bond Issue - $95M appropriated for Maintenance and Repair from new state bonds as part of a $200M funding package for higher ed University leveraged an additional $32.5M to complete 5 projects, eliminating $88M in deferred maintenance 50/50 Match – Private gifts and State match - $28.6 million in state general funds appropriated Leveraged against $29.7M private gifts to build 4 academic buildings Impact of these 9 projects
- 28. Recent Developments Projects will eliminate 6.2% of the $1.4 billion M&R backlog, but it continues to grow … $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 $2.40 $2.60 $2.80 $3.00 FY2016 FY2018 FY2020 FY2022 FY2024 Billions Backlog Impact of State's Aid Current backlog with funding at current level adjusted for inflation Current Backlog with funding to stablize facilities conditions Current backlog with funding at current level adjusted for inflation with State's Aid Current Backlog with funding to stablize facilities conditions with State's Aid
- 29. Strategy Moving Forward We must continue to make it a priority to reallocate more internal funding to facility needs. We need sustainable funding sources so renovations and repairs may be planned. We must examine the utilization of our existing space and work towards ‘right sizing’ the campuses with the type of space needed. We are evaluating a policy of NO net new space without net new revenue.
- 30. Speaker: Walter Branson Vice Chancellor for Finance and Administration Missouri University of Science & Technology
- 31. Leader in green: First US university to receive ISO 14001 certification for environmental management Solar village Sightlines member since 2007 2.7M GSF 165 Maintained Acres 8,642 Students Founded 1870 Campus Profile
- 32. Operating Costs by Building Size 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 A B C MS&T D E F G GSF Average Building Size *Ozanne analytics $3.00/GSF $1.00/GSF Smaller Buildings Than Peers
- 33. 20% 14% 14% 19% 19% 27% 24% 25% 41% 40% 44% 27% 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 FY14 Peer Average %ofTotalCampusGSF Campus Age by Renovation Age Category Under 10 10 to 25 25 to 50 Over 50 Space Profile Renovations and new construction are managing campus age
- 34. Capital Profile $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TotalDollarsinMillions Institutional Recurring Capital One-Time Capital Sources Target Need Capital investments falling short of target
- 35. $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TotalDollarsinMillions Institutional Recurring Capital One-Time Capital Sources Infrastructure Capital Profile Significant infrastructure spending for geothermal energy
- 36. 16% 59% 21% 4% 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” projects Historic Spending Mix
- 37. $0 $50 $100 $150 $200 $250 $inMillions Backlog Growth Since FY03 Backlog Maint/ Repair Backlog Modernization Backlog Infrastructure Recent investment curbs growth in infrastructure, Repair/Maint grows Total Backlog
- 39. Speaker: Bob Simmons Associate Vice Chancellor, Administration University of Missouri – Kansas City
- 40. 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 GSF 149 Maintaine d Acres 11,397 Students Founded 1933 University of Missouri – Kansas City
- 41. Changing Campus Density -5% 0% 5% 10% 15% 20% ChangeinDensityFactor 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.
- 42. 23% 17% 18% 20% 46% 42% 14% 21% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UMKC '03 UMKC '14 %ofTotalCampusGSF Campus Renovation Age Under 10 10 to 25 25 to 50 Over 50 Age Shifts Over Last 10 Years Buildings Under 10 Little work. “Honeymoon” period. Low Risk Buildings 10 to 25 Short life-cycle needs; primarily space renewal. Medium Risk Buildings 25 to 50 Major envelope and mechanical life cycles come due. Higher Risk Buildings over 50 Life cycles of major building components are past due. Failures are possible. Highest risk
- 43. Changing Funding Sources $- $10 $20 $30 $40 $50 $60 $70 $inMillions UMKC Capital History - Sources 1990 - 2012 State Federal Private Campus Bonds Other (PPP) As state funding decreases, shifting toward creative use of bond funding
- 44. 0 2 4 6 8 10 12 14 16 18 20 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 $110.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Capital$/GSF Backlog$/GSF Capital Spending vs. AR Backlog Backlog Maint/ Repair Capital Spending/GSF Capital Spending and Backlog Large infusions of capital have significant impact on backlog
- 45. Leaner Budget Than Peers $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $/GSF Daily Service Daily Service Over Time
- 46. $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $/GSF 5- year Avg. Planned Maintenance PM Avg. Avg. w/o Highest Peers Planned Maintenance Increased PM efforts has improved in-house PM performance Institutions ordered by tech rating $0.12 $0.31 $0.29 $0.17 $0.13 $0.25 $0.27 $0.01 2011 2012 2013 2014 UMKC PM In-House External
- 47. Driving Capital Investment Strategy Program Value SAMPLE DATA
- 48. 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.
- 49. 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 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.