CAPITAL BUDGET PRINCIPLES

Revenue Principles

Funding for capital improvements projects include the issuance of University general obligation bonds, central operations and maintenance funds, ICR funds, departmental funds, fees, gifts/grants, federal funds, State general obligation bonds, the Internal Loan Fund, central reserves or other funds. The Administration shall require that:

The Capital Improvement Program identifies the sources of revenue for financing proposed projects. Projects involving requests to the State consider the legislative requirement that the University pay one-third of the debt service. The use of Federal, State, and other non-University funds be maximized. Internal Loan Fund financing of capital projects be provided within the guidelines and limits of that loan program and be consistent with all other Capital Improvement Program principles.

Borrowing funds for financing capital improvements is accomplished through the issuance of general obligation bonds. A capital improvement project provides benefits over future years, and therefore, it is prudent to spread the payments over future years. The amount of revenues devoted to the repayment of debt is determined through the University's debt management policies. The Administration shall require that:

The Capital Improvement Program maintains the University's long term AA/A-1 and short term A1+/P1 credit ratings, provides flexibility to issue different forms of variable and fixed-rate bonds, and minimizes University borrowing costs. The sale of University general obligation bonds not be undertaken in aggregate amounts of less than $10,000,000. The issuance of revenue bonds be limited due to the uncertainty of internal revenue streams and higher debt service costs. University debt not be incurred for projects with a life expectancy less than the maturity of the bonds. Bonded indebtedness not be used for operating and maintenance costs.

Expenditures Principles

The University has certain valid, written agreements or contracts with regard to capital Improvements that have been approved by the Board of Regents. The Administration shall require that:

Contractual obligations, made in good faith by both the the University and the construction contractor for capital projects, be honored.

Contractual obligations for design services will, at a minimum, be brought to a point of logical conclusion before being put on hold; and will be interrupted only if there is no realistic possibility of financing the project which they support.

Many of the buildings at the University are sixty or more years old. Over the years, constant improvements have been made to the fire and life safety codes designed to protect both people and property. Many of these older structures do not have enclosed stairwells, fire rated exit corridors, automatic alarm systems or emergency lighting. The Administration shall require that:

The safety and well being of people during an emergency and the protection of existing facilities be the highest rated priority for the expenditure of capital resources.

Fire and life safety improvements are so critical as to require their inclusion in every major remodeling project. All new construction shall meet applicable building codes, including fire and life safety codes.

The environmental health and safety of all persons on campus is of the utmost importance. Past construction practices, such as the use of asbestos, potentially present a clear danger to the health of University community members. The Administration shall require that:

Conditions which present a danger to the safety or health of persons on campus be mitigated, or abated as quickly as possible.

Other potentially unsafe conditions ranging from poor air quality within a building, for mechanical or other reasons, to vehicular/pedestrian conflicts are recognized as hazards to be eliminated.

In order to become a truly diversified and richer community, the University's campuses and all University facilities must be accessible to all members of the general population especially those that may be mobility impaired. In support of the spirit and to meet the requirements of the Americans with Disabilities Act (ADA), the Administration shall require that:

Priority be given to projects that enhance accessibility, and no major renovation of any University facility shall be undertaken without including as a part of the project all actions necessary to make the facility totally accessible to all persons.

New facilities will also meet this requirement. Commensurate with its intent to make facilities on campus accessible to all persons, the University will also move to insure that all facilities rented by the University will be totally accessible to all persons.

The specific requirements generated by the teaching, research, and service mission of the University are dynamic in nature. The Administration shall require that:

Recommended capital improvements be in compliance with approved departmental, collegiate and University academic plans; and/or demonstrate a potential for substantial advancement of the University's teaching, research and service mission.

When a decision is made to remodel an existing facility, or construct a new building, an implicit decision is also made to operate the program in the structure after external funding is gone. For this reason, projects will be undertaken with the understanding of their real ranking among University priorities; and the University may choose not to accept funds because they require a long term commitment to operating expenses the University does not wish to bear.

The Master Plan articulates the University's vision for the physical campus environment. Since this vision is achieved incrementally through the implementation of individual projects, the Administration shall require that:

Capital projects that impact the campus environment comply with the approved Master Plan for long range development and demonstrate that the improvements advance the values which are the basis of the plan.

Review of prospective projects from a Master Plan perspective will be conducted at the preprogramming stage of the Capital Budget Management Process.

Considerable operating costs savings can be realized through the application of energy conservation efforts in existing facilities. The Administration shall require that:

Energy conservation measures needed to reduce operating costs be undertaken in buildings worth investing in, if the projects pay-back period meets the University's criteria for sound investment.

As a general rule, these projects tend to have a pay-back period not greater than ten years. Proirity shall be given to those projects that have more rapid pay-back periods. Waste management projects are considered to be of an energy conservation nature and given like priority. No specific pay-back period is recommended for waste management projects.

The Administration believes that present University facilities should be utilized to the fullest extent. Implicit in this belief is the desire to place heavy emphasis on maintaining present University facilities so that they will continue to be serviceable. The Administration shall require that:

The utilization of existing facilities be maximized, and that maintaining present facilities, utilities and other infrastructure elements be given priority over new construction whenever feasible.

The assignment of space to departments or programs in a facility shall not preclude full utilization of the facility. Maximum utilization of all University facilities helps reduce the need to commit scare resources to new construction or major renovation. Adequate maintenance is essential to insuring full utilization of University facilities, preserves and protects the University's capital assets, and saves money in the long run. Facilities which have outlived their functional and structural lives and have not been designated by the Regents as being historically significant may be considered for demolition as a way of maximizing operating and maintenance money for useful facilities. The expense of demolition shall be programmed into the cost of "replacement" facilities.

With the initiation of MAPS (maintenance/accounting/planning/scheduling), the establishment of standards for custodial productivity, and the metering of both demand and usage for electricity and steam at individual buildings, it will be possible to better project the operating cost implications of proposed capital projects. Life Cycle costs are a relative comparison of the projected value of a facility or infrastructure improvement over its projected life. The Administration shall require that:

The operating and life cycle cost implications of all proposed capital projects be identified and priority be given to those which will result in a reduction in operating expenditures; or represents the wisest use of University resources over time.

Some capital improvements proposed by University departments will require additional operating expenditures, while others may actually reduce operating costs. The application of life cycle costing will result in the selection of designs and components which favor minimizing total cost over initial costs.

The long-range utilization of University facilities can be enhanced if the construction and/or renovation of facilities are completed with as much flexibility as is possible. The Administration shall require that:

Every new or renovated facility be designed to maximize flexibility consistent with programmatic needs and operating efficiency.

The ability to accommodate programmatic changes and/or future growth is enhanced and scare financial resources can be stretched if facilities are designed to accommodate change. Research laboratory and instructional spaces should be as "modular generic" as possible.

Continuing maintenance and operations needs demand timely repairs to facilities and the infrastructure of each campus in order to provide adequate support for University programs. In some instances, new facilities and/or utilities are needed to replace functionally obsolete buildings and inadequate utilities. The Administration may require that:

Studies needed to substantiate the physical condition of a building or infrastructure element, or its ability to support academic activities be undertaken prior to committing capital funds for construction projects.

Like needs, such as roof repair studies etc. should be appropriately grouped by type of study and the ability to complete the effort in one budget year.

Unique events or circumstances may require a change in the approved capital improvement plan after its adoption by the Board of Regents. Unforeseen revenues, changing programmatic needs, additions or reductions in the scope of a project, or other emergencies may require changes to the approved Capital Improvements Program during the fiscal year. In order to accommodate these unforeseen events, the Administration shall require that:

Modifications to the approved Capital Improvements Program necessary to accommodate unforeseen events be adopted by the Board of Regents.

These amendments to the program will be introduced to the Regents at one meeting, and acted upon at the next.