Amid the struggling global economy, Facilities Management employees said several of the capital construction projects, totaling almost $400 million, were completed for less-than-estimated costs and were equipped with additional and upgraded amenities using leftover funds.
Out of the 17 total capital construction projects several are estimated to come in under budget and construction officials attributed the savings to cuts in contractors’ and suppliers’ costs as a result of the recession.
“We are getting a lot more building for our money than we thought we would,” said Brian Chase, director of Facilities Management, of the Academic Instruction building, Lake Street Parking Garage, Rockwell Hall at the College of Business, Computer Science building and the North addition to the Recreation Center.
“We are taking advantage of a very good construction state right now.”
Chase said costs for the Academic Instruction building – a four-story 90,000 square-foot instruction building that will house three classrooms, four seminar rooms and a 400-seat state-of-the-art lecture hall – came in “almost $2 million under” the estimated $45 million total planned cost.
With surplus dollars, Facilities Management upgraded the audio systems and the quality of finishes used throughout the building. Because the money for the project is funded entirely by student fees, as approved by the Student Fee Review Board in 2007, Chase said a portion of the $2 million will be used to adorn the building with student artwork.
In the Computer Science building, located to the East of the Lory Student Center, additional study space was incorporated into the 24-hours access, keyless entry facility with the thousands saved in supply costs.
Leftover money on the Student Recreation Center Expansion/Renovation – a project started in May 2008 that will provide for the addition of 60,000 square feet of new construction and the renovation of 81,000 square feet of the facility – was used to increase the amount of workout space and equipment provided.
Administrators and university finance experts said members of the CSU and Fort Collins communities have questioned how CSU can afford to fund and complete construction projects in the volatile economy.
The answer: The majority of the capital construction is funded by multi-million dollar loans – bonds the university is mandated to repay within 30 years – from large investment corporations on Wall Street.
“The majority of the projects currently underway are funded through bond financing. These funds were secured last year, and must be used for the specified construction projects in accordance with the bond financing provisions,” Interim Provost Rick Miranda said in an e-mail.
“In other words, we are committed to the bond-holders to move forward on these projects, and stopping construction is not a legal option.”
Finance experts agreed.
“Paying back debt is not an optional thing,” said Allison Dineen, CSU vice president of Finances, of the university’s plan to pay debt service on $210 million in bonds sold in September 2007 and $83.3 million sold in June 2008 to fund construction on campus.
Debt service on the two bond sets, which are slated to be repaid in 2037 and 2038, are paid for from a $5.82 million slice of the University Operating Budget – an amount Dineen said will be unaffected by university budget cuts in fiscal year 2010.
The debt service funds are “certainly a high priority in our budget process,” Dineen said of the money “considered a mandatory cost.”
“(The $5.82 million) is built in the base,” she said. “We have to be mindful to maintain as we move forward.”
Dineen assured the university that department revenue streams allocated to pay debt service payments will not change with next year’s budget cuts required to make up for the 2009 $13.1 million budget shortfall.
Other construction funding – which comes from student fees, private donations and state allocations – are fixed amounts and also will not change.
On March 18, the CSU System closed on almost $57 million in revenue bonds, which will be used to fund construction of a residential village at the CSU-Pueblo campus and a $1.9 million, 4,418 square-foot addition to the CSU-Fort Collins Cooperative Institute for Research in the Atmosphere.
CSU System Treasurer Bob Osika, who worked with three large corporate investors to sell the bonds to corporations, small businesses and “mom ‘n pop” entities, said the entirety of the system’s bonds sold after two hours on the market.
Osika attributed the sale to the stability of the CSU system’s stable revenue streams and high credit ratings, currently at a AA level out of the highest attainable level of AAA.
Osika said the ratings were “extremely important because most investors are not looking at anything below a AA rating.”
Before 2007, CSU-Pueblo and Fort Collins campuses were separated financially, each with its own system of bond finances and individual credit ratings. To become more financially viable to investors, all CSU entities were combined under a cohesive system of credit in 2007. The merge allowed the university to increase its overall credit rating.
Osika said CSU makes “predictable, safe” fiscal decisions are made when taking out loans in the market – especially in light of the unpredictability of the bond market and overarching economy.
All of CSU’s bonds, which Osika and Dineen compared with the mortgage an individual would pay on a home, are taken out on a flat fixed rate so the debt service payment is always the same and will not fluctuate with the market.
Osika said in the current state of the economy, universities with floating bond rates are receiving debt service bills far above anticipated numbers and are being forced to come up with extra money.
“CSU’s financial strategy is never to roll the dice,” Osika said. “We know what we can afford . and we know how much we have to pay.”
At the present, Osika and Dineen said there are no additional bond plans on the horizon.
“I don’t have anything on my plate for the next 12 months,” Osika said. “But that could change.”
As for community critique of the large-scale campus construction, Chase said the money spent is an investment in CSU’s students and the quality of education provided by the institution.
“Some people have raised the issue of ‘Why are you building the buildings when the economy is so bad?'” Chase said. “There are almost a million square-feet of buildings that are needed . and even though they cost money to build, they are things we can use in 30 years and is an investment in the students.”
Assistant News Editor Madeline Novey can be reached at firstname.lastname@example.org.