Taming Deferred MaintenanceBefore the Roof Caves In

Mike Gower, Executive Vice President for Finance and Administration and Treasurer, Rutgers University

Harold Hewitt, Executive Vice President and Chief Operating Officer, Chapman University

Mark Schiff, President, Sightlines

Hugh Warren, Associate Vice President, Facilities Operations & Maintenance, University of Alberta

WHERE CAMPUSES STAND…

National, Public & Peer Group Trends in Facilities

June 2016

By the Numbers – State of Facilities Database

3

Public, 60%

Private, 40%

377 Higher Education Institutions

Comprehensive/Doctoral, 34%

Research, 26%

Small Institutions,

32%

Community Colleges, 8%

1.5 Billion Total GSF

2,137,705 Students educated at included institutions

The Sightlines’ Paradigm

4

5

Space and Enrollment GrowthSpace growing faster than enrollment beginning in 2013 to 2015

0%

2%

4%

6%

8%

10%

12%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Space and Enrollment Growth(National Average)

Space Growth Enrollment Growth

0%

2%

4%

6%

8%

10%

12%

% o

f G

SF

Sightlines Database- Construction Age Sightlines Database- Renovation Age

6

The campus age drives the risk profile with Post-War and Complex comprising 67%

Putting Campus Building Age in ContextP

re-W

ar

Built before 1951

Durable construction

Older but typically lasts longer P

os

t-W

ar Built between 1951 and

1975

Lower-quality construction

Already needing more repairs and renovations

Mo

de

rn Built between 1975 and 1990

Quick-flash construction

Low-quality building components

Co

mp

lex

Built in 1991 and newer

Technically complex spaces

Higher-quality, more expensive to maintain & repair

Pre-War Post-War Modern ComplexPercent of Total Space

40%Percent of Total Space

27%

7

Progress in resetting the clock on buildings over 50 years old

Square Footage by Age Category

13% 19%

18%

27%

31%

30%

38%24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Construction Age Renovation Age

% o

f Sp

ace

Construction Age vs. Renovation Age

Under 10 10 to 25 25 to 50 Over 50

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

8

Annual Capital InvestmentPrivate campuses rely more on annual institutional capital; public rely more on one-time

Public Average Private Average

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

$/G

SF

9

Annual Capital Investment36% of private campus capital comes from annual institutional sources

26%22% 25% 24%

28% 28% 28% 29% 28%

74%78% 75% 76%

72% 72% 72% 71% 72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Pe

rce

nt

of

Tota

l Do

llars

Sp

en

t

Public Average Private Average

28% 27% 25%31%

35% 33% 35% 36% 36%

72% 73% 75%69%

65% 67% 65% 64% 64%

2007 2008 2009 2010 2011 2012 2013 2014 2015

10

Facilities Backlogs Continue to Rise

Capital investment not enough to keep backlogs from growing

Backlog $/GSF

Public Average Private Average

0%

5%

10%

15%

20%

25%

30%

0.00

20.00

40.00

60.00

80.00

100.00

$/G

SF

0%

5%

10%

15%

20%

25%

30%

0.00

20.00

40.00

60.00

80.00

100.00

11

Facilities Operating BudgetsAfter years of flat budgets, small increases in campus operating budgets in 2014 and 2015

Public Average

3.65 3.91 3.92 3.854.29 4.28 4.39 4.51 4.67

0.250.25 0.26 0.26

0.26 0.27 0.28 0.290.31

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2007 2008 2009 2010 2011 2012 2013 2014 2015

$/G

SF

4.44 4.61 4.62 4.62 4.62 4.64 4.58 4.75 4.84

0.320.34 0.34 0.32 0.32 0.33 0.34

0.37 0.36

2007 2008 2009 2010 2011 2012 2013 2014 2015

Private Average

Operating Budget $/GSF

Trends in Summary

Space is growing faster than enrollment; there are exceptions, particularly research institutions

Campus age profile driven by when buildings were constructed. 67% of space was built in two periods: 1955-1975 or 1995-2015

There is some progress on resetting the clock on building systems. But the majority of space (55%) needs some level of renovation.

Capital investment at public campuses is the highest since 2009, mainly as a result of borrowed one time capital.

Capital investment at private campuses is gradually returning to 2009 peak levels, driven by annual institutional capital.

Despite capital investment increases there is not enough money to address aging campuses, so deferred maintenance continue to grow.

After years of flat funding, facilities operating budgets grew modestly in 2014 and 2015.

Rutgers University

13

Case Study: Rutgers University What data made the case that a

paradigm shift was needed?

What strategies are being adopted?

What are the expected outcomes?

How is campus engaged in the conversation?

Top Research University

Member of the Association of American Universities (AAU) and the Big 10 Conference

Top 20 in the U.S. in research R&D expenses

Celebrating its 250th Anniversary this year

Sightlines member since 2003

27MSupported

GSF

1,550Maintained

Acres

67,000Students

Established

1766

Space Challenge: Older Buildings

15

50.4 49.448.8

41.1

0

10

20

30

40

50

60

Rutgers Big 10 Peers

Year

s

Construction vs. Renovation Age

Construction AgeRenovation Age

Under 10 Years

Under 10 Years

10 to 25 Years

10 to 25 Years

25 to 50 Years

25 to 50 Years

Over 50 Years

Over 50 Years

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rutgers Big 10 Peers

% o

f To

tal C

amp

us

GSF

Campus Buildings by Renovation Age

High Cost High Cost

Space Challenge: Smaller Buildings

16

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Rutgers Big 10 Peers

AV

ERA

GE

GSF

/ B

UIL

DIN

G

Average Building Size

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Under10,000 GSF

10,000 to30,000 GSF

30,000 GSFto 60,000

GSF

Over 60,000GSF

Building Count vs. Building Size

% of Buildings

% of GSF

Inadequate Spending into Existing Space

17

$0

$20

$40

$60

$80

$100

$120

$140

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Mill

ion

s

Capital Spending vs. TargetsExisting Space Only

Annual Capital One Time Capital

Target Need Equilibrium Need

$98

$79

$126

$96

$0

$20

$40

$60

$80

$100

$120

$140

Rutgers Big 10$

/GSF

Asset Reinvestment NeedFY10 vs. FY15

FY10 FY15

A New Paradigm

18

1. Engage campus in a conversation to think about space in a new way

2. Provide Facilities with a Seat at the Table

3. Put in place new policies around space use

• Small buildings are taken down

• Buildings with high backlog are taken down

EXPECTED

OUTCOME

19

Strategy #1: No Net New Policy

• For any new building, at least one building comes down

• Enforced through Facilities Leadership & President’s OfficeACTION

$0.00

$1.00

$2.00

$3.00

$4.00

Under 10,000 GSF 10,000 to25,000 GSF

25,000 to50,000 GSF

Over50,000 GSF

Mai

nte

nan

ce C

ost

-$

/GSF

Typical Maintenance Costs* by Building Size

*Costs are from the Sightlines database, featured in the Chronicle of Higher Ed article, “Less is More: Campus Officials Trim Square Feet to Cut Costs”

• Owners release space

• University has flexibility to consolidate and take down excess space

• Campus utilization increases – more revenue with lower carrying cost of facilities

EXPECTED

OUTCOME

20

Strategy #2: Change the Budget to Charge for Space

• Schools/Departments/Centers pay for space – RCM ModelACTION

21

Strategy #3: Change the Paradigm of Classroom Utilization

• Document and measure utilization

• Get serious about scheduling – target the low hanging fruit

• Set policies that incentivize central control:

• If departments put space into the pool for general use, facilities will support upgrades

• If departments keep space for their own use, the department is on their own to fund improvements

ACTION

• Campus utilization increases – more revenue with lower carrying cost of facilities

• Starts to make an impact on reducing the cost of Higher Education

EXPECTED OUTCOME

Mission: To provide personalized education of distinction that leads to inquiring, ethical and productive lives as

global citizens.

7th Best University in the Western Region According to US News and World Report

Sightlines member since 2006

2.1M GSF

75Maintained

Acres

7,500Students

Established

1861

Space Growth vs. Enrollment Growth

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Peers % Change in Space and Enrollment

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

Chapman % Change in Space and Enrollment

24

Impact of Campus Growth

19% decrease in density since 2004

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Use

rs/1

00

K G

SF

Density Factor

Chapman Density Factor Peer Avg Density

Wear & Tear on Facilities

Capital Investment

Trades Staffing Levels

Operating Expenses

Density Affects:

24%35%

25%

46%21%

14%29%

6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Peer Reno Age Chapman RenoAge

% o

f G

SF

Campus Age by Category

Under 10 10 to 25

25 to 50 Over 50

25

Campus Age Profile

Understanding the Impact of Age on Capital & Operations

$32.94 $34.65

$111.66

$174.06

$0.00

$50.00

$100.00

$150.00

$200.00

Under 10 10-25 25-50 Over 50

$/G

SF

10-Year Capital Need from BPS

$0.63$0.69 $0.72

$0.29

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

Under 10 10-25 25-50 Over 50

$/G

SFAverage Work Order Cost by Reno. Age Category

Total Needs

$469.4M

Projects beyond FY23 (10 years)

$18.0M

New Space

$358.1M

Grounds & Infrastructure

$1.4M

Building Needs

$91.9M

Capital Upkeep

$27.2M

1.1M GSF

$24/gsf

Repair and Maintain

$15.4M

191,383 GSF

$81/gsf

Systemic Renovation

$24.3M

232,982 GSF

$124/gsf

Transitional

$25.0M

117,495 GSF

$212/gsf

26

Creating Building Portfolios

27

Total Investment vs. Funding Target

One-time capital closed the gap prior to FY13

$1.5 $1.8 $2.6 $2.5 $2.9 $3.5 $4.0 $4.2 $3.3$5.0

$3.5 $3.6$1.4$1.9

$2.5 $2.7 $2.3

$4.1 $3.9$5.0 $6.7

$0.8 $3.3 $3.2

$0

$5

$10

$15

$20

$25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$ in

Mil

lio

ns

Total Capital Investment vs. Funding Targets

Annual Capital One Time Capital Annual Investment Target Life Cycle Need

Increasing Backlog

Reducing Backlog

Stabilizing Backlog

28

Asset Reinvestment Need

Spending at target levels has arrested growth in Asset Reinvestment Need

$66

$57 $59 $58 $58 $58 $55 $56 $57$60

$54 $57

$72 $73 $73 $74 $74 $73 $76$80 $78 $81 $83 $85

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$/G

SF

Total Asset Reinvestment Need $/GSF

$6/GSF Difference

$28/GSF DifferencePeersChapman

$4

$25

$114

$0

$20

$40

$60

$80

$100

$120

$140

$160

$ in

Mill

ion

s

ROPA+10 Year Total Capital Need

29

Defining Need with ROPA+ Prediction

ROPA+ provides a more comprehensive view of backlog and upcoming need

Renewal Need• What building needs will come

due in the next 10 years?• Building Exteriors• Electrical• HVAC• Interiors• Plumbing• Roofing

Current Need• What on campus is currently

broken, operating at a significantly higher cost, or requires significantly more time to maintain?

Mod. & Infra. Need• Large-scale renovations• Upgrading systems prior to end

of useful life

Type of Need Type of Funding

One-Time

Annual

Annual & One-Time

Top Research University

Top 5 Canadian, Top 100 world wide

6 Years on “Canada’s Greenest Employers”

Sightlines member since 2014

11.3MSupported

GSF

443Maintained

Acres

36,918Student FTE

Established

1908

Waves of Construction

UAlberta differs from Canadian national trend due to recent construction

0%

5%

10%

15%

20%

25%

30%

35%

40%

% o

f sp

ace

CAUBO National Trend

Alberta

UAlberta 8% 49% 10% 33%

CAUBO 11% 48% 13% 28%

Pre-WarPrior to 1951

Durable construction, older but built to last

Post-War1951-1975Low quality

construction, not aging well

Modern1975-1990Quick-flash

construction, low quality

Complex1990 to today

Quality but costly construction, highly

technical

Understanding the Age of CampusSome of UAlberta’s oldest buildings have been reset, but profile changing in coming years

18%25%

13%

13%

17%

20%

47%

46%

35%

21%12%

32%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

U AlbertaConstruction Age

U Alberta RenovationAge

Peer Renovation Age

University of Alberta Campus Age

Under 10 10-25 25-50 Over 50

Buildings Under 10

Little capital work required, Implement PM program.

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. Reactive

maintenance needs are high.

Highest Risk

Complexity Drives Operating Costs

Younger buildings are more complex and cost intensive

4.1

3.5 3.4 3.2

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Under 10 10 to 25 25 to 50 Over 50

Tech

Rat

ing

Tech Rating by Age Category

$504

$517

$551

$655

$801

$- $300 $600 $900

Tech 1

Tech 2

Tech 3

Tech 4

Tech 5

$/WO

Average WO Cost

Adding Complex Space Increases Costs

UAlberta will double the amount of Tech 5 space in the next 10 years

High campus density impacts flexibility

UAlberta is as Dense as Research Peers

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015

Use

rs/1

00

,00

0G

SF

Density Factor

Density Peer Average

Consistent Investment while Need Increases

One-time capital helps close the gap between stewardship and target

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2010 2011 2012 2013 2014 2015

USD

Total Investment vs. Target

Annual Capital One Time Capital Target

Decreasing Campus Value

Sustaining/Increasing Campus Value

Annual Investment Capacity: $35-$55MDue to limited decant space and contractor restrictions

Ten Years of Repair & Maintenance Need

UAlberta’s priority need is largest of peer group, with less occurring after year 5

$0

$20

$40

$60

$80

$100

$120

A B C D E U of A G

US

$/G

SF

Repair & Maintenance Need

5-Year Need Years 5-10

Peer avg: $72

Operating Budget Compared to Peers

UAlberta has lowest resources in peer group

Benchmarks ordered by increasing technical complexity

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

A B C D E F G H U of A J K

US

$/G

SF

Operating Budget Actual Expenditures

Daily Service Preventive Maintenance

Peer avg: $4.83

Plan Going Forward

• Continue to use quality data to show the DM need, support for partnering funds and making decisions

• Explore Campus as a Living Lab with Faculties for Student Research

• Be agile and ready to partner in with new opportunities

• People Counters

Grab your free State of Facilities report today!

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