Revival of the Fittest
How can you keep your campus facilities in tip-top shape? Your plan should incorporate both a realistic timeline as well as options to repair, renovate, or replace.
By James Kadamus, Juanita Holler, and Roger Stackpoole
We are at a unique point in the history of higher education. A confluence of factors compounds the current climate for capital needs of colleges and universities and influences the health of our physical assets. The traditional strategy of cyclical building renovations and replacements will not work for the future. Institutions need to closely examine mission and make tough decisions regarding backlogs if they wish to remain "physically sustainable."
The May 20, 2012, article "How the Campus Crumbles" in the Chronicle of Higher Education provided perspective on the growing deferred maintenance problems campuses face across the country: "Figures on deferred maintenance are hard to quantify. Sometimes they include repairs of buildings that colleges plan to replace anyway, and sometimes the estimates are inflated or deflated, depending on how they might play politically." Nevertheless, notes the article, "Some experts estimate that deferred maintenance on college campuses amounts to about $36 billion across the country, with $7 billion of that considered urgent."
Data gathered annually from more than 300 campuses by Sightlines, a higher education consulting firm in Guilford, Connecticut, suggest that these numbers are underestimated. Meanwhile, the public has been asking: "But haven't campuses been spending billions on new construction and renovations over the past 20 years? Why hasn't this spending made a difference? And what can higher education leaders do to reverse the trend?"
Multiple Factors Compound Facilities Failure
At today's colleges and universities, three major factors are coming together to exacerbate asset reinvestment backlogs, increase capital needs, and lessen the reach and impact of funds already being spent.
- Building life cycles. Buildings typically cross major capital thresholds after 25 and 50 years of age, times when most major systems require replacement. Currently, the buildings built in the 1950s and '60s in response to the baby boomers, the GI Bill, and major science investments from the government are nearing or have crossed the 50-year mark. Many have not had significant renovation. This is happening at the same time that buildings from the construction boom of the 1990s will be nearing the 25-year mark.
- Funding uncertainty. While endowments hit by the economic downturn are nearing prerecession levels, business officers and trustees will continue to be reluctant to undergo large renovation campaigns. State support for higher education is falling for the public sector, and many schools have either reached debt limits or simply don't have the ability to borrow to fund projects.
- Potential enrollment decline. The projected decrease in high school graduates expected in the Northeast and Midwest in the coming years will make for greater competition among higher education institutions. The U.S. Department of Education estimates that 17 states—including all New England states, New York, New Jersey, Maryland, and the District of Columbia—will experience declines in the number of high school graduates from now until 2019. Campuses that are more tuition-driven than endowment-supported could face uncertainty in their ability to fund both operations and capital.
Many business officers understand that campuses will never have enough money to fix all of the buildings and eliminate deferred maintenance, yet they are seeking new capital planning and investment strategies that will work in the future. With backlogs estimated to have been growing at a rate of 15 percent over the past five years, engaging campus leaders to set priorities for capital funding is important. But, how and where do they begin?
Working with a number of colleges and universities, our firm has found that a four-step strategy—when followed diligently—can have significant impact.
- Document the backlog of deferred projects. Include not only an inventory of all the buildings, but include building components such as HVAC systems, electrical and plumbing systems, windows, and roofs as well.
- Segment buildings and capital needs into portfolios. Sorting projects in a way similar to investment portfolios will result in a more strategic approach to capital investment and greater impact from those investments. Sometimes simply demolishing buildings with high deferred maintenance is the best solution. Of course, these are tough decisions facing campus leadership.
- Engage campus leadership to set capital funding priorities for the portfolios. Once portfolios are set up and project estimates in place, sufficient data will allow engaged leaders to set priorities based on the institution's goals. This will lead to the creation of a cohesive multiyear capital plan.
- Set realistic annual investment targets to steward campus facility assets. We've found that campuses with the discipline to fund at annual investment target levels have less need for infusions of capital and less risk of high deferred maintenance.
Campuses across the country face growing capital needs and deferred maintenance issues. Combine this with fewer capital dollars, and it is clear the situation will worsen before it improves. Despite serious financial constraints, however, campuses like the University of Massachusetts Amherst and Le Moyne College, Syracuse, New York, demonstrate the results that can be realized by applying a disciplined approach to facilities capital planning and budgeting.
Following are case studies of the two institutions—one a large public university and the other a small private college—explaining how each developed processes to document its project backlog, segment project inventories, and engage campus leadership in setting priorities. The result on both campuses has been the development of sustainable capital plans—supported by senior leadership, faculty, and trustees—that address the backlog of deferred maintenance, and attract new capital resources.
JAMES KADAMUS is vice president, Sightlines, Guilford, Connecticut.