Strategic Capital Funding on a Smaller Scale
By Roger Stackpoole
Located in Syracuse, New York, Le Moyne is a private Jesuit liberal arts college. The small comprehensive institution serves 3,500 students on a campus with 1 million square feet of space in 40 buildings. Though a much different campus than that of the University of Massachusetts Amherst, Le Moyne used the same data-driven, multiyear capital investment strategy to add significant clarity to a difficult situation.
Science Center Plans, Second Thoughts
In 2006, Le Moyne was seriously considering the construction of a 105,000-square-foot science center. However, a campus tour I took with the college's facilities department leadership team revealed significant deferred maintenance and critical repair needs. Many older buildings had not been renovated since the mid-1980s. Construction of a new building would represent a 30 percent increase in academic space, yet the campus did not appear overcrowded. In short, the college lacked a comprehensive plan for addressing its substantial programmatic and deferred maintenance needs, including the existing science building, which was in need of a full renovation.
We realized that our stakeholders needed a more holistic understanding of the campus's physical condition and its competitive strengths and weaknesses. It was important to develop an executable facilities strategy to ensure that the campus appearance and infrastructure are more consistent with the college's academic reputation.
In early 2007, we placed the new science building on hold pending the outcomes of additional strategic consideration of the facilities requirements for our academic, athletic, residential, and student support programs, and evaluation of alternative approaches to meeting the facilities needs envisioned by our science faculty.
Le Moyne needed a process to find the right balance between adding new space, stewarding existing buildings, and investing in our operations. Once we gathered the relevant data to complete a comprehensive campus assessment, and shared this with our board, faculty, and staff, our capital renewal strategy fell into place.
Given the complexities and urgency for these assessments, we retained Sightlines to ensure data objectivity and credibility. The firm gathered data, benchmarked assessments, analyzed classroom utilization, and developed an inventory of capital needs (building portfolios). Provost Linda LeMura and I then presented data and assessment outcomes in meetings with faculty, staff, students, and trustees.
The presentations painted a vivid picture of a campus aging due to years of under-investment. We'd discovered the following:
- More than 80 percent of our campus space was more than 25 years old, a figure about 10 percent higher than that of peer institutions. A total of 58 percent of space was between 25 and 50 years old and needed a life-cycle update—a situation presenting serious risks to the institution.
- Capital spending was falling short of levels needed to keep pace with growing deferred maintenance problems. As a result, the net asset value of the campus was actually declining.
- The backlog of projects was estimated at $80 per square foot, but most knowledgeable people on campus believed that figure was low. Even at that amount, the estimate placed Le Moyne at one of the highest levels of deferred maintenance compared to its peers.
In addition, our lean facilities operating budget did not provide adequate resources to address both preventative maintenance and our goals for achieving a higher standard of care. The growing backlog and maintenance issues were putting a significant and growing strain on the facilities operations team.
Modifications and a Multiyear Model
In late 2007, the college and our board reviewed the outcomes from the assessments, including the data prepared by Sightlines, along with the initial alternative to the previously planned freestanding science building. A process was developed to more fully document and prioritize deferred maintenance needs—some 700 projects—and to develop a multiyear capital plan to include options for a
state-of-the-industry science complex, while also addressing needs across other major programs and services.
In June 2008, the college welcomed its first lay president, Fred Pestello, who called on the college community to work together to envision its future. He initiated and led a dialogue and process resulting in a new vision and strategic plan called OneLeMoyne. As part of the planning, Provost LeMura and I worked closely to engage all constituencies in a discussion of facility needs, since the OneLeMoyne initiative would further shape our facilities plans.
As predicted, the actual backlog of needs was significantly greater than previous estimates. The facilities team documented $175 million of need, with $90 million in existing buildings. The newly developed building portfolios, combined with a disciplined capital planning and funding processes, led to the core of a multiyear capital plan, which included the following projects:
- Modify the plans for the science complex. Instead of adding a new building to our campus (approximately $45 million estimated cost), we decided to fully renovate the existing Coyne Science Building (approximately $23 million estimated cost) and construct a 48,000-square-foot addition (actual cost just under $20 million).
- Conduct a phased renovation of our original and main academic building.
- Relocate administrative offices to increase the number of classrooms.
- In the areas of athletics, recreation, and wellness, construct a new turf field, softball complex, varsity fitness room, and women's locker rooms, along with an updated community fitness room and other smaller improvements.
- Return the popular Dolphin Den, a community retail dining space, to its former home in the academic complex. Since its move in the 1990s to the Campus Center, students, faculty, and staff alike strongly urged the college to move the Den back "where it belongs."
- Completely transform the dining hall, after almost no investment for nearly 20 years.
- Significantly upgrade our utility infrastructure to reduce energy consumption, achieve cost savings, and improve Le Moyne's carbon footprint.
Sizing Things Up
The college has now invested more than $64 million, or approximately 25 percent of the facilities replacement value, into our campus renewal strategies—achieving design awards and high praise from our community, our board, and all stakeholder groups. Our investments have continued a 20-year trend in improving energy efficiency, and our disciplined facilities planning process has helped inform our developing strategy to repurpose an existing building such that it will house our recently named Madden School of Business.
A number of factors led to the ongoing successful implementation of the capital plan, including engagement of faculty, staff, students, senior officials, the president, and trustees. One key decision was to help all stakeholders understand the needs, and trade-offs that had to be made. Senior leadership used reliable data and considered for all projects the strategic relevance and potential impact on OneLeMoyne, as well as issues relating to construction costs, work schedules, deferred maintenance concerns, and funding sources. Our goal is to strike the best balance, addressing the most-serious deferred facilities issues while investing in renewal projects to optimize the strategic outcomes envisioned in OneLeMoyne.
Ultimately a new science building was adjoined to our existing Coyne Science Building, but it was rightsized for our needs and affordability, while we phase the full renewal of Coyne. The first phase of that renovation was completed last summer and represents approximately 40 percent of the required renovations and systems renewals.
Strategic bonding strategies were used to time borrowing to get the best rates and prudently manage debt levels. The college borrowed $12 million in 2009 by issuing floating rate debt and entering a swap at a fixed rate of 2.6 percent. We then borrowed $25 million in 2010 and $15 million in 2012 by issuing conventional 30-year fixed rate tax-exempt bonds with all-in costs of 5.5 percent and 4.5 percent, respectively. These new bond issues brought our total outstanding debt to approximately $61 million, well within our debt capacity.
Similar to the University of Massachusetts Amherst, Le Moyne reviews the capital plan annually and works to remain flexible. For example, when an opportunity came to purchase a run-down plaza adjacent to campus, Le Moyne was able to allocate capital resources to purchase and renovate it, relocate our bookstore (Barnes and Noble at Le Moyne), and open a Dunkin' Donuts and pizzeria. The result: We extended our campus footprint and removed a deteriorating building in the neighborhood, winning community praise.
Since adapting these new tools and data-driven working processes, the college has transformed the campus by investing approximately 20 percent of the campus replacement value in existing buildings and adding the science addition, turf field, and softball complex.
ROGER STACKPOOLE is vice president, finance and administration, and treasurer, Le Moyne College, Syracuse, New York.