NACUBO

My NacuboWhy Join: Benefits of Membership

E-mail:   Password:   

 Remember Me? | Forgot password? | Need an online account?

Business Officer Magazine
Loading

Business Briefs

Short news articles based on research surveys and peers’ business experiences that can benefit institutions

SUSTAINABILITY
Solar Energy Projects Spurred By PPA Finance Agreements

They're Coming to America

672K

The estimated number of international students at U.S. colleges and universities in 2008–09.

21%

The share of international students who were enrolled in business and management programs in 2008–09.

$15.5B

The net economic contribution to the U.S. economy from all international students in 2007–08.

7%

The percentage increase in total international graduate school applications for fall 2010.

Sources: Findings From the 2010 CGS International Graduate Admissions Survey Phase I: Applications (Council of Graduate Schools, April 2010); Open Doors 2009: Report on International Educational Exchange (Institute of International Education).

Zero capital investment made possible by third-party financing and ownership. Reduced electricity rates locked in for decades. Plus, the cutting-edge status of going solar. These hallmarks of a power purchase agreement (PPA) have convinced higher education institutions like Smith College, Northampton, Massachusetts, and the San Diego Community College District (SDCCD), California, to implement solar power on their campuses.

Smith had 130 solar panels installed late last year on the roof of its College Campus Center building, explains Dano Weisbord, environmental sustainability director. A local renewable energy marketer and developer, Community Energy Inc., owns the $240,000 system.

In the midst of a $1.5 billion capital bond program that will double its facility square footage, SDCCD will also implement solar power districtwide. According to David Umstot, vice chancellor of facilities management, the initiative is part of a strategy to reduce operating costs. Its PPA is with Borrego Solar Systems.

Ways to Pay

PPAs differ from performance contracts, which guarantee a minimum level of savings in energy efficiency investments (see “Alternative Energy Economics” in the February 2009 Business Officer). Under a PPA, a third party pays for the cost of owning and operating a solar energy system on a campus building(s), and sells the electricity generated by the system back to the institution at a set rate for a period of time—generally 10 to 25 years. The deal is attractive to the third party because it can take advantage of federal and state energy credits and tax incentives as well as depreciation write-offs.

While self-funding is another option, up-front costs of solar projects are substantial and nonprofits can't take advantage of federal tax incentives. However, as Mike Hall, CEO of Borrego Solar Systems, points out, “If institutions have applied for and received a special grant [perhaps under the American Recovery and Reinvestment Act], or if they have either extremely low-cost debt or a cash grant to do infrastructure projects for which solar energy qualifies, then it can make sense to own the system.”

PPAs have their moorings in the traditional energy world, explains Hall, where it's common for builders of a power plant to secure a PPA with a utility to buy the energy. Only recently have PPAs emerged as an attractive financing option with solar energy projects. They are available in select markets because of regulatory and economic hurdles that vary nationwide. Massachusetts, New Jersey, and California are among the states where PPA-financed solar projects have become more common.

Points to Consider

Institutions sitting down at the table may want to try to negotiate ownership of renewable energy credits after the period of time in which PPA providers have received most of the project's value—generally after the first five or six years.

Here are just a few of the many practical insights offered by Smith's Weisbord and SDCCD's Umstot to help guide fellow business officers at institutions that are investigating solar energy options.

1. Mitigate all your risks. “That's my No. 1 operational advice,” says Weisbord. “Make sure your contract protects the integrity of your roof. We intentionally put the solar panels on a relatively new roof that had a warranty, so we made sure our contract protected that warranty [i.e., that any penetrations would be covered]. We were literally worried that if you were making a hole in our roof, you were making a hole in our asset. We wanted to make sure that our risk associated with that is as limited as possible. We don't own the solar panels—we do own the building.” Another risk mitigation step: “Make sure you have approval for the way the solar electrical system interconnects with your existing electrical system.”

2. Clearly identify candidate sites prior to proceeding with a solar project. Recommends Umstot, “Make certain that you factor in long-term facilities master plan requirements [e.g., buildings slated for demolition or replacement, new building footprints, or utility easements] as well as scheduled maintenance activities [e.g., roof replacements].”

3. Keep in mind that your institution can't take credit for the carbon reduction made possible by the solar project. Most PPA contracts require that renewable energy credits or RECs (the renewable attribute of a unit of electricity) are sold to other parties. “In the world of energy, our system will make a carbon reduction of 238 metric tons over the next 20 years,” notes Weisbord. “But our PPA specifies that the RECs will be sold into the market for green power. Therefore, when I calculate Smith's carbon footprint, I will literally have to add in greenhouse gas emissions as if the electricity that came from our solar system were purchased from the grid.” Given this carbon reality, he suggests that institutions sitting down at the table may want to try to negotiate ownership of renewable energy credits after the period of time in which PPA providers have received most of the project's value—generally after the first five or six years.

4. Develop clear terms and conditions of your PPA and site license agreement. “Share these at the time of proposal and selection,” advises Umstot, “to avoid protracted negotiations of agreements after selection.”

Don't forget, too, says Umstot, to closely scrutinize the financial backing of the PPA provider. “You don't want to be left with an unfinished project or program.”

Smith College installed solar panels on the roof of its College Campus Center building in late 2009.

Smith College installed solar panels on the roof of its College Campus Center building in late 2009.

SUBMITTED BY Linda Daily, a contributing editor for Business Officer

^ Top

RESEARCH
Donations Decline for Colleges and Other Nonprofits

Two recent reports show that total donations (monetary and in-kind) to higher education and other nonprofit organizations in the United States fell sharply in 2009. Both reports reflect the impact of the Great Recession, which began in late 2007 and continued through 2008 and most of 2009. They also reflect changes in tax law that may have reduced incentives to provide support to nonprofits.

The annual Giving USA 2010 report, produced by Indiana University's Center on Philanthropy, reveals that from 2008 to 2009 total charitable donations fell 3.6 percent to $303.8 billion, the steepest one-year decline since 1956. Over the past two years, the total amount of charitable contributions has fallen 2.2 percent.

The second report, Target Analytics' 2009 Index of Higher Education Fundraising Performance, found that the portion of alumni who donated to their higher education institutions declined from 15.9 percent in 2008 to 12.4 percent in 2009. In addition, for the first time, the revenue institutions received from fundraising activities declined by a median of 13 percent over the one-year period.

Relative Reversals

Donations to educational institutions were particularly hard-hit during the past two years of economic contraction. From 2007 to 2009, financial support to education at all levels (kindergarten through higher education) fell 8.8 percent, according to Giving USA; only gifts to human services organizations suffered a greater loss (10.4 percent) in this time span.

Donations to international affairs organizations (which include relief activities), on the other hand, increased 7.2 percent over the two-year period, as more Americans donated to agencies providing relief to Haiti and other countries hit by natural disasters. Still, colleges, universities, and other education institutions received roughly $40 billion in charitable gifts in 2009, the second-largest amount among any of the groups included in the Giving USA report-trailing only religious organizations, which collectively received $101 billion.

The Index of Higher Education Fundraising Performance, which is based on fundraising activities at 61 public and private nonprofit colleges and universities, reports that both the number of donors and the median amount received from each donor declined sharply, particularly at public colleges and universities. The number of new donors fell 13.2 percent at public institutions, compared with a 6.6 percent drop at independent colleges and universities (see figure). The median amount received from all contributors to public universities decreased 9.2 percent, versus 5.5 percent at private nonprofit institutions. Overall, the median gift amount received by all colleges and universities fell from $500 in 2008 to $477 in 2009.

Backing Off Bequests

Like all nonprofits, colleges and universities depend heavily on charitable bequests for very large gifts. Giving USA's data shows gifts from estates were particularly weak in 2009. From 2008 to 2009, total charitable bequests to all nonprofits declined 23.9 percent, from $29.5 billion to $23.8 billion.

While the economic recession and the decline in the stock market may account for a large share of this downturn, another factor may have been the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which—according to this Web site—increased the federal estate tax exemption amount from $1 million in 2002 to $3.5 million in 2009, and reduced the maximum federal estate tax rate from as high as 60 percent to 45 percent.

As a result, many estates and trusts were no longer subject to the federal estate tax, and this may have reduced incentives to donate to charities as part of estate planning. As the law currently stands, the federal estate tax is completely eliminated in 2010, which could lead to an even lower level of donations this year to higher education and other charities from bequests. 

Considering Context

While the overall decline in contributions to higher education and other nonprofits is troubling, it is important to place the level of giving in historical context. Giving USA estimates that charitable giving in 2009 was 2.1 percent of gross domestic product, compared with 1.8 percent in 1974. By this measure, Americans continue to give generously despite tough economic times. The survey report also estimates that roughly half the charities had contributions in 2009 that were either the same as or greater than those received in 2008. This result suggests that focusing on the overall trends in charitable giving may mask a great deal of variation among different organizations.

RESOURCE LINK See an executive summary of Giving USA 2010, or go to 2009 Index of Higher Education Fundraising Performance.

NACUBO CONTACT Kenneth Redd, director, research and policy analysis, 202.861.2527

^ Top

SPOTLIGHT: COMPREHENSIVE AND DOCTORAL INSTITUTIONS
Software Centralizes Data for Firefighting Efforts

Since 9/11, the emphasis on disaster preplanning understandably has increased dramatically. One component of a process to mitigate losses and injuries resulting from catastrophic events is anticipating the prospect of fire damage to individual buildings across a university's campus—and quickly planning the appropriate response. Such planning can be a daunting task for a college or university without sufficient staff dedicated to safety or risk management.

First responders generally have only the 5 to 10 minutes from the time they leave the fire station until they arrive on campus to acquire as much information as possible about the location experiencing a fire. We thought that a computer software package allowing first responders to access floor plans and the location of fire sprinkler valves, roof access points, fire alarm panels, and many other details could significantly improve the effectiveness of their efforts and reduce fire damage risk.

Traits for Gaining Traction

When we were unable to identify such a solution in the higher education environment, we designed a system of our own, which we refer to as the firefighter information data organizer, or FIDO. When we approached local municipal fire and safety officials to discuss this project, they were overwhelmingly positive and offered immediate cooperation. We met several times to incorporate their needs and our own requirements into a single computer-aided design document depicting university building layouts and key access points.

We agreed that we needed to develop a software package that was user-friendly and easy to learn; accepted information in common, yet varied, software formats; created documents with consistent layout so users could quickly look up information while speeding to the campus for a call; and produced documents that were in a common language, allowing people to easily share and view the information.

Putting It All Together

After reviewing several options, we developed the FIDO system based on the Signature Scene product offered by Trancite Logic Systems. The basic product is a report-generating software package originally designed for police investigating crimes and vehicular accidents. We were able to customize the standard report to include the following:

  • A cover sheet to provide location information and a general description.
  • A template to include consistent information, such as building occupancy, number of elevators, building usage, number of floors, sprinkler and fire alarm information, and so forth.
  • A narrative section describing a particular building's unique features.
  • Diagram and attachment sections to create or import floor plan files as well as photographs and other images.

The information for each campus building is captured in individual PDF files, which are easily read on the laptop assigned to each fire engine and allow responders to quickly plan appropriate actions for the particular situation.

So far, the system has been used only informally in a residential fire drill situation. But we're so confident in its applicability to live situations that we've supplied a copy of the completed data files to our mobile Emergency Operations Center, should the need arise during a large or significant incident occurring on campus.

By collaborating with our community fire and safety officials, we've created a report that makes campus firefighting preparation simpler and more consistent for higher education institutions and their fire departments.

SUBMITTED BY Brian G. Gutierrez, vice chancellor for finance and administration, and Randy Cobb, director of safety, Texas Christian University, Fort Worth

 ^ Top

 

Technology Tools Provide the Next-Best Thing to Being There

“Videoconferencing tools have been there for years, but not everyone purchased or used them,” says Frederick R. Brodzinski, associate director of the CUNY Transportation Institute at City College in New York. “Now, the financial crisis is driving us in that direction; we're using videoconferencing to save travel, meeting, and teaching costs.” According to Brodzinski, five years ago there was one videoconferencing room on his campus. Today there are units in all academic buildings, and they are used for a variety of purposes, ranging from coteaching of classes to collaborating on research projects.

READ AN ONLINE EXTRA, “Virtual Frugality” by Apryl Motley, to learn ways that colleges and universities are using videoconferencing to generate cost savings while fostering collaboration.

 

^ Top