DRAFT. MINUTES OF THE MEETING October 15, :00 a.m. East Carolina University
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1 DRAFT MINUTES OF THE MEETING October 15, :00 a.m. East Carolina University The meeting of the Higher Education Bond Oversight Committee (the Committee ) held at East Carolina University ( ECU ) was called to order by co-chair, Charlie Davidson. Committee members attending were: Charlie Davidson, co-chair, Paul Fulton, co-chair; William Long, William Marshburn, William Smith and William Thurman. Legislative Staff, Jim Klingler, and Committee Assistant, Ann Faust, were in attendance. Others attending are noted on the sign in roster attached to the minutes. Mr. Davidson commended the Committee and schools for doing an excellent job in evaluating and reporting and for judicious use of the Bond funds. He cited East Carolina University for good budget control and management of the completion schedule. The minutes of the August 20, 2007 meeting were approved. Dr. Kevin Seitz, Vice Chancellor of Administration and Finance, welcomed the Committee to East Carolina ( ECU ) and expressed regrets from Chancellor Ballard. Dr. Seitz stressed the importance of the Bond funds to an institution that is growing and has a major problem with deferred maintenance on buildings, some of which are 100 years old. The funds for ECU were used for both new construction and renovation and repairs, and the goals set by the school could not have been met without the bonds. ECU looks forward to a second bond program to cover rising construction costs and prepare for academic program growth. A preliminary six-year list totals about $700 million, more than half for renovations to current buildings. George Harrell, Senior Associate Vice Chancellor for Facilities Services, presented a broad scope overview of the work of the bonds on campus. Of the $190 million ECU received from the bond sales, $184 million has been paid out. About $12 million of ECU s own money has also been spent on projects to enable bond money to go further. During the bond program ECU has built infrastructure and other enhancement projects (office space, parking, food service, recreation facilities) to accommodate growth of approximately 1,000 students per year. Two major new buildings have been built the Science and Technology Building is about 295,000 sf and was the first building in the System to get out of the ground after the bond referendum passed. Plans had been drawn with other money before the referendum, and ground-breaking took place the night the results of the vote were announced. The Allied Health Sciences Building, housing the nursing program and Health Sciences Library, among others, is the largest new building. Additions have been made to the Rivers Building and the Fletcher Music Hall and complete renovations were made to four major buildings. The power of the Bond Program was the ability to plan and carry out plans with guaranteed funding over the course of
2 years. Among large projects, The Flanagan Building which was the second worst chemistry building in the University System has been renovated; Old Cafeteria has been renovated, retaining the triple arches, and people and programs were moved in and out of most buildings during the process. Many classrooms and offices have been added, and new programs are offered because there is space. There are still buildings in need of extensive renovations and money is nearly gone. HUB is now an active program on the campus, after an extensive learning process. A successful HUB Academy was held on campus to help minority firms learn how to operate and do business with the University System. Programs are firmly in place. The first female architect, female engineer and minority architect hired in the System were hired by ECU. Mr. Harrell presented a slide show of campus construction. In response to questions from Mr. Davidson, Mr. Harrell would have liked to have some funds from this bond issue for future planning. Close-out of projects is getting more scrutiny but time begins to run only after beneficial occupancy. It is hard to get red-line drawings from architects. Mr. Davidson suggested getting drawings as the projects proceed, not waiting until completion. Mr. Harrell said that they are working to get monthly check lists. Mr. Fulton asked what are the most critical needs in case of a second bond issue? Mr. Harrell said they were totally out of academic office space; one dorm has been converted to office space and is nearly filled. The nursing program needs to expand to meet the needs of North Carolina, and an addition is already planned for the new building. Lab space is at a premium. An academic building and a major science building are the two priorities in the next bond program. This will provide a little surge space so that renovations can be done when people are moved out. About 2/3 of students live offcampus living space on campus is filled and there is a waiting list. Self-liquidating dorm space is a consideration. General Thurman asked if it is possible to keep upgrading and planning going for the future. Mr. Harrell said that planning was underway, and a firm has been hired to mold a strategic plan, and the Board of ECU is already involved. General Thurman asked about the involvement of the State in the process of long range planning so that so much catching up is not necessary. Rob Nelson, Vice President of Finance with the University System, responded that before the construction program, it was often a matter of finding cash where you could. The State has a requirement that agencies do a six year capital plan, and the University System has adhered to that on three levels: what the state would fund, self-liquidating, and repair and renovation needs. There is often cross-over in funding projects. He said there is a limit to what students can be charged for dormitory on campus living; 30% is about the norm System-wide more at Western Carolina and less at UNC Charlotte. UNC Wilmington is trying to increase students living on campus to about 40%. President Bowles has asked the System to look at three things: 2
3 Growth, which is projected to be 80,000 in the next 10 years where and how; How to get optimum use of space; Use of facilities: what specialized buildings need to be on which campuses to meet the needs of particular programs. An independent commission appointed by the Board is traveling around the State listening to what the people want the University to provide. Their report is due in late December, the Board will study that and by summer hopes to have an understanding of the needs for new facilities for cutting edge research. Planning and continuity are difficult to achieve when funding is feast or famine, and the Bond Program has helped a great deal to show that when there is a mixture of a good steady stream of resources, good planning, and good leadership to attain the goals, a bond program can be successful. Mr. Fulton asked how ready is the University for a second bond issue? Mr. Nelson replied that after meeting with the Chancellor and a review of UNC Tomorrow report, the University should have a good feel going into the short Session of the Legislature in May. 60% of the projects on the Eva Klein report have been accomplished. Changes have occurred on campuses as needs changed, more students than projected are enrolled and information and technology needs have grown. There are still basic needs remaining on some campuses. At NC A & T work on Cherry Hall is slowed by waiting on outside funding. Faster work on Barnes Hall is being encouraged. Expansion of the medical school and Berryhill Building on the UNC-CH campus is being discussed. Work at Elizabeth City State is underway after transition in the administration there and is mostly under contract. Closeouts on every campus are being closely monitored. Claims from contractors are very low. Shari Harris, Assistant Vice President for Finance/Capital Projects, gave the University s HUB report. (See Chart at Attachment A: University Report) 14.1% of design work has gone to HUB contractors, construction contracts in the amount of $404 million, 16% of work, has gone to HUB contractors. In the last quarter, there has been a 12% increase in HUB participation across the board. 70% of campuses achieved or surpassed the legislated goal of 10% participation. African American participation continues to be a challenge at just under $89 million. Elizabeth City State leads with about 18%. By the end of the Bond Program, $416 million in HUB participation must be achieved to keep the existing percentages. Ms. Harris believes that the outlook is good to meet the goal with projects at NC A & T and Chapel Hill still underway. Outreach is expanding beyond bond projects and partnerships are being created at the CM level one of which is a large non-bond project at ECU. The Pilot Bonding Program of the Institute is on hold, but about 10 companies have been bonded which had not been previously bonded. The HUB Academies are ongoing; one is underway at UNC Charlotte with 30 contractors and one at UNC Wilmington. Academies are scheduled in Winston Salem and at Fayetteville State, then HUB Academy 2 at NC State in January. A new program will be offered dealing with Contracts 101 and pre-dispute resolution with the help of an outside construction law firm through the Carolinas Associated General Contractors. The first will be in November and, depending on its success, others will be offered around the State. Managing the data that goes to the State Office of Construction to assure prompt and correct payment, and internal auditing are areas of more attention and concern. An 3
4 external auditor proved to be too expensive. All information will be assessed so that all subcontractors are paid in a timely manner. Internal monitoring is stressed. General Thurman asked if evaluation was being done to determine why some campuses have bee successful and some not. One of the things that Ms. Harris has found is that smaller jobs still go to ethnic categories, and that keeps the percentage down. Build capacity and strength of HUB contractors and the percentage will rise. Pembroke had several large contracts awarded to a Native American contractor which raised their participation. CM at Risk - mentor/protégé relationships have been more successful than joint ventures. Sessions on partnering are offered by the HUB Academy. Companies have to be built up to handle large contracts. Location also plays a large part. Terrance Feravich, Associate Vice President University Property Officer, continued the University Report. Program Status shows that fewer projects are in design, and completed projects continue to increase. 91% of funds have been expended, and 96% of funds are committed. Seven projects are in design. A University team assisted NC A & T to bring the large Barnes Hall design up to code to pass the Department of Insurance review; they have two projects in design with the same designer. The bid date has been established for Barnes Hall. UNC-CH is involved in a program and feasibility study to determine what ought to be done. Construction matters are not holding the project back. The University is still within the 2009 Master Schedule completion date set at the beginning of the program. It is important to do the right thing in completing, not just finish on time. Mr. Fulton questioned the work on Berryhill, an old inadequate building at UNC- CH. Mr. Nelson said that work is paused to re-evaluate. That project might go off-line with the funds diverted to other projects. Mr. Feravich reminded the Committee that a process has been in place during the program to make changes as things come along. Discussion followed concerning the larger question of the Medical School s plans. Mr. Feravich said that all bonds have been sold, and there have been no cash constraints during the bond program. Some bills have been paid by other than bond funds if necessary. Campuses have been reminded to pay from the proper funds and to pay only when the work billed is complete and is done correctly. It is important for campuses to project their needs more accurately. UNC-C is resolving a potential $6 million claim in good order through negotiations. Project close-outs include close out documents from the architect and all as-builts and a history of the project. The Final Report will be a concise story of each project for future reference. Campuses are doing well. The project team on each campus is responsible for compiling the documents, and final overview in done by the System. The Report is reconciled with the HUB report. Sharon Rosado reported for the Community Colleges. (See Attachment B) The State Board has approved 383 projects for $489 million in new construction funds and $100 million in repair and renovation funds. $10.6 million, 2%, of the funds remain uncommitted. There are 14 projects of $10 million or more using $139 million of new construction funds and $3.5 million of repair and renovation funds and $84 million of other funds. HUB participation is higher in these large projects by campus than their overall participation. All counties have met the matching requirements to release all funds. Two campuses, Martin and Pamlico, do not have matching funds to meet the Advance Planning requirement. Both have a hard time receiving matching funds from the county. HUB 4
5 participation is 12.69%, $70 million. 31 colleges exceed the 10% State requirement. All colleges have some HUB participation, but more education is required. Cash flow projections still are off some primarily because matching reimbursements are done in percentage of payment. 197 projects have been completed and closed out, and 62 projects are completed. Colleges are holding funds from some projects for other needs that may arise on campus. Ten projects are inactive, primarily because of other capital issues on campus and lack of proper time to allot to a project. Fayetteville has a large project that is unfolding. The last project using bond funds is scheduled to be completed in July Mr. Long asked who controls the money after the bonds are sold. Ms. Rosado said that the money is not allotted to the campus until they ask for the reimbursement from the System Office s account in the State budget. A claim against Pitt came from the interest earned on the account. Tom Hunter made a report on advanced planning long range programmatic institutional planning by each college. Each college has been briefed and a program plan should be submitted by January 1 to the System Office for approval. Similar criteria will be developed for facilities master plans. Four colleges have had long range plans approved and will start of their facilities plans or tweak existing master plans. Evaluation of infrastructure necessary to support facilities for each campus is required. Metric space (libraries, offices, etc.) is to be included in plans as well as academic and instructional space to justify those spaces as the most critical need on campuses not experiencing growth. Quality and functionality of space must be evaluated to assure greatest usage. A capital needs list not tied to a funding stream must be submitted to the Board and to the funding county for repair and renovation projects for which it is responsible. Some of these needs may qualify for future bond funds or state funding. Submissions will be reviewed to verify that 8% escalation costs are included to cover the project from start to finish. In response to a question from General Thurman, Mr. Hunter said that the state has no control over monies raised by a county for community college needs. Counties may raise money through bond issues for community colleges. Funding is driven by the economy of local counties which causes trouble for a few counties. In response to a question from Mr. Davidson, Mr. Hunter said that the criteria to be included in all master plans will be determined in fall and winter orientation meetings. Infrastructure, quality and quantity of spaces and proposed use must be clearly stated in master plans. The Council of Educational Facility Planners, an international group, sets the guidelines for quantifiable space in order to cover R & R and non-instructional space. The intent is that by September, 2008 the System will have a capital needs list to submit to the Legislature, backed up by hard data, for use to support the need for a second bond issue or state appropriation. The master plans will preclude inflated requests. Current legislation mandates that counties must contribute matching funds. Funds may come from contributions, not state government. Eight million dollars has been allocated by the State for advanced planning needs. $2.5 million has been allotted to determine the capital list, and $5.5 million will be distributed to begin design work after the capital master plan is approved by the System. Current thought is that 6.5% of estimated construction cost will be allocated up to a maximum of $90,000 to allow a leveling across the System and 5
6 cover 65% of the 10% design fee depending on the cost of the project. Distribution was determined by a matrix including size, age and growth of a campus. Mr. Fulton requested that a summary of the UNC Tomorrow report be presented at the February meeting of the Committee. Mr. Nelson and Mr. Klingler will take care of it. Jim Baker reported for the Office of State Treasurer. All bonds have been sold. Cash on hand for the Community Colleges is $150 million, for the University is $219 million. Care is taken to not violate Federal arbitrage rules in spending order. Bill Davis reporting for the Office of State Construction (See Attachment C) said that a slight backlog has built up due to movement within staff. A 60 day limit turn around is the goal. Berryhill is probably the only University project not out. Every day s hold up anywhere in the project is approximately $150,000 lost in the current economy, and the project then is subject to value engineering to meet the cost, even after bid. Mr. Davis encourages writing in 20% in owner preferred alternates in the base bid. MEMBER REPORTS General Thurman reported that Winston-Salem State and UNC-G are basically finished within budget. NC A & T is still working on several projects. Mr. Marshburn reported that UNC TV is still awaiting FCC frequency designation before ordering equipment, and equipment availability could become a problem. UNC-W is complete and work is proceeding on close-out. The CM at Risk did not prove to be cost effective. Most HUB participation has been female-owned businesses. Mr. Smith reported the Science and Math is complete. Pembroke projects are either complete or under construction. Elizabeth City State is working to catch up. The February 4, 2008 meeting will be held at Nash County CC in Rocky Mount. The April 21 meeting will be at Appalachian State. There being no further business, the meeting was adjourned. Charles Davidson, Co-Chair Paul Fulton, Co-Chair Ann Faust, Committee Assistant 6
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