Capital Renewal/Deferred Maintenance FAQ
Oregon State University
Oct. 31, 2017
Q: Why does the university have such a backlog of capital renewal needs (deferred maintenance)?
Past state budgeting rules that prohibited the use of operating funds for capital renewal needs and limited OSU resources have resulted in this significant backlog. For example, OSU was not allowed to use money from the state for instructional purposes to address deferred maintenance concerns such as a new roof for a building.
Many universities across the country also face deferred maintenance issues of the relative scale of OSU’s due to funding constraints, and are working to address these concerns.
Q: How much money would it take to address all of OSU’s capital renewal projects?
Sightlines, a facilities analysis firm that OSU hired to evaluate this issue, estimates that it would cost $650 million to fully address the university’s deferred maintenance backlog. Another $350 million is required to implement recommended life safety and seismic upgrades. Visit our website to read the Sightlines report.
Q: How is OSU working to pursue a more systematic and transparent approach to capital planning and renewal?
In spring of 2016, the provost and the vice president for finance and administration partnered to establish an Infrastructure Working Group (IWG) with representatives from the Provost’s Council, University Housing and Dining Services, and the Department of Intercollegiate Athletics. The Office of Capital Planning and Development assists this group.
The IWG was charged with these two major tasks:
Develop a clear and transparent process to guide capital planning and recommend projects to university leadership for consideration by the OSU Board of Trustees. Central to the process are an annual planning cycle that assembles needs from across the campus and a set of criteria by which proposed capital projects are prioritized. The criteria fall into the following categories: life safety concerns; operational needs; facility condition; accessibility; space utilization; impacts on finance, scholarship, research, and outreach; impacts on student and employee success; impacts on university reputation; and potential to leverage other sources of funding.
Apply the process to the development of a 10-year capital forecast. The forecast, which the Board of Trustees approved in January 2017, lays out anticipated capital investments over the next decade based on current needs, priorities and resources. Because needs, priorities and resources constantly change, in response to unanticipated maintenance demands and opportunities arising from fundraising and other sources, the capital forecast is a working document that the IWG will update annually, seeking board approval every two years.
The Office of Capital Planning and Development and the IWG have initiated the next annual capital forecast planning cycle and plan to present a revised 10-year capital forecast to university leadership and the Board of Trustees in January 2018.
Q: What are the key strategies that OSU will employ to address the deferred maintenance backlog in a proactive way?
Create a funding source to address building repair and renewal needs. Beginning with the FY18 operating budget, the university will increase the E&G funding committed to capital improvement and renewal by $5 million in each of the next nine years to total $45 million. This annual allocation is critical because state capital improvement and renewal commitments are not keeping pace with OSU needs.
Establish a stewardship fund as part of all new major capital construction projects. Going forward, budgets for all major capital projects must include a 10 percent allocation to a facility stewardship fund that will partially support the replacement of major building systems and avoid the accumulation of deferred maintenance.
Prioritize renovation over new construction, with a particular focus on research facilities. Over the last decade, the university has added many new buildings while also making considerable progress to improve OSU’s instructional spaces. The current 10-year capital forecast includes 10 major building renovations, with a focus on research facilities with serious maintenance and upgrade needs. The 2017 legislature approved $29 million in state-paid bonds for renovations to Cordley, Fairbanks and Gilkey halls. Executing these projects and the other projects on the 10-year capital forecast will remove approximately $160 million of the deferred maintenance backlog, provide enhanced accessibility and life safety in many campus buildings while also increasing support of the research mission.
Continue to actively pursue state bond funding for capital improvement and renewal. State bonds have been the primary source of funds for capital improvement and renewal in the past and will remain important going forward. They include support for specific projects (e.g., as noted above) and general monies for use at the university’s discretion. Recent discretionary amounts allocated to OSU include $26 million for the 2015-17 biennium and an estimated $14-18 million for the 2017-19 biennium.
Q: How long will it take make significant progress toward eliminating the capital renewal backlog at OSU?
By implementing the four strategies outlined above, the existing deferred maintenance backlog will be reduced by $400 million over the next 10 years. While there are always competing needs for resources, OSU faculty, staff and students are best served by a sustainable university plan to ensure that buildings and infrastructure are safe, operational and functional.
Q: If I want more details on this issue and OSU’s strategy to address it, what should I do?
Please contact the associate vice president for university facilities infrastructure and operations at 541-737-7345.