Report on Deferred Facilities Needs UM

1. University of Missouri System Board of Curators February 2-3, 2012 FINANCE COMMITTEE Report on Deferred Facilities NeedsUM

2. Maintenance & Repair History • Before 1994, State Capital Repair funding was requested project by project [$85M in 1992] • in 1994, two steps were taken • Executive Order 28 - annually reinvest 1.5% of building replacement value for maintenance and repair by FY97 • $28.6 Million of Critical Repairs to catch up • $12 Million line item for M&R was added to the State Operating Appropriation

3. Executive Order 28 Established a Minimum Investment in Annual M&R • Budget at 1.5% of Building Replacement Value • National Best Practice in 1994 was to budget between 1.5% - 3.0% replacement value for M&R* • Funded from both Recurring and One-Time • Used for work to: • Prevent deterioration • Repair/Replace Deteriorated Facilities and Facilities-Related Equipment * Reference: Financial Planning Guidelines for Facility Renewal and Adaption, SCUP, 1989

4. 1996-2011 M&R Spending Complied w/EO28 Executive Order 28

5. Since 2002 M&R Spending Has Dropped Below EO28 Requirement * 2011 Replacement values reevaluated at a higher amount

6. Outside Review of Facilities Highlights Growing Deferring M&R and Adaption Needs In FY 2008 Sightlines, a facilities benchmarking consultant, was hired to provide an independent review of E&G facilities. The observations included: • Estimated Annual Facilities Stewardship [M&R] Investment target for system at $57M [FY2008] • The Backlog of Deferred M&R and Adaption Needs is Growing • Dollars are increasingly spent on Daily Service rather than Major Repairs, which compound the amount backlogged • Determining precise information on backlogged facility needs will improve decision support

7. Limited Capital Investment Results in E&G Backlog Growth Annual investment target One-time capital investments have not prevented an increase in the backlog over the past 6 years. The 6 year net growth of backlog has been$66 million.

8. M&R Becomes More Reactive Growing proportion spent on Daily Service since FY98 Daily Service Major Repair *Sightlines FY 2008 Facilities Report

9. Increased Investment Required to Balance Needs

10. ISES Facilities Condition Audit Provides More Precise Assessment of Needs & Investment • Evaluate Building deficiencies [windows, HVAC, lighting, classrooms, etc.] and estimate costs • Determine the building Current Replacement Value based on use, size, comparator cost information • Calculate Facilities Condition Needs Index *(FCNI) = (Deferred Maintenance + Capital Renewal + Plant Adaption) Current Replacement Value * Reference: Financial Planning Guidelines for Facility Renewal and Adaption, SCUP, 1989

11. 48% of UM Buildings Below Average or PoorJanuary 2012

12. $1.3 billion in Total Facilities Needs Total Facilities Needs at $1.3 Billion January 2012

13. $37m Required to Address Highest Priority Critical Needs

14. FCNI Will Grow at Current Funding Level Signifying Increased Deferred Needs

15. Deferred Needs Projected to Grow from $1.3 to $2.3 billion Over Ten Years

16. Additional Budget Required to Achieve .30 FCNI in 10 Years

17. The FCNI Index Varies by Campus

18. Best Practice Budgeting for Facility Needs includes FCNI • The Facilities Condition Needs Index (FCNI) less than 0.30 is a Best Practice • 1.5% of replacement Value as a proxy for M&R budget understates the need when determined using FCNI

19. Appendix

20. University of Missouri - Columbia

21. University of Missouri – Kansas City

22. Missouri University of Science & Technology

23. University of Missouri – St. Louis