the capital budget game august 2006 the university of north carolina presentation to sheeo...
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The Capital Budget Game
August 2006August 2006The University of North Carolina
Presentation to SHEEO Professional Development Conference
Robert O. NelsonVice President-Finance
The University of North Carolina
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UNCW
WSSUNCSA UNC
GA&T
NCCU
ECSU
NCSU
ECU
FSU
UNCP
UNCC
UNC-CH
UNCA
WCU
ASU
University of North Carolina16 Constituent Institutions
University of North Carolina16 Constituent Institutions
The University of North Carolina
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Appalachian State University 13,416East Carolina University 21,744Elizabeth City State University 2,285Fayetteville State University 4,965North Carolina A& T State University 9,964North Carolina Central University 6,727North Carolina School of the Arts 1,080North Carolina State University 25,532University of North Carolina at Asheville 3,249University of North Carolina at Chapel Hill 25,255University of North Carolina at Charlotte 16,872University of North Carolina at Greensboro 13,700University of North Carolina at Pembroke 4,601University of North Carolina at Wilmington 10,555Western Carolina University 7,655Winston-Salem State University 4,649
TOTAL 172,249
Appalachian State University 13,416East Carolina University 21,744Elizabeth City State University 2,285Fayetteville State University 4,965North Carolina A& T State University 9,964North Carolina Central University 6,727North Carolina School of the Arts 1,080North Carolina State University 25,532University of North Carolina at Asheville 3,249University of North Carolina at Chapel Hill 25,255University of North Carolina at Charlotte 16,872University of North Carolina at Greensboro 13,700University of North Carolina at Pembroke 4,601University of North Carolina at Wilmington 10,555Western Carolina University 7,655Winston-Salem State University 4,649
TOTAL 172,249
The University of North Carolina2005-06 Average Annual FTE Enrollment
The University of North Carolina2005-06 Average Annual FTE Enrollment
The University of North Carolina
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North CarolinaCapital Improvements Planning Act
North CarolinaCapital Improvements Planning Act
Requirements
(1) An inventory of facilities owned by State
agencies.
(2) Criteria used to evaluate capital improvement
needs.
(3) A six-year capital improvement needsinventory.
(4) A six-year capital improvement plan.
Requirements
(1) An inventory of facilities owned by State
agencies.
(2) Criteria used to evaluate capital improvement
needs.
(3) A six-year capital improvement needsinventory.
(4) A six-year capital improvement plan.
The University of North Carolina
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General FundRepairs and RenovationsNew ConstructionLand Acquisition
Non-General FundCampus Requests for Non-Appropriated Projects
• Housing
• Parking
• Dining
• Athletics
• Bookstores
• Student Recreation
UNC Board of Governors Capital Plan and Budget UNC Board of Governors Capital Plan and Budget
The University of North Carolina
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The University of North CarolinaApproval of Debt
The University of North CarolinaApproval of Debt
Constitution of North Carolina requires voter approval of all general obligation bonded indebtedness
Revenue bonds are approved by the North Carolina General Assembly
North Carolina’s State Capital Facilities Finance Act allows issuance of special indebtedness without voter approval
The University of North Carolina
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The University of North CarolinaThe University of North Carolina
3%
58%39%
Non-Appropriated (other)
Appropriated
Non-Appropriated (inst.)
The University of North Carolina
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The University of North CarolinaCapital Funding (including R & R & 1993 Bonds)
The University of North CarolinaCapital Funding (including R & R & 1993 Bonds)
$0
$50
$100
$150
$200
$250
$300
$350
$400
1965 1971 1977 1983 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
AppropriatedNon-appropriated
Appropriated and Non-AppropriatedCapital Funding – Selected Years
The University of North Carolina
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The University of North CarolinaBond Expenditures – 2000 Bond Referendum
$0
$100
$200
$300
$400
$500
$600
2001 2002 2003 2004 2005 2006
Mil
lion
s
The University of North Carolina
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Enrollment growth requires additional facilities
Competitiveness requires investments in facilities modernization and expansion
Capital needs are significant and well documented
Alternatives to historic “pay-as-you-go” financing must be found to protect the state’s capital investment in the University
The University of North Carolina1999 Capital Equity/Adequacy StudyThe University of North Carolina
1999 Capital Equity/Adequacy Study
Key Conclusions
The University of North Carolina
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Competitive posture will require continued investments in renewal and expansion
Annual “pie” is too small for identified needs
Pay-as-you-go overemphasizes new construction
Pay-as-you-go is not explicit capital development policy
Political influence on choice of projects
Insufficient emphasis on private fundraising
The University of North Carolina1999 Capital Equity/Adequacy StudyThe University of North Carolina
1999 Capital Equity/Adequacy StudyOverview of Funding Issues
The University of North Carolina
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Matrix of Financial ResponsibilityMatrix of Financial Responsibility
The University of North Carolina
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University of North Carolina2000 Bond Program
University of North Carolina2000 Bond Program
Use of Funds
Infrastructure 13%
Land 2%
Modernization 34%
New 26%
Replacement 25%
The University of North Carolina
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Cash Flowing ProjectsCash Flowing Projects
The bond program relies on cash flow financing to support the build out of bond projects.
The cash-flow method applies the proceeds from the bond sales to the projects incurring the first costs up to established allotments for each campus.
Cash flow financing differs from more typical capital budgeting that would allot funds to campuses in a proportional fashion until bond programs are completed.
The University of North Carolina
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Cash Flow Timing
Cash Flow and Bond Sales
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
JA
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Bond Sales April 2002 BaselineJune 2004 Forecast ActualsCurrent Forecast (2/28/05)
$443.5M
$927.4M
$1,411.3M
$201.6M
$1,975.8M
3/06
Cash Flow and Bond Sales
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
JA
N 2
00
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AP
R 2
00
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JU
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JAN
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Bond Sales April 2002 BaselineJune 2004 Forecast ActualsCurrent Forecast (2/28/05)
$443.5M
$927.4M
$1,411.3M
$201.6M
$1,975.8M
3/06
The University of North Carolina
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Higher Education FacilitiesFinance Act
Higher Education FacilitiesFinance Act
Best Practices Comprehensive study Standards, analyses, and metrics Ten-year plan with five-year phases List of projects – established scopes and set
dollar amounts Identified sources of funds and fiscal
responsibility Process for increased costs/use of savings Accountability Source of funds for construction administration Identified long-term operating impact
Best Practices Comprehensive study Standards, analyses, and metrics Ten-year plan with five-year phases List of projects – established scopes and set
dollar amounts Identified sources of funds and fiscal
responsibility Process for increased costs/use of savings Accountability Source of funds for construction administration Identified long-term operating impact
The University of North Carolina
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Innovations in PlaceInnovations in Place
Alternate construction delivery methods
Independent design assessment
Program scheduling and cash flows
Project Partnering
Dispute Mediation
Because there is a funded program and UNC is working as an alliance
The University of North Carolina
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Higher Education Bond Oversight Committee
Higher Education Bond Oversight Committee
Reports The University Facilities Office of each institution of the University of
North Carolina The Facilities Office of the General Administration of the University of
North Carolina The State Construction Office of the Department of Administration The president of each community college, or the president’s
designee The Administrative and Facilities section of the North Carolina
Community College System Office
Responsibilities Whether expenditures of the proceeds from the bonds issued under
this act are in compliance with the provisions of the bond bill Whether the awarded contracts are consistent with the budget and
scope of the approved projects Whether changes in construction methods could enhance cost
savings and promotion of on-time completion of projects Whether the bond issuances are adequately timed to reflect cash-
flow requirements of the project
Reports The University Facilities Office of each institution of the University of
North Carolina The Facilities Office of the General Administration of the University of
North Carolina The State Construction Office of the Department of Administration The president of each community college, or the president’s
designee The Administrative and Facilities section of the North Carolina
Community College System Office
Responsibilities Whether expenditures of the proceeds from the bonds issued under
this act are in compliance with the provisions of the bond bill Whether the awarded contracts are consistent with the budget and
scope of the approved projects Whether changes in construction methods could enhance cost
savings and promotion of on-time completion of projects Whether the bond issuances are adequately timed to reflect cash-
flow requirements of the project
