UI's capital plan will focus on facilities

UI's capital plan will focus on facilities

Since 2013, the University of Illinois has invested more than $1.2 billion in research labs, classrooms, residence halls and athletic venues across its three campuses.

But UI leaders say it's time for a renewed focus on facilities and hope to use the university's borrowing power to fund key projects — including the highly-touted Discovery Partners Institute in Chicago.

At the direction of UI trustees — led by one of the newest, Chicago equity investor Donald Edwards — the university is embarking on a long-term capital plan to set priorities for the next five to 10 years.

With no state capital budget for the past decade, the UI has had to cover more than half of its building projects through operating funds, UI officials said Thursday. State funding covered about 7 percent.

That, coupled with a backlog of deferred maintenance estimated at $2 billion, demands a long-term approach done "100 percent in concert" with the UI's overall financial plan, Edwards said.

"It's a harsh reality that every dollar we spend on a building, whether it's borrowed or from our operating funds, could be spent somewhere else — on faculty, programming, research initiatives or something else. So we have to do them in concert," said Edwards, who has frequently scrutinized spending since being appointed to the board last year.

Facilities are a key to the UI's academic mission that "could all too easily be lost in the shuffle when money is tight and attention rightfully shifts to maintaining the day-to-day excellence in classrooms and laboratories," said Trustee Tim Koritz, who was elected to a second term as board chairman on Thursday.

The UI's leaders haven't lost sight of those needs, he said, even during a two-year budget impasse and three years of a tuition freeze.

The $1.2 billion in spending includes $850 million at the Urbana campus, on such projects as the Electrical and Computer Engineering building, which leveraged $50 million in donations to get state matching funds, Koritz said.

But only about 12 percent was spent on new buildings, according to the UI. The rest went to renovations, utilit-ies and maintenance and repairs.

The projects were paid for through operating funds (54 percent), gifts and grants (12 percent), student facility fees (10 percent), bonds (13 percent), auxiliary reserves (4 percent) and state capital funds (7 percent).

$1.5 billion in debt

Debt financing is a possibility for funding future capital needs, interim Vice President and CFO Avijit Ghosh said.

The UI holds about $1.5 billion in debt, selling bonds to raise money for buildings or other needs and repaying them over time, like a mortgage, with money from student fees, housing income, ticket sales, health clinics income or energy savings.

The largest share is for auxiliary facilities bonds, which fund UI residence halls, State Farm Center, student unions and the like and are guaranteed by income from those units.

The UI's debt payments this year total $153.5 million. That cost will continue to climb for a few more years, to almost $160 million in 2021, then start to taper off as bonds arepaid off, according to UI figures.

About $470 million in principle will be paid off in the next five years, bringing the UI's overall debt down to about $1 billion, Ghosh said. That would provide room to issue new debt or replace retiring bonds, he said.

The UI has also launched some public-private partnerships, another avenue for financing.

"There's capacity there," he said.

'An urgency to this'

Edwards and Koritz said they're interested in freeing up funds for the Discovery Partners Institute, a public-private education and research institute to be led by the UI.

It would allow top faculty and students to work side-by-side with industry on new innovations to spur jobs and keep talent in Illinois.

Backers said funding would largely from private sources, as well as some state or city grants. But "we may have to consider doing some of theinitial funding ourselves to kick-start the process," Koritz said.

"DPI is just too big an opportunity to pass up. Commencing its planning and construction should be one of our priorities," said Edwards, who attended the project announcement in October.

"Starting that institute for the benefit of our entire system and students and the state of Illinois is probably the single-most important thing we can do to maintain and build up our reputation in engineering and computing and sciences," he said.

"I think it's huge for Urbana" and the other two campuses, he said.

UI President Tim Killeen said some international partners have already expressed interest, so "there's an urgency to this."

He said he's talked with officials in Mexico, Israel and Singapore, where the UI has other partnerships.

Killeen: 'Deep dive' time

But Killeen emphasized that DPI wasn't the impetus for the new capital planning process. He said he's talked with Ghosh, Edwards and other trustees for months about the need for a more strategic approach for building projects, "recognizing that the state has not been supporting capital for quite awhile now."

Given the UI's growing enrollment, and changing research needs, "it's time to do a deep dive," he said, especially now that the state budget crisis has subsided.

He said it's the "next logical step" in the UI's strategic planning efforts — following a Strategic Framework adopted in 2016; a proposed long-term agreement with the state to ensure stable funding; a new five-year, $3.1 billion fundraising campaign; and a realignment of UI system offices to reduce administrative costs, expected to drop $16.6 million this year.

Killeen said the plan won't mean the UI will necessarily spend more on building projects, but rather provide a better blueprint of future needs. It also doesn't mean the university will stop pushing for more capital funding from the state, he said.

"It's time for the state to return to supporting its own capital needs and investments," he said.

Altgeld update on tap

Ghosh said the $1.2 billion spent by the UI over the last few years "sounds like a large amount," but the aging inventory of campus buildings requires upkeep.

The largest number were built in the 1960s and 1970s, and some date back to the 19th century, including Mumford House in Urbana (1870) and the Jane Addams Hull House in Chicago (1856). Altgeld Hall, built in 1896, is a heavily used academic building that's slated for a $90 million renovation.

The long-range capital plan will look at priorities, the balance among the types of buildings needed, sustainability and environmental standards, the lifetime costs of any new buildings, and prudent funding models — "all done within the context of overall budget planning," Ghosh said.

Koritz said prioritization is key.

"It's exciting to know we have this capability," he said.

Follow the money
Of the $499.2 million in Urbana building projects exceeding $5 million from 2013-14 to 2016-17:

— $210.4 million went to academic buildings.

— $163.5 million went to athletic facilities (including State Farm Center).

— $84.1 million went to auxiliary units (residence halls, etc.)

— $31.6 million went to energy retrofit projects.