Call to Order and Roll Call
The 3rd meeting of the Capital Planning Advisory Board was held on Wednesday, August 19, 2015, at 9:00 AM, in Room 131 of the Capitol Annex. Representative Terry Mills, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Stan Humphries, Co-Chair; Representative Terry Mills, Co-Chair; Senator Whitney Westerfield, Representative Tom Riner, Charles Byers, Jane Driskell, Carole Henderson, John Hicks, Sherron Jackson, Mary Lassiter, Dan Markwell, Mark Overstreet, and Katie Shepherd.
Guests: Robert L. King, President, Shaun McKiernan, Senior Associate, Finance, Doyle Friskney, Interim Vice President of eLearning and Innovation, and Enid Wohlstein, Director, Kentucky Virtual Library, Council on Postsecondary Education; Mary Vosevich, Vice President for Facilities Management, Chief Facilities Officer, University of Kentucky; Harlan M. Sands, Senior Vice President, Chief Financial/Operating Officer, and John Shipley, Associate Vice President of Finance, University of Louisville; Wayne D. Andrews, President, and Beth Patrick, Chief Financial Officer and Vice President for Administration, Morehead State University; Dr. Raymond M. Burse, President, and Joseph Gronefeld, Senior Project Manager, Kentucky State University; Michael Benson, President, Barry Poynter, Vice President of Finance and Administration, Paul Gannoe, Director, Capital Construction and Project Administration, and David McFaddin, Executive Director, Engagement and Regional Stewardship, Eastern Kentucky University; Dr. Gary Ransdell, President, and Bryan Russell, Director of Planning, Design, and Construction, Western Kentucky University; Jackie Dudley, Vice President for Finance and Administrative Services, and David Burdette, Interim Chief Facilities Officer, Murray State University; Eric Shaffer, Director of Facilities Management, and Ken Marks, Director of Capital Construction, Kentucky Community and Technical College System; and Sue Hodges Moore, Senior Vice President for Administration and Finance, and Larry Blake, Assistant Vice President for Facilities Management, Northern Kentucky University.
LRC Staff: Shawn Bowen, Katherine Halloran, and Jennifer Luttrell.
Approval of Minutes
A motion to approve the minutes of the July 14, 2015 meeting was made by Mr. Hicks, seconded by Ms. Lassiter, and approved by voice vote.
Information Items
One information item was included in members’ binders as follow-up from the board’s July 14 meeting. The Energy and Environment Cabinet submitted a list of Kentucky state-owned dams. The total inventory of state-owned dams in the Commonwealth is 74. Representative Mills noted that of the state-owned dams, 60 percent were rated either high or moderate hazard and 33 percent of the dams not owned by the state were rated high or moderate hazard. No action was required.
Presentation – Council on Postsecondary Education
As part of the capital planning process, the Council on Postsecondary Education (CPE) is responsible for the review and evaluation of capital construction and information technology (IT) projects submitted by the postsecondary institutions. Mr. Robert L. King, President, CPE, discussed the review process and the corresponding results.
A model developed in 2011 was used to evaluate postsecondary capital projects for the 2016‑2022 planning period. Rather than recommend funding for individual capital projects, CPE is recommending a pool of funding for each institution using a formula that takes into account factors such as an institution’s deferred maintenance needs and full-time equivalent (FTE) student enrollment. In its report CPE notes “the approach was adopted to achieve a more equitable distribution of capital funds among institutions, rather than a request based on highest priority projects at each institution, and to provide institutions greater flexibility to address multiple, smaller, but potentially more critical, capital projects.” This approach also places greater emphasis on asset preservation and renovation, rather than new construction.
CPE has identified separate, but nearly equal in size, pools for asset preservation and new construction, and established a specified asset preservation spending level for each institution. For 2016-18, CPE plans to request a pool of funds totaling $600 million General Funds (GF), with $288 million allocated for preservation and renovation projects and $312 million allocated for new/expanded space projects. This request is part of the three-biennia (six-year) $1.8 billion capital budget plan that would use a pooled approach for allocating capital funding among institutions.
CPE’s report also specifies a pool of $60,000,000 GF for information technology projects. If authorized by the General Assembly, funding for this request would be appropriated to the Technology Initiatives Trust Fund. Twenty-one information technology projects were submitted to CPE for review, ten were designated as high value and seven were designated as very high value.
In its report to the board, CPE recommended that the Capital Planning Advisory Board endorse higher thresholds for capital projects and leases. CPE also requested that the board again endorse its multi-biennia strategy for funding capital needs of the postsecondary institutions. The board has endorsed this approach in the last two statewide capital improvement plans.
In response to a question from Senator Humphries, Mr. King said many of the postsecondary facilities are still usable, but the facilities should be retrofitted to meet current educational needs. Retrofitting a facility takes advantage of the existing space and, in many instances, when new HVAC and other energy efficient features are added, operating costs are reduced. If this pool of funds is authorized in the next budget, funds allocated to each university would be based on recommendations in the VFA Study, and allocated among projects that address asset preservation/renovation and new/expanded spaces.
In response to a question from Senator Humphries, Mr. King said the Kentucky Community and Technical College System (KCTCS) continues to raise funds for new facilities authorized in the last budget. The effort has been positive, however, in the smaller communities, the challenge will be to raise the required matching funds for KCTCS projects planned in that community.
In response to a question from Representative Riner, Mr. Friskney said funding to support expanded database content at public and private universities includes law schools, seminaries, and medical schools. Mr. Friskney added that there are over 65 databases available online.
In response to a question from Representative Mills, Mr. King said the multi-biennia funding approach and the corresponding pool allocations were developed with the knowledge, agreement, and the participation of the postsecondary institutions.
Representative Mills said CPE has formally recommended that the board endorse higher thresholds for capital projects and capital leases than those currently in place. He asked Mr. King to further discuss this recommendation. Mr. King said CPE plans to survey the campuses as to the types of projects that could be reasonably managed without legislative authorization. Based on the results of that survey, CPE will formulate and recommend new capital project thresholds. Representative Mills recommended that CPE work with the board’s staff to develop the new threshold amounts.
Mr. Jackson said the thresholds were increased in 2006. At that time, staff from the LRC Economists Office provided the recommended thresholds based on certain price indices. He said in addition to the work CPE will do with the institutions in identifying the appropriate levels, it would be appropriate that LRC staff that conducted the last study, engage and review data related to whether an increase would be appropriate. He said other agencies within state government are impacted by those thresholds as well. To further assist in this effort, Mr. Hicks recommended that the board’s staff review data from the LRC Capital Projects and Bond Oversight Committee Quarterly Report. The data should encompass previously authorized capital projects $1 million or less in scope, and the project status.
Consideration of Agency Plans
The Capital Planning Advisory Board received testimony regarding 11 state agency capital plans: Council on Postsecondary Education, University of Kentucky, University of Kentucky Hospital, University of Louisville, Morehead State University, Kentucky State University, Eastern Kentucky University, Western Kentucky University, Murray State University, Kentucky Community and Technical College System (KCTCS), and Northern Kentucky University. The testimony included discussion of capital construction, information technology, and equipment needs for the period 2016-2022.
Council on Postsecondary Education
Robert King, President, CPE, and Doyle Friskney, Interim Vice President of eLearning and Innovation, presented the capital needs for CPE. The agency’s capital plan contained three capital information technology project requests: the Commonwealth College Technology System project, $4,000,000; the Kentucky Virtual Library project, $8,500,000; and the Kentucky Regional Optical Network Enhancement project, $1,000,000.
In response to a question from Mr. Hicks regarding the Commonwealth College (HB 265) Technology System (formerly the Adult Learner Degree Attainment Initiative), Mr. King said a number of other states have embraced this model for the delivery of Internet-based instruction, and it is expanding across the country. Kentucky was one of the first states to develop such a program and has the advantage of experience in this area. The program, known as Learn on Demand, is administered through KCTCS and offers full 15-week courses, and modules (a portion of a full course), that lasts up to eight weeks.
Representative Mills said HB 265, 2012 Executive Budget, appropriated $375,000 for the Commonwealth College Technology System project. The bill also directed CPE, in consultation with KCTCS, to develop a Request for Proposal (RFP) for up to two four-year public postsecondary institutions to serve as the lead institution(s) for the project. He asked what the status of the RFP process was, and if the institution(s) has been selected to lead the project. Mr. King said the original model has been modified. Initially, they thought one or two postsecondary institutions would manage the project. However, the current model includes many participants that have agreed to solicit participants and develop needed programs for employers.
In response to a question from Representative Mills, Enid Wohlstein, Director, Kentucky Virtual Library (KYVL), said KYVL does not track Internet searches by individuals, however, they do track the searches of KYVL’s 300 member libraries by month, year, and location. Last year there were 85.5 million searches, 29 million unique sessions, and 5 million downloads in a 12-month period.
University of Kentucky
Ms. Mary Vosevich, Vice President for Facilities Management, Chief Facilities Officer, presented the capital plan for the University of Kentucky. The university’s capital plan, for the six-year period, included 218 proposed projects totaling $5,496,155,000. The University of Kentucky Hospital plan contained a total of 88 proposed projects totaling $1,881,275,000.
For the 2016-2018 biennium, the university’s plan contained one project, the Facilities Renewal and Modernization project. This project will address many facilities on campus that require modernizing, as well as much needed maintenance that has been deferred for several years. The project establishes a pool of funds to address projects that cost $600,000 or more. The funding sources include $125,000,000 Agency Bonds and $125,000,000 General Funds.
In response to a question from Senator Humphries, Ms. Vosevich said the Facilities Renewal and Modernization project will address renovations and upgrades to a particular set of buildings on campus. The university will evaluate each building to determine programmatic, technological, and/or renovation needs. The university will also evaluate whether programs functioning in separate facilities can be consolidated in one location. Spaces will be updated as needed to modern, contemporary designs. She added that the buildings under evaluation have a Facilities Condition Index (a measure used to compare the condition of a group of facilities) of about 39 percent.
In response to another question from Senator Humphries, Ms. Vosevich said none of the facilities being evaluated will be razed.
Representative Mills stated that a list of the projects, or the top ten projects, included in Facilities Renewal and Modernization project pool would be useful to the board in making its final recommendations in the six-year plan. Ms. Vosevich said based on programs in the buildings, and the university’s priorities, the university is currently vetting the list to determine how to proceed. The university has identified the buildings and the scope of work in those particular facilities, but nothing has been finalized. Ms. Vosevich said the university will provide the most comprehensive list possible at this point in time.
In response to a question from Ms. Shepherd, Ms. Vosevich said the university is raising funds for the Expand/Renovate/Upgrade Law Building project. The project was authorized in the 2014-2016 Executive Budget, but has not been undertaken.
University of Louisville
Harlan M. Sands, Senior Vice President, Chief Financial/Operating Officer, and John Shipley, Associate Vice President of Finance, discussed the university’s capital plan. The university’s capital plan, for the six-year period, included 82 proposed projects totaling $2,230,576,000.
In response to a question from Senator Humphries regarding the cost of renovating versus the cost of constructing a new facility in today’s economy, Mr. Sands said the cost of renovating older facilities sometimes becomes prohibitive when trying to retrofit those facilities to modern standards. Space limitations of older buildings, compared to the cost of constructing a new structure, must be taken into consideration also. An overall assessment of the facility, including the condition of the structure, the infrastructure, and the mechanical structure, will determine whether to build new or renovate. Mr. Sands said the university strives to maintain a balance of new and renovated spaces.
In response to a question from Mr. Hicks regarding the status of the Construct Belknap Classroom/Academic Building project ($80,560,000 bond funds, 2014-2016 Executive Budget), Mr. Sands said the project is in the design/plan and design/build phase. The university plans to issue bonds in spring 2017, and begin construction shortly thereafter. Construction should be complete by summer 2018.
Morehead State University
Dr. Wayne Andrews, President, and Beth Patrick, Chief Financial Officer and Vice President for Administration, presented the university’s capital plan. The university’s capital plan, for the six-year period, included 54 proposed projects totaling $680,210,000.
In response to a question from Mr. Hicks regarding the need for enhanced network infrastructure on campus, Ms. Patrick said the university has undertaken a project to completely renovate its data network and campus technology infrastructure. New fiber optic cable, with redundant ring technology, is being installed. This new technology will ensure network availability at all times, and provide various security enhancements, such as video monitoring and a campus-wide emergency alert/warning system. The project will be completed within the next 18 months. At that time, the university will have the bandwidth to handle administrative, classroom, and residence hall needs.
Kentucky State University
Dr. Raymond M. Burse, President, and Joe Gronefeld, Capital Projects Manager, discussed the university’s capital needs. The university’s capital plan, for the six-year period, included 25 proposed projects totaling $181,016,000.
Mr. Jackson asked President Burse to further discuss the need for the Betty White School of Nursing project ($13,014,000 General Funds). This project has been the university’s top priority in successive capital plans. President Burse said the expansion and renovation of the Betty White building will encompass the entirety of the nursing program, both the undergraduate and the new Bachelor of Science Doctor of Nursing Practice (BSN-DNP). With the further development of the BSN-DNP program and the current academic programs, the School of Nursing is poised to grow exponentially.
In response to another question from Mr. Jackson, President Burse said undergraduate students are accommodated in the Betty White Health Center. The first floor is primarily the healthcare center for on-campus students, and the second floor provides space for the nursing program. Classroom and training space is needed in one central location rather than in multiple facilities on campus. Mr. Gronefeld noted that the Betty White Health Center contains about 6,000-square-feet on the second floor, and 10,400-square-feet in total.
In response to a question from Representative Mills, Mr. Gronefeld said the university is still searching for off campus space for the Aquaculture program. The one potential property did not work out.
In response to another question from Representative Mills, President Burse said the university does not do beekeeping, however, the university’s extension office does a great deal of research and outreach on the subject, and provides that knowledge to beekeepers statewide and nationally.
Eastern Kentucky University
Dr. Michael Benson, President, discussed the university’s capital needs. The university’s capital plan, for the six-year period, included 52 proposed projects totaling $904,000,000. There were no questions regarding the university’s plan.
Western Kentucky University
Dr. Gary Ransdell, President, and Bryan Russell, Chief Facilities Officer, discussed Western Kentucky University’s capital plan. The university’s capital plan, for the six-year period, included 63 proposed projects totaling $637,430,000.
In response to a question from Senator Humphries regarding the Construct New Gordon Ford College of Business ($97,200,000 GF, priority #1), President Ransdell said as far back as 1997 when he started as president, the Gordon Ford College of Business building showed signs of deterioration. The university has been able to address the facility’s maintenance needs over the last eighteen years, including a roof replacement project, but a new facility is needed. President Ransdell said the university may be able to raise some private money to assist with the project and to provide an endowment for the College of Business.
In response to a question from Mr. Hicks regarding the multi-phased underground infrastructure replacement projects, Mr. Russell said the university has now completed Phase 8 of a multi-phased project to replace the university’s above ground infrastructure. The Replace Underground Electric Infrastructure project is now complete, and overhead lines no longer supply power to the university. The university has also replaced sections of failing steam lines, including those in and under Gordon Wilson Hall. In addition, water lines have also been replaced. There are ten facilities left to incorporate into the new grid.
Murray State University
Jackie Dudley, Vice President for Finance and Administration Services, and David Burdette, Interim Chief Facilities Officer, gave a brief overview of Murray State University’s capital plan. The university’s capital plan, for the six-year period, included 100 proposed projects totaling $771,000,000.
In response to a question from Mr. Hicks, Ms. Dudley said the university is continuing to update its on-campus housing facilities. Three high-rises are scheduled for renovation, including White, Regents, and Hart Hall. Clark Hall was replaced in 2007 and New Richmond was completed in 2009. New Franklin Hall is in construction.
In response to a question from Senator Humphries, Mr. Burdette said the university’s top three General Fund priorities: Upgrade Campus Electrical Distribution System, $16,494,000; Replace Campus Steam Distribution System, $7,549,000; and Upgrade Building Systems Capital Renewal Pool, $6,616,000, focus on upgrades to, or replacement of, outdated electrical and building systems.
Kentucky Community and Technical College System
Eric Shaffer, Director of Facilities Management, Ken Marks, Director of Capital Construction, and Sandy Adkins, Budget Director for Capital Projects, gave a brief overview of the KCTCS capital plan. For the six-year period, the KCTCS capital plan included 136 proposed projects totaling $1,373,160,000.
In response to a question from Representative Mills regarding the Expansion of Pikeville Campus Big Sandy project (priority #1, $28,000,000 General Funds), Mr. Shaffer said this project was priority 15 in the last capital plan. The project, along with two others, were part of the Build Smart initiative created after the last session. The project is needed due to the growth of the Pikeville campus, and it is a top priority for the Big Sandy Community and Technical College. Mr. Marks added that the Big Sandy project, along with two other projects that were part of the Build Smart initiative, were authorized for design only in previous budgets. KCTCS is ready to move forward with the projects once the funding becomes available.
In response to a question from Mr. Jackson about expanding the construction on the Newtown Pike campus (Cooper Campus), Mr. Shaffer stated that KCTCS will most likely buy the Cooper Campus. The technical programs will primarily remain at the Leestown and Georgetown campuses. Other technical programs administered by KCTCS will be relocated as needed.
In response to a question from Mr. Jackson, Mr. Schaffer said the Ashland Community and Technical College has relocated from its Roberts Drive location to the EastPark Industrial Parkway location. Two programs, the diesel and automotive programs, remain at the Roberts Drive location in a separate set of buildings. These programs will be moved at some point, and the buildings will be demolished.
In response to questions from Senator Westerfield, Mr. Shaffer said local community and technical colleges are responsible for determining their capital project needs. The projects are then prioritized in the KCTCS capital plan. Mr. Shaffer said the priorities for the current planning period are different than those from the 2014-2020 period. During the last capital planning period, through the Build Smart initiative, the top priority from each college became the top sixteen priorities in the KCTCS capital plan.
Northern Kentucky University
Sue Hodges Moore, Senior Vice President for Administration and Finance, and Larry Blake, Assistant Vice President for Facilities Management, gave a brief presentation of Northern Kentucky University’s six-year capital plan. The university’s capital plan, for the six-year period, included 51 proposed projects totaling $973,890,000.
Adjournment
The next meeting is scheduled for Tuesday, September 15, 2015, in Room 171 Annex starting at 9:00 AM. There being no further business, the meeting adjourned at 2:06 p.m.