Legislature(2013 - 2014)SENATE FINANCE 532

04/04/2013 02:30 PM FINANCE

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Moved Out of Committee 4/4/13 9:00 a.m. Meeting
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 74                                                                                                            
     "An  Act creating  the  University  of Alaska  building                                                                    
     fund for  the payment  by the  University of  Alaska of                                                                    
     the costs  of use, management,  operation, maintenance,                                                                    
     and   depreciation   of   space   in   buildings;   and                                                                    
     authorizing the  Board of Regents of  the University of                                                                    
     Alaska to designate buildings for  which the fund is to                                                                    
     be used."                                                                                                                  
3:26:40 PM                                                                                                                    
HEATHER SHATTUCK,  STAFF, SENATOR  PETE KELLY,  related that                                                                    
the bill would create a  University Building Fund (UBF) as a                                                                    
special account in  the General Fund. She  shared that there                                                                    
was  currently $1  billion in  backlog  maintenance for  the                                                                    
university's  7  million  square  feet  of  facilities.  She                                                                    
stated  that  the  university   was  shifting  to  long-term                                                                    
strategic  planning   to  adequately  address   the  ongoing                                                                    
maintenance issue.  She stressed  that the  fund would  be a                                                                    
tool  that the  university could  use to  do their  share in                                                                    
assuring that facilities were taken  care of properly, while                                                                    
bringing deferred  maintenance costs  down to  a responsible                                                                    
and  sustainable  level.  She relayed  that  the  university                                                                    
could  begin  charging  departments for  rent,  which  would                                                                    
encourage   improved  space   utilization  and   operational                                                                    
efficiency. She  explained that  before the  Public Building                                                                    
Fund,  which the  UBF was  based on,  state departments  had                                                                    
more space  than was needed.  The fund, along  with charging                                                                    
rent,  had forced  department's  reconsider  how much  space                                                                    
they  actually  needed. She  said  that  the intent  of  the                                                                    
legislation  was to  help the  university take  advantage of                                                                    
the same  process to ensure  that it was implemented  in the                                                                    
most effective  way possible.  She explained  that initially                                                                    
the university would  put buildings that were  new, or under                                                                    
15   years-old,   into   the   fund;   as   buildings   were                                                                    
rehabilitated they  would be added  to the fund in  order to                                                                    
prevent them from falling into disrepair.                                                                                       
3:28:58 PM                                                                                                                    
Co-Chair  Kelly   thought  the  bill  would   alleviate  the                                                                    
university's deferred maintenance  problem. He believed that                                                                    
the  legislation would  highlight  that  space costs  money,                                                                    
which would  prompt managers to  give up space that  was not                                                                    
completely  necessary.  He  felt  that  significant  savings                                                                    
would  result  from   an  aggressive  space  reconfiguration                                                                    
3:30:24 PM                                                                                                                    
PATRICK GAMBLE,  PRESIDENT, UNIVERSITY OF  ALASKA, testified                                                                    
in support of  SB 74. He understood that  the university had                                                                    
some catching up to do  after the previous decade of funding                                                                    
predominately  for the  purpose  of growth.  He shared  that                                                                    
growth began  to level off  in 2011, and he  understood that                                                                    
the  university  needed  to   take  responsibility  for  the                                                                    
maintenance  of its  infrastructure.  He  offered that  more                                                                    
funding  alone  would not  benefit  the  university at  this                                                                    
time.  He described  the legislation  as a  tool that  would                                                                    
give  the  university  the  ability  to  take  steps  toward                                                                    
further autonomy. He  believed that the UBF  would address a                                                                    
large  account in  the university  budget,  which was  where                                                                    
efficiencies and savings  would be found. He  noted that the                                                                    
university  was  the  largest real  estate  manager  in  the                                                                    
state.  He   said  that  the   facilities  managed   by  the                                                                    
university  were being  examined  on a  building-by-building                                                                    
basis  to   determine  whether  they  would   remain  or  be                                                                    
demolished,  which would  reveal information  concerning the                                                                    
entire building  array that had previously  been unknown. He                                                                    
reiterated  that the  legislation would  provide a  tool for                                                                    
the  university that  had already  proved  to be  successful                                                                    
when used by universities in  the Lower 48. He believed that                                                                    
the  legislation would  inspire  discipline in  the area  of                                                                    
space management.                                                                                                               
KIT   DUKE,  ASSOCIATE   VICE   PRESIDENT  FOR   FACILITIES,                                                                    
UNIVERSITY OF  ALASKA, believed  that the  legislation would                                                                    
instill discipline  in the university that  would ensure the                                                                    
future  care of  all of  its facilities.  She expressed  the                                                                    
desire  to provide  tools that  could  be used  in times  of                                                                    
lesser  revenue to  maintain buildings.  She noted  that new                                                                    
construction  was sometimes  necessary,  but maintenance  of                                                                    
older buildings was equally important.  She thought that the                                                                    
bill  would  generate a  cultural  change  in the  way  that                                                                    
academic  administrations  valued  physical  space  and  the                                                                    
costs  associated with  maintaining the  space beyond  first                                                                    
3:40:00 PM                                                                                                                    
Co-Chair Kelly wondered how the  legislation was useful when                                                                    
no funds  would be  distributed for  2013. He  asked whether                                                                    
the SBF was capitalized at when it was created.                                                                                 
Ms.   Duke   replied  that   she   did   not  remember   the                                                                    
capitalization amount.                                                                                                          
Co-Chair Kelly  asked if the  money that the  university was                                                                    
currently  spending on  building  maintenance and  operation                                                                    
would shift into the UBF.                                                                                                       
Ms. Duke relied that that was the intent.                                                                                       
3:42:53 PM                                                                                                                    
Co-Chair  Kelly  understood that  in  the  future the  money                                                                    
could be capitalized upon through  donations or general fund                                                                    
Ms.  Duke related  that  the funding  could  come from  many                                                                    
sources  and that  the legislation  allowed  for almost  any                                                                    
type of deposit  to be made into the fund.  She related that                                                                    
the  money  would  still  need to  be  appropriated  by  the                                                                    
legislature from  the UBF,  which was  why she  believed the                                                                    
fund would  prove to be a  tool for the legislature  as well                                                                    
as the  university in  the long term.  She stressed  that it                                                                    
would  take some  time  to implement  the  plan, which  made                                                                    
immediate funding less of a concern.                                                                                            
3:44:47 PM                                                                                                                    
Co-Chair  Kelly  wondered  why   the  university  could  not                                                                    
currently set  up a rent  charging system for  the different                                                                    
Ms. Duke replied  that the issue was not  that rent charging                                                                    
could not be  set up, rather, whether a system  could be set                                                                    
up that  would survive long  enough to  do any real  good in                                                                    
the long term.                                                                                                                  
3:45:16 PM                                                                                                                    
Senator  Bishop  hoped  that the  funds  authorized  by  the                                                                    
legislature would remain in-state.                                                                                              
President Gamble felt  that there was nothing  in the intent                                                                    
language  of the  bill  that would  prevent  the funds  from                                                                    
remaining in-state.                                                                                                             
3:48:10 PM                                                                                                                    
Co-Chair  Kelly   asked  if  the  university   had  been  in                                                                    
discussion with  the Office of  Management and  Budget (OMB)                                                                    
concerning the shift of funds planned for 2014.                                                                                 
President Gamble replied no.                                                                                                    
Co-Chair  Kelly thought  that the  discussion should  happen                                                                    
soon  and   that  the   changes  should   be  made   at  the                                                                    
administrative  level as  the budget  was submitted,  rather                                                                    
than have the legislature make the changes after the fact.                                                                      
3:48:36 PM                                                                                                                    
President   Gamble   commented   that   extensive   internal                                                                    
discussions  had   occurred  at  the  university   with  the                                                                    
understanding  that whatever  the  legislature budgeted  for                                                                    
2013 would inform the expected numbers for 2014.                                                                                
3:49:09 PM                                                                                                                    
Ms.  Duke reiterated  that the  plan  laid out  in the  bill                                                                    
would provide  information concerning space  utilization and                                                                    
program cost,  which would  cause the  university to  take a                                                                    
more business approach to investment decisions.                                                                                 
3:50:07 PM                                                                                                                    
Co-Chair  Meyer wondered  if federal  grant monies  could be                                                                    
used in the UBF.                                                                                                                
Ms. Duke thought  that Co-Chair Meyer could  be referring to                                                                    
grants  allotted  for  deferred  maintenance  projects.  She                                                                    
imagined that there was a  possibility that the grants could                                                                    
be put into the UBF.                                                                                                            
3:51:01 PM                                                                                                                    
President  Gamble  offered that  there  were  many kinds  of                                                                    
grants,  some of  which had  very specific  restrictions. He                                                                    
added  that  the university  generally  liked  to use  grant                                                                    
dollars for their intended purpose.                                                                                             
3:51:40 PM                                                                                                                    
Vice-Chair Fairclough  asked why language indicating  that a                                                                    
dedicated fund was not being created was not in the bill.                                                                       
3:52:28 PM                                                                                                                    
President Gamble referred the question the DOL.                                                                                 
3:52:35 PM                                                                                                                    
Vice-Chair  Fairclough  turned to  Page  3,  line 13,  which                                                                    
contained  language specifying  that any  money in  the fund                                                                    
would stay  in the fund unless  it was allocated out  by the                                                                    
3:53:27 PM                                                                                                                    
Vice-Chair  Fairclough queried  how  much bonding  authority                                                                    
the university currently had.                                                                                                   
President Gamble replied  about 2 percent. He  said that the                                                                    
goal  was  to stay  below  5  percent encumbered  with  debt                                                                    
service.  He asserted  that the  university was  comfortable                                                                    
with its ability to bond further.                                                                                               
3:54:16 PM                                                                                                                    
Vice-Chair Fairclough wondered  whether the university could                                                                    
qualify   for  the   Alaska   Housing  Finance   Corporation                                                                    
Revolving  Loan  Fund  to offset  the  deferred  maintenance                                                                    
costs  of   the  university's  engineering   buildings.  She                                                                    
understood that  $250 million  had been  capitalized through                                                                    
the  fund for  improvements  in weatherization,  and at  low                                                                    
interest  rates.  She  stressed  the  need  to  address  the                                                                    
deferred maintenance issue as soon as possible.                                                                                 
Ms. Duke  replied that the  university was  taking advantage                                                                    
of some  of the  energy monies  available through  AHFC. She                                                                    
said that the university was  looking into accessing more of                                                                    
those funds for deferred maintenance work.                                                                                      
3:56:24 PM                                                                                                                    
Vice-Chair  Fairclough  reiterated her  question  concerning                                                                    
the university's bonding authority limit.                                                                                       
President  Gamble  replied that  he  was  not aware  of  the                                                                    
bonding authority limit.                                                                                                        
3:57:23 PM                                                                                                                    
Kit Duke  interjected that  additional information  could be                                                                    
provided to the committee at a later date.                                                                                      
3:57:30 PM                                                                                                                    
Vice-Chair Fairclough  believed that the bond  limit was set                                                                    
in stature.                                                                                                                     
Co-Chair Meyer CLOSED public testimony.                                                                                         
SB  74  was   HEARD  and  HELD  in   committee  for  further                                                                    
3:58:59 PM                                                                                                                    
AT EASE                                                                                                                         
4:21:19 PM                                                                                                                    

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