Legislature(2017 - 2018)SENATE FINANCE 532
04/19/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: State of Alaska Deferred Maintenance Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
April 19, 2017
9:01 a.m.
9:01:42 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Shelley Hughes
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Adam Bryan, Capital Budget Coordinator, Office of
Management and Budget.
PRESENT VIA TELECONFERENCE
Mark Davis Director, Facilities Shared Services, Department
of Transportation and Public Facilities.
SUMMARY
^PRESENTATION: STATE OF ALASKA DEFERRED MAINTENANCE
OVERVIEW
9:02:44 AM
ADAM BRYAN, CAPITAL BUDGET COORDINATOR, OFFICE OF
MANAGEMENT AND BUDGET, discussed the presentation, "State
of Alaska Deferred Maintenance Overview; Senate Finance
Committee; April 19, 2017 Office of Management and Budget"
(copy on file).
Co-Chair MacKinnon announced the individuals who were
available for questions.
Mr. Bryan highlighted slide 2, "What is Deferred
Maintenance?"
Maintenance that is postponed due to lack of resources
Replacement of building components as they reach
end of useful life such as roofs or HVAC systems
Deferred maintenance projects are mostly items that
entities cannot address through preventative
maintenance
Preventative maintenance is important to managing
growth and severity of future deferred
maintenance
Each entity manages maintenance independently
Legislature appropriates funding for preventative
maintenance annually - facilities management
allocations; Public Building Fund
Maintenance decisions must consider changing
business needs
Mr. Bryan addressed slide 3, "How many Facilities does the
State Maintain?"
Over 2,200 facilities
14 entities including University of Alaska and Courts
19 million square feet of space
Combined replacement value of $8.6B
Mr. Bryan discussed slide 4, "What do our Facilities Look
Like?"
Types of facilities vary by entity
DOA manages general office space
DOC and DHSS both manage 24 hour facilities
DMVA manages base facilities and statewide
armories
DNR oversees park service cabins, shelters, fire
suppression and preparedness shops
Mr. Bryan highlighted slide 5, "Statewide Deferred
Maintenance Totals":
Total of $1.84 billion, including
Executive agencies and Courts $1.6 billion
School District Major Maintenance $240 million;
$165 million as the State share
Total peaked at $2.3 billion in FY2012
Reduced significantly through a five-year funding
plan
Expect to trend up without consistent funding
9:08:04 AM
Vice-Chair Bishop wondered whether the 5-year plan on the
$100 million per year spending for deferred maintenance
that was enacted by Governor Parnell was still in effect.
Mr. Bryan replied that the plan expired.
Senator Olson noted that slide 3 showed 16 facilities in
the Department of Education and Early Development (DEED),
and wondered where the schools were listed. Mr. Bryan
replied that it did not include the school district
facilities.
Senator Olson surmised that all the schools were not
included in the graph. Mr. Bryan agreed.
Co-Chair MacKinnon looked at slide 5, and wondered if the
$165 million was the debt service. Mr. Bryan replied that
school districts sent an application to DEED for a deferred
maintenance item through the school district maintenance
grant program. He stated that, depending on the size of the
school district, it would put money toward that project.
Therefore, the number was the total based on the
calculation provided by DEED of the local to state match
through that program.
Co-Chair MacKinnon surmised that the state was obligated to
match the grant funding. Mr. Bryan agreed.
Co-Chair MacKinnon asked for information about the debt
service in major maintenance. Mr. Bryan agreed to provide
that information.
Senator Micciche queried the processes that continued to
reduce major maintenance. Mr. Bryan stated that the
deferred maintenance projects lasted more than one year, so
money was carried forward annually.
9:12:52 AM
Mr. Bryan displayed slide 6, "FY2017 Deferred Maintenance
Backlog by Entity":
The majority of deferred maintenance backlog is within
the University of Alaska ($1B) and the Department of
Transportation and Public Facilities ($347M)
Senator von Imhof requested the difference between the main
campuses and the rural hubs. Mr. Bryan agreed to provide
that information.
Co-Chair MacKinnon queried other ways, besides repairs,
that removed items from the major maintenance list. Mr.
Bryan replied that replacement and closure might remove an
item from the list. He agreed to provide specific examples.
Co-Chair MacKinnon remarked that a meat packing building
was sold into the private sector, and remarked that there
could be bridges that might be removed from the list.
Mr. Bryan continued to discuss slide 6:
School District Major Maintenance requests total $240M
All other entities total $252M
Mr. Bryan highlighted slide 7, "FY2017 Deferred Maintenance
Backlog by Entity." He stated that it was a graph of the
backlog by entity, and noted that the University was
approximately three times as large as transportation at
$346 million.
Co-Chair MacKinnon wondered whether the engineering
building was included. Mr. Bryan did not believe that
building would be considered deferred maintenance, and
agreed to examine the power plant.
Vice-Chair Bishop wondered whether there would be a
liability removed upon completion of the power plant. Mr.
Bryan agreed to provide that information.
9:18:17 AM
Mr. Bryan addressed slide 8, "Deferred Maintenance Funding
History; Statewide DM and School District." He stated that
the slide may help to see the progress in spending the
appropriations.
Senator Micciche remarked that the maintenance program had
drastically increased over time. He felt that there was not
enough information to address the real cause of the issue.
Mr. Bryan looked at slide 9, "Deferred Maintenance Funding
History":
From FY1998 to FY2010, DM funding was sporadic and
inconsistent
Spikes in 1999 ($53M), 2006 & 2007 ($33M), 2009
($127M)
Low years 2000-2005 averaged $6.5M
FY2011 began a five-year initiative to address DM
backlog
Gov initiative of $100M annually for five years
Actual average funding of $123M for DM; $18.6M
for School Districts
Mr. Bryan addressed slide 10, "Deferred Maintenance
Backlog." He stated that the impact of the funding from
2011 reduced the backlog of major maintenance.
Mr. Bryan looked at slide 11, "Example of DHSS Deferred
Maintenance Management":
Annual facility condition audit
Projects are logged on an ongoing basis in a Capital
Asset Management system
4 project categories
Fire and Life Safety
Security
Building Integrity
Code Requirements and Mission Efficiency
Priority weight applied (high, medium, low)
Facility Condition Index factor
24 hour facility factor
9:25:42 AM
Mr. Bryan addressed slide 12, "Example of School District
Major Maintenance Management":
Eligibility Requirements: six-year district plan,
fixed asset inventory system, property loss insurance,
preventative maintenance and facility management
program certified by DEED
Applications evaluated on several factors resulting in
an overall total points rating
Condition survey
District rating
Weighted average age of facility
Previous funding through grant program
Complete planning and design
Effectiveness of preventative maintenance program
Emergency conditions and seriousness of
life/safety and code conditions
Mr. Bryan looked at slide 13, "What We've Learned":
Pattern of funding DM backlog coincides with years of
high revenues
The SLA 2010-2014 initiative reversed the trend of
growing DM backlog
Gave entities predictability and confidence
Without a consistent level of funding, entities cannot
effectively execute planned renewal
Funding uncertainty leads to emergency only
spending
In a constrained fiscal environment a statewide
approach provides DM attention to highest priority
needs across multiple agencies
Vice-Chair Bishop remarked that combined factors
contributed to the problem, and hoped to be consistent in
reducing major maintenance.
9:30:20 AM
Senator von Imhof hoped to see a reflection of the price of
oil contributing to the cost of the major maintenance
backlog.
Co-Chair MacKinnon queried the space consolidation effort.
Mr. Bryan stated that the following slides would address
that issue. He stated that the Department of Administration
(DOA) had a leasing component, which had been reduced by $2
million in FY 18.
Senator Micciche felt that the state was "over built." He
remarked that a large deferred maintenance list resulted in
new buildings, but could not determine affordability. He
queried a plan to address that affordability and state
ownership of building. Mr. Bryan agreed to provide that
information.
9:36:11 AM
Senator von Imhof requested an asset sale schedule.
Senator Micciche furthered that he would like to see a
comprehensive plan.
Vice-Chair Bishop requested a total amount of lease space
reduction.
Co-Chair MacKinnon stressed that there needed to be a
geographical analysis of a project or building. She
wondered who would address the Department of Transportation
and Public Facilities (DOT/PF) portion of the presentation.
Mr. Bryan replied that Mr. Davis would present the DOT/PF
slides.
9:39:21 AM
MARK DAVIS DIRECTOR, FACILITIES SHARED SERVICES, DEPARTMENT
OF TRANSPORTATION AND PUBLIC FACILITIES (via
teleconference), introduced himself.
Mr. Davis discussed slide 14, "Statewide Facilities
Maintenance":
Timeline:
2015 - EFMAC Creation and Recommendations
2016 - State Facilities Council Formed, Centralization
Analysis Recommendation & Approval
2017 - Determination of lead agency for Centralized
Facilities Services
Advantages to centralized operations and maintenance
of state facilities
Enterprise approach
One lead agency (DOT&PF)
Economies of scale
Commonality of processes, procedures
Consolidate contracts
Juneau Pilot - four waves thru 2017
(approximately 20 buildings) followed by
expansion statewide
9:42:48 AM
Co-Chair MacKinnon queried the number of buildings in phase
1. Mr. Davis stated that the first phase was nine
buildings, and the entire Juneau pilot was 20 buildings.
Co-Chair MacKinnon queried the reason for the pilot being
in Juneau. Mr. Davis replied that much of the leadership
was located in Juneau.
Vice-Chair Bishop requested a list of the nine buildings in
the pilot project. Mr. Davis agreed to provide that
information.
Senator Micciche wondered whether the state would retain
ownership of the buildings. Mr. Davis replied that the
facilities council conducted a comprehensive review of all
state buildings. He stressed that the inclusion of the
buildings was a result of extensive analysis.
Senator Micciche requested a proportion of buildings that
may have been marked for disposition. Mr. Davis replied
that he could share the plan, but could not share the
proportion of buildings.
Co-Chair MacKinnon queried the goal of the pilot. She
wondered whether the goal was consolidation, building
surplus, or preserving current building. She stressed that
there was a hope to reduce the footprint of the owned
building. She announced that the state could not retain the
number of owned buildings. She wondered whether there was
an unknown issue within the program. Mr. Davis replied that
the goal of the program was to consolidate the facilities,
maintenance, and operation of the buildings. She understood
that there was an issue about whether the state was
"overbuilt."
9:47:23 AM
Co-Chair MacKinnon noted that the presentation was about
building maintenance, rather than the cost. She was
disappointed in that approach.
Senator Micciche agreed with Co-Chair MacKinnon. He
remarked that many buildings were approved in times of
surplus state revenue.
Senator Olson queried the percentage of federal money that
initially built the airport maintenance facilities. Mr.
Bryan agreed to provide that information.
Vice-Chair Bishop shared that a building in his district
was recently replaced.
Co-Chair MacKinnon understood that there were a large
number of transportation buildings, and felt that it was
important to evaluate the importance of every building.
9:53:22 AM
Mr. Davis looked at slide 15, "Opportunities Going
Forward":
Opportunity to comprehensively plan recapitalization
of State buildings
Starts with inspections to develop a Facilities
Condition Index (FCI)
Provide holistic view of all state building
assets
Baseline health of our assets; prioritize
deferred maintenance needs
Analyze backlog of existing deferred maintenance
items in relation to actual needs
Develop a framework built on best practices:
processes, procedures; provide data/metrics to measure
progress
Implement a common Computerized Maintenance Management
System
Assess risk and prioritize work
Strive for a systematic funding program for major
maintenance and system life cycle replacement-ensure
consistency, predictability
Mr. Davis addressed slide 16, "Best in Class State
Examples":
Utah - Division of Facilities Construction and
Management
Provides centralized facilities related services
- maintenance, operations, design and
construction to 200 plus buildings.
Facilities Conditions Indices (FCIs) renewed
every 5 years per facility.
A computerized maintenance management system used
to manage their portfolio, reactive and
preventative maintenance and real estate
management.
Deferred maintenance funding appropriated into
the annual budget as percentage of the value of
all state facilities
Key Performance Indicators are measured - FCIs,
maintenance costs per sq. ft.
Texas has benchmarked success as well
Mr. Davis discussed slide 17, "The Long View":
Build on Successes of Juneau Pilot
Advance in waves to bring in all state facilities
Results-based reporting to investors, stakeholders,
public
Continuous improvement culture
Best stewardship of public funds rooted in consistency
and predictability
9:58:23 AM
Senator Olson looked at slide 8, and wondered whether the
funding was authorized or the amount of deferred
maintenance that remained on the list. Mr. Bryan replied
that it was appropriations provided by the legislature to
address deferred maintenance.
Senator Olson surmised that it was authorized funding.
Senator Micciche looked at slide 16. He noted that all
industries were in a computerized maintenance management
system (MMS) by 2005. He wondered whether the state
equipment fleet was in a computer MMS. Mr. Davis replied
that there were several computer MMSs in use in the state.
He stated that some were new, some with contracts that were
set to expire, and some with varying range user
satisfaction. He remarked that there was an attempt to put
all buildings into the same computerized MMS.
10:00:44 AM
Mr. Bryan highlighted slide 18, "Future Considerations":
The Governor's 10 Year Plan includes $70M-$90M
combined funding level for DM and School Maintenance.
DM should be a primary component of a GO Bond package
DM funding has strong local and in-state economic
impact
DM distribution considerations based on objective
rating system to address most critical projects
statewide
Constant attention to Preventative Maintenance
required
Senator von Imhof looked at the second bullet. She queried
the current capacity, current bond payoff schedule, and how
a new bond plan would be integrated. She wondered whether
the governor's plan was in addition to the federal match.
Mr. Bryan agreed to provide information.
Co-Chair MacKinnon announced that the state bond debt
capacity over the following five to ten years was $50
million to $100 million. She stressed that the payoff was
high, and the current payments were also high. She remarked
that deferred maintenance typically exceeded the life cycle
of a bonding process. She asserted that the governor's plan
did not meet the per year deferred maintenance cost. Mr.
Bryan stated that the first bullet addressed an annual
level of funding in a ten year plan.
10:05:27 AM
Senator von Imhof stressed the challenge of prioritization
with limited UGF funds. Mr. Bryan agreed.
Co-Chair MacKinnon remarked that there was an issue of
leveraging federal funds.
Senator Micciche understood that there was an issue with
remote facilities.
Vice-Chair Bishop requested a list of the sold state
assets.
Senator von Imhof stressed that there should be a
consideration of the cash flow change by changing ownership
of a building.
10:10:56 AM
Senator Micciche stressed that a comprehensive evaluation
would remove data.
Senator Hughes requested on the focus of the $1 billion
deferred maintenance backlog.
Co-Chair MacKinnon discussed the committee process related
to deferred maintenance.
ADJOURNMENT
10:16:52 AM
The meeting was adjourned at 10:16 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 041917 Deferred Maintenance Presentation for SFIN 4.19.17.pdf |
SFIN 4/19/2017 9:00:00 AM |
SB 23 |