Legislative Notebook

The State Board of Higher Education reviewed and prioritized capital construction projects under the lens of: preserving current assets; finishing what has been started; partnering for the future; leveraging donor contributions and interests; and avoiding a crisis (e.g., a heating plant shutting down). Each project was examined to determine if it met one or more of the Board's overriding objectives of: Access, Affordability, Excellence, and Economic Growth.

Capital construction projects create new jobs across the state, approximately nine new full-time jobs per million dollars of project budget, contributing to state economic development as we fix and build on the very foundations of the campuses. Investments maintain and upgrade labs and facilities so students are workforce ready, having been trained on modern equipment and in up-to-date processes. Deferred maintenance is an access issue when it gets so critical that it shuts down facilities, limits access to buildings, labs, classrooms and educational tools that students need to move toward graduation.

Facing a $600 million deferred maintenance backlog, OUS can make only incremental fixes on the most critical problems in facilities, 50% of which were constructed between 1960 and 1975. Now 30-45 years later these buildings need simultaneous overhaul. To keep existing facilities operational requires about $40 million a year. Subsystems in buildings are substantially past published standards for lifecycle. Currently, less than $12 million of maintenance is funded by the state each year.

OUS is working on a strategy that focuses on leveraging the resources available through our state agency partners, and replacing building subsystems in a sustainable manner, using the energy savings generated to help re-pay debt service. In addition to the General Fund, deferred maintenance projects will use the following funding sources: State Energy Loans from the Department of Energy (repaid by General Fund and energy savings); Lottery Bonds to support Oregon Economic and Community Development; and Article XI-G Bonds.

Greater investment in Capital Construction and deferred maintenance will assure that current and future Oregonians will have access to higher education. The Governor's Recommended Budget (GRB) proposes a significant increase in deferred maintenance from the prior biennium and will have a great impact both currently and in decades to come. The 2005-2007 GRB for capital construction proposes $17.2 million in General Fund amounts, an increase of 50% over the $11.5 million provided in the 2003-2005 biennium.

The 1960’s and 70’s were a huge growth period for all of higher education. Fifty percent of OUS space was constructed over a 15-year time period. Now 25 to 40 years later the major subsystems in those buildings (heating, electrical and plumbing) are simply worn-out and require extensive overhaul.

A Facilities Renewal Baseline Study, conducted in 1997 and updated each biennium, demonstrates the extent of the capital repair problem. The study also looked ahead 50 years and determined that OUS needs to spend $40 million per year on average just to keep the current backlog from growing higher than the $600 million.

The OUS strategy focuses on leveraging the resources available through our state agency partners, and replacing building subsystems in a sustainable manner, using the energy savings generated to help repay debt service. The $600+ million request will be funded over multiple biennia with the following funding sources:

Education & General (E&G) (General Fund, Article XI-G bonds, Lottery, COP, Gifts/Others) projects are the only types of facilities eligible to receive State General Fund revenues and Article XI-G bonds. E&G facilities provide the basic instructional space, administrative and campus support facilities necessary for the university. Examples include libraries, classrooms, and physical plants.

Auxiliary (Article XI-F(1) bonds, Gifts/Other) projects are self-financing and self-supporting. These facilities include Campus Housing/Dining, Parking and Athletics. Funding is primarily received through the use of Article XI-F bonds, repaid through revenues generated by operations.

Systemwide (State Energy Loan Program, SELP) projects support academic modernization, code, deferred maintenance and capital repair projects from the other three facility categories (E&G, Aux, SBF). Therefore, the funding sources for systemwide projects are the same funding sources available to the facility category under which the supported facility is classified.

Student Building Fee (Student Building Fee, Article XI-F(1) bonds) projects are student-related facilities such as recreation centers or student unions. The Student Building Fee Debt Service Reserve serves as the source of debt repayment on Article XI-F(1) bonds issued to finance the construction and renovation of major student facilities These projects are in a category of their own because they have a dedicated fund source.

Definitions
General Fund - a pool of resources used to support a wide range of state services. These include K-12 schools, higher education, state police, state prisons, assistance and medical services for the needy.

Article XI-G bonds - defined by XI-G of the State Constitution, Article XI-G bonds may be issued to support E&G projects as long as they are matched equally by the General Fund (including Lottery Funds), Building Use Credits, or gift funds placed in a legislatively approved Donation Account. Debt service is paid from the State General Fund within the operating budget. No appropriations are received for debt service in the biennium in which the bonds are approved.

Article XI-F(1) bonds - defined by XI-F(1) of the State Constitution, Article XI-F(1) bonds may be issued for projects that are self-liquidating and self-supporting. Each campus and auxiliary is responsible for their share of the debt service. Projects not selling bonds within two years may request reauthorization in succeeding Legislative sessions.

Lottery - Oregon 's Lottery proceeds are used to support education, economic development, and natural resources programs. Lottery Bonds are administered by the Department of Administrative Services, with State Lottery revenue pledged to pay the debt service.

Certificates of Participation - Tax-exempt government securities used to raise funds to improve and construct buildings or purchase equipment. Certificates of Participation (COP) are used to finance capital costs related to construction or acquisition and may not be used to finance ongoing operating costs. In return, the investors receive COP payments, which include interest income that is exempt from federal and Oregon income tax.

Gifts/Other - These include various gifts and grants. Gift funding typically consists of donations. Grant funding is present at the federal, state, and local level.

State Energy Loan Program (SELP) – This program offers low-interest, long-term loans for any qualified Oregon project that invests in energy conservation, renewable energy, alternative fuels, or creating products from recycled materials. These Oregon general obligation bonds support the loans used to fund a majority of the OUS capital renewal backlog as proposed in the GRB. The loans would be structured so that energy savings and General Funds would cover the loan payment.

Student Building Fee – This fee is established by the State Legislature and is currently $45 a term. These funds, collected from students for the Student Building Fee Debt Service Reserve, serve as the source of debt repayment on Article XI-F(1) bonds issued to finance the construction and renovation of major student facilities such as recreation and fitness centers, student unions, and child care centers.

Oregon University System follows Oregon Revised Statutes Chapter 351 and Oregon Administrative Rule 580-50 when submitting the capital budget. ORS Chapter 351 provides guidance to the OUS specific to higher education. Specifically, ORS 351 establishes OUS procurement authority separate from the state, releasing OUS from operating under ORS 279. OAR 580-50 establishes the rules and procedures OUS follows in campus planning, capital construction and use of property. One of the most prominent policies OUS now follows is that all newly constructed buildings must be LEED/SEED certified. Leadership in Energy & Environmental Design (LEED) is a green building rating system. Please view 'Seismic & Sustainability' on the left for more information. This requirement ensures that new OUS buildings are energy efficient, helping to reduce operating costs in the future.

The capital construction budget request must go through a comprehensive, multi-level review process of assessments, edits, and approvals. First, the budget starts out with the campuses working hand-in-hand with the Oregon University System. The campuses assess their current facilities, forecast their future enrollment, and anticipated the facilities needs of their programs while engaging their students, faculty, and staff. Next, the capital budget goes to the State Board of Higher Education for review. After the Board makes its recommendation, the budget is then submitted to the Governor's staff for review. The Governor then compiles his recommended budget for submission to the State Legislature.

OUS’s primary sustainable practice targets are operating university buildings efficiently by improving earthquake life-safety, limiting property damage caused by earthquake shaking, and reducing high energy consumption and operating costs.

Undersea image of Cascadia Fault depicted in orange. Looking Southeast from Astoria channel, Mt. Shasta in Background. Praxson and Haxby, 1997

One of the greatest physical threats to Oregon is an earthquake on the offshore Cascadia subduction zone. OUS's sustainability plan on reducing earthquake risks is threefold: protect lives, limit property damage and minimize impact on campus activities. This cost-effective plan focuses on strengthening weak buildings from destructive earthquakes. Please click on '6-step method to ID unsafe facilities' to view the basis for this plan.

Furthermore, Oregon University System is actively pursuing and receiving seismic general obligation bonds from the Department of Geological & Mineral Industries as well as funding from the Federal Department of Homeland Security. These funds will be used to complete seismic upgrades in many of the same buildings that are being repaired for deferred maintenance.

Part of the Deferred Maintenance replacement process includes alterations to support sustainability and efficiency. In regards to energy use, this will achieve savings of 30% or more by using components such as control systems, efficient lighting, daylighting, and improved HVAC equipment.

To reach OUS sustainability initiative standards, green building design is becoming an integral part of OUS capital construction. All new buildings must meet 'Leadership in Energy & Environmental Design' (LEED) silver requirements.

UO Lillis Business Complex:

The Lillis Business Complex is one of the newest additions to the University of Oregon. The architecture surpassed building code energy standards by 40%. This building incorporates solar panels, light shelves, natural day lighting, occupancy sensors, thermal mass, and natural ventilation in its design.

OSU Kelly Engineering Center:

The 146,000 sq-ft Kelley Engineering Center is at the heart of the engineering section of campus. Opened in the fall of 2004, this building has enough "green" building features to be certified as a LEED (Leadership in Energy and Environmental Design) Silver structure, one of the first in the Oregon University System.

Portland State University NW Center for Engineering, Science and Technology:

Sustainable design is an integral part of all new construction projects at PSU. The NW Center for Engineering, Science and Technology Building, which will the Maseeh College of Engineering and Computer Science, is under construction. It will incorporate sophisticated computer control systems to integrate natural ventilation of the lobby, circulation, and study spaces. Storm water from the roof will be collected in the Hydrology Lab for analysis by civil engineering students. Deep-water wells will allow geothermal heat exchange to augment the mechanical systems in the building. The facility will be submitted for LEED™ certification; a Silver rating is anticipated.

Future Concepts

OUS has been challenged to define, for a system of higher education institutions, what sustainability means, how it should be pursued and how it will reshape internal and external institutional relationships. OUS has set three goals:

Goal #1: Collaborative Development of Principles
Goal #2: A Framework for Sustainability Governance
Goal #3: Development of New Financing Models for Challenges that Defy Current Systems

Pursuing these goals provides a better understanding of how activities on the campuses can contribute to sustainability and ultimately achieve a brighter, safer and "greener" future.