If there is one thing Steven C. Ender wants you to understand about the money he needs to fix up Grand Rapids Community College, it’s this: “This is not about new carpet.”
Mr. Ender, the college’s president, can tick off the $2-million in repairs needed in the applied-technology center alone: Fire alarms, $21,000. Emergency lighting, $17,000. Roof exhaust fans, $130,000. Air-volume boxes, used for cooling, $931,000. And so on—with the most pressing needs totaling about $36-million across the campus, which was built mostly in the 1960s and 70s.
“I am having a hard time limping along without fire-suppression systems in all of my buildings,” he said. “I am having a hard time limping along in classrooms where you are so uncomfortable with the heat that it is hard to focus.” Because students look closely at buildings when they decide to enroll at a college, and because repair costs mount as time goes on, said the president, “limping along only puts us deeper in the hole.”
Reached early this month by phone, Mr. Ender was only days away from a county vote on a proposal that would allow the community college to borrow $98-million, to be repaid through property taxes, to tackle its maintenance problems and outdated buildings. If the bond proposal didn’t pass—and Michigan’s antitax groups were lining up against it—Mr. Ender said he might curl up “in a fetal position” in the corner of his office.
Colleges clearly face many challenges these days. But persistently deferred maintenance of aging campus buildings remains a nagging burden—and some recent trends suggest that the situation could be getting worse. Sightlines, a consulting company that tracks and analyzes facilities issues at more than 300 colleges, shared some of its latest findings with The Chronicle. The data indicate that the need for repairs and modernization has risen since the start of the 2008 recession, particularly at public institutions. At some institutions the backlog, which is not recorded on balance sheets, would rival or far exceed their net assets or liabilities.
Many major universities can tally their maintenance needs in the hundreds of millions of dollars. Some state systems put it in the billions. With state money receding and philanthropy an unreliable source of relief, colleges increasingly face two unappealing options: charge students higher fees or borrow more money.
For some institutions, the options are constrained even more by politics and public opinion. On the day of the vote in Michigan, the antitax crusaders prevailed, blocking Grand Rapids Community College’s bond proposal and sending Mr. Ender and his colleagues back to the drawing board. The opponents even used automated “robocalls” in the days leading up to the vote. “We just got crushed,” Mr. Ender said.
Billions, and Growing
Figures on deferred maintenance are hard to quantify. Sometimes they include repairs of buildings that colleges plan to replace anyway, and sometimes the estimates are inflated or deflated, depending on how they might play politically. Some experts estimate that deferred maintenance on college campuses amounts to about $36-billion across the country, with $7-billion of that considered urgent. While pushing the American Jobs Act last year, the Obama administration estimated that deferred maintenance at community colleges alone amounted to $100-billion. (The act, which has not been passed, proposed $5-billion for repairs.)
In any case, the figures tossed around are sizable. “It is a growing problem across the country, there is no doubt,” says Mary Vosevich, director of the physical-plant department at the University of New Mexico and president-elect of APPA, a leading association for college-facilities administrators. Her own university, with 12 million square feet of space, has a deferred maintenance backlog of $450-million
“If we got rid of all deferred maintenance—everything—that would cost us $25-million a year to keep up,” she says. In a sparsely populated, poor state like New Mexico, “that is not going to happen.” So the university has taken on a plan to track the most urgent projects and tackle them.
Several years ago, the campus suffered major failures in its utilities infrastructure—boilers and chillers were worn out, and the distribution lines could not handle modern demands. Periodic failures disrupted teaching and research. The university borrowed $60-million to replace and upgrade the equipment and is paying off the debt over the next 25 years through energy savings.
“We’re kind of keeping our nose above water, but it’s hard to say, going forward, what is going to transpire,” Ms. Vosevich says.
David A. Kadamus, president and CEO of Sightlines, says colleges are embracing all sorts of strategies to deal with deferred maintenance. The savviest have devised comprehensive plans that deal with maintenance issues while pursuing strategic goals. That might include replacing dilapidated, outdated, or inefficient buildings with new facilities that more closely fit a college’s current mission. (Raising money for new buildings is always easier than raising money for repairs.) Less-well-organized institutions scramble to react to the latest breakdown or leak.
“If you try to renovate your campus building by building,” Mr. Kadamus says, “you are going to run out of money before you run out of building projects.”
The trends point to different challenges in the future for different kinds of institutions—and as usual, the wealthier and more prominent institutions will very likely have an easier road, Mr. Kadamus says. At large research universities, for instance, facilities costs compose only 3 to 5 percent of the annual operating budget; those institutions can deal with the costs largely with state funds, research money, and strong donor support. Small private colleges have a bigger burden—facilities costs make up 12 to 15 percent of their annual operating budgets—but many of them also have healthy endowments and devoted alumni.
For mid-size public universities, which spend about 10 percent of their operating budgets on facilities, it’s a different story. “They do not have the debt capacity or the endowments that the privates do, nor do they have the research or the revenue base that the large publics do,” Mr. Kadamus says. “They are in the squeeze.”
They also tend to have more buildings from the 1960s and 70s, which need major repair or replacement.
Illinois State University might be in that category. Since the recession, the state has been so strapped that it has failed to give its public institutions regular cash infusions on time, forcing colleges to take money from their operations budgets simply to make payroll. As a result, many college facilities suffered. Illinois State, which has a deferred-maintenance backlog of $500-million, completed its most recent major renovation project in 2004. In 2010, the state appropriated $54-million for a renovation of the university’s fine-arts complex, but it hasn’t released the money.
Daniel Layzell, Illinois State’s vice president for finance and planning, says the university will take on new projects in buildings that generate revenue, such as residence halls. But for the rest, the money will have to come from tuition or from borrowing.
The university’s maintenance woes turned tragic on Christmas Day 2009, when concrete cladding peeled off an I-beam column on the administration building. The university hired a crane operator to remove a hanging 18,000-pound chunk of concrete. It fell on the crane’s cab, crushing the 57-year-old driver. Now Illinois State is removing and replacing all of the cladding, at a cost of $5.5-million.
3 Critical Factors
Mr. Kadamus sees converging challenges in the near future. The first is demographics: Over the next several years, in parts of the country including the Northeast and the Midwest, the number of college-age students will decline, putting pressure on tuition-dependent institutions. “History has shown us that when enrollments drop, the stronger institutions will take students from the weaker institutions,” he says, adding that some colleges might find ways to fill the gap with distance education or foreign students.
The second is the life cycle of buildings: They typically require major renovations at 25 years, with further major renovation, or replacement, at 50 years. College buildings from the construction boom of the late 1960s and 70s, and those built at the start of a later boom, in the mid-1990s, will be due for major renovation later this decade.
The third is debt: “Many institutions are near or at their limits,” Mr. Kadamus says.
Debt is indeed a major challenge, but it is also increasingly the preferred solution for colleges. In March, Moody’s Investors Service released a report noting that among the 287 private colleges it rates, debt for capital projects had more than tripled, from $27-billion in 2000 to $90-billion in 2010. (Debt ballooned after a 1997 law eliminated the cap on the amount of money a nonprofit college could borrow.) The report also said colleges were spending significantly less on building projects and the stewardship of existing facilities since the start of the recession.
Particularly in the Northeast, private colleges have put their resources into facilities to make sure they can continue to attract students when the demographics decline, says John C. Nelson, director of the higher-education practice at Moody’s. But in some states public colleges, too, have borrowed heavily, he adds. “New Jersey campuses recently took out a lot of debt and renovated a lot of buildings,” he said, but that means they have lots of obligations in debt service.
Problems arise when the debt service starts to interfere with paying for continuing maintenance. Mr. Ender, who has been at Grand Rapids Community College for four years, pegged the time when deferred maintenance started becoming a problem there: In the mid-1990s, the college built a science center, still its crown jewel. But money that had previously been used for maintenance started going toward paying off the debt on that building.
“When I got here, we were literally not budgeting for deferred maintenance,” the president says. “We were waiting to see if there was any money left in the budget, and then we would try to do the most urgent projects at the end of the year. It was not pretty.”
Today the college budgets for about a million dollars a year for maintenance needs, but it’s not enough. “We will never catch up with that amount,” Mr. Ender says. After the voters killed his first proposal, he considered Plan B: asking the Board of Trustees to borrow $37-million to be repaid through a student fee. He may try to get some donors to cover renovations in two of the college’s buildings. He is even considering making another plea to voters in 2014.
New Thinking Needed
Mr. Nelson believes colleges will have to adopt new (and, to some, unappealing) strategies to get more out of their buildings. Colleges may have to schedule more classes in the early morning and evening. They might have to lengthen their academic years to include the summer—especially in the Northeast, where summers are the nicest time of year. Those ideas, he acknowledges, don’t always sit well with faculty members.
But new realities may force a change in attitude—particularly at the pressured public colleges.
“There was a day in American higher education where the pact between states and universities was such that the states provided the buildings and the bulk of support for running the building,” says Lester A. Lefton, president of Kent State University. Those days are over.
Kent State has $350-million in deferred maintenance. Sixty of its 135 buildings were built during the 1960s, and very little significant maintenance has been done on them since.
Like Mr. Ender, at Grand Rapids, Mr. Lefton emphasizes the seriousness of the problem: “I am not talking about painting of walls. I am talking about window air-conditioning units that are so loud that faculty have to shut them off to be heard, and then the room goes to 90 degrees. I am talking about laboratories where fume hoods no longer work, and we have had to shut down the laboratories.”
In the past two years, the university got $16-million from the state for capital improvements, and Mr. Lefton’s administration has set up a plan to set aside a few million dollars a year for continuing maintenance.
But it’s not nearly enough. So, this spring, Kent State’s Board of Trustees approved a plan to issue $170-million in bonds to pay for renovations to 40 buildings and even replace a couple of them.
At one time, Kent State wanted more. In late 2010, Eric Fingerhut, then chancellor of the Ohio Board of Regents, shot down the university’s plan to borrow $210-million, to be repaid with student fees. When Kent State officials tried to revive the plan with the state’s Office of Management and Budget last year, it languished as lawmakers fretted over the burden on students.
So, Mr. Lefton and his colleagues have cut back on the plan, to fit their financial constraints. “Nothing is free,” he says. “We are just going to have to do less, and we’re going to have to make some tough decisions.”
