october, 2009 david a. kadamus president sightlines€¦ · a $1 increase in stewardship funding...
TRANSCRIPT
© Sightlines 2008
October, 2009
David A. Kadamus President Sightlines
© Sightlines 2008
• Are there new ways to manage escalating costs when resources are declining?
• How do you know if we are receiving the best value for the facilities investments?
• Does the campus have the proper amount of space and is it utilized effectively?
• How much should be invested in aging campus buildings?
• How are service expectations set and service satisfaction measured?
• What are campuses doing to manage the expectations for new space?
• Can environmental sustainability remain a focus in a declining resource period?
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Rethinking Campus Planning Strategies
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Public / Private Institutional
Profile Capital Renewal
New Constr.
Oper. Budget
Public Large Public Med / Small Private Highly Endowed Private Research Private High Residential Private Low Residential
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Draw
Inflation
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Tax exempt, fixed rate, investment grade bonds are now at their lowest yields levels in 42 years.
Many campuses are looking at the economics of refunding many old bond issues and also possibly converting variable rate debt to fixed rate debt.
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Rethinking Campus Planning Strategies
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Residential Liberal Arts Colleges - NE
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Space & Wealth Profile
• Is the space paradigm sustainable? • Rethink renovations • Adaptive Reuse • Reduce buildings per 1 million sf
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By Investing in Maintenance:
Systems Exceed Life Cycle Expectations
Failures are Avoided
Premiums for Repairs are Eliminated
Program is not Interrupted
A $1 increase in stewardship funding reduces capital investment need by $3-4
If the stewardship investment goes to space this capital impact will be lost
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Planned DM Failure
Construction Reduced Life
Failure Mitigation Temp Services
$
Example: The Cost of System Failure
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A 15 Year Profile:
No Change in the current funding
results in a deterioration of the assets at a rate of
1.2% of the campus replacement value
each year.
NPV Assumptions – 4.5% interest, 7% IRR, 20 years
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Capital Only
Stewardship Only
A 15 Year Profile:
Comparing a One Time $75 Million
Investment to a 3 fold increase in stewardship.
NPV of the Capital = $96m
NPV of Stewardship = $32m
NPV Assumptions – 4.5% interest, 7% IRR, 20 years
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Capital Only
Stewardship Only
A 15 Year Profile:
Comparing 3 Separate $45 Million Investments to a 5
fold increase in stewardship.
NPV of the Capital = $147m
NPV of Stewardship = $41m
NPV Assumptions – 4.5% interest, 7% IRR, 20 years
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Rethinking Campus Planning Strategies
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Developing a Vocabulary for Measurement The Return On Physical Assets – ROPASM
• Annual Stewardship: The annual investment needed to insure buildings will properly perform and reach their useful life. “Keep-Up Costs”
• Asset Reinvestment: The accumulated backlog of repair and modernization needs and the definition of resource capacity to correct them. “Catch-Up Costs”
Asset Value Change
• Operating Effectiveness: The effectiveness of the facilities operating budget, staffing, supervision, and energy management
• Service: The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery.
Operations Success
Annual Stewardship
Ass
et
Rei
nve
stm
ent O
peratin
g
Effectiven
ess
Service
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Annual Stewardship
Ass
et
Rei
nve
stm
ent O
peratin
g
Effectiven
ess
Service
As the annual stewardship spending falls, operations effectiveness is lowered, customer satisfaction is reduced, and
greater capital investment is often the result.
Campus A Campus B Campus C
Target
Actual
Optimal
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Issues:
• Lack of annual stewardship accelerated the backlog growth. • A large repair and
modernization backlog with limited funding. • Poor operations performance
due to systems failures that drove daily service and energy costs. • Dissatisfied Customers.
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• Increased Capital Investment and a stronger mix of projects
• Energy Reductions that funded stewardship
• Coordinated repair & modernization investment to lower daily service failures.
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David A. Kadamus President Sightlines
WWW.Sightlines.com [email protected]
203.682.4950
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