SUNY PPAAWinter Conference

Presented by theState University Construction Fund

January 28, 2014Cooperstown, NY

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2013/14 Response to Fiscal Challenges

• Fiscal Plan Adjustments

• Payment Predictability• Coding Scrub• Project Evaluation/Prioritization

• B-1184 reviews

• Re-evaluation of Staff Charged to Capital

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2013/14 Response to Fiscal Challenges

• Maximizing 384 funds

• Bid Postponements

• Construction Manager Reductions

• Program Management Campus Meetings

• Program Finance Presentations

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2014/15 Executive Budget Summary:

Capital Program2014-15 Executive Budget vs. Capital Request (in millions)

Program2014/15 Request

2014/15 Executive Budget Variance

Educational Facilities: • Critical Maintenance• Binghamton School of Pharmacy

$750.00.0

$500.010.0

($250.0)10.0

Hospitals 600.0 0.0 (600.0)

Residence Halls 50.0 50.0 0.0

Community Colleges 91.0 32.1 (58.9)

SUNY-Wide Capital Initiatives:

Transformational Information Technology Initiative 189.0 0.0 (189.0)

Research Initiative 200.0 0.0 (200.0)

Energy Initiative 100.0 0.0 (50.0)

Total $1,980.0 $592.1 ($1,337.9)

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Educational FacilitiesNew Funding:

• $500M for critical maintenance

• $10M for new School of Pharmacy at University at Binghamton

• $55M for NYSUNY 2020 Round IV

• $15M for a facility to house the College of Emergency Preparedness,

Homeland Security and Cyber Security

• $50M for New York Genome Center at the University at Buffalo

• $5M for Cornell College of Veterinary Medicine

• $180M for Nano Utica (SUNYIT)

• $150M to support campus-funded projects (384 appropriation)

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Educational Facilities

Other Items of Interest:• New critical maintenance funding restricted to existing

facilities

• Allocated to each State-operated campus based on current methodology

• All spending from new appropriations must be accommodated under existing 2014/15 limit ($887M)

Prior Year Funding:• All prior year appropriations are recommended for

reauthorization

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Community Colleges

• $32.1M (State share) was provided for 50 critical maintenance projects which obtained local sponsor support at 20 community colleges

• $57.3M (State share) for 13 strategic initiatives or related critical maintenance projects at 9 colleges was not included

• Colleges have the opportunity to apply for funding through the local Regional Economic Development Councils ($150M) and NY-SUNY 2020 ($55M)

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Disbursement Targets1. Limits total spending in a fiscal year for each

state-supported program.

2. Includes all spending within a program, including from new and prior year appropriations, but DOB disbursement target for Educational Facilities bonded program for 2014/15 was not adjusted upward.

Targets for 2015/16 and 2016/17 targets were reduced, however, 2017/18 was increased and a 5th year was added at $600M.

3. Spending from new and existing appropriations will continue to be carefully monitored.

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Spending Targets Reflect Debt Limitations:

Total Debt Outstanding & Corresponding Available Bond Cap Room

$52,912

$50,821

$49,237

$46,850

$42,971

$39,521

$1,591

$1,025

$106

$157

$1,866

$3,179

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

SFY 2019/2020

SFY 2018/2019

SFY 2017/2018

SFY 2016/2017

SFY 2015/2016

SFY 2014/2015

Debt Outstanding Subject to the Bond Cap Available Bond Cap Room

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2007-08 2008-09

2009-10 2010-11

2011-12 2012-13

2013-14 (Actual/Projected)

2014-15 (Projected)

2015-16 2016-17

2017-182018-19

2018-19

$0

$200

$400

$600

$800

$1,000

$505 $504

$729 $775$905

$1,080$968

$887

$600 $606

$718

$943 $912$946 $968

$887 $893

$776

$393

$678$656

$619 $600

Annual Disbursements 2012-13 Fiscal Plan Target 2014-15 Fiscal Plan Target

SUNY Educational Facilities & Hospital Capital Program Bonded Disbursements:

Annual Disbursements vs. Financial Plan Targets ($ in millions)

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Plan Management(in a Post-2014 Executive Budget

World)

• Factors & Issues

• Approach

• Actions

• Requirements

• Cautionary Notes

• Important Updates

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Factors & Issues

• Fiscal Plan

• Current Obligations

• Appropriations

Plan Management

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Approach

• Determine System Spending Capacities

• Identify Campus Priorities

• Address Plans Disrupted by Last Year’s Fiscal Issues

• Take Timely Actions to Support Campus Calendar

Plan Management

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Actions (Next 60 Days)

• Establish Campus Capital Priorities

• Complete Status Review of All Active Projects• Campus Lets – Unexpended Coding• Fund – In Design, In Construction• Equipment

• Verify / Update Associated Spending Projections

• Calculate Capacity for New System-Wide Spending

• Authorize Priority Projects within Fiscal Capacity

Plan Management

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Actions (Immediate)

• Make 2014 MCM Funds Available

• Issue New Coding for Priority Summer Work

• Process Eligible Year-End Transactions for FY 2014

Plan Management

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Requirements

• Existing Coding ‘Accounted for’ First (including MCM)

• Appropriate Project Scopes

• Realistic Project Values

• Reasonable Project Schedules

• Demonstrated Project Readiness

• Flexibility, Adaptability, and Predictability!

Plan Management

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Cautionary Notes

• “Maintenance of Existing Infrastructure”

• “Multiple,” “Various,” & “Bank” Projects

• “Charging Staff to Capital Funds”

• “B-1184”

• Expect Data, Metrics, & Benchmarks!!

Plan Management

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Important Updates

Fund Terminology in the New Paradigm

OUT:

Strategic InitiativesAppropriations

FundingPBEBob

IN:

SUNY 2020Fiscal Plan

Disbursementse-Builder

Tom

Plan Management

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Construction Cost &

Economics Update

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FY 2013 Bid Results(January 2013 to January 2014)

• Total value of bids taken for this period is $497,735,000

• Bids are 6.5% below established budgets

• Bids are 0.6% above median budgets

• 33 bids have been taken

• Average number of bidders per project statewide is 7.2, below recent trends

2008 2009 2010 2011 2012 2013

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2

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5.6

8.6 8.9 8.68.2

7.2

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Regional Results Breakdown (1)

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Projects by Region (count)

South

Central

West

East

$267,845 54%

$47,676 10%

$172,261 35%

$9,952 2%Volume by Region

(budget x 1000)

South

Central

West

East

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Regional Results Breakdown (2)

• South (Downstate) Region: $267.8 million bidsLvB -10.5%, MvB +0.8%, 9.5 bids each project

• Central Region: $47.7 million bidsLvB -6.0%, MvB -2.7%, 7 bids each project

• West Region: $172.3 million bidsLvB +0.8%, MvB +4.1%, 6 bids each project

• East Region: $9.9 million bidsLvB -12.0%, MvB -1.1%, 6.3 bids each project

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Current Comparison to FY 2012

Comparison of Bid Ranges, all bids FY2012 to Current Point of

FY 2013:

• 2012 Statewide: LvB -16.1%, MvB -8.4% = Range of 7.7%

• Current Statewide: LvB -6.5%, MvB +0.6% = Range of 7.1%

• 2012 Volume $312M vs. Current Volume $497M = Net Increase of

59%Differences in Bid Range:

• Current bid range is superior compared with previous results in the 10-11% area.

• Halting of bids for 2012 created a data gap that was damaging to our internal tracking.

• As always, there are specific projects that have results outside of these averages.

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What Do the Bid Results tell us?

• The construction market in western NY has become very tight. GC’s, certain specific trades and union labor availability are driving prices up.

• Similarly, Downstate markets have an increase in cost due to permanent Sandy recovery work, although their increases are smaller due to the depth of the market.

• Increases in labor costs, while small, are being passed on to owners. Material costs appear to be stable, although long term indicators suggest higher trends…. Someday.

• Beware the desperate shrewd bidder – don’t spend your savings.

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Where are we going?

• Global manufacturing has spotty and limited signs of growth

• There are no economic paradigm-changers available – Live the New Normal

• USA wholesale inventories have increased by +/- 50% in the last 4 months

Baltic Dry Index, 3 Year Chart

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Where are we going?

• Harper-Petersen Index (right) reflects container shipments, i.e. finished goods.

• North American railroad car shipments have declined about 3% from 2012-2013.

HARPEX, 5 Year Chart

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Where are we going?

M2 – total supply of money, USA, 30 years

M2V – velocity of total money, USA, 50 years+

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Where are we going?Commodity prices have been surprisingly stable

over the last 12+ months.

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Where are we going?

Crude Oil (WTI)

Ethanol

Natural Gas

• Energy pricing has assumed “typical” seasonal and political peaks and valleys without any surprises.

• Food pricing is mixed and “peaky.”

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So, all this means…

• Construction cost trends already established can be expected to continue without any dramatic change.

• All construction work takes place in a local market; budget issues must be anticipated, monitored, adjusted and managed.

• “Eternal vigilance is the price of getting a good deal.”

(a misattribute of Thomas Jefferson, actually a misquote of John Philpot Curran)