Budgeting for a Building Projecct

Ralph Rohner, Catholic University

Budget planning for a new building:

1. A starting point: What is it you think you need to build, and why?

a. -- How does building project relate to current self evaluation and long term plan for the school (and the University)?
b. -- What objectives, other than just square footage, are you after?
c. -- Are you sure this project is top priority, and won't be soon overtaken by other demands (faculty lines, library holdings, loan forgiveness, etc.)?
d. -- Politics -- have you sold the concept, and the need, to your constituencies, including university administration? have you gotten maximum help (leverage) from the ABA Accreditation Com.?

2. An overview of budgeting:

a. -- There are two budgets: costs to construct & revenue to cover those costs.
b. -- Process is two parallel lines which move forward at different paces, but must eventually converge. I.e., you can't build what you can't pay for. Real costs and real revenue remain contingent for a long time!
c. -- Rough-in a range of project cost figures, and options (hopefully) for covering those costs. E.g., if what we need costs $20 million, where are we likely to get that sum? If it costs $35 million....? If it costs $50 million....?
d. -- A "consultant/advisor" (from legal education, from the Univ. administration or Architecture/Engineering school, even from your alumni) may help in these early ballpark projections. Also in assessing basic project directions. E.g., if your problem is classroom configuration, is the answer necessarily a new building? Can existing facilities be retained and adapted to desired use, or is new construction inevitable?

3. Budget expense issues at the git-go; getting started.

a. -- Expenses right out of the box....

• - dedicated staff or faculty;
• - materials; storage; workspace;
• - travel; consultants
• - architect selection process
• other professional retainers (technology, library, landscaping, etc.)

b. -- Fund-raising planning expenses:

• - developing the "case statement";
• - feasibility studies;
• - donor prospecting and evaluation
• - early promotional materials

c. -- Where does this seed capital come from?

• - diversions within school's operating budget;
• - Univ. capital improvement funds;
• - a seed-money gift.

4. Developing project cost parameters: the "wish list":

a. -- Deciding what your project will include:

• - Need architect or other professional on board to oversee "building program" exercise; projecting current estimations of facilities design and function over the next half century or so.
• - Academic space: classrooms, library, faculty offices, administration, courtrooms, clinics, "program" activities;
• - Student services and living space: lockers, lounges, mail drops, food service, student organizations, bulletin boards or other info systems, ceremonial activities.
• -Furniture & furnishings; function and form;
• - Technology: balancing today's and tomorrow's "state of the art";
• - Exterior landscaping: blending this project into its environment.

b. AND DON'T FORGET...

• - Decorations, artwork, customized design features;
• - "Service" space: kitchens (!), loading, parking, security, storage;
• - Moving and relocation costs;
• -Interim disruptions and relocations;
• - Indirect costs: legal, permits, "political" cultivation";
• - "Expansion" features.

c. Bite the bullet:

• - Prioritize and set options among all design features; be prepared to cut, shrink, economize;
• - To deans: don't do this alone; build consensus, and justify to all constituencies.
• - Use professional estimators.

d. G0 or NO G0.
-- Somewhere about this stage of cost projections, and parallel revenue projections, comes the critical decision to proceed or not, and at what cost level. That means letting the project out to bid, and negotiating contract cost with contractors, while keeping your fingers crossed that the end figure is tolerable.

5. Assessing funding capacity
-- How much can we really afford to spend, and where do we get it?

a. WHO takes what shares of financial responsibility?

• - Law School (tuition set-asides; capital campaign, etc.)
• - Univ./State system
• - Legislature (?)
• - Other (foundation)

b. WHAT sources of funds?

• - existing capital budget (Law School's or University's);
• - new CASH:
  * Budget (tuition) set asides [start early!];
  * Capital fund raising [figure 10-12 cents spent for each dollar raised]; [There should be a hyper-link here to another program about planning, funding and executing a capital campaign].
  *Univ./legislative allocation.
• - new CREDIT:
  * internal institutional borrowing;
  * commercial loans;
  * bond financing;
• - and DON'T FORGET
  *Interest earnings on invested cash;
  * Univ. credits for space, equipment, furnishings relinquished.

c. Timing: WHEN are the funds needed?

• - schedule of disbursements before and through construction; parallel projection of available cash: Will the two match? Interim borrowing strategies.
• - for financed costs, project amortization schedule; identify who pays what portions of it.
• - appreciate possible impacts on school's future operating budgets (and mitigating effect of fixed term borrowing).
• -- Note: Overlap effect of fund-raising vs. construction expenditures: revenue may accrue after all construction costs paid (e.g., deferred pledges). Can be a source of quasi-endowment for building maintenance.

6. The political side of budgeting

-- Outside the law school

• - cultivate support from highest levels in Univ.
  * President & Trustees
  * Provost; Treasurer; VP for Facilities Management
  * If you can't co-opt one, go for his/her boss.
  * Campus pride is a good motive. So is fear (of dis-accreditation; USNews fifth tier, embarrassment vs. crosstown rival, etc.)
  * Keep them posted on all steps and successes en route.
• - with alumni and prospects, justify the budget but don't brag about it.
• - co-opt campus jealousies: pretty-up the campus; new campus parking; new pleasant food service; share/rent ceremonial space, etc.
  

-- Inside the law school:

• -Try to capture disaffected faculty and staff; maybe give them a responsibility in the project;
• - Acknowledge and cater to "suffering" of current students (especially if they are paying a tuition surcharge)