Education

With unwritten checks, campus construction starts at Iowa's public universities

Projects underway even as donation goals unmet

Work progresses Jan. 12, 2018, on a new building for the University of Iowa College of Pharmacy as it is reflected in the windows of Rienow Hall. It is one of the UI construction projects that have started even though its fundraising goal has fallen short so far. (The Gazette)
Work progresses Jan. 12, 2018, on a new building for the University of Iowa College of Pharmacy as it is reflected in the windows of Rienow Hall. It is one of the UI construction projects that have started even though its fundraising goal has fallen short so far. (The Gazette)
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IOWA CITY — After spending nearly two years building a $37.1 million annex onto its Seamans Center for the Engineering Arts and Sciences, the University of Iowa in September 2017 wrapped up work on the 65,000-square-foot space featuring a 128-seat tiered lecture hall, design studio, collaboration space and 5,000 square feet of green roofing — not to mention 234 solar roof panels.

The goal was to pay for nearly half the project with donations, and the university set a fundraising target of $17 million. But two years since its completion and since students and faculty started using it, less than a quarter of that goal has been raised — $4.2 million, according to the UI Center for Advancement.

The Seamans annex is not the only new construction across Iowa’s public university campuses to get started — or even finished — before meeting the private fundraising goals that often are spelled out in requests to the Board of Regents for approval.

An $11.8 million revitalization of the UI College of Nursing building — approved by regents in April 2017 to be funded entirely through gifts and earnings — has raised $2.3 million so far, even though the project is already finished.

An $89 million renovation of the Hawkeye’s Kinnick Stadium north stands — which debuted for the start of this fall’s football season — remains about $3 million shy of its $25 million fundraising goal. And construction is well underway on a $96.3 million UI College of Pharmacy Building and $50 million UI Museum of Art, even though neither of those projects have attained their fundraising targets.

National experts interviewed by The Gazette say that starting capital projects on public and private college and university campuses without achieving fundraising goals or securing the necessary resources isn’t terribly uncommon — although it’s not ideal.

“There are some schools that have been burned by that,” said Ann Forman Lippens, who runs the facilities forum research team for EAB, a Washington, D.C., technology, services and research firm focused on helping schools support students from enrollment to graduation.

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Lippens said a growing number of institutions have bench marks, checkpoints or policies in place to regulate financial commitments or resources required before undertaking a construction project.

The University of Notre Dame’s Board of Trustees, for example, advises that “in order to maintain the fiscal integrity of the institution,” the university secure commitments in writing for 100 percent of a project cost; have at least 75 percent in hand; and collect most of the remaining funds within five years of starting.

Michael Fischer, another facilities management consultant with EAB, said although some institutions do require all of a project’s funding — or a large percentage — to be in hand before breaking ground, many instead have processes in place involving checks throughout a project.

“Funding has to be achieved in order to progress,” Fischer said. “But funding doesn’t have to be all in place before work begins.”

Of course, he said, schools in an ideal situation would have all a project’s funding before beginning work, “to avoid the risk of having to seek money from somewhere else.”

Facility- and construction-related policies at Iowa’s public universities require Board of Regents approval at various points in the process — although the board doesn’t have a policy on how much cash an institution must have in hand before breaking ground, board spokesman Josh Lehman said.

The UI spells out in its operation manual a “total-cost-of-ownership decision framework,” which takes into account a broad range of current and future financial obligations for capital projects — from initial design and construction to operation and maintenance, utilities and energy, renewal and even demolition.

Iowa State University likewise requires all projects have a financial plan, according to ISU Director of Communications Rob Schweers.

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“Projects can be started or completed at various times as the funding sources are defined and Board of Regents approval is provided,” he said.

He confirmed ISU commonly starts work on projects before reaching a fundraising target, and UI spokeswoman Jeneane Beck said her institution’s fundraising goals are “intentionally aspirational.”

“Fundraising is intended to help offset the cost but is not typically a requirement of proceeding,” she said. “Projects submitted to the board for approval are important and worthy of general education funding or other institutional investments, regardless of donor support.”

‘We need to be very, very, very careful’

But UI President Bruce Harreld about a year ago noted construction on his institution’s new 63,000-square-foot, $50 million Stanley Museum of Art shouldn’t begin until the campus reached its 50-percent target for donations.

“Every penny that we don’t raise has to come from our general education fund,” he said at a December 2018 Iowa City Noon Rotary Club gathering about a fund that receives most of its support from tuition.

“With 70 percent coming from our students, we need to be very, very, very careful about what we invest that in,” he said. “It needs to be focused on students and research and the core mission of the institution.”

At that time, the university had raised about $17 million toward its $25 million art museum goal, and Harreld said the institution wouldn’t start construction until attaining the goal.

“We’ll be able to start and dig and pay contractors to pay that out,” Harreld said last year. “But at some point you can’t pay any more if you don’t have cash in the bank, and then you have to go borrow money. And we are trying to keep the borrowing amount as low as possible.”

Despite those assertions, the university this fall broke ground on the new museum with about $20 million raised. In September, the university issued $30.2 million in bonds to ensure it has enough cash to complete the work.

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UI officials at the time told The Gazette they would have issued $30 million in debt regardless — in that some of the $20 million in donations were scheduled as installments over time, and the university had about $12 million of those commitments in hand.

That $30 million brings the UI Facilities Corporation outstanding debt to $140.4 million. It has incurred most of that in the last decade, issuing $106.1 million in new money bonds for the Pappajohn Biomedical Discovery Building, College of Public Health and art museum since 2010.

The UI hospital system, separately, has issued $321.9 million in revenue bonds over the same period, with a total $328.4 million outstanding. UI athletics has issued $113.3 million since 2010, with $198.7 million outstanding, according to Lehman, the regents spokesman.

Donations continue toward paying debt

ISU’s Facilities Corporation had one $37.9 million bond issue since 2010 — for its biosciences facilities — with $35.6 million outstanding. ISU athletics has issued $54.7 million in the decade, with $64 million outstanding, and University of Northern Iowa athletics hasn’t issued any revenue bonds since 2010. It has about $4 million outstanding, Lehman said.

ISU projects that have started or finished before reaching fundraising goals include its $57.7 million Advanced Teaching and Research Building, which sought $10 million in private gifts but sits at $2.8 million; its $90 million Sports Performance Center and Jack Trice Stadium improvements, shooting for $28.5 million with $22.7 million raised so far; and its $21.2 million Kent Corporation Feed Mill and Grain Science Complex, which ISU hopes to fully fund with gifts and has raised $18 million so far.

The university’s proposed $40 million Industrial and Manufacturing Systems Engineering Building is “contingent on securing private funding,” according to Elaine Watkins-Miller, spokeswoman for the ISU Foundation. She said a “fundraising feasibility study is being planned.”

And fundraising is “in the beginning phases” for a $55 million replacement of LeBaron Hall for the ISU College of Human Sciences — along with a renovation of nearby MacKay Hall, according to Watkins-Miller. ISU spokesman Schweers said the university has secured $3.3 million toward that project’s goal of $15 million.

Toward its $10 million goal for its new $57.7 million Advanced Teaching and Research Building — which opened last year as part of $88 million in biosciences facility improvements — ISU has raised under $3 million, according to Schweers.

The university taps a variety of sources to make up the gap between fundraising goals and amounts raised — including college or university funds or bonding, he said. And because fundraising for capital projects continues even after buildings are completed and open, Schweers said, building-specific donations pay back those budgets tapped to complete the projects.

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UI spokeswoman Beck stressed these capital ventures are not frivolous projects but deemed necessary following vetting “by multiple campus professionals with a thorough institutional understanding of design and construction, building function, building systems, operations, and landscaping.”

“If we are requesting permission to proceed with a project, it is because we believe it is necessary to fulfill our mission of teaching, research, and scholarship,” Beck said.

‘Institutions have to be creative’

Shifting demands across a higher education landscape that’s become increasingly competitive for top students and elite faculty is behind an increase in campus construction nationally in recent years.

EAB’s Fischer said fast-advancing technologies — along with improvements in sustainable construction — have made those projects more complex and often expensive.

Universities increasingly are communicating these new demands and pressures to potential benefactors in hopes of drumming up more philanthropy.

“If a university is committed to building something like an engineering building, it’s because they know or anticipate it’s going to be a program in demand,” EAB’s Lippens said.

But with states including Iowa curtailing support for public higher education, affected institutions are forced to rely more heavily on alternate revenue sources, like private giving.

“And a lot have turned to debt to support these projects,” Lippens said, adding that “public-private partnerships” also are of growing interest.

“Institutions have to be creative,” she said. “If they believe a facility is critical to execute on a strategic plan, then they are going to look anywhere they can to construct those buildings.”

Comments: (319) 339-3158; vanessa.miller@thegazette.com

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