F–5 VII. STANDING COMMITTEES B. Finance and Asset Management Committee Denny Hall Renovation – Approve Revised Budget and Finance Plan J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D INFORMATION 2013 2014 2015 2016 PHASES 2013 2014 2015 2016 ACTION J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D May 2007 January 2008 January 2015 Select Architect Adopt Budget Approve Revised Approve Use of Budget and Approve Alternative Public Debt Funding Works Delegate Award of GC/CM Contract Note for duration of project: Semi-annual reports in January & July RECOMMENDED ACTIONS It is the recommendation of the administration and the Finance and Asset Management Committee that the Board of Regents: 1. Approve a decrease to the Denny Hall project budget from $56.9 million to $52.9 million; and 2. Approve the debt funding financing plan, including the use of up to $16.16 million of general revenue bond proceeds toward the project. PROJECT BACKGROUND Constructed in 1895, Denny Hall is the oldest building on the Seattle campus and is listed in the Washington State Heritage Register. Denny Hall has been prioritized as part of the University’s ongoing “Restoring the Core” renovation program to restore and modernize buildings in greatest need of renovation. The last major structural and interior renovation of this over one hundred-year old building was in 1957. F–5/201-15 1/8/15 VII. STANDING COMMITTEES B. Finance and Asset Management Committee Denny Hall Renovation – Approve Revised Budget and Finance Plan (continued p. 2) The 89,745 gross square foot building currently houses offices and programs for the College of Arts and Sciences, including the Departments of Anthropology, Classics, Germanics, Near Eastern Languages & Civilization as well as the College’s Language Learning Center. Denny also houses 12,000 square feet of general assignment classrooms totaling 765 seats. State funding of $2.3 million was provided in the 2007-09 biennium for the predesign and design phases. The project construction phase funding was anticipated in the 2009 – 2011 biennium. Due to the economic recession, the project was not funded. The project was subsequently put on hold in the spring of 2009, at the completion of the design development phase. In the 2013-2015 biennium, the legislature appropriated $30.6 million, and authorized the University of Washington to issue bonds in an amount not to exceed $20.0 million to be repaid from the state appropriated UW Bond Retirement Account for total project funding of $52.9 million. PROJECT DESCRIPTION The University has evaluated other alternatives and determined that a total building renovation is the most sensible and cost-effective alternative for preserving and restoring Denny Hall to a safe and useful condition. The planned renovation work will address structural, seismic, life safety, hazardous materials, accessibility, other code deficiencies, and will repair the building enclosure (windows and masonry systems) to ensure the long-term preservation of the building and safety of its occupants. The building foundation will be exposed, waterproofed, and a new footing drain installed to eliminate the water seeping into the basement. The project will also upgrade all major building systems including mechanical, fire protection and electrical systems to improve performance and energy efficiency, and upgrade communications and interior finish systems to meet modern classroom and academic program needs. There will be some reduction in the assignable square footage to address the necessary improvements to the building. In accordance with the requirements of the state of Washington, the project will be designed to achieve Leadership in Energy and Environmental Design (LEED) Silver certification or higher. When the project was restarted in January 2014, cost reduction strategies were explored and the functional program was reexamined to update it based upon a reduction in necessary laboratory space and pedagogical changes. Some of the F–5/201-15 1/8/15 VII. STANDING COMMITTEES B. Finance and Asset Management Committee Denny Hall Renovation – Approve Revised Budget and Finance Plan (continued p. 3) functional changes include a reconfiguration of the teaching areas to create fewer, more efficient, and larger teaching and seminar spaces, including an interactive collaborative teaching space for 100 students. Small study alcoves were created along with corridor seating. A study area was configured in a new open entry lobby area. A wider central open stair reflecting the original 1895 configuration was adopted. The two large dormers on the north side of the central building core are being restored from louvered air intake/exhaust vents to the original window configurations. This is made possible by constructing new in-plane roof intake/exhaust vents that match the slope of the existing roof. SCHEDULE The original schedule included a 21-month construction schedule and anticipated occupancy at the start of Autumn Quarter 2011. Architect Selection May 2007 Predesign July 2007 -December 2007 Design April 2008 - January 2009 On Hold February 2009 -December 2013 Design Completion January 2014 -May 2015 Construction June 2015 - August 2016 Occupancy and Use August – September 2016 An accelerated 14-month construction schedule with occupancy at the start of Autumn Quarter 2016 is planned. The accelerated construction schedule is made possible through detailed coordination of the design through the use of BIM, early equipment procurement and the use of the MC/CM and EC/CM process during the design phase. Extensive site investigations of the interior and foundations have been completed to provide additional coordination and information on the existing conditions. BUDGET The revised budget is $52.9 million. With estimated costs of issuance of $160,000 on the General Revenue Bonds, the total cost is $53.1 million. To meet the revised budget of $52.9 million, much more than $4.0 million in savings were needed. Several strategies were used to identify cost savings due to escalation. To meet existing research needs, two of the laboratories planned for Denny Hall were reconstructed in Kincaid and Raitt Halls using College of Arts F–5/201-15 1/8/15 VII. STANDING COMMITTEES B. Finance and Asset Management Committee Denny Hall Renovation – Approve Revised Budget and Finance Plan (continued p. 4) and Sciences funds of approximately $2.0 million. Only a portion of the new laboratories could be realized as cost savings to the Denny Hall project, because of the inefficiencies of doing smaller projects and the need to renovate the space in Denny, although at a less intensive use. Numerous other cost savings in the project were identified and approved to reduce the project cost. These include changing from hydronic (water) to electric baseboard heating; reductions in the amount of casework; wall, ceiling, and floor finish changes; and reconfiguration of laboratory/teaching spaces to create more efficient and less expensive space. A goal of the project is to procure all new furniture. The project cost forecast reflects only the partial cost of the new furniture. If additional cost savings in the project are not achievable, the College of Arts and Sciences will fund the difference from its reserves. The building occupants will be surged to Condon Hall for the duration of the construction phase. The forecasted cost for moving the occupants and making tenant improvements necessary to support the departmental needs for office, research, and teaching spaces is estimated at approximately $500,000. These costs will be funded separately from this project using Central Funds. The project does not include donor-naming opportunities. FINANCING PLAN The source and uses for the project are as follows: Sources of Funds State Contribution $32,892,000 University Funds $ 4,000,000 University Debt (General Revenue Bonds) $16,160,000 $53,052,000 Use of Funds Design/Construction/Contingency/Other $50,700,000 Furniture, Fixtures and Equipment $ 2,192,000 Estimated cost of bond issuance $ 160,000 $53,052,000 Estimated annual debt service (30 year amortization at 4.50%): $983,000 Repayment source: Primarily student building fees F–5/201-15 1/8/15 VII. STANDING COMMITTEES B. Finance and Asset Management Committee Denny Hall Renovation – Approve Revised Budget and Finance Plan (continued p. 5) FUNDING The Denny Hall project will be funded from three sources. The State will use cash and/or State bond proceeds to fund $32.9 million of the project. The rest will be funded from a combination of University reserves ($4.0 million), to reduced debt funding requirements, and General Revenue Bonds issued by the University ($16.2 million). Altogether, the total project cost is expected to be $53.1 million. State proceeds and University reserve dollars are expected to be spent first, followed by University bond proceeds. Since the primary source of repayment for the bonds is student building fees, an appropriated local fund, by policy the debt is excluded from the Internal Lending Program (ILP). CREDIT ANALYSIS In partnership with the Capital Projects Office and the Budget Office, the Treasury Office performed due diligence on the financial plan for the Denny Hall Renovation project. This process included creating a base case pro forma, evaluating key risks, performing stress tests, and identifying appropriate mitigation strategies. Base Case Assumptions and Pro Forma The base case pro forma is shown in Attachment 2. The pro forma captures revenues that flow to a State fund that is available for appropriation by the State legislature.