State funds to address unmet ‘time bomb’ maintenance needs for Arizona's universities

State funds to address unmet ‘time bomb’ maintenance needs for Arizona's universities

On a sweltering afternoon in the middle of summer last year, patients at Banner-University Medical Center suddenly had to be evacuated and moved to the neighboring Diamond Children’s Medical Center when the power cut out.

A surge of electricity had overloaded the hospital’s circuit breaker, knocking out the building’s primary power and causing the backup generator to burst into flames. The hospital’s basement mechanical room filled with smoke, which floated up to the patient floor above.

Tucson Fire Department investigators quickly identified the culprit: an equipment failure in a University of Arizona building next door. Because the two buildings’ electrical systems are linked, it caused a chain reaction that affected both buildings.

When the university facilities management crew began repairs, they found equipment and parts that were decades old. Scouring eBay was the only way to find the fuses they needed.

“A lot of the equipment in there is from the 1960s,” said Chris Kopach, assistant vice president of Facilities Management at the University of Arizona.

Since the fire, the department has been working on separating the two electrical systems, “so if Banner did have a failure on their end, the university’s equipment would continue to stay up” and vice versa, Kopach said.

That “catastrophic failure” was the result of years of maintenance that wasn’t performed on the system because of a lack of funding, Gregg Goldman, the senior vice president for business affairs and chief financial officer for the University of Arizona, told the Arizona Board of Regents in November 2016.

Unexpected maintenance nightmares caused by aging systems aren’t entirely uncommon at Arizona’s public universities, but administrators and public officials are hopeful that a plan recently passed by the Legislature and signed by Gov. Doug Ducey will help address the mounting challenge.

“It’s been an ongoing concern,” said Arizona Board of Regents President Eileen Klein. “It’s been an operating concern for the universities and it’s been a big, growing business concern for us.”

In the face of insufficient resources, gutted budgets and reduced state funding, maintenance concerns for aging buildings and backlogged upkeep has turned into a ticking “time bomb,” Goldman said.

The universities are now getting a much-needed injection of funding with a $1 billion bonding package built into the state’s 2018 budget. The funds are slated to address the long-needed maintenance projects and also fund new research and development facilities.

“Today will be remembered as one that paved the way for decades of breakthroughs at our universities; one that opened the door for Arizona students to receive the highest-caliber university experience; and one that makes Arizona second to none in support of higher education,” Ducey said in a prepared statement May 22 after signing the bill that authorized the funding.

Starting in 2019, the universities will receive $27 million per year for the next 25 years from the state’s general fund, with an annual increase to match inflation up to 2 percent. The universities will in turn match state funding with money from their own budgets to go toward research and development projects and deferred maintenance. Each university will match the state funds.

In the first year, ASU will receive about $12 million, NAU $4.5 million and UA will receive in $10.5 million.

Senate Republicans largely supported the proposal, SB 1532, with all members voting in favor with the exception of Sen. Warren Petersen, Gilbert, who did not respond to a request for comment. Support from Senate Democrats was evenly split.

While Senate Minority Leader Katie Hobbs, D-Phoenix, supported the funding proposal, she said she ultimately voted against it because she felt it unjustly took funding from K-12 education.

“What you see happen when you have all these neglected needs in the state, it turns into the ‘Hunger Games.’ It ended up being sort of a situation where universities were pitted against K-12,” Hobbs said. “Just the optics of it looked bad when you just saw this $2 billion lawsuit filed for deferred maintenance for K-12 schools, and not paying teachers enough to keep them in the (state).”

A group of school districts, educational groups and parents filed a lawsuit against the state on May 1 for failing “to adequately fund public schools,” according to the suit filed on behalf of the districts by the Arizona Center for Law in the Public Interest.

Although Assistant Senate Minority Leader Steve Farley, D-Tucson, agreed the budget unfairly leveraged the university’s funding proposal against the needs of the state’s K-12 education, he said he voted for the bill because it was “about time we reinvested in our universities,” and investment in higher education is sound economic development.

“It attracts more and higher quality professors to want to come here and stay here. The more we strengthen our universities, the more benefits happen to the universities and the stronger our universities are, the better our economy gets,” he said.

Farley also said he believes education funding across the board, whether it was for K-12 or higher education, became an overly politicized issue during the legislative session.

“It would have been nice if we didn’t have to choose either-or, if we could get those 4 percent teacher raises we were demanding as well as the good university construction jobs,” Farley said.

Every House Republican voted in favor of HB2547 except for Eddie Farnsworth and Travis Grantham, both from Gilbert. Every Democrat voted against it.

Farnsworth and Grantham did not respond to requests for comment.

A backlog of repairs

In total, Arizona’s three state universities need an estimated $691 million in delayed repair work and maintenance, according to the universities’ 2018-2020 capital improvement plans.

The deferred maintenance needs include far more than day-to-day upkeep.

“This isn’t just about putting new paint on buildings or fixing sprinkler heads,” regents President Klein said. “This is about very serious pent-up needs to remediate buildings and to renew buildings.”

Klein said these maintenance needs have been a matter of growing concern for the board.

“This year, when we did our very in-depth look at the universities, each one of them spoke, particularly in the case of U A and NAU, they spoke at length about the concerns they have about their buildings,” she said.

UA reports $312 million in needed repairs to “heating, ventilation and air conditioning; roofs, flooring, walls, ceiling and lighting, electrical and plumbing.”

ASU needs an estimated $239 million to address “chilled water distribution replacement, steam/hot water replacement and tunnel upgrades, roofs, building systems, building envelopes.”

The cost to address delayed maintenance at NAU is almost $140 million. Four buildings are on the chopping block for demolition, including the physical sciences building, the chemistry building, biological sciences and the Wall Aquatic Center.

Building demolition is the very thing the regents hope to avoid.

“We don’t want the deficiencies or the maintenance needs to become so great that, ultimately, we wind up decommissioning buildings,” Klein said. “We need to be continually renewing and refurbishing these buildings, because we don’t want to just have them get so dilapidated that they can’t be used.”

Klein said she’s encouraged by the state’s move to provide what she called long-overdue funds to the universities, and sees it as a step toward addressing the nearly $700 million the state would have fully covered under the normal capital outlay formula for building maintenance, but hasn’t since the 2008 recession.

“It’s just been sitting in suspense and, each year, the state acknowledges it,” Klein said. “Each year, the (Joint Legislative Budget Committee) talks about it, and a year or so ago, we got about $10-$15 million for some high priority projects, but there hasn’t been a consistent attempt to fund this formula.”

“The last time it was fully funded was, like, four governors ago. It has really been something that’s been lacking attention for a long time on the state’s part.”

Former UA President Ann Weaver Hart acknowledged the money would have a larger effect beyond addressing the UA’s much-needed building maintenance deficit.

“Not only will we now be able to make repairs and renovations deferred for years and avert millions of dollars in accumulating disrepair, we will also make critical investments in the research infrastructure needed to secure Arizona’s competitive advantage in a global economy,” Hart said in a prepared statement.

Klein called the funding plan a “true investment for the future of (the) state,” and the regents touted the positive effects that the capital funding is expected to have on Arizona’s economy for decades to come. In just the first five years, the board estimates 2,200 construction jobs will be created, Arizona’s gross domestic product will increase by $166 million and personal incomes will rise by $148 million each year.

An earlier version of the budget included a proposal that would have given the universities a tax break of sorts by allowing them to retain the money they pay in transaction privilege taxes, which all businesses pay to operate in the state. The three universities would have used the recovered $37 million toward a $1 billion bond over the next 30 years.

But after failing to gain enough support, that proposal was replaced with the plan to give aid to the universities from the general fund.

This article comes from the Arizona Center for Investigative Reporting, a nonprofit investigative newsroom, of which the Arizona Daily Star is a partner.

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