UC decides not push for bond measure, turns to alternate funding sources

Carli Baker/File
Carli Baker/File

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For the sixth straight year, the University of California will not see a general obligation facilities bond measure on the November ballot after the university decided not to pursue it.

The decline of bond revenues that have supported capital projects over the past decade has forced the university to find alternative ways of funding these projects on its campuses, including an increasing reliance on private donations and different types of bonds.

The university faced about 3.4 million square feet of unfunded seismic and life safety building and renovation projects on eight campuses in 2011, according to the UC Office of the President 2011-21 Consolidated State and Non-State Capital Financial Plan. The report indicated that about 77 percent of the space to be addressed is at the Berkeley and Los Angeles campuses.

Deborah Wylie, associate vice president for Capital Resources Management at the UC Office of the President, said the university decided not to push for the bond because of the unlikelihood that the bond would have been successful.

“Since the economic crisis in 2008, there hasn’t been any confidence that the voters would approve general obligation bonds,” Wylie said. “There hasn’t been confidence amongst either the voters or the higher education sectors or elected officials in Sacramento that the populace would support the state assuming more debt.”

According to a report released by the state Legislative Analyst’s Office in August 2011, general obligation bonds have provided the largest source of state infrastructure spending in the past decade, and the university received over $2 billion in bonds from 2000-10, with 80 percent coming from general obligation bonds that voters approved in the past.

Wylie said the university has seen less of this type of state funding for capital projects in recent years and that, as a result, the system and individual campuses have turned toward finding alternate ways of funding necessary projects. These have included accepting lease-revenue bonds, which require that the title of the building be given to the state until the lease is paid off, and seeking private donations for new buildings.

In 2010-11, the university received $352.7 million primarily from lease-revenue bonds, according to the UCOP financial plan.

The system has also begun to rely on other types of bonds, including $860 million worth of University of California 100-year bonds sold in February by the California State Treasurer’s Office. According to Wylie, UC Berkeley is looking at using some of this funding to replace the seismically unsafe Tolman Hall.

Paula Milano, executive director for Space Management and Capital Programs at UC Berkeley, said that while 4.9 million square feet of campus seismic improvements have been made by 2011, 1.6 million square feet still needs to be addressed. However, Milano said that task might be a difficult one due to the decrease in state funding.

“While we have been very fortunate in the past in securing gifts, grants and other funds to support the construction of many new buildings on campus, some kinds of investments — not only seismic upgrades but also the repair and renewal of existing buildings and infrastructure — have very few alternatives to state funding,” Milano said.

The campus’s new Li Ka Shing Center for Biomedical and Health Sciences provides an example of the new types of funding UC campuses are seeking for capital projects. The center, which was dedicated October 2011, was primarily funded by businessman Li Ka-shing. Out of the approximately $257 million budget for the project, about $75 million in funding came from external financing, about $53 million came from state funds and about $129 million came from private donations.

As the university works to fund its capital projects, another strategy could entail making better use of its existing space. The Legislative Analyst’s Office report suggested that schools could better utilize the buildings that they have as the likelihood of state funding for capital projects decreases.

Furthermore, Paul Golaszewski, a senior fiscal and policy analyst for the office, said universities in general could employ strategies such as adding summer classes and expanding distance education.

“Ideas like that could relieve the pressure to build new buildings,” Golaszewski said. “Our demographic forecasts are showing a slight decline in the college-age population in coming years. That raises the question as to why these new buildings are totally necessary.”

According to UC spokesperson Dianne Klein, last year, the UC system engaged in more than 200 buildings projects that were more than $750,000 in value.

Klein said that regardless of the economic situation, certain projects, such as seismic and safety improvements, must still be a priority.

“The work of the university is ongoing, through good and bad economic times,” Klein said. “There are delays. There are compromises. There is a lot of making do. But the importance of maintaining our physical plant can’t be ignored.”

Jamie Applegate covers higher education.