FY2013 ROPA PresentationUniversity of Alaska System

A vocabulary for measurement

The Return on Physical Assets – ROPASM

Asset Value Change

The annual investment needed to ensure buildings will properly perform and reach their useful life

Recurring Capital

AnnualStewardship

The accumulated backlog of repair/ modernization needs and the resource capacity to correct them

One-Time Capital

Asset Reinvestment

The effectiveness of the facilities operating budget, staffing, supervision and energy management

OperationalEffectiveness

The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery

Service

Operations Success

System Comparisons

Connecticut Maine Mississippi Missouri

New Hampshire Oregon Pennsylvania

Summary of main points

University of Alaska System

• A combination of factors make both operational and capital management of facilities at UA System more difficult:• Complex building systems – impact maintenance coverage, skill mix, and cost• High building intensity – more buildings to tend to and different types, also impacts

maintenance coverage, skill mix, and costs• High cost – regional costs means dollars don’t go as far as they do for peers

Campus & regional characteristics are demanding

• Facilities’ operating budget has grown more quickly than peers• UA System’s maintenance and custodial departments are covering more buildings than peers

and has increased coverage by over 15% in the last 3 years• Customer satisfaction survey highlights improvements & opportunities

Higher levels of daily service compensate for campus demands

• Stronger investments into existing facilities has primarily come from one-time sources of capital and has helped narrow the gap between targets

• Upcoming renewal needs are expected to be greater than the historical recurring capital levels, furthering the importance of continued campus reinvestment

Rising investments, closing the target gap

SAMPLE

Majority of space in high-need category

25-50 Years51%

* Life cycle costs based on the average tech 3 academic space.

Over 509%

Under 1019%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50$0$5

$10$15$20$25$30$35$40$45$50$55$60

Annual Life Cycle Cash Flow Amortization of Life Cycle Expenses

$/G

SF

10 – 25 Years21%

Average Life Cycle Costs – Standard Academic Building

Total capital spending

Heavier recent investment in new construction

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013$0.0

$50,000,000.0

$100,000,000.0

$150,000,000.0

$200,000,000.0

$250,000,000.0Total Capital Spending*

Existing Space New Space/Non-Facilities

Mill

ions

$98M

NAV index steadying with increased investment

System is nearing Systemic Renovation Stage

Capital Upkeep Stage: Primarily new or recently renovated buildings with minor capital needs;

“You pick the projects”

Repair & Maintain Stage: Buildings beginning to show their age, may require more significant

investment on a case-by-case basis

Systemic Renovation Stage: Buildings require more significant repairs and large capital

infusions; “The projects pick you”

Transitional/Gut Renovation/Demo Stage: Major buildings components are in jeopardy of

failure. Reliability issues are widespread throughout the building

2006 2007 2008 2009 2010 2011 2012 201320%

30%

40%

50%

60%

70%

80%

90%

100%

76% 76%73%

75% 74% 72% 72% 72%76% 75%

74% 73% 71% 70% 69% 68%

NAV Index

Repl. Value – Backlog

Repl. ValueNAV =

UA System NAV UA System NAV w/o AR

Without asset reinvestment investments, NAV would decrease by 8% and over

$607M would be added to backlog within 7 years

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023$0.0

$20,000,000.0

$40,000,000.0

$60,000,000.0

$80,000,000.0

$100,000,000.0

$120,000,000.0

UA System ROPA+ Prediction Model10 years

ROPA+ prediction model

10 year total renewal need: $235.7M; annual deferral

Low Risk (Space Renewal)

Medium Risk (Envelope)

High Risk (Mechanical)

*B-Line does not reflect existing deferred maintenance, utility & grounds infrastructure needs or upcoming modernization need

$23.6M avg.

Key Takeaway #2

The UA System already has an estimated $1.13B in deferred maintenance, infrastructure, and modernization backlog:

• $425M of deferred maintenance identified through ROPA+ analysis • Estimated $708M backlog in campus infrastructure and modernization

Over the past 8 years, the UA System has invested an average of $35.5M into the existing facilities. If the historic investment trend continues over the next 10 years the total expected investment would be $355M, roughly $778M less than the existing backlog of deferred maintenance and modernization need.

Backlog Future Reinvestment $-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$425,390,771

$354,820,000

$707,917,556

$778,488,327

10-Year AverageReinvestment Spending

Remaining Backlog with Sustained

Reinvestment Spending

Key Takeaway #3

If reinvestment investments increased by 15% over the next ten years, UA system would be able to invest approximately $408M into deferred maintenance, infrastructure, and modernization needs. Increase in overall investment results to a rising NAV by 6%.

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 202320%

30%

40%

50%

60%

70%

80%

90%

100%

72% 72% 73% 74% 74% 75% 76% 76% 77% 78% 78%

$-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,133,308,3

27

$873,967,327

-$53 +$149

-$355

10 year investment scenario Projected NAV

Additional Investment by

15%

Key Takeaway #5

Continue to communicate strategic plans, such as the Investment Quadrant Chart, University Building Fund, and Sustainability Funding Plan to each campus to aid in projecting upcoming needs and capital planning.

Key Takeaway #6

Sample Performance Dashboards

Goal

Capital Investment (% Invested in Envelope/Mechanical)

+5%

Change in Energy Consumption(% Change in total BTU’s/GSF)

-5%

Operating Budget(% difference budget vs. actual)

+/- 1%

Planned Maintenance(% of facilities operating budget)

8%

Sample

Identify key metrics for monitoring performance toward future goals. The upcoming detailed analysis of the customer satisfaction survey could identify some areas for improvement.