Big changes are occurring on college and university campuses
College and university executives struggle valiantly as the gap between their critical funding needs and the revenues they receive grows larger each year. State spending on public higher education is now well below pre-Recession allocations, according to the Center on Budget and Policy Priorities. A recent report notes that state funding for colleges and universities for the 2017 school year was nearly $9 billion below the 2008 level. Left with few alternatives, educational leaders are turning to alternative funding sources for all projects and initiatives.
Funding is critical and many colleges and universities have been forced to increase tuition rates. The College Board reports that tuition at four-year public colleges nationwide has risen more than 100 percent since 2001.
In California, higher education funding shortages are almost extreme. The California Community Colleges, the University of California and the California State University estimate they will need a combined $47.2 billion over the next five years. This total includes construction of new facilities that will be required and the modernization of many current facilities. Public colleges in other states are facing similar problems.
As they seek alternative funding sources, many state colleges and universities are turning to public-private partnerships (P3s). In these types of engagements, public officials partner with private-sector companies that offer capital, expertise, experience and a willingness to take on project risk. P3 engagements are structured so that a long-term revenue model is designated to repay the initial investment funding.
Initially, higher education P3 engagements were primarily used to fund and build student housing projects. The success of the projects, however, led to other collaborative efforts. Now, higher education P3 engagements are common for all types of projects and initiatives.
The University of Kentucky recently completed a five-year, $450 million P3 engagement that resulted in the addition of more than 6,800 new beds on the campus. The university also has a 15-year, $245 million P3 contract for dining services. At Texas A&M University-Texarkana, a P3-funded project will result in construction of an $11 million multipurpose building that will feature sports facilities as well as a lab, classrooms, a gaming room, student recreation area and retail space. Building on other P3 successes, the University of Kentucky is currently considering a collaborative effort for a mixed-use retail and parking development.
San Diego State University’s proposed $3 billion development plan for the former San Diego Chargers stadium property will likely involve a P3 engagement. The project will include a 35,000-seat sports stadium, two hotels and a total of 4,500 housing units. The plan also calls for the inclusion of retail and office space.
Appalachian State University will be soliciting proposals for a P3 project that will include the construction of more than 2,200 student housing beds on campus. The project will also include rebuilding another dormitory.
Officials at Delaware State University will seek to engage a private partner to design, build, operate and maintain a residence hall through a long-term ground lease. Not only will the university gain new beds, but it also expects to eliminate $15 million in maintenance costs for two aging residential facilities that will be razed once the new housing complex is completed. In announcing a $750 million fundraising campaign, a University of Delaware spokesperson announced plans to use a P3 to build housing designed for graduate students, young professionals and faculty.
A $35.2 million plan to renovate the Stevens Center was recently approved by the University of North Carolina (UNC). This renovation is expected to convert the aging facility into a world-class performing arts venue. UNC will solicit private-sector partners to collaborate with on the project.
Kent State University (KSU) is eyeing a possible 10-year project that will cost more than $1 billion to transform its main campus. The project would include construction of new academic and other buildings, renovation of existing buildings, addition of green space and expansion of bike trails and walkways. KSU officials indicate that more than half the cost of the first of three phases will likely be paid in part by a public-private partnership. Among the first phase projects are additions and renovations to Rockwell Hall and White Hall and additions to the Aeronautics and Technology Building. Terrace Hall will be torn down to facilitate a new parking deck.
University leaders now realize they must seek new solutions to funding shortages. With an abundance of alternative funding sources available, some officials say that when a large project is approved and before debt is incurred, there should be a study to determine whether a public-private engagement is appropriate. If so, collaboration with experienced partners and the use of private-sector capital is very compelling.