Building Renewal & Deferred Maintenance - Arizona State University

Building Renewal & Deferred Maintenance
Overview
The buildings and infrastructure within the Arizona University System are in a constant state of
deterioration reflecting the wear and decline associated with their age and intensive use. Roofs start to
leak as they age, floors look worn, and HVAC systems become inefficient. These building components
must be updated through a process referred to as "Building Renewal". When compromised
components are not updated, they become candidates for “Deferred Maintenance”.
When building performance and integrity are not high priorities, deferred maintenance costs increase
dramatically. Failure to fund building renewal turns into deferred maintenance expense. Systems still
need to be replaced, but it becomes more costly, and continued deferral increases the need for even
more costly emergency repairs. This leads to the deterioration of the capital assets and ultimately
lessens the quality of facilities available for teaching and research.
Building Renewal
ABOR defines Building Renewal to include major activities that involve the repair or reworking of a
building and the supporting infrastructure that will result in maintaining a building's expected useful life.
Each university in the system calculates every building’s renewal needs based on the Sherman Dergis
Model and compiles those needs in the annual Capital Improvement Plan and State Operating Budget
Request sent to the Governor's Office, as required by law (ARS §41-793).
The University System Building Renewal Request for FY2012 is $90,136,900.
Sherman-Dergis Model for Building Renewal
The Joint Committee on Capital Review approved the use of a modified Sherman-Dergis Model for
calculating the Building Renewal request at each university. The formula takes into consideration each
building’s age, replacement value, and expected life in the following configuration:
Building Renewal Request = (Replacement Value x .667) x (Age/1275)
The formula reflects the current year building value by updating the original construction cost by using a
national building cost index. In addition, the formula recognizes that older buildings require more capital
funding than newer buildings and that building renewal should cost less than building replacement.
Unfortunately, the formula does not consider increased deferred maintenance expense resulting from
less that 100% funding of Building Renewal requests in previous years.
Deferred Maintenance
ABOR defines Deferred Maintenance as deficiencies in a facility’s condition where deterioration and/or
life safety concerns are evident, and affect the proper function and use of a facility.
State law requires that all buildings be inspected every four years, and the next phase will be
accomplished using a computer model due to budget restrictions. The computer model takes previous
inspection information, subtracts known improvements, and adjusts remaining costs for escalation and
wear out.
Based on previous inspections and current computer modeling, the Arizona University System’s
Estimated End of Year Deferred Maintenance for FY2012 is $627,962,800.
Stimulus Plan for Economic and Educational Development (SPEED)
The SPEED legislation, originally passed in 2008, provides financing supported by lottery and university
resources for new construction, deferred maintenance and building renewal. Anticipated SPEED
expenditures are included in the Estimated End of Year Deferred Maintenance. While some SPEED
projects will address deferred maintenance and building renewal, SPEED financing does not eliminate
the need for state supported building renewal funding.

Funding History
Each year the University System submits a Building Renewal request representing the funds necessary
to restore and maintain the buildings on campus in a satisfactory condition. Over the last twenty-five
years, the State Legislature has funded only 16.9% of the System’s Building Renewal request which
represents a net shortfall of $816,405,600.
Fiscal
Year
Building
Renewal
Formula
State
Appropriation
Difference from
Formula
Percent
of
Formula
1987* 11,456,600 5,727,500 5,729,100 50.0%
1988 12,579,600 8,689,000 3,890,600 69.1%
1989 13,838,400 5,187,700 8,650,700 37.5%
1990 13,630,400 6,815,200 6,815,200 50.0%
1991 14,599,800 3,000,000 11,599,800 20.5%
1992 16,174,900 1,614,700 14,560,200 10.0%
1993 17,742,200 5,459,300 12,282,900 30.8%
1994 18,435,200 3,051,700 15,383,500 16.6%
1995 21,254,900 12,402,400 8,852,500 58.4%
1996 21,385,900 19,247,300 2,138,600 90.0%
1997 27,680,000 11,482,000 16,198,000 41.5%
1998 29,558,000 14,779,100 14,778,900 50.0%
1999 32,031,700 32,031,700 0 100.0%
2000 34,892,300 8,128,100 26,764,200 23.3%
2001 37,598,500 8,804,600 28,793,900 23.4%
2002 42,296,800 0 42,296,800 0.0%
2003 45,642,800 0 45,642,800 0.0%
2004 52,079,200 0 52,079,200 0.0%
2005 55,918,700 0 55,918,700 0.0%
2006 58,961,500 0 58,961,500 0.0%
2007 70,188,900 20,000,000 50,188,900 28.5%
2008 71,534,300 0 71,534,300 0.0%
2009 82,862,900 0 82,862,900 0.0%
2010 91,525,300 0 91,525,300 0.0%
2011 88,957,100 0 88,957,100 0.0%
Totals 982,825,900 166,420,300 816,405,600 16.9%
* A mid-year budget cut reduced the funding from 100% to 50%.
Building Inventory Summary
The Arizona University System includes 1,670 facilities, comprised of 37,185,928 gross square feet,
with a replacement value of $9,139,759,102.
Institution
Total
Number of
Facilities
Gross
Square
Footage
Estimated
Replacement Value
ASU 976 17,246,209 $3,948,050,760
NAU 108 5,730,334 $1,279,032,973
UA 653 14,613,455 $4,425,435,055
SYSTEM TOTAL 1,737 37,589,998 $9,652,518,788