Dear faculty and staff,
I want to keep everyone advised of our progress on the 2020 Project as we prepare to seek formal approval from the UC Board of Regents, in stages, this fall and in the first half of 2016.
I met yesterday with the Committee on Finance and the Committee on Grounds and Buildings, meeting in joint session, to address specific issues raised at our last update in March and to gather additional feedback and advice on the approach we are proposing for expanding our campus. Daniel Feitelberg, vice chancellor for Planning and Budget, and Elisabeth Gunther, chief campus counsel, joined me, along with Nathan Brostrom, executive vice president and chief financial officer for the University of California. I hope some of you were able to listen to the discussion through the audio link we provided.
Our discussion with the Board focused on three important topics. First, we focused on the project delivery strategies that we have considered. Second, we discussed the financial, cost and credit implications to the system of expanding the Merced campus. Finally, we discussed the protections available to the university to address the risks that would be part of the capital project.
In order to deliver the facilities necessary to continue our campus enrollment trajectory, we need to consolidate the design and construction of all campus facilities into a single contract. Options that would phase the development of our facilities would take more time to accomplish and, ultimately, prove more costly.
As you may recall, the development model we recommend is an extension of a Design-Build contract, known as an Availability Payment Design-Build-Finance-Operate-Maintain contract. This model takes Design-Build’s advantages and effectively adds a preventative capital maintenance program and capital renewal program into the contract. Rather than rely upon limited construction warranties, it would hold our contractor accountable for the performance of our facilities over the long term.
We also discussed how this strategy differs from other long-term public-private partnership contracts that the university has historically undertaken. Under our proposed model, the university will not transfer property rights to the contractor. It is not a lease. In addition, we do not propose to assign revenue streams to the contractor. The university would receive all revenue associated with the implementation of its programs.
I welcome you to review the presentation and project memorandum that we provided to the Board of Regents to facilitate this discussion.
Several committee members, as well as UC President Janet Napolitano, reaffirmed their support for our continued growth and acknowledged our efforts to build creatively on a development model already in use within the UC system. I also appreciate the acknowledgement of the Chair that we answered the questions the Board asked in March.
During our discussion, members of the Board asked new specific questions about our strategy. These questions included the simultaneous use of multiple contractors, the details of the finance plan and insurance. We welcome this continued dialogue and will carefully consider their counsel and suggestions as we prepare our proposal for further review by the full Board in the coming months.
The current schedule calls for an additional update in September, when the Regents will consider the commercial terms of the proposed contract, followed by Board review and approval of the RFP (Request for Proposals) and certain procedural considerations in November. In September, the Regents will also consider approval of the 2016-17 budget for state capital improvements. We anticipate that this item will propose to use a portion of the university’s State General Fund allocation to support the 2020 Project.
Three highly qualified development teams have already been identified and have been actively reviewing the parameters of our project since April. Our goal is to complete the selection process and obtain final Board approval for the project by July 2016. This will enable the first delivery of buildings by the Fall 2018 semester.
In other news, I am pleased to report that the Regents approved financing and design plans for development of the Downtown Center, at the corner of N and 18th streets in Merced. This facility will serve as the hub for our growing presence in the downtown area and will promote economic vitality and a closer relationship between the campus and the Merced community. While we still need assurance that the City of Merced will provide the necessary city services for the expansion of the campus, we hope to move forward with this project as soon as possible.
More information on the 2020 Project can be found on its website. I will continue to provide updates as we get closer to our next appearance before the Board.
Sincerely,
Dorothy Leland
Chancellor
