|UW-Eau Claire||News Bureau|
|Schofield Hall 218|
|Eau Claire, WI 54702-4004|
MAILED: Jan. 31, 1997
EAU CLAIRE - A new residence hall planned for the University of Wisconsin-Eau Claire should be built through the normal state construction process instead of through the private sector, UW System administrators told the Board of Regents this week.
The recommendation came after bids indicated the cost to students would be significantly higher under the private sector construction scenario.
"In the interest of keeping student costs at a reasonable level, we recommend that the shortage of student housing at UW-Eau Claire be addressed through typical state construction," Paul L. Brown, vice president for UW System Physical Planning and Development, said in a memo to regents.
UW-Eau Claire plans to build a residence hall to house 250 to 350 students. The hall will relieve the overload on current residence hall space and provide needed space for the expected upswing in high school graduates.
The new hall, expected to accommodate juniors and seniors, will offer apartment-style suites, each with a small living area, cooking facilities, a bathroom and from two to six bedrooms. Some suites will offer single bedrooms. Rooms will be wired for cable and computer access. The building will be air conditioned and include seminar classrooms equipped for the latest instructional technology.
It's estimated the project will cost $11.2 million under the typical state construction process.
Eight proposals were received from the private sector, including one for construction on private land and seven for construction on university property. However, three proposals did not include the appropriate information to warrant further consideration.
The Request for Proposals (RFP) process required that responses first be reviewed for fiscal and functional viability. If deemed viable, finalists are selected for further negotiations. Because of the costs included in the bids, Brown recommended to regents that there be no further negotiations with the private sector.
"Review of the remaining five proposals by the university, System administration and the Department of Administration has indicated that development by the private sector would result in significantly higher student costs than we would expect to encounter under normal state contracting procedures," Brown stated.
University officials have determined the average student rent in the new hall will be about $3,100 per academic year regardless of whether public or private ownership is pursued. The number was determined to be the maximum rate students would be willing to pay, and was based on comparable private apartment rental rates and existing residence hall rates.
Any shortfall between the amount of revenue generated by the residence hall and the cost of operation and debt service, whether state construction or private lease costs, will be distributed among the 3,271 residents of UW-Eau Claire residence halls. It currently costs students $1,670 per academic year to live in the existing halls.
With state construction and ownership, it's estimated that hall residents will pay about $38 more per student per academic year, assuming a 20-year bond. This represents an annual subsidy of $124,000, or a 20-year subsidy of about $2.5 million.
These costs are based on a state project cost of about $11.2 million, about $9.95 million of which would be borrowed. The 20-year debt service cost would be about $17.3 million, assuming a 6 percent interest rate.
While all terms of the submitted proposals are negotiable, the annual revenue shortfall for the privately developed proposals ranged from about $315,000 to $1.1 million, Brown said.
"Even the lowest cost acceptable proposal would result in a rate increase for the 3,271 students living in existing residence halls of approximately $96 per year, or $58 more than state construction," Brown said.
During a 30-year lease term, this would result in the students paying about $7 million more for a privately developed facility, plus acquisition costs at a portion of the then-current appraised value.
Since the 30-year lease would be so prohibitive in cost, the state made all comparisons on a 20-year basis. Officials evaluated the alternatives of leasing for five or 10 years, and exercising the purchase option and using state bonding for the balance of the 20-year period, Brown said.
Under those scenarios, purchase in the sixth year would have a net cost (rent payments for five years, 15-year state bond thereafter) of about $1 million more than state construction, Brown said, noting the costs would have been passed along to the students in existing residence halls. The alternative of a 10-year lease and a 10-year state bond would cost nearly $3.8 million more than a state project.
Since the state construction alternative was approved by the regents in the 1997-99 Capital Budget, no additional action by the board is required.
Unless regents state otherwise, an architect will begin design of the new hall this spring or summer, said Charles Bauer, assistant chancellor of business affairs at UW-Eau Claire. Bids would be let next year, and construction would begin in the spring of 1998, Bauer said. The residence hall would then be ready for occupancy by the fall of 1999, he said.
[Administrative Offices] [News Bureau]
UW-Eau Claire News Bureau
Updated: April 23, 1997