University of California (6440)

The budget proposes $210 million from general obligation bonds to fund 22 projects under the University of California's (UC) 1999-00 capital outlay program. This amount is all from the Higher Education Capital Outlay Bond Fund of 1998. The estimated future cost to complete these projects is about $153 million.

As discussed in our companion document, 1999-00 Budget: Perspectives and Issues (Part V), we recommend that UC and the other segments of public higher education in California implement year-round operation. Under year-round operations the segments should be able to accommodate up to a third more students in any one-year period. In turn, this will virtually eliminate the need for new instructional space at the UC until well after 2008.

For the 22 projects in the Governor's budget, we recommend approval of $159.8 million for 19 projects. A discussion and our recommendations on the other three projects follows. In the Crosscutting Issues section of this chapter we recommend that the university (as well as the other segments of higher education) submit new projects addressing other priorities for legislative consideration for funding in the budget year using any funds "freed up" by legislative action adopting any of our recommendations.

Reduce Scope of UC Davis Life Sciences Alteration

We recommend that the Legislature reduce the $466,000 requested for preliminary plans and working drawings to alter life sciences buildings by $86,000 because part of the proposed alterations are for a nonstate-funded research activity and space on campus is already being altered for this purpose. (Reduce Item 6440-301-0574 [4] by $86,000--future savings of $782,000.)

The budget includes $466,000 for preliminary plans and working drawings to renovate 49,000 assignable square feet (asf) of space in Robbins and Hutchison Halls. The estimated future cost for this project is $4.2 million. About 9,100 asf of this space, however, is proposed to be altered for the Center for Engineering Plants for Resistance Against Pathogens, a research activity funded by the National Science Foundation (NSF) and currently housed in lease space off-campus. The NSF funds these off-campus costs and the state should not need to pay to alter space for this purpose. In view of the nonstate-funded activity, we recommend reducing the scope of this proposal by deleting the work associated with the center. Accordingly, we recommend a reduction of $86,000 for this project. This results in a future savings of $782,000 in the construction phase of the project.

Additional Space Not Needed

We recommend that the Legislature delete a total of $48 million for two projects--one on the Irvine campus and one on the Santa Barbara campus--because (1) there is a sufficient amount of research space on each campus and (2) the instructional space is not needed either at the current time or under year-round operation. (Delete Item 6440-301-0574 [9] for $1,226,000--future savings of $30.2 million and Item 6440-302-0574 [10] for $46,688,000--future savings of $3.8 million.)

The budget includes a total of $47,914,000 for construction of a new natural science building on the Irvine campus ($46,688,000) and design of a new engineering building on the Santa Barbara campus ($1,226,000). A summary of the proposals and the future estimated cost is shown in Figure 1. It shows that most of the proposed new space would be for research.
Figure 1
University of California--Proposed Projects at Irvine and Santa Barbara
(Dollars in Thousands)
Assignable Square Feet (Percent of Total)
Project Research Instruction Offices And Other Budget Amount Future Cost
Irvine, Natural Sciences, Unit 1 59,000

(82%)

 2,900

(4%)

 9,700

(14%)

 $46,688 $3,750
Santa Barbara, Engineering-Science Building 36,570

(70%)

 9,200

(18%)

 6,230

(12%)

 1,226 30,171
Totals 95,570 (77%) 12,100 (10%) 15,930 (13%) $47,914 $33,921

As discussed below, our analysis of the UC space information indicates that neither the research space nor the instructional space proposed in these projects are needed.

Existing Amount of Research Space Is Adequate. Our analysis of the space information provided by UC indicates that these two campuses currently have a sufficient amount of research space. The UC Irvine currently has 748,000 asf of research space compared to 586,000 asf "needed" based on actual 1998-99 enrollment and faculty, a difference of 162,000 asf. The UC Santa Barbara has 781,000 asf compared to 668,000 asf "needed," a difference of 113,000 asf. Based on projected enrollments, this amount of space at each campus should be sufficient to accommodate students and faculty well into the next decade. The UC should consider altering existing space if necessary to address changes in research activities. Based on the amount of existing research space at these campuses, however, the proposed new buildings are not needed.

More Instructional Space Not Needed. Based on UC space information, the Irvine and Santa Barbara campuses have sufficient instructional space to accommodate an additional 1,100 full-time equivalent (FTE) students and 1,900 FTE students, respectively, above current enrollments.

Consequently, in view of the amount of research and instruction space on these campuses, we recommend the Legislature delete $48 million for the proposed new buildings. As discussed in the Crosscutting Issues section of this chapter, these funds could be used for other priority projects in higher education. (Delete Item 6440-301-0574 [9], $1,226,000--future savings of $30.2 million and Item 6440-302-0574 [10], $46,688,000--future savings of $3.8 million.)

Seismic Replacement Building Is Unnecessary

We recommend the Legislature delete the $2 million requested for the design of "Seismic Replacement Building 1" at the Berkeley campus because it would be less costly to repair existing buildings than to construct the proposed building. (Delete Item 6440-302-0574 [1] for $2,025,000--future savings of $15.5 million.)

The budget proposes $2 million for preliminary plans and working drawings for a 44,000 asf "Seismic Replacement Building 1" at the Berkeley campus. The estimated total project cost for this building is $17.5 million--nearly $400 per asf. The UC justified this building on the basis that it is needed to replace two buildings--2223 Fulton and Warren Hall tower--because each is considered a significant seismic risk to life (Level V on the Department of General Services' [DGS'] rating scale). The UC has not, however, completed the evaluation of all of its buildings using the DGS' seismic risk assessment methodology. Thus, it is not clear that the Fulton and Warren buildings are the most critically deficient on the campus, or if there are others that should be accorded a higher priority for funding. The campus also indicates that it does not intend to vacate the Fulton and Warren buildings. Instead, the "replacement" building will be used to temporarily house activities moved from other campus buildings that are to be seismically strengthened over the next 20 to 30 years. Thus, UC appears to justify this building for two reasons: (1) a replacement for two seismically deficient buildings and (2) to provide space to temporarily locate various activities displaced by renovation work on campus buildings. As discussed below, the university has not substantiated the need for this new building for either purpose.

Less Expensive to Strengthen Fulton and Warren. It would be less expensive to seismically strengthen the Fulton and Warren buildings than to construct the replacement building. (Indeed, since the campus indicates it does not intend to demolish the Fulton and Warren buildings and they will continue to be occupied, the buildings will need to be seismically strengthened even if the replacement building is constructed.)

The estimated total project cost of $17.5 million for the replacement building includes $15 million for construction. According to UC, the construction costs to strengthen the Fulton and Warren buildings are $6.3 million and $6.2 million respectively, a total of $12.5 million, or $2.5 million less than the replacement building. Furthermore, it appears that these renovation costs are overstated. Specifically, our review of the cost estimates to alter the Fulton and Warren buildings leads us to believe the projects include improvements that are not necessary for structural strengthening. Figure 2 (see next page) indicates representative items taken from the cost estimates for these buildings that are beyond the scope of seismic retrofit.

The strengthening of the buildings could be accomplished without the construction of a replacement building. Based on our review, construction costs for structural retrofitting of the Fulton and Warren buildings could be undertaken for around $7.5 million--one-half the construction cost of the replacement building.

Building Not Justified as Long-Term Replacement Space. The Berkeley campus has undertaken a review of campus buildings to evaluate the vulnerability of the buildings in the event of an earthquake. The campus has concluded that 95 of the campus buildings, containing 2.25 million asf, need to be seismically strengthened. The UC plans to make these improvements over a 20- to 30-year period, at an estimated cost of at least $1.2 billion. Apparently, then, the replacement building will be needed for the next 20 to 30 years.
Figure 2
Nonseismic Improvements to

Fulton and Warren Buildings

(In Thousands)
Item Fulton Cost Warren Cost
Finish casework $156 $20
Bathroom and miscellaneous specialties 127 131
Air conditioning 596 535
Replace fire sprinkler system 127 352
Electrical 405 326
Design contingency 1,054 1,035
Totals $2,465 $2,399

The UC has provided no justification for constructing this building for temporary use. The campus could, as is done in most instances, make the building improvements without relocating the occupants. The campus could also, if necessary, relocate occupants to existing campus space during the time the alterations are being made. (The Berkeley campus has a total of eight million asf of building space.) In view of these less costly alternatives, we believe the building is not justified.

For these reasons, we recommend that the Legislature delete the $2 million requested for this project. This results in a future savings of $17.5 million. (Delete Item 6440-302-0574 [1], $2,025,000.)

California State University (6610)

The budget proposes $209 million from general obligation bonds to fund 24 projects under the California State University's (CSU) 1999-00 capital outlay program. This amount is all from the Higher Education Capital Outlay Bond Fund of 1998. The estimated future cost to complete these projects is about $113 million.

As discussed in our companion document, The 1999-00 Budget: Perspectives and Issues (Part V), we recommend that CSU and the other segments of public higher education in California implement year-round operations. Under year-round operations the segments should be able to accommodate a third more students in any one-year period. In turn, this will virtually eliminate the need for new instructional space at the CSU for well beyond the next decade.

For the 24 projects in the Governor's budget we recommend approval of 14 projects and $123.7 million. As discussed below, we have raised issue with the $244 million cost and justification for six telecommunications infrastructure projects, and the need for a new library at San Jose State University costing over $100 million. In addition, for ten of the projects we have recommended reductions in the amounts requested because of improper escalation of construction costs. In the Crosscutting Issues section of this chapter we recommend that the CSU (as well as the other segments of higher education) submit new projects addressing other priorities for legislative consideration for funding in the budget year using any funds "freed up" by legislative action adopting our recommendations.

Benefits of Investment in Telecommunications Infrastructure Are Not Clear

We withhold recommendation on $1.8 million requested for six telecommunications infrastructure projects (listed below) because insufficient information has been provided to identify the work to be done and the benefits that may be realized from investment in this technology. These six projects have a future cost of $50 million and are part of CSU's $244 million Integrated Technology Strategy-Technology Infrastructure Initiative.

The Governor's budget proposes spending $1.8 million in capital outlay funds to develop working drawings for technology infrastructure projects on six CSU campuses (See Figure 1). These initial capital outlay expenditures are part of a much larger technology program called the Integrated Technology Strategy-Technology Infrastructure Initiative (ITS-TII) which CSU described in its report, The Integrated Technology Initiative: Technology Infrastructure Initiative, Status and Directions, released in October 1998. According to CSU, the ITS-TII will cost $243.6 million to build and $83.4 million above current telecommunications support costs annually to maintain.
Figure 1
California State University

Proposed Telecommunications Infrastructure Projects

(In Thousands)
Item 6610-301-0574 Campus Budget-Year Request Future Cost
(2) Dominguez Hills $256 $7,494
(4) Long Beach 422 13,093
(5) Los Angeles 350 10,815
(7) Northridge 220 5,634
(8) Pomona 231 6,500
(9) San Bernardino 278 6,894
Totals $1,757 $50,430

Insufficient Information About Specific Campus Needs and Proposed Work

The budget proposals are to fund telecommunications infrastructure improvements at six campuses on the basis of a uniform $6.24 per assignable square foot (asf) of state-supported space on the campus. The CSU indicates this amount was determined to be appropriate for these projects because it was the amount spent to complete a 1993 telecommunications infrastructure project at CSU Fullerton which CSU believes provided a satisfactory level of infrastructure. This approach, however, does not take into account the fact that several campuses have already constructed a large portion of telecommunications infrastructure and should not need this funding level, while others campuses may need more because of different site conditions. In addition, the budget proposal appears premature because in fall 1999 the campuses will be updating their plans for information technology access, training, and support within the standards and framework of the segment's information technology master plan, the ITS-TII.

Specific Campus Needs Not Identified. The CSU indicates that some campuses have already achieved a certain level of telecommunications capability. As examples, Chico, Monterey, Pomona, Sacramento, and San Francisco all provide students with access to a computer laboratory 24 hours per day for a good part of the academic year. Long Beach has connected every full-time faculty office to its network. Northridge and Pomona report that all buildings are now connected to campus data, voice, and video networks. San Francisco expanded the capacity of its existing network to make more databases accessible to students and faculty both on-site and remotely. San Luis Obispo is expected to have all classrooms equipped with analog and digital data connections this year. The CSU has indicated that some campuses have achieved or are close to achieving the necessary capability in one or more of the ITS-TII components. There is clearly significant variability of need among the campuses and to fund all at the same unit cost per asf is simply not the best use of limited state funds. Funding proposals should be based on specific information technology needs at each campus, and site-specific plans and cost estimates for the infrastructure necessary to support them.

Campuses to Update Their IT Plans. The CSU's primary information technology plan was the "Baseline Hardware/Software Access, Training and Support" (BATS) initiative begun in 1996. Based on the BATS plan, campuses developed their individual plans for information technology access, training, and support. The CSU indicates BATS has now been superceded by the ITS-TII plan and that beginning in the fall of 1999 the campuses will be asked to update their plans to conform to the standards and framework of the ITS-TII. Since the specific campus needs for telecommunications infrastructure will be determined by these updated campus plans, it is unclear why funding for telecommunications infrastructure should be provided prior to the campus plans being updated.

CSU Has Not Provided Information Previously Required by Legislature

Four of the six projects in the budget were previously funded for preliminary plans (Long Beach, Los Angeles, Northridge, and Pomona) in the 1996-97 Budget Act. In the Supplemental Report of the 1996-97 Budget Act, the Legislature directed that the preliminary plans contain, among other things:

The information submitted by CSU does not respond to this supplemental report language.

Legislature Needs Detailed Description of ITS-TII's Benefits

In order to make an informed decision about this high-cost investment, it is crucial that the Legislature understand all the costs and benefits associated with the project. A key element missing from CSU's ITS-TII proposal is a detailed description of the benefits which would result from ITS-TII's implementation. In particular, specific details regarding improvements in instructional efficiency are absent from the plan. The CSU's November 1998 report, ITS-TII: The Network Installation Financing Program, indicates: "The real issue is not quality (the learning outcomes will be roughly similar), but productivity in the learning process. In general, learning outcomes tend to be similar, with or without the use of technology. The real value of the infrastructure appears to be in terms of institutional efficiencies and personal productivity."

We believe CSU needs to provide specific, quantifiable productivity improvements for legislative review before funding these proposals. Lacking this information and without a CSU commitment to quantifiable improvements in efficiency and a timetable for achieving them, the Legislature cannot evaluate the benefits of this capital investment compared to other competing priorities.

ITS-TII Proposal Lacks Quantifiable Performance Measures

The ITS-TII proposal identifies general areas in which benefits would occur, such as "responsiveness in meeting campus and system-wide academic and administrative requirements and priorities" and "contributions to personal productivity." While these are reasonable benefits to expect, the plan falls short of identifying specifically how the proposed infrastructure will allow this to occur or how benefits will be measured. As discussed earlier, CSU indicates that learning outcomes are about the same at institutions with and without telecommunications infrastructure, but productivity improvements can be substantial with telecommunications infrastructure. Since productivity improvements are readily quantified, CSU should enunciate its improvement goals and a timetable for achieving them. Examples of quantifiable performance measures include faculty/student ratios, time-to-degree, and space-efficiency in serving students. Without this level of detail, it is impossible to estimate the proposed project's benefits or, in the event ITS-TII is funded, to measure its progress toward desired outcomes.

Recommendation

In view of the lack of information on (1) the specific projects in the budget and (2) the benefits that may be realized from the ultimate investment of $244 million for capital infrastructure and $84 million in additional operational costs annually, we cannot recommend approval at this time. The CSU should develop the information necessary for the Legislature to evaluate this extensive plan prior to budget hearings. Consequently, we withhold recommendation on the budget proposal pending receipt of the information.

Los Angeles: Renovate Physical Sciences Building

We recommend deletion of $696,000 for preliminary plans to renovate the Physical Sciences Building because insufficient information has been submitted about the specific improvements to be constructed, or the associated cost. (Delete Item 6610-301-0574 [6] for $696,000, with a future saving of $32.1 million.)

The budget requests $696,000 for preliminary plans to renovate the Physical Sciences Building at CSU Los Angeles. The estimated total project cost is almost $33 million. The CSU has provided limited information in support of the project and has not established that there are critical fire and life safety or seismic corrections that must be made.

The project documentation briefly describes proposed mechanical and electrical improvements in a general way but provides no specific information to document deficiencies. It also indicates that the building needs seismic strengthening but no documentation has been submitted to indicate it represents a significant risk to life (Level V or higher as determined by the Department of General Services' risk evaluation methodology and ranking system). Furthermore, no detailed cost estimate has been submitted to substantiate the cost of the project. A summary estimate, however, indicates the construction contract cost to be $24 million and the total project cost to be $33 million. The $9 million of nonconstruction costs also needs to be better substantiated.

Given these serious shortcomings in the request, we recommend the Legislature delete $696,000 for preliminary plans for this project.

Sonoma: Remodel Salazar Building

We recommend deletion of $371,000 for preliminary plans to renovate the Salazar building because the project cost is too high and CSU should reevaluate the proposed use of the building. (Delete Item 6610-301-0574 [12] for $371,000.)

The budget requests $371,000 for preliminary plans to renovate what is now the Salazar Library, which is being replaced by a new library currently under construction. This project will renovate the Salazar building to provide instructional space and offices for student services and administration. The estimated total project cost is $15.3 million. The proposed use of the space in the renovated building is shown in Figure 2.
Figure 2
Proposed Use of

Renovated Salazar Building

Use Assignable Square Feet Gross Square Feet
Instruction 24,000 37,000
Student Services and Administration Offices 35,000 55,000
Cotati Rohnert Park High School 15,000 23,000

Clearly, there is a need to use this 115,000 gross square feet (gsf) building after the library is relocated. However, we have several concerns with the reuse plan proposed in the budget. These concerns include the high cost of the project, the amount of new instructional space, and the plan to allocate 23,000 gsf in the building for the Cotati Rohnert Park High School's use as a magnet technical high school.

Alterations Cost. The CSU indicates that nonstate funds will be used to renovate the portion of the building to be occupied by the high school. Thus, this $15.3 million proposal to renovate the university-occupied space amounts to $207 per asf or $133 per gsf--a very high unit cost. The CSU's current cost guidelines for construction of new classrooms is $167 per gsf and for new administrative offices is $176 per gsf. Thus, the proposed renovation cost is about 75 percent of the cost of a new building. No detailed cost estimate has been provided to substantiate this high cost, and the Legislature needs better cost information before funding this project.

Additional Instruction Space Not Needed. The renovation work to provide space for student services and administrative offices appears to be warranted. These activities are currently located in temporary buildings first occupied in 1969. We have concerns, however, with the renovation work proposed to provide instructional capacity for an additional 1,198 full-time equivalent (FTE) students.

In the 1999-00 Perspectives and Issues (Part V), we are recommending that all three higher education segments implement year-round operations. Under year-round operations, the campus would be able to accommodate one-third more students during the year in existing facilities, therefore, the additional instructional space provided by this project would not be needed. (Even without year-round operations, this project would give the campus 18 percent more capacity than the campus would need for the foreseeable future.)

High School Use of Building. Before dedicating space for use as a magnet high school, the university should evaluate current and future needs for university activities to determine if they could be accommodated in this space. Although interaction between the university and high schools is encouraged, there needs to be assurance that additional space will not be needed in the future for university activities that could have used space in the Salazar building. Since the Cotati Rohnert Park High School is adjacent to the university campus, CSU should also advise the Legislature why the magnet high school cannot be located at the high school.

In view of the above issues, we recommend that the Legislature delete the funding for this project. The CSU should reexamine potential uses for this building that address other university needs such as additional student service activities and administrative offices, and resubmit a modified project for legislative consideration.

Bakersfield: Classroom/Office Building III

We recommend deletion of $8.7 million for preliminary plans, working drawings, and construction of a classroom and office building because it will not be needed under year-round operation. (Delete Item 6610-302-0574 [1] for $8,702,000, with a future saving of $401,000.)

The budget requests $8.7 million for preliminary plans, working drawings, and construction of this 37,590 gsf classroom/office building. The new building would increase the instructional capacity of the Bakersfield campus by 967 FTE. The campus' current capacity (4,552 FTE) is only slightly above its current enrollment (4,335 FTE). Given projected enrollment, this project would be justified under traditional operations at the campus. In the 1999-00 Perspectives and Issues (Part V), however, we are recommending that all of the higher education segments move to year-round operations. Under year-round operation, the campus would be able to accommodate one-third more students each calendar year. This increased instructional productivity would be accomplished without any increase in instructional space or the number of students on campus at any time.

Thus, under year-round operation, this project would not be needed. Consequently, consistent with our recommendation to implement year-round operations throughout higher education, we recommend that the Legislature delete the $8.7 million requested for this project.

San Jose: Joint Library

We recommend deletion of this $70 million request for working drawings and construction of a new library on the San Jose campus because the campus has a sufficient amount of library space and because of questions that need to be addressed concerning ownership and operations of a library that will be owned as tenants-in-common with the City of San Jose. (Delete Item 6610-302-0574 [10] for $69,638,000, with a future saving of $33 million.)

The budget proposes $70 million for working drawings and construction of a library to be jointly developed, owned, and operated by the state and the Redevelopment Agency of the City of San Jose. The city and San Jose State University have signed a memorandum of understanding (MOU) for this project that, among other things, provides that the state will budget up to $101 million for the project and the city will contribute $70 million. According to CSU, the commitment of $101 million consists of: the $70 million in the budget; $16 million in additional higher education bond funds, of which $8 million is for equipment and $8 million is for an undesignated purpose; $5 million from the campus support budget for an undesignated purpose; and $10 million in donor funds. In addition, the CSU estimates that another $11.5 million will be required to alter one of the existing campus libraries upon completion of the new library. Thus, the estimated total state cost for this project is $102.5 million.

The library is proposed to be constructed on the campus on state-owned land that is now occupied by three buildings, Walquist North, South, and Central. These buildings, totaling 317,000 gsf, will need to be demolished in order to construct the new library. The MOU provides that the state will convey the land to the city and state as tenants-in-common and that ownership of the library building will likewise rest in the parties as tenants-in-common. The building is proposed to have 465,000 gsf (325,000 asf), of which 227,000 asf will be allocated to the university and 98,000 asf to the city.

New Library Not Needed and Is Too Costly

Existing Amount of Library Space Is Sufficient. The current campus library function at San Jose is located in two buildings, Clark Library and Walquist North Library (which will be demolished if the joint library is constructed). Wahlquist North was constructed in 1961 and renovated in 1993 at a cost of $3.6 million. Construction of Clark Library was completed in 1982. These two libraries have a combined total of 199,000 asf. The combined libraries were designed to accommodate an enrollment of 20,200 FTE, which compares to a current enrollment of less than 20,000 FTE. Consequently, the existing amount of library space should be sufficient for the campus enrollment and the campus has not substantiated the need for any additional library space.

Proposed Additional Space Is Costly. The net result of the state's $91 million investment (not including renovation of the existing library) in the new library would be an increase of 28,000 asf--a cost of $3,250 per asf of additional space. Using the CSU cost guidelines for library construction, a 28,000 asf addition would cost $6.2 million. Furthermore, in addition to spending $91 million for this purpose, the state would lose (1) about 96,000 gsf of space in Walquist South and Central because of demolition and (2) clear title to the land underlying the joint library site.

Joint Library Project Poses Operational and Ownership Questions

There are important operational and ownership questions raised by this proposal that CSU and the campus have not addressed. These are:

According to CSU, there are few joint library projects in the United States and almost all involve one public entity contracting with another to operate the library. This is a much less problematic arrangement because the library building and land are owned by one entity and the other entity simply contracts for space and operating personnel. Such an arrangement can easily be disentangled if cost and operational disagreements arise. This proposal, on the other hand, is significantly more complex because of the tenants-in-common relationship that would be established between the city and state. We are aware of no such joint library arrangements in the U.S., and we believe the Legislature should consider the risks this may pose in the event of future disagreements between the parties.

Summary

The CSU has not justified the need to construct a new library on the San Jose campus. Moreover, the proposal in the budget is both too costly and raises questions over ownership and operation of a library owned as tenants-in-common with the city. Consequently, we recommend that the Legislature delete the $70 million request for a new library on the San Jose campus. (Delete Item 6610-302-0574 [10], for $69,638,000, with a future savings of $32.5 million.)

Construction Cost Escalation Is Incorrectly Applied

We recommend reductions totaling $4.2 million in 12 project budgets because excessive construction cost escalation has been applied in calculating the amount of the capital outlay request.

In determining the amount to be requested to fund construction of a project, the segments and departments first estimate the cost of construction based on costs at the start of the budget year. For 12 projects, however, CSU has further escalated the amount requested to a date at the mid-point of construction, which ranges from an additional 6 to 18 months. This is not justified.

The price to the state is determined at the bid opening. If the winning bidder anticipates there will be increases in the price of labor and materials during the course of construction, this cost is included in the bid price. These anticipated increases are already included in the contractor's bid price which was first estimated by CSU. Accordingly, we recommend the reductions shown in Figure 3 (see next page).
Figure 3
California State University--Recommended

Reductions to Correct Cost Escalation Errors

(In Thousands)
Item 6610-302-0574 Campus Project Recommended Reductions
(2) Chico Education Classroom/Faculty Office Addition $521
(3) Fullerton Physical Education Renovation/Addition 1,031
(4) Fullerton Seismic Upgrade, Humanities 32
(5) Long Beach Fire/Life Safety Infrastructure 85
(6) Northridge Corporation Yard 113
(7) Pomona Sewer Infrastructure 92
(8) San Francisco Renovate Hensill Hall (Seismic) 616
(9) San Francisco Seismic Upgrade, Psychology Building 284
(11) San Luis Obispo Engineering and Architecture Renovation and Replacement Phase I 505
(12) Stanislaus Educational Services Building 942
Total $4,221

We have previously recommended deletion of the following projects. Should they be approved, we recommend reductions as follows to correct for incorrect cost escalations:

California Community Colleges (6870)

The proposed 1999-00 capital outlay program for the California Community Colleges (CCCs) totals $153.1 million from the general obligation bonds approved by the voters in November 1998. This amount includes $117.3 million for 44 projects that have previously been funded by the Legislature and $35.8 million for 49 projects that are proposed to the Legislature for the first time. The estimated future cost to complete all projects in the budget is $307 million. In our Crosscutting Issue "Managing the Capital Outlay Program" (earlier in this chapter), we recommend approval of proposed construction funding for 26 community college projects contingent on receipt of preliminary plans that are consistent with the scope and cost previously approved by the Legislature. In the discussion below, we raise issues with 14 projects and withhold recommendation on two projects. We raise no issues with the remaining 51 projects proposed for 1999-00.

Five-Year Capital Outlay Plan

The community colleges' five-year capital outlay plan shows improvement over previous plans, but further refinements are needed to develop a plan that better reflects statewide needs and priorities for the community college system.

Background. In our Analysis of the 1998-99 Budget Bill (page H-90), we indicated that the community colleges' statewide five-year capital outlay plan (which totaled $3.6 billion) was essentially a compilation of the five-year plans submitted by the districts and did not evaluate or establish funding priorities for the system. Specifically it:

We indicated that if the Chancellor's Office evaluated the district's five-year plans more critically--including the deficiencies noted above--the five-year needs of the system would likely be considerably less than the $3.6 billion total. The Chancellor's Office committed to undertake this task in preparing the plan to be submitted in the fall 1998.

Current Five-Year Plan. The most recent five-year plan prepared by the Chancellor's Office--covering the period 1999-00 through 2003-04--totals $3 billion, or 20 percent less than the prior year's plan. The new five-year plan lists projects by district in alphabetical order and also in the priority order submitted by each district. The Chancellor's Office still has not taken into account whether some of the requested facilities are actually needed based on the capacity of existing district facilities or on other factors. The reduction in total cost of the new five-year plan is because the Chancellor's Office generally limited the number of new projects to two per year for each district. Thus, projects proposed in some district's five-year plans are deferred to beyond the five-year period in the statewide plan.

Better Plan Needed. Though the current five-year plan shows some improvement over prior plans, the Legislature still lacks a plan that shows systemwide needs and priorities. We also note that, as discussed in our companion document, The 1999-00 Budget: Perspectives and Issues (Part V), implementation of year-round operation at the community colleges will almost eliminate the need to build additional instructional capacity for the foreseeable future. The system, however, does have 18 million square feet of buildings that were built or renovated before 1970. Making improvements to many of these older facilities, in addition to addressing infrastructure and seismic safety deficiencies, will entail significant costs. While the new five-year plan shows improvement, the Chancellor's Office needs to make further improvements in its planning process in order to provide the Legislature with a better picture of its future funding requirements.

1999-00 Capital Outlay Program

Figure 1 shows the community college projects proposed in the budget year by type of project. Including the future costs, the total capital outlay program in the budget will cost $460 million. Over one-half of the program costs are for 12 library projects and 25 new child development centers. The category of mitigating code deficiencies includes five projects for renovation and three projects for replacement of buildings identified as seismic hazards. The replacement projects are at San Bernardino Valley College and are funded with 25 percent state funds and 75 percent federal funds (from the Federal Emergency Management Agency's hazard mitigation program).
Figure 1
California Community Colleges

1999-00 Capital Outlay Program

(Dollars in Thousands)
Category Number of Projects Budget Bill Amount Estimated Future Cost Total
Mitigate code deficiencies 9 $10,718 $14,945 $25,663
Equipment 18 26,836 -- 26,836
Utilities/infrastructure 6 2,218 12,178 14,396
Add instructional facilities 6 14,230 40,823 55,053
Upgrade instructional facilities 5 6,784 3,143 9,927
Libraries 12 17,805 152,068 169,873
Two new off-campus centers 6 2,785 35,476 38,261
Child development centers 25 68,537 11,256 79,793
Other 6 3,214 37,003 40,217
Totals 93 $153,127 $306,892 $460,019

Library Projects

We recommend deletion of $10.7 million for 11 library projects because the districts should instead consider less costly proposals to build additions to existing libraries. (Reduce Item 6870-301-0574 by $10,736,000.)

The budget proposes $17.8 million for 12 library projections. Of this total, $7.1 million is for the construction phase of a project at Citrus College (Citrus Community College District [CCD]) for which we recommend approval. The remaining $10.7 million is for preliminary plans and working drawings for ten projects to build new libraries and one project to expand an existing library. The estimated future costs to complete these 11 projects is $151 million. In general, the districts indicate that their existing libraries are too small and lack the ability to be renovated for the technology-related requirements of a modern library.

Based on (1) existing space standards for libraries and media-related functions (instructional audio and visual services) and (2) each district's current inventory of these types of space, all 11 districts can justify building additional space. However, as shown in Figure 2, the districts are requesting to build only 145,000 additional assignable square feet (asf) classified as library and media space but are requesting buildings totaling 425,000 asf. Rather than proposing to add the incremental library and media space as shown in Figure 2, districts are proposing to build entirely new libraries and use the existing libraries for other purposes.
Figure 2
Space Requested in Library Projects
(Assignable Square Feet)
Community College District (CCD)--College Additional Library and Media Space Requested Total Proposed Building Space
Barstow CCD--Barstow College 11,129 19,976
Compton CCD--Compton College 7,080 30,000
Grossmont-Cuyamaca CCD-- Grossmont College (library expansion) 16,696 44,716
Kern CCD--Cerro Coso College 14,082 27,232
Mira Costa CCD--Mira Costa College 3,043 34,441
Monterey Peninsula CCD-- Monterey College 18,540 50,872
San Jose-Evergreen CCD-- San Jose City College 9,434 37,377
Southwestern CCD--Southwestern College 28,077 64,730
Ventura CCD--Moorpark College 18,545 39,148
Ventura CCD--Ventura College 13,217 61,394
Yosemite CCD--Columbia College 5,142 15,530
Totals 144,985 425,416

We believe that the space deficiencies with the districts' existing facilities could be addressed at far less cost by constructing additions to the existing libraries. To address any problems with retrofitting the existing libraries for technology-related purposes, the districts could place the technology-intensive functions in a new building addition and keep the more traditional library functions--stack space and student study carrels--in the existing libraries. This is the approach being taken by Citrus College, which has a library remodel and expansion project proposed for construction in the Governor's budget.

Another advantage of adding to an existing building is the lower cost required for utility and site development. For the ten new libraries proposed in Figure 2, these costs average about 10 percent of total estimated construction costs. For the one new library expansion project--at Grossmont College--these costs are only 4 percent of total construction costs.

While the alternative of incremental library expansion may appear less than optimal from each individual district's perspective, the significant savings realized through this approach can be used to fund other high priority projects for higher education, including other community college projects. We therefore recommend deletion of the $10.7 million proposed for the 11 projects. Proposals to expand the districts' existing libraries would merit legislative consideration.

Kern CCD, Bakersfield College-- Concrete Restoration

We recommend deletion of $685,000 to repair deteriorated concrete in several campus buildings because these repairs should be funded from operating funds rather than through the capital outlay program. (Delete $685,000 under Item 6870-301-0574 [30].)

The budget proposes $685,000 for preliminary plans, working drawings, and construction to repair deteriorated concrete at the base of 20 campus buildings, most of which are over 40 years old. The district indicates that weathering, soil conditions, and the use of concrete below current standards have led to this deterioration over the years. The district's proposal includes several photographs as evidence of the deterioration. While it is obvious that the district has a problem that should be addressed, we do not believe that the costs should be paid for with general obligation bonds. These are the types of normal repairs that districts fund through their annual operating budgets.

In addition, there is another funding source available to the district to fund this project. As in recent years, the Governor's budget includes $39 million in the community colleges' support budget for scheduled maintenance. These monies are matched by the districts on a dollar for dollar basis and are used for specific maintenance projects based on priorities established by the Chancellor's Office. This funding mechanism would be another way to address the district's problem.

For these reasons, we therefore recommend deletion of the $685,000 in bond funding under Item 6870-301-0574 (30).

Los Angeles CCD, Harbor College-- Fire Alarm Corrections

We recommend deletion of $337,000 for preliminary plans and working drawings because the district has not justified the need to completely replace the existing fire alarm system with a new $3 million system. (Delete $337,000 under Item 6870-301-0574 [38].)

The budget includes $337,000 to prepare preliminary plans and working drawings to completely replace the fire alarm system at Los Angeles Harbor College. The estimated future capital outlay construction costs are $2.8 million. The district indicates that the existing alarm system does not meet current code requirements and has several problems, including:

While it is apparent that the campus has problems with the existing system, the district has not explained why improvements or repairs could not be made to the existing system to alleviate the major problems. Instead the district proposes a new alarm system involving almost every building on the campus--even buildings that are relatively small (under 3,000 square feet). We believe that the district could address its problems with modification to the existing alarm system at much less cost than the $3 million project submitted to the Legislature. We therefore recommend deletion of $337,000 under Item 6870-3101-0574 (38).

West Valley-Mission CCD, Mission College-- Science and Technology Complex

We recommend deletion of $755,000 for preliminary plans and working drawings because under year-round operation, the district will not need the additional laboratory space provided by the project. Estimated future savings are $9.5 million. (Delete $755,000 under Item 6870-301-0574 [90].)

The budget proposes $755,000 to prepare preliminary plans and working drawings for a 21,000 asf science building at Mission College. The project includes laboratories for chemistry, physics, engineering, and biology. The estimated future construction costs are $8.8 million. Based on the traditional way that the CCCs have used their facilities (that is--nine months out of the year), the district would need additional lab space and the project would be appropriate. However, in our companion document, The 1999-00 Budget: Perspectives and Issues (Part V), we recommend that the three segments of higher education begin implementing year-round operation. Under this approach, the segments could accommodate up to 33 percent more students in existing instructional space because campuses will be fully used in the summer. In the case of the West Valley--Mission Community College, the district's existing laboratory facilities are sufficient to accommodate projected enrollments under year-round operation. Consequently, the project would not be needed. We therefore recommend deletion of the $755,000 under Item 6870-301-0574 (90).

We note that there are five other community college projects proposed in the budget to add new instructional facilities to existing campuses that are justified even with implementation of year-round operation. Below, however, we raise an issue with the cost of one of these projects.

Antelope Valley CCD, Antelope Valley College-- Technology Building

We withhold recommendation on $380,000 for preliminary plans and working drawings pending discussions with the district regarding the need for $1 million in utility and site development work for the project.

The budget includes $380,000 for preliminary plans and working drawings for a new 14,000 asf technology building at Antelope Valley College. The building would provide laboratories for the following programs: refrigeration; heating, ventilation, and air conditioning; fiberglass/composite technology; and materials fabrication. The estimated future construction costs are $5.1 million. As mentioned above, based on the district's current inventory of laboratory space, the additional proposed space is justified even after the transition to year-round operation. In addition, the estimated cost to construct the new building is appropriate. However, we question the need to spend $1 million, as proposed by the district, for utility and site development work associated with a relatively small new building.

The district's master plan indicates that the technology building and several future buildings will be located on the edge of the existing developed campus. The proposed project, however, includes infrastructure that is not needed for the technology building. It would instead serve future buildings. The infrastructure for these buildings should therefore be considered in the future--not with the technology building. The infrastructure directly related to the new technology building could be installed at much lower cost than that proposed by the district. We therefore withhold recommendation on the budget proposal, pending discussions with the district on the scope of utility and site development work for the project.

West Hills CCD, Kings County Center-- Off-On Site Development

We withhold recommendation on $301,000 for preliminary plans and working drawings for site development at a new off-campus center pending discussions with the district on ways to reduce future construction costs of $3.6 million.

The budget includes $301,000 to develop preliminary plans and working drawings for utilities and site development related to the initial phase of a new off-campus center in Lemoore (Kings County). The estimated future construction cost is $3.6 million. Two other budget proposals would provide funding for costs related to a new 100-acre site and to design two buildings for the campus (total of 38,000 asf). The district has provided a detailed cost estimate and schematic drawings showing the utility and site development work. Based on our review of these materials, we believe that the scope of the proposed work exceeds that which is necessary to serve the two new buildings. For example, the drawings show utility lines and an access road being extended beyond the two buildings into areas planned for future expansion of the center. This work should instead be funded at the time that any future buildings are approved.

We intend to hold discussions with the district on ways that the scope and cost of the site development can be reduced. Pending these discussions, we withhold recommendation on the $301,000 proposed in the budget.

Construction Cost Escalation

We recommend that the Legislature direct the Chancellor's Office to reduce the budgets for those community college projects where excessive construction cost escalation has been applied in calculating the project budget.

Each year the amounts to be requested for construction are determined by first estimating the cost of construction at today's prices then escalating that price to the assumed cost on July 1 (the start of the fiscal year). Though projects do not typically bid on July 1, and instead are bid sometime later in the fiscal year, the administration's authority to augment appropriations by up to 20 percent provides a sufficient cushion to cover any cost escalation up to the bid date.

For some community college projects proposed in the budget, costs have been escalated to the mid-point of the construction period. This is inappropriate. The price to the state is determined at the bid opening. If the winning bidder anticipates there will be increases in the price of labor and materials during the course of construction, these additional costs are included in the contractor's bid. We therefore recommend that the Chancellor's Office be directed to reduce the construction budgets for any project proposals that include this improper cost escalation factor. These reduced amounts should be reflected in the project descriptions included in the supplemental report of the budget act.

Department of Food and Agriculture (8570)

The California Department of Food and Agriculture (DFA) operates 21 major facilities--16 agricultural inspection stations, two veterinary laboratories, a chemistry and plant pest diagnostic laboratory, and two out-of-state pest laboratories in Arizona and Hawaii. The department's five-year capital outlay plan totals $36 million, with an additional $21 million required after five years to complete partially funded projects. It emphasizes relocation of agricultural inspection stations and the veterinary laboratories at Fresno and Turlock.

The Governor's budget proposes $7.3 million for two major projects and $0.3 million for minor projects, financed by $1.1 million from the General Fund and $6.5 million from lease-payment bonds. We have withheld a recommendation on one of the two major projects, relocation of the Truckee Agricultural Inspection Station pending receipt of preliminary plans and clarification of the status of land acquisition. This and other similarly situated projects are discussed in "Managing the Capital Outlay Program" under Crosscutting Issues in this capital outlay section.

Relocation--Yermo Agricultural Inspection Station

We recommend the Legislature delete the $411,000 requested from the General Fund for this project because more information is needed about the cost of the land and construction, and how costs of the Yermo "superstation" will be apportioned between the Department of Food and Agriculture and the California Highway Patrol. If this information is received, the project may warrant legislative consideration. (Delete $411,000 from Item 8570-301-0001 [1].)

The budget contains $411,000 for acquisition and preliminary plans for an agricultural inspection station at Yermo, San Bernardino County. The estimated total project cost is $8.2 million. The station would be part of a "superstation" that would also include a separate truck inspection station for the California Highway Patrol (CHP). Trucks and cars would exit Interstate 15 using separate lanes and stop at the agricultural inspection station. After inspection by DFA, cars would leave the station and return to the freeway. Trucks leaving the agricultural inspection station would proceed to the CHP truck inspection station about 1,000 feet down the truck lane for further inspection by CHP if necessary. The proposal calls for the Department of Transportation (Caltrans) to design and manage construction of the facilities for both DFA and CHP.

The cost information submitted in support of this proposal is incomplete and unclear. It indicates the cost of acquisition and preliminary plans to be $462,000, but the budget requests only $411,000. The cost of acquiring the land is estimated to be $166,000 but there is no basis provided for this amount (such as information on comparable sales, an appraisal or an offer to sell from the current owner) and whether there is a willing seller. The documentation includes a cost estimate prepared by the Department of General Services (DGS) which estimates the total construction cost to be $6,679,800, but an accompanying letter from Caltrans indicates it has reviewed the DGS construction cost estimate and recommends it be increased to $7,198,000. If this is the case, then the total project cost would be about $8.7 million, not $8.2 million. The Caltrans letter also indicates it has included a 25 percent contingency because of ". . . the lack of drawings and no definitive program or scope of work . . ." upon which to base a more definitive estimate. A sufficiently specific program, scope of work, and more accurate cost estimate should be developed before the Legislature is asked to approve this proposal. It is also not clear how the cost of the traffic lanes and facilities are apportioned between DFA and the CHP. This apportionment is important because the DFA part of the work will likely be funded by the General Fund with the CHP portion funded from a special fund.

All of these points raise uncertainties about the cost and management plan for the project. Accordingly, we recommend that the Legislature not approve this proposal. If additional information is submitted, the project may warrant legislative consideration.

Military Department (8940)

The Military Department is responsible for the command and management of the California Army and Air National Guard. To support its operations, the department maintains 127 armories and 38 maintenance operations throughout the state. These facilities total about 2.5 million square feet of building space. About 70 percent of this space was built before 1960.

The department's proposed capital outlay program for 1999-00 totals $8 million--virtually all from the General Fund except for $36,000 in federal funds. This total includes:

  • $4.8 million for planning, design, and supervision of construction of projects for which the federal government fully funds the construction. In our Crosscutting Issue, "Managing the Capital Outlay Program," we recommend a one-year deferral of the study and preliminary plan phases for two of these projects--new maintenance shops in Riverside and San Francisco--due to delays in implementing the currently funded capital outlay program.
  • $2.1 million to acquire a site, including existing facilities, for an armory in Bakersfield to replace the existing 45-year-old armory.
  • $562,000 for minor capital outlay projects (cost of less than $250,000 per project).
  • $545,000 for the second phase of an effort to develop a master plan for the department's facilities. In the Crosscutting Issue mentioned above, we also recommend deferring this project for one year. Below, we discuss a second reason for deferring this proposal.

Facilities Survey, Phase II

We recommend deletion of $545,000 from the General Fund for a second phase of the department's master plan because the initial phase will not be completed and available for legislative review until next year. (Delete $545,000 under Item 8940-301-0001 [3]).

The budget proposes $545,000 for the second phase of a statewide master planning effort for the department's armories and maintenance facilities. The purpose of this study is to develop a long-range plan for addressing the department's facilities needs on a statewide basis. In the 1998-99 Budget Act, the Legislature appropriated $485,000 for the initial phase of this planning effort--a statewide survey to assess the condition of the department's facilities. The survey was supposed to be completed by June 1999. However, the Department of General Services (DGS), which will manage the consulting contract for the survey, indicated at the time this analysis was written, that a consultant would not be selected to start the survey until April 1999. The DGS anticipates that survey will not be completed until January 2000. We see no reason for the Legislature to fund the second phase of the plan until it has had an opportunity to review the information gathered in the first phase. Because the first phase is so far behind schedule, we recommend deferring funding for the second phase until 2000-01.

Veterans' Home of California--Yountville (8960)

The Department of Veterans Affairs operates the Veterans' Home of California in Yountville. The Yountville facility provides five levels of care, ranging from residential to acute health care. The 1999-00 capital outlay program for the home totals $900,000 from the General Fund for the design costs of three major projects and for one minor project (cost of less than $250,000). The three major projects are:

  • $250,000 to remodel the activity area in Holderman Hospital. The future construction cost is $1.8 million.
  • $310,000 to correct code deficiencies in Section L of Jefferson Hall. The future construction cost is $2.4 million.
  • $100,000 to convert a portion of the laundry building to warehouse space. Estimated future cost for working drawings and construction is $1.6 million.

In our Crosscutting Issue, "Managing the Capital Outlay Program," we discuss delays in implementing the currently funded capital outlay program. Because of these delays, we recommend deferring the Section L and laundry building projects and partially deferring the Holderman Hospital project by only funding the preliminary plans in 1999-00. Below, we discuss additional issues with the Section L and laundry building projects.

Correct Code Deficiencies in Section L

We recommend deletion of $310,000 for preliminary plans and working drawings because there are sufficient licensed beds for the home's current population and no plan exists for expanding the population at the home. (Delete $310,000 under Item 8960-301-0001 [1].)

The budget proposes $310,000 to prepare preliminary plans and working drawings for a renovation to meet fire and life safety and other building code requirements in Section L of Jefferson Hall. The estimated future construction costs are $2.4 million. The project will provide renovated space for 33 domiciliary beds and is part of a master plan to make such improvements to all living areas at the home.

Over the last 15 years, the state has funded several renovation projects at Yountville, and the number of beds at the home in renovated areas totals 1,477, including 762 domiciliary beds. The average population at the home is projected to total only 1,103 (613 domiciliary) in the current year and 1,125 (625 domiciliary) in the budget year. Thus, the home currently has about 150 extra domiciliary beds in renovated areas, and it currently does not have a plan for expanding its population. Finally, there are vacant domiciliary beds at the Veterans' Home in Barstow and the new 400-bed Veterans' Home in Chula Vista will open in spring 2000. Given the currently available capacity and the additional capacity from new construction in the Veterans' Home system, we recommend the Legislature disapprove this project. We therefore recommend deletion of $310,000 under Item 8960-301-0001 (1).

Convert Laundry Building to Warehouse Space

We recommend deletion of $100,000 for preliminary plans because the need for the project has not been justified and other, potentially less costly, alternatives should be considered. (Delete $100,000 under Item 8960-301-0001 [2].)

The budget proposes $100,000 from the General Fund to prepare preliminary plans for a project to convert a portion of the home's laundry building to warehouse space. The estimated future cost for working drawings and construction is $1.6 million. The department indicates that the home is required to provide storage space for the personal belongings of its members, and that the members and their families must have proper access to these items. The laundry building is available for use as a warehouse because the home recently began contracting out for laundry services.

We have two concerns with this proposal. First, the department has not identified what specific deficiencies are present in its current storage space. If such deficiencies are shown, it may be possible to address them by making improvements to the existing space at a much lower cost than the budget proposal. Second, if the home does need other storage space, it should evaluate whether constructing a new warehouse would be more cost-effective than the proposed renovation. For these reasons, we recommend deletion of $100,000 under Item 8960-301-0001 (2).

 
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