Plans divert more tuition to cover UH repair backlog

University of Hawaii-Manoa students would see a bigger chunk of their tuition dollars go toward repairs on the 107-year-old flagship campus under a plan to eliminate two decades’ worth of backlogged repairs.

Repair and maintenance needs across the 10-campus system now total $487 million, with 84 percent of that — $407 million — on the Manoa campus.

With fewer state dollars coming through for the repairs, university officials have come up with a proposal that calls for issuing revenue bonds to tackle the backlog over four years. The bonds — which UH would issue to buyers — would be repaid using tuition revenue to the tune of about $28 million annually in debt service.

UH Chief Financial Officer Howard Todo shared the maintenance plan with the Board of Regents on Tuesday at a joint meeting of the committees on facilities and finance. He expects to pre­sent a more formal proposal at the regents’ October meeting.

The revenue bond funding would go toward deferred maintenance. UH would continue to ask the Legislature for state funds to cover renovation projects, routine maintenance and repairs deemed necessary for health and safety reasons as part of its capital improvements budget requests.

"We’re unpacking what we have traditionally called CRDM — capital renewal, deferred maintenance — we’re pulling out the ‘DM’ … and we would like to go in with a plan that essentially says to the Legislature, ‘We all share a concern about this backlog,’" UH interim President David Lassner said. "The ‘grand bargain’ would be to say we’d like to take responsibility for that."

The university has not been able to secure enough state-backed bond financing (general obligation bonds) through the Legislature to keep up with repairs, renovations and safety improvements.

For example, this year UH had requested $76.8 million in general obligation bonds over the next two fiscal years for health and safety repairs, and $282 million for capital renewal and deferred maintenance for all campuses.

Lawmakers approved $57 million over two years for health and safety improvements, and just $50 million over two years for systemwide deferred maintenance.

The situation, Lassner said, was exacerbated by the economic downturns in the 1990s and this decade.

"We’re proposing that over this four-year period, if they help us with some things more on the operating budget side, we will commit to using tuition revenue that is already in the board-approved (tuition) schedule" to eliminate the backlog, Lassner said.

He said the operational assistance UH is seeking is about $14 million to cover faculty salary restorations that come due next year as part of its six-year contract with the University of Hawaii Professional Assembly faculty union.

Lawmakers earlier this year chose not to fund about $22 million for the pay increases over the next two years, and told UH to instead fund them with tuition hikes.

"That had created huge pressure on our use of tuition funds because that was an unexpected — to us — requirement that we had been thinking that those funds would be available," Lassner told the Star-Advertiser. "And so what we’re really suggesting is that if the Legislature can help us with the UHPA funds, then that will enable us to make the investment of tuition dollars to catch up with the backlog."

Todo said UH estimates that it can use that $14 million to fund about $212 million in revenue bonds in the first year of the proposal, ideally next year. The university would need approvals from both the Legislature and the governor to float the revenue bonds.

That $212 million, Todo said, could be used to eliminate the existing deferred maintenance backlogs at UH-Hilo and the seven community college campuses, with about $135 million left over to start making repairs at Manoa. (UH-West Oahu’s new Kapo­lei campus has no repair backlog.)

The university would issue more revenue bonds to cover the rest of Manoa’s repairs over the next three years of the plan: $68 million, $73.5 million and $76.6 million. In all, $430 million in revenue bonds would be issued.

Some regents said they were concerned about devoting more tuition to repair aging buildings.

Under a five-year tuition schedule regents approved in 2011, tuition will increase 7.5 percent each year for the next three academic years. The annual debt payments for the bonds would consume about 46 percent of the projected increased tuition in those three years, Todo said.

Regent Jan Sullivan, who chairs the committee on budget and finance, said although the plan would be a "one-time catch-up," it "saddles the university with debt and will have implications on tuition for a long time."

"It’s not necessarily ideal. But we need it to reset, so to speak," Todo said.

Lassner said plans to boost undergraduate enrollment at Manoa have been challenging because "having a $400 million maintenance backlog doesn’t create an environment conducive to growing enrollment."

Some of the older classroom buildings have peeling paint, mold, crumbling walls and mismatched linoleum floor tiles.

Kristel Rodillas, a sophomore zoology major at UH-Manoa, said she generally doesn’t mind the aging classrooms.

"I can still learn. As long as I’m able to learn, I’m good," she said. "But for my science classes, I would want more modern facilities."

Regents Chairman John Holzman said the university will need to supplement its financial plan with an action plan that spells out how it will use the revenues to eliminate the backlog.

"Assuming we got the money one way or another, what’s the plan to assure the Legislature and the people of Hawaii that we’re going to spend the money wisely? I think they have a lot of doubts about that," Holzman said. "If we’re going to ask for money, we’d better have a plan on how we’re going to use it, with some assurances that it will be used wisely."

Todo said the scenario he was discussing is a funding plan and that the university is working on an implementation plan.

State Sen. David Ige, chairman of the Senate Ways and Means Committee, said he’d be open to hearing UH’s pitch.

"We’ve been after the university to develop a plan to deal with the deferred maintenance backlog. And up until this point the representation has been that it had to be done with (general obligation) bonds," Ige said in an interview. "We are open to the possibility of using revenue bonds. Of course, we’ll be looking at the request in terms of what the entire plan is and see how that all fits together."

He added, "We want to make sure, and more important, really, we want to get to a more sustainable deferred maintenance plan so that we don’t get into a situation again where no maintenance is done and it grows to hundreds of millions of dollars."